HH Biotechnology (HHBT) 10-Q 2007 Q1 Quarterly report

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[ X ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

[     ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No. 0-23015

GREAT CHINA INTERNATIONAL HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)

Nevada	87-0450232
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

C Site 25-26F Presidential Building, No. 69 Heping North Street
Heping District, Shenyang 110003, Peoples Republic of China

(Address of Principal Executive Offices)

0086-24-22813888
(Issuer’s telephone number)

Not Applicable
(Former name, address and fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [ X ] No [    ]

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

[    ] Large accelerated filer [     ] Accelerated filer [ X ] Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes [    ] No [ X ]

State the number of shares outstanding of each of the issuer’s classes of common equity: As of March 31, 2007, there were 11,782,036 shares of common stock outstanding.

FORM 10-Q
GREAT CHINA INTERNATIONAL HOLDINGS, INC.

TABLE OF CONTENTS

		Page
PART I.	Item 1. Financial Information
	Balance Sheet as of March 31, 2007 (Unaudited) and December 31, 2006	3
	Statements of Operations for the Three Months Ended March 31, 2007 and 2006 (Unaudited)	5
	Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006 (Unaudited)	6
	Notes to the Financial Statements	7
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	28
	Item 4. Controls and Procedures	28
PART II.	Other Information	28
	Item 1A. Risk Factors	28
	Item 6. Exhibits	29
	Signatures	30

2

GREAT CHINA INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2007 AND DECEMBER 31, 2006

	2007			2006
	(Unaudited)
ASSETS
Current assets:
Cash and equivalents	$	641,778		$	1,769,744
Accounts receivable
Trade, net of allowance of $770,798 and $1,443,476, respectively		2,076,308			1,454,164
Advances to suppliers		1,201,015			1,089,048
Advances to employees		9,886			5,473
Deposits		1,653,861			1,636,942
Properties held for resale		10,472,943			10,620,550
Assets held for sale, net of impairment of $199,542 at March 31, 2007		9,389,821			9,372,189
Prepaid expenses		10,038			86,617
Total current assets		25,455,650			26,034,727
Property and equipment:
Land and buildings		50,505,521			49,988,841
Motor vehicles		686,476			679,453
Office furniture and equipment		344,927			340,618
		51,536,924			51,008,912
Less accumulated depreciation		(7,775,540	)		(7,114,334	)
		43,761,384			43,894,578
Total assets	$	69,217,034		$	69,929,305

See accompanying notes to the consolidated financial statements.

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GREAT CHINA INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2007 AND DECEMBER 31, 2006

	2007			2006
	(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	10,034,291		$	10,554,995
Deposits held		760,076			767,481
Advances from buyers		2,897,551			3,004,011
Amounts due to related companies		537,717			695,002
Taxes payable		1,276,210			1,083,765
Short-term loans		50,536,176			51,308,184
Current portion of long-term debt		395,547			428,076
Total current liabilities		66,437,568			67,841,514
Long term debt, net of current portion shown above		1,808,324			1,999,465
Total liabilities		68,245,892			69,840,979
Stockholders’ equity:
Common stock, $.001 par value 50,000,000 shares authorized,
11,782,036 issued and outstanding
at March 31, 2007 and December 31, 2006		11,783			11,783
Additional paid in capital		4,542,308			4,542,308
Retained deficit		(4,084,704	)		(4,934,109	)
Accumulated other comprehensive income		501,755			468,344
Total stockholders’ equity		971,142			88,326
Total liabilities and stockholders’ equity	$	69,217,034		$	69,929,305

See accompanying notes to the consolidated financial statements.

4

GREAT CHINA INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(UNAUDITED)

	2007			2006
Revenues
Sales	$	233,015		$	1,357,244
Rental and management fee income		1,358,273			1,325,826
Total revenues		1,591,288			2,683,070
Expenses
Cost of properties sold		213,273			1,278,988
Building management expenses		228,782			375,378
Operating and selling expenses		18,242			39,850
Administrative expenses		378,781			769,637
Depreciation and amortization		580,321			544,147
Total expenses		1,419,399			3,008,000
Income (loss) from operations		171,889			(324,930	)
Other income (expense)
Other income		1,949,269			15,223
Gain on disposal of fixed assets		--			103,043
Impairment loss		(199,542	)		--
Interest and finance costs		(594,123	)		(1,331,177	)
Total other income (expense)		1,155,604			(1,212,911	)
Income (loss) before income taxes		1,327,493			(1,537,841	)
Provision for income taxes		478,088			--
Net income (loss)		849,405			(1,537,841	)
Other comprehensive income (loss):
Foreign currency translation adjustment		33,411			57,792
Total comprehensive income (loss)	$	882,816		$	(1,480,049	)
Basic and diluted net income (loss) per common share	$	0.07		$	(0.14	)
Weighted average basic and diluted shares outstanding		11,782,036			11,097,466

See accompanying notes to the consolidated financial statements.

5

GREAT CHINA INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(UNAUDITED)

	2007			2006
Cash flows from operating activities:
Net income (loss)	$	849,405		$	(1,537,841	)
Adjustments to reconcile net income (loss) to operating activities -
Depreciation and amortization		580,324			544,147
Reduction in (provision for) doubtful accounts		672,678			--
		199,542			--
Non-cash stock compensation expense		--			180,711
Changes in assets and liabilites:
(Increase) decrease in -
Accounts receivable and other receivable		(1,316,154	)		(304,234	)
Advances to suppliers		(111,967	)		(5,241,075	)
Refunds due from contractors		--			(1,508,751	)
Amounts due from related parties		--			--
Prepaid expenses		76,579			1,237,103
Accounts payable and other payables		(520,704	)		512,850
Deposits held		(7,405	)		--
Advances from buyers		(106,460	)		213,433
Properties held for resale		147,607			693,216
Income and other taxes payable		192,445			(317,678	)
Net cash provided by (used in) operating activities		655,890			(5,528,119	)
Cash flows from investing activities:
Construction in progress		(217,174	)		198,511
Purchases of fixed assets		(447,130	)		(434,726	)
Net cash (used in) investing activities		(664,304	)		(236,215	)
Cash flows from financing activities:
Loan repayments		(995,678	)		(2,945,039	)
Advances from (to) directors and affiliated companies		(157,285	)		(960,950	)
Net cash (used in) financing activities		(1,152,963	)		(3,905,989	)
Effect of exchange differences		33,411			57,792
Net (decrease) in cash and cash equivalents		(1,127,966	)		(9,612,531	)
Cash and cash equivalents, beginning of period		1,769,744			10,896,807
Cash and cash equivalents, end of period	$	641,778		$	1,284,276
Supplemental disclosures of Cash Flow information:
Interest paid, net of capitalized amounts	$	410,041		$	959,807
Income taxes paid	$	247,431		$	--

See accompanying notes to the consolidated financial statements.

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GREAT CHINA INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2007

1.     Description of business

Nature of organization

Great China International Holdings, Inc., (the “Company”) was incorporated in the State of Nevada on December 4, 1987, under the name of Quantus Capital, Inc., and in 1992, it changed its name to Red Horse Entertainment Corporation. Effective July 5, 2005, the Company completed the acquisition of Silverstrand International Holdings Limited (“Silverstrand”), a Hong Kong limited liability company, by issuing 10,102,333 shares of its common voting stock to the former stockholders of Silverstrand in exchange for all of the capital stock of Silverstrand. For financial reporting purposes the acquisition was treated as a recapitalization of Silverstrand. On September 15, 2005, the Company changed its name to Great China International Holdings, Inc. Prior to its acquisition of Silverstrand, the Company was not engaged in active business operations.

Silverstrand was incorporated on September 30, 2004 in Hong Kong Special Administrative Region, in the People’s Republic of China (“PRC”) with an authorized capital of $12,820,513 divided in 100 million ordinary shares of par value $0.12 per share.

During October of 2004, Silverstrand acquired all of the outstanding capital of Shenyang Maryland International Industry Co., Limited (Shenyang Maryland”) for $5,000,000, payable to its former owners as follows:

— Jiang Fang as to $4,350,000;

— Jiang Peng as to $500,000; and,

— Pay $50,000 to each of Dang Jing Shi, Li Guang Hua and Wang Li Rong

This transaction was treated as a recapitalization of Shenyang Maryland for financial reporting purposes and the excess purchase was treated as dividends to shareholders.

On November 23, 2004 the Ministry of Commerce and Business Registration issued a business registration certificate approving Shenyang Maryland reclassification to a wholly owned foreign enterprise.

Pursuant to several agreements dated December 8, 2005 and December 28, 2005, the Company, through its subsidiaries, agreed to acquire in 2006 a 100 percent interest in the land use rights for the Xita Project. First, pursuant to a sale and purchase agreement dated December 8, 2005, subsequently amended on December 28, 2005, the Company agreed to acquire, through Shenyang Maryland, 70 percent of the equity interest in Shenyang Xinchao Development Co. Limited (“Xinchao”), a Sino-Foreign joint venture corporation that owns approximately 66 percent of the land use rights of the Xita Project, from Shenyang Yunfeng Real Estate Development Co., Limited (“Yunfeng”). The Company agreed to acquire the remaining 30 percent equity interest in Xinchao through Silverstrand from Sapphire Corporation Limited (formerly: I.R.E. Corporation Limited) (“Sapphire”), an unrelated Singapore corporation, pursuant an agreement dated December 28, 2005.

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The remaining approximately 34% interest in the land use rights of the Xita Project is held by Shenyang Yindu Property Co., Limited (“Yindu”), also a Sino-Foreign joint venture. Pursuant to agreements dated December 28, 2005, Shenyang Maryland agreed to acquire a 70 percent interest in Yindu from Yungfeng, and Silverstrand agreed to acquire a 30% interest in Yindu from Sapphire. Following the closing of these transactions, the Company holds, through its subsidiaries, 100 percent interest in the land use rights comprising the Xita Project.

Shenyang Xin Chao Property Company Limited (“Xinchao”) was registered on August 16, 2005 in Shenyang, Liaoning Province, in the PRC with a registered capital of $12,330,456 (Rmb.100,000,000) and a defined period of existence of 11 years to August 15, 2016. Xin Chao was formed to develop a certain tract of property located in the Heping District of Shenyang featuring a construction area of almost 500,000 square meters with a linear site area of approximately 101,000 square meters.

Shenyang Yindu Property Company Limited (“Yindu”) was registered on August 16, 2005 in Shenyang, Liaoning Province, in the PRC with a registered capital of $6,615,228 (Rmb.50,000,000) and a defined period of existence of 11 years to August 15, 2006. Xin Chao was formed to develop a certain tract of property located in Xi Ta district of Shenyang, China.

Shenyang Jitian Property Company Limited (“Jitian“) was registered on February 22, 2006 in Shenyang Liaoning Province, in the PRC with a registered capital of $616,523 (Rmb.5,000,000) and a defined period of existence of 15 years to February 22, 2021. On March 7, 2006, the registered capital increased to $20,000,000 from $616,523. Jitian was formed to develop a certain tract of property located in Chessboard Mountain Tourism Development District of Shenyang, China known as Galaxy Bay.

In December, 2006, Silverstrand completed an agreement for the sale of all of the outstanding equity interest in Shenyang Jitian Property Company, Ltd., (“Jitian”).

Under the agreement Beijing Capital Land Limited and Reco Ziyang Pte Limited purchased Jitian from Silverstrand in exchange for a total cash payment of $1,399,970 and assumption of all bank debt incurred by Jitian in connection with the acquisition of Galaxy Bay, which will result in a release of guaranties provided by Shenyang Maryland.

The Company engages in the development and sale of high quality private residential properties and commercial buildings for lease in the City of Shenyang, China. Shenyang Maryland, the Company’s indirect wholly-owned subsidiary, was one of the first private property developers and retailers in China, and, according to the statistical information on sales of construction area as published by Shenyang Statistical Authority, Shenyang Maryland was the ninth largest private property developer in Shenyang City in 2004.

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2.     Going concern

The Company had short-term bank debt of $50,536,176 as of March 31, 2007, which included $35,032,300 of delinquent bank loans (Note 8). As a result the Company also had a working capital deficit of $40,981,918 as of March 31, 2007. The Company’s ability to continue as a going concern is dependent on the ability to renegotiate an extension of the bank debt maturities and to obtain a profitable level of operations. These issues raise doubts about the Company’s ability to continue as a going concern. Management is in the process of negotiating a settlement of these delinquent notes and it also in the process of attempting to raise additional capital through debt and equity offerings.

The financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in the normal course of business at amounts different from those reflected in these financial statements.

3.     Summary of significant accounting policies

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and the following is a summary of significant accounting policies:

Basis of presentation- The accompanying condensed consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and U.S. generally accepted accounting principles, but do not include all of the information and disclosures required for audited financial statements. These statements should be read in conjunction with the condensed consolidated financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2006. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods presented. Operating results for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

The factors discussed in Footnote 2 above raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Consolidation policy– All significant inter-company transactions and balances within the Company are eliminated in consolidation.

Cash and equivalents– The Company considers all highly liquid debt instruments purchased with maturity period of three months or less to be cash equivalents. The carrying amounts reported in the accompanying consolidated balance sheet for cash and cash equivalents approximate their fair value. Substantially all of the Company’s cash is held in the PRC and is not protected by FDIC or any other form of insurance.

9

Accounts receivable- Provision is made against accounts receivable to the extent which they are considered to be doubtful. Accounts receivable in the balance sheet is stated net of such provision. As of March 31, 2007 and December 31, 2006, the provision for doubtful debts amounted to $770,798 and $1,443,476 respectively.

Related companies– A related company is a company in which a director has a beneficial interest in and in which the Company has significant influence.

Advances from buyers– Advances from buyers represents prepayments from buyers on properties on which sales revenues have not yet been recognized for financial reporting purposes.

Properties held for sale– Properties held for sale are comprised of properties held for sale and repossessed properties held for resale and are stated at the lower of cost or net realizable value. Cost includes acquisition costs of land use rights, development expenditures, interest costs and any overhead costs incurred in bringing the developed properties to their present location and condition.

Net realizable value is determined by reference to management estimates based on prevailing market conditions. Management evaluates the market value of its properties on an annual basis by comparing selling prices of its properties with those of other equivalent properties in the vicinity offered by other developers.

Management reduces the estimated market value by anticipated selling expenses and associated taxes to derive the net realizable value.

Assets held for sale– Assets held for sale are comprised of land use rights and associated costs of development for the Xita project, which had previously been classified as construction in progress as of December 31, 2006. During 2007 the Company determined that the Company would cease development on this project and sell the associated assets. Based on the estimated fair value of the assets held for sale an impairment loss of $199,542 has been recorded during the quarter ended March 31, 2007.

Property and equipment– Property and equipment is being depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line basis for both financial and income tax reporting purposes over useful lives as follows:

Building and land use rights	9-30 years
Leasehold improvements	20 years
Equipment	5 years
Motor vehicles	5 years
Office furniture and fixtures	5 years

10

Depreciation expense for the three months ended March 31, 2007 and 2006 totaled $580,321 and $544,147 respectively.

Repairs and maintenance costs are normally charged to the statement of operations in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.

Property and equipment are evaluated annually for any impairment in value. Where the recoverable amount of any property and equipment is determined to have declined below its carrying amount, the carrying amount is reduced to reflect the decline in value. There were no property and equipment impairments recognized during the years ended December 31, 2006, 2005 and 2004.

As of March 31, 2007 fixed assets totaling $29,087,864 have been pledged as security to various banks in respect of borrowings totaling $50,536,176 and mortgage loans of $2,203,871.

Construction-in-progress– Properties currently under development are accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition cost, including land rights cost, development expenditure, professional fees and the interest expenses capitalized during the course of construction for the purpose of financing the project. Upon completion and readiness for use of the project, the cost of construction-in-progress is to be transferred to properties held for sale.

Construction-In-Progress is valued at the lower of cost or market. Management evaluates the market value of its properties on a quarterly basis by comparing selling prices of its properties with those of other equivalent properties in the vicinity offered by other developers reduced by anticipated selling costs and associated taxes. In the case of construction in progress, management takes into consideration the estimated cost to complete the project when making the lower of cost or market calculation.

Income Recognition– Revenue from the sale of properties is recognized when the following four criteria are met: (1) a sale is consummated (2) the buyers initial and continuing investments are adequate to demonstrate a commitment to pay for the property, (3) the seller’s receivable is not subject to future subordination and (4) the seller has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property.

Rental and building management income comprises rental and building management income from Qiyun New Garden and President Building. Rental income is recognized on an accrual basis as the rents and management fees are earned.

Interest income is recognized when earned, taking into account the average principal amounts outstanding and the interest rates applicable.

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Cost of sales– The cost of sales includes the carrying amount of the properties being sold and the business taxes paid by the Company in connection with the sales. Business taxes included in cost of sales were $139,440 and $274,266 for the three months ended March 31, 2007 and 2006, respectively.

Other income– Other income consists of primarily services performed on behalf of the purchasers of Jitian. These revenues are recognized when the services have been performed in accordance with the terms of the agreement.

Foreign currencies- The Company’s principal country of operations is in The People’s Republic of China. The financial position and results of operations of the Company are determined using the local currency (“Renminbi” or “Yuan”) as the functional currency. The results of operations denominated in foreign currency are translated at the average rate of exchange during the reporting period.

Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the market rate of exchange ruling at that date. The registered equity capital denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of the financial statements into the reporting currency (“US Dollars”) are dealt with as an exchange fluctuation reserve in shareholders’ equity.

Historically the local currency’s exchange rate had been unofficially tied to the US Dollar at a rate of approximately 8.28 Yuan per US Dollar. Effective July 21, 2005, the Yuan was revalued to an effective exchange rate of approximately 8.11 Yuan per US Dollar. Subsequent to the revaluation the Yuan has been allowed to float within a specified range. As of March 31, 2007 the exchange rate was 7.74 Yuan per US Dollar.

Taxation– Taxation on overseas profits has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the countries in which the Company operates. Provision for The People’s Republic of China enterprise income tax is calculated at the prevailing rate based on the estimated assessable profits less available tax relief for losses brought forward.

Enterprise income tax
Under the Provisional Regulations of The People’s Republic of China Concerning Income Tax on Enterprises promulgated by the State Council and which came into effect on January 1, 1994, income tax is payable by enterprises at a rate of 33% of their taxable income. Preferential tax treatment may, however, be granted pursuant to any law or regulations from time to time promulgated by the State Council.

Enterprise income tax (“EIT”) is provided on the basis of the statutory profit for financial reporting purposes, adjusted for income and expense items, which are not assessable or deductible for income tax purposes.

