TAX changes in China hurt profit and turnover at property development firm China Vanke Co in the first half of the year. Turnover was down 14 per cent under accounts prepared to International Accounting Standards (IAS), at 397.77 million yuan (about HK$350 million at the June 30 exchange rate). Profit was up 13 per cent at 83.16 million yuan and earnings per share fell 2.8 per cent to 34 fen. No interim dividend was announced. Chairman Wang Shi said: ''The translation to the new tax system has substantially affected the group's trade business, resulting in a decrease of 68.5 per cent in turnover and 5.7 per cent in profits compared with the corresponding period last year.'' The reduction in turnover and profit was down to the application of income tax rates in a range from 7.5 per cent to 33 per cent. Turnover includes proceeds from the sales of properties, retail sales, sub-contracting income and invoiced value of goods sold to customers excluding sales tax. Profit, in accordance with mainland accounting standards, slipped 7.5 per cent to 75.8 million yuan. The reconciliation with IAS includes the deduction of a 12.54 million yuan staff bonus scheme in the previous period for last year and 12.7 million yuan of tax items in the current period. A further deduction of 4.9 million yuan is included this year for written-off income from bonus shares on share investment. Mr Wang said the group had undergone major reorganisation in the period. Government macroeconomic policy to slow the economy had resulted in an economy with moderate growth. Company policy in the second half would focus on cutting costs, reorganising the company structure and raising margins. ''The group's two construction projects in Shanghai, Vanke Plaza and Vanke City Garden, are expected to make substantial contributions to the group's profit forecast for the year,'' said Mr Wang. Qingdao Silver Garden would continue to bring profits, he said. City Garden projects in Beijing, Tianjin and Shenyang would gradually be introduced to the market in the second half of the year. While continuing to provide property management, Mr Wang said: ''In the next six months, the group will develop its construction materials trading business and begin to participate in other property-related businesses to realise economies of scale.'' Investment in listed and unlisted companies would continue with a view to providing a steady profit for the group in the future. Vanke is also involved in colour separation, entertainment karaoke laser discs and advertising. Mr Wang said in the first half ''the group adjusted its property sales strategies to adapt to market conditions. ''As at June 30, the group's property projects under development amounted to an aggregate area of about 1.6 million sq metres, while completed projects amounted to an aggregate area of 52,000 sq metres.'' Investment profits were accrued from Shenyang Fangtian, Beijing Department Store Group, which was listed on the Shenzhen stock market in the first half. The portfolio contains 28 enterprises, of which 14 are listed.