Citic Pacific will spend 700 million yuan (about HK$656 million) on a huge Shanghai site - with a potential gross floor area of about three million square feet of residential development. At an analyst meeting yesterday, Citic Pacific management said the residential project in the Huang Pu district would be developed in phases. The first phase, would account for about 40 per cent of gross floor area, and be offered for sale in 2003. Citic Pacific said the standard of living on the mainland had improved rapidly, particularly in major cities such as Shanghai where demand for better housing was strong. It believed the development of higher-quality apartments would be a lucrative business. Analysts believe the company's future will continue to focus on telecommunications in China. Through its 50 per cent-owned Citic Guoan the number of mainland cable television subscribers rose by 46,000 in the first half, bringing the total to about four million. However, this was still far below its seven million target for this year. Citic Pacific also said a 20-year goodwill write-off would be made for its recent acquisition of Internet service provider PSINet Hong Kong for about HK$148 million. But analysts feel the write-off would have little impact on earnings. Citic Pacific's interim profit rose 7 per cent to HK$1.5 billion, but analysts warned the full-year result would be undermined by its 25.4 per cent associate Cathay Pacific. Citic Pacific's aviation profit contribution fell 33.7 per cent to HK$423 million partly due to Cathay Pacific's pilot industrial action. Morgan Stanley has reduced its earnings forecast for Citic Pacific to reflect the lower contribution from Cathay Pacific. It is now expecting an annual profit of HK$2.89 billion this year.