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Value added tax
The Provisional Regulations of The People’s Republic of China Concerning Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations and the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax is imposed on goods sold in or imported into the PRC and on processing, repair and replacement services provided within the PRC.

Value added tax payable in The People’s Republic of China is charged on an aggregated basis at a rate of 13% or 17% (depending on the type of goods involved) on the full price collected for the goods sold or, in the case of taxable services provided, at a rate of 17% on the charges for the taxable services provided, but excluding, in respect of both goods and services, any amount paid in respect of value added tax included in the price or charges, and less any deductible value added tax already paid by the taxpayer on purchases of goods and services in the same financial year.

United States income tax
Great China International Holdings, Inc., the U.S. holding company, does not accrue income taxes on foreign earnings as there is no intention at the current time to transfer any of these earnings to the holding company. Should earnings be transferred to the U.S. holding company, they would be subject to U.S. Corporate income taxes at rates approximating 40%.

Earnings Per Share– Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and dilutive potential common shares outstanding during the period.

As of March 31, 2007 and December 31, 2006, there were no outstanding securities or other contracts to issue common stock, such as options, warrants or conversion rights, which would have a dilutive effect on earnings per share as the effect of options outstanding at that time was anti- dilutive.

Fair value of financial instruments– The carrying amounts of certain financial instruments, including cash, accounts receivable, commercial notes receivable, other receivables, accounts payable, commercial notes payable, accrued expenses, and other payables approximate their fair values as at March 31, 2007 and December 31, 2006, because of the relatively short-term maturity of these instruments.

Use of estimates– The preparation of financial statements in accordance with generally accepted accounting principles require management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Stock based compensation– In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123(R),Share-Based Payment. SFAS 123(R) replaces SFAS No. 123,Accounting for Stock-Based Compensation,

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and supersedesAccounting Principles Board(APB) Opinion No. 25,Accounting for Stock Issued to Employees. Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123(R), Share-Based Payment, (“SFAS No. 123(R)”), using the modified prospective transition method. SFAS No. 123(R) requires equity-classified share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant and to be expensed over the applicable vesting period. Under the modified prospective transition method, share-based awards granted or modified on or after January 1, 2006, are recognized in compensation expense over the applicable vesting period. Also, any previously granted awards that are not fully vested as of January 1, 2006 are recognized as compensation expense over the remaining vesting period. No retroactive or cumulative effect adjustments were required upon The Company’s adoption of SFAS No. 123(R).

Prior to adopting SFAS No. 123(R), The Company accounted for its fixed-plan employee stock options using the intrinsic-value based method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (“APB No. 25”) and related interpretations. This method required compensation expense to be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Had the Company elected the fair value provisions of SFAS No. 123(R), The Company’s 2005 net earnings and net earnings per share would not have differed from the amounts actually reported as no share-based payments were made during this period.

The fair value of each option award is estimated on the date of grant using a Black Scholes option pricing model that uses the assumptions noted in the table below. Because Black Scholes option valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock, and other factors. The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Expected volatility	25%
Weighted-average volatility	25%
Expected dividends	0%
Expected term (in years)	1 to 5 years
Risk-free rate	4.5%

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A summary of option activity under the Plan as of March 31, 2007, and changes during the three months then ended is presented below:

Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2007		173,568	$	5.88		6.67	$	--
Granted		--	$	--
Exercised		--	$	--
Forfeited or expired		173,568	$	5.88		6.67	$	--
Outstanding at March 31, 2007		--	$	--			$	--
Exercisable at December 31, 2006		--	$	--			$	--

A summary of the status of the Company’s nonvested shares as of March 31, 2007, and changes during the three months then ended, is presented below:

Nonvested Shares	Shares		Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2007		10,000		$    1.08
Granted		--		$        --
Vested		--		$        --
Forfeited		(10,000)		$    1.08
Nonvested at March 31, 2007		--		$        --

On March 3, 2006 the Company issued to its Chief Executive Officer options to purchase 572,491 shares of its common stock at a purchase price of $6.00 per share. The options vest in five equal increments beginning with the date of issuance in March 2006 and the following four anniversary dates. The options are exercisable over a term of five years from the date of vesting. In March 2007 the Chief Executive Officer left the Company and agreed to surrender 114,498 of vested option shares.

On March 15, 2006 the Company issued to an employee options to purchase 245,350 shares of its common stock at a purchase price of $6.00 per share. The options vest in five equal increments beginning with the date of issuance in March 2006 and the following four anniversary dates. The options are exercisable over a term of five years from the date of vesting. In November 2006 the employee left the Company and during 2007 agreed to surrender 49,070 of vested options shares.

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On May 18, 2006 the Company issued to its Chief Financial Officer options to purchase 10,000 shares of its common stock at a purchase price of $11.00 per share. The options vest immediately upon issuance and are exercisable over the one year period from the date of issuance. The Chief Financial Officer subsequently left the Company and has surrendered all options that were issued.

On October 1, 2006 the Company issued to an employee options to purchase 10,000 shares of its common stock at a purchase price of $7.00 per share. The options vest in one year from the date of issuance and are exercisable over the one year period from the date of issuance. These options were subsequently surrendered in February 2007.

Recent accounting pronouncements– In February 2006, the FASB issued Statement No. 155, “Accounting for Certain Hybrid Financial Instruments” (“SFAS No. 155”), which amends FASB Statements No. 133 and 140. This Statement permits fair value remeasurement for any hybrid financial instrument containing an embedded derivative that would otherwise require bifurcation, and broadens a Qualified Special Purpose Entity’s (“QSPE”) permitted holdings to include passive derivative financial instruments that pertain to other derivative financial instruments. This Statement is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring after the beginning of an entity’s first fiscal year beginning after September 15, 2006. This Statement has no current applicability to the Company’s financial statements. The Company adopted this Statement on January 1, 2007 and the initial adoption of this Statement did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In March 2006, the FASB issued Statement No. 156,“Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140”(“SFAS No. 156”). This Statement is effective for fiscal years beginning after September 15, 2006. This Statement requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. This Statement has no current applicability to the Company’s financial statements. The Company adopted this Statement on January 1, 2007 and the initial adoption of this Statement did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In June 2006, the FASB issued Interpretation 48,“Accounting for Uncertainty in Income Taxes”(“FIN 48”), an interpretation of FASB Statement No. 109,“Accounting for Income Taxes.”FIN 48 clarifies the accounting and reporting for income taxes where interpretation of the law is uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. FIN 48 is effective for fiscal years beginning after December 15, 2006. This Statement has no current applicability to the Company’s financial statements. Management adopted this Statement on January 1, 2007 and the initial adoption of FIN 48 did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In September 2006, the FASB issued Statement No. 157,“Fair Value Measurements”(“SFAS No. 157”). SFAS No. 157 addresses how companies should measure fair value when they are

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required to use a fair value measure for recognition or disclosure purposes under GAAP. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. Management is assessing the impact of the adoption of this Statement.

In September 2006, the FASB issued Statement No. 158,“Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”(“SFAS No. 158”), an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires (a) recognition of the funded status (measured as the difference between the fair value of the plan assets and the benefit obligation) of a benefit plan as an asset or liability in the employer’s statement of financial position, (b) measurement of the funded status as of the employer’s fiscal year-end with limited exceptions, and (c) recognition of changes in the funded status in the year in which the changes occur through comprehensive income. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006. The requirement to measure the plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. This Statement has no current applicability to the Company’s financial statements. Management plans to adopt this Statement on December 31, 2006 and it is anticipated the adoption of SFAS No. 158 will not have a material impact to the Company’s financial position, results of operations, or cash flows.

In September 2006, the Securities Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB No. 108”). SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect as a cumulative effect adjustment to beginning of year retained earnings and disclose the nature and amount of each individual error being corrected in the cumulative adjustment. SAB No. 108 was effective beginning January 1, 2007 and the initial adoption of SAB No. 108 did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In February 2007, the FASB issued Statement No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). This statement permits companies to choose to measure many financial assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS 159 on its consolidated financial statements.

Reclassifications– Certain amounts in the 2006 financial statements have been reclassified to conform to the 2007 presentation. These reclassifications had on effect on previously reported results of operations or retained earnings.

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4.     Concentrations of business and credit risk

Substantially all of the Company’s bank accounts are in banks located in the PRC and are not covered by any type of protection similar to that provided by the FDIC on funds held in U.S. banks.

The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and clients and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers and clients, historical trends, and other information.

Substantially all of the Company's fixed assets and operations are located in the Peoples Republic of China.

Substantially all of the Company's profits are generated from operations in mainland China.

Payments of dividends may be subject to government restrictions.

5.     Cash and equivalents

At March 31, 2007 the Company held no restricted cash balances. Pledged bank deposits, which are now unrestricted, bear interest at 0.06% per month and in accordance with the terms and conditions of the banking facilities agreed with banks to provide mortgage loan facilities to buyers of properties developed by the Company, the Company agreed to place guarantee fund deposits of not less than 5% to 10% of the total outstanding mortgage loans extended to property buyers and to guarantee the repayments of the mortgage loans. As of March 31, 2007, the bank had released the Company from its loan guarantees, and the formerly restricted funds have been transferred to an unrestricted bank account at the same bank.

Substantially all of the Company’s cash is held in financial institutions in the PRC and are not protected by FDIC insurance or any other form of guaranteed payment.

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6.     Properties held for resale

Properties held for resale at March 31, 2007 and December 31, 2006 by project are as follows:

	March 31, 2007		December 31, 2006
Qiyun New Village	$	1,814,203	$	1,795,644
Peacock Garden		315,815		312,584
Chenglong Garden		7,534,746		7,712,615
President Building		416,427		412,167
Maryland Building		236,744		234,322
Others		155,008		153,218
Total	$	10,472,943	$	10,620,550

As of March 31, 2007 the carrying values of stock of properties of $10,457,943 have been pledged as security for the Company’s bank loans and mortgage loans.

7.     Amounts due from/(to) directors and related parties

The amounts due from/(to) directors and related parties at March 31, 2007 and December 31, 2006 are as follows:

Amounts due from/(to) directors	March 31, 2007			December 31, 2006
Frank Jiang Fang	$	(257,709	)	$	(418,708	)
Gong Wang Fu		(280,008	)		(276,294	)
Amounts due from/(to) affiliates, net	$	(537,717	)	$	(695,002	)

Amounts due from/(to) related parties are unsecured, bear no interest, and have no fixed repayment terms.

8.     Short-term loans

	March 31, 2007		December 31, 2006
Loans from Banks – delinquent	$	12,583,980	$	13,743,945
Loans from Banks - short term		15,503,876		15,345,569
Bank loans purchased by asset management company		22,448,320		22,218,670
Total current notes payable	$	50,536,176	$	51,308,184

At March 31, 2007 and December 31, 2006, all bank loans and those purchased by the asset management company were treated as short-term because all bank loans have matured and negotiations, while ongoing, are not settled as to an extension of the due dates of the bank loans.

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The delinquent notes had due dates ranging from May of 2003 to December of 2006.

On June 22, 2006 the Company entered into a settlement agreement with a bank with respect to $7,992,326 of past due notes. In accordance with the terms of this settlement agreement, $5,434,782 in principal was repaid prior to December 31, 2006 and the balance of the note is to be repaid in two equal quarterly installments of $1,278,772 with the final payment due on June 30, 2007. If the Company makes all payments on a timely basis, the bank has agreed to waive $1,150,895 in past due interest. The Company will recognize the benefit of this interest waiver once it has complied with all terms of the settlement agreement.

There have been numerous instances of events of defaults arising from the non-payment of interest and principal in accordance with the terms of the loan agreements with two of the banks. No definitive demands have been made by the banks to foreclose on the secured borrowings. The Company is still in discussions with the banks to approve an extension of the terms and tenure of the secured and unsecured loans. Management expects that the bank negotiations will result in an extension to bank debt maturities.

The Company has not accrued any interest on the loans acquired by the asset management company since March 21, 2005 as the asset management company has agreed to waive interest on these acquired loans subsequent to that date.

Interest is accruing on all other past due loans at rates ranging from 6.0535% to 7.533%, the rates called for in the original loan agreements.

Substantially all of these loans were collateralized, however, a significant portion of the properties held as collateral were subsequently sold by the Company.

9.     Long-term debts — secured

	March 31, 2007			December 31, 2006
Long term debts:
Mortgage loans	$	2,203,871		$	2,427,541
Less: Current portion of long-term debts		(395,547	)		(428,076	)
Long-term debts	$	1,808,324		$	1,999,465

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Maturities of long-term debt including mortgage loans for each of the next five years and thereafter are as follows:

	Amount
2007	$	395,547
2008		428,076
2009		428,076
2010		364,419
2011		286,407
Thereafter		301,346
	$	2,203,871

10.    Commitments

As of March 31, 2007 the Company had $90,867,081 in commitments for capital expenditures for contractual agreements related to the development of the Xita project. The Company intends to sell its interests in this development project, which would release the Company from these commitments. Additionally the Company has $5,813,953 of commitments for funding the registered capital of its subsidiaries.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

(1)    Caution Regarding Forward-Looking Information

The following discussion and analysis should be read in conjunction with our consolidated financial statements prepared in accordance with accounting principles generally accepted in the USA. Unless otherwise indicated, references in this discussion to “we”,”our” and “us” are to Great China International Holdings, Inc., and its subsidiaries.

(2)    Executive Summary

Great China International Holdings, Inc., is a comprehensive real estate company with principal activities in real estate investment, development, sales and management. We conduct all our operation in the People’s Republic of China through our direct and indirect wholly owned subsidiaries; Shenyang Maryland International Industry Company Limited, Shenyang Jitian Property Company Limited, Shenyang Yindu Property Company Limited, Shenyang Xinchao Property Company Limited and Silverstrand International Holdings Company Limited.

Prior to June 30, 2006, Shenyang Maryland International Industry Company Limited (“Maryland”) has been the principal operating company and until 2005 owned five real estate projects.

— President Building comprises three blocks of commercial towers situated in Shenyang City, Heping North Street, which is the financial district of Shenyang. While the original intention was to sell a majority of the office buildings, management intends to retain this as their flag ship and a number of units were leased. The Company’s head office is situated on the 25th and 26th Floors of President Building.

— Chenglong Garden, situated in Shenyang Huanggu District, comprises 12 blocks of modern apartments, a number of retail shops and ancillary facilities including basement car parking facilities and parks.

— Qiyun New Village is situated along the Nanyun Riverside and consists of 347 residential units, among which 327 units have been sold, and 2,186 square meters of commercial units.

— Peacock Garden is situated in Heping North Street, the commercial district of Shenyang. Construction was completed in November 2000 and Peacock Garden comprises 197 low-density residential apartments of whic 193 have been sold.

— The Maryland Building consists of 12,858 square meters of commercial space among which 11,310 have been sold and other remaining 1,548 square meters are held for leasing purposes.

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Our subsidiary, Shenyang Jitian Property Company Limited, was established on February 22, 2006 for a new project development in Shenyang called the Chessboard Mountain Residential project known as Galaxy Bay. On February 27, 2006, Shenyang Jitian Property Company was confirmed as the highest bidder in a public auction for a residential development project located in the Chessboard Mountain International Tourism Development District in Shenyang City. The total purchase price for the 420,317 square meters of land use rights was approximately $56.7 million. On May 12, 2006, bank financing was obtained through a related third party. On May 16, 2006, Shenyang Jitian Property Company obtained planning approval from the relevant local authority for the project with a total construction area of approximately 891,840 square meters (9.6 million square feet), and on May 28, 2006, construction approval from the relevant local authority was obtained.

Effective July 3, 2006, Shenyang Jitian Property Company entered into a loan agreement with the Shenyang City Commercial Bank whereby the Bank agreed to provide a loan of up to RMB 550,000,000, or approximately $68.7 million, to Shenyang Jitian Property Company for the purpose of acquiring the land use right for the Chessboard Mountain Project. The loan agreement has a term of three years, and any amounts advanced thereunder bear interest at a rate of 6.633% per annum and must be repaid by the end of the term of the loan agreement.

On November 20, 2006, Silverstrand International Holdings entered into an agreement for the sale of all of the outstanding equity interest in Shenyang Jitian Property Company, and this transaction closed effective December 8, 2006. Under the agreement, Silverstrand sold 50% of the equity interest in Shenyang Jitian Property Company to each of Beijing Capital Land Limited and Reco Ziyang Pte Limited in exchange for a total cash payment of US$1,399,970 (the amount of Silverstrand’s invested capital in Shenyang Jitian Property Company) and assumption of all bank debt incurred in connection with the acquisition of Galaxy Bay. In connection with and effective upon the completion of the sale of Shenyang Jitian Property Company, our subsidiary, Shengyang Maryland International Industry Company Limited, entered into a Land Consolidation and Development Agreement with respect to the Galaxy Bay Project. Under this Development Agreement, Shenyang Maryland was engaged to arrange for necessary permitting, site preparation and installation of development infrastructure. As the developer/contractor, the contract provides for Shenyang Maryland to be paid a total of approximately $13.3 million in staged amounts upon completion of different aspects of the development work provided for by the Development Agreement. Shenyang Maryland is obligated to pay any necessary sub-contractors on the Galaxy Bay Project for their work and materials. The agreement is a fixed-price contract, which means that Shenyang Maryland has agreed to complete its development work at fixed prices, and any cost overruns incurred in connection with the development work covered by the Development Agreement would therefore impact Great China’s profit with respect to such development work. It is estimated that the Galaxy Bay Project will take approximately one year to complete.

Pursuant to agreements entered into in December 2005, we acquired two companies that own rights to develop and acquire a property interest (land use right) for a large parcel of property in Shenyang City known as the Xita Project. The two companies are successors in interest to a bid confirmation letter, originally issued by the City of Shenyang to Shenyang Yunfeng Real Estate Development Co., Ltd., and subsequently amended and supplemented in September 2005. We expect the Xita Project shall be a major development project for 2007 and subsequent years. It is an urban reconstruction development project with multi-functional sections, which is consistent with government development planning. The project is located in the Xi Ta area in the city of

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Shenyang and is mostly populated by ethnic Koreans. It will feature a construction area of almost 500,000 square meters, with an occupying area of approximately 83,071 square meters.

Pursuant to a sale and purchase agreement dated December 8, 2005, subsequently amended on December 28, 2005, we agreed to acquire through our indirect subsidiary, Shenyang Maryland International, 70% of the equity interest in Shenyang Xinchao Development Company, a Sino-Foreign joint venture corporation that owns approximately