CITIC Pacific says its wholly owned Dah Chong Hong car trading business fell 40 per cent in the first four months this year because of the slowdown of the economies of Hong Kong and China. The company expects reduced earnings growth this year owing to the fall in car sales and the depressed property market. Managing director Henry Fan Hung-ling said after the company's annual general meeting that contributions from Dah Chong Hong would slow because of the fall in car sales in the two areas. Last year, the company posted a nine per cent decline in operating profit, to $828 million, because of the fall in car trading. This year, the performance in the motor division was expected to be worse than last year, said Mr Fan. Chairman Larry Yung Chi-kin said the company would find it difficult to maintain profit growth of 36 per cent achieved last year in view of the unfavourable factors. Mr Yung said the decline in the car trade would not cause a significant dent in CITIC Pacific's earnings, as the proportion of net profit contribution from Dah Chong Hong to the group was decreasing. The company was considering a cost-cutting plan to streamline the operation, and this might include laying off some staff. Property income would be a key barometer of the mainland-backed conglomerate's profit growth potential in this year. Mr Fan said the company's earnings growth would depend on the development income generated this year. Its 50 per cent owned 319-unit residential development, La Costa in Discovery Bay, will be on offer soon, but pricing has not been finalised yet. CITIC Pacific is arranging a $2.15 billion seven-year loan to refinance its purchase of a 20 per cent stake in Hong Kong Telecom five years ago. In 1990, CITIC Pacific had to put up 1.3 billion shares of Hong Kong Telecom as collateral to finance its purchase. Mr Fan said the recent refinancing released 875 million of 1.3 billion shares of Hong Kong Telecom, that had been used as security. He said the deal would improve CITIC Pacific's cash flow, because about $500 million in share dividend would be generated from the released shares. The refinancing also reduces the company's interest payment burden, because better financing terms were achieved compared with those for a loan arranged previously. Despite the release of the shares, Mr Fan said CITIC Pacific had no plans to reduce its 12 per cent interest in Hong Kong Telecom and would keep it as a long-term investment. But CITIC HK, parent of CITIC Pacific, might sell out its less than two per cent stake in Hong Kong Telecom, in future, he said. The conglomerate will join other property developers in vying for the site of a former British military base at Tamar Basin and is seeking a partner to bid to develop above the future Central station along the new airport railway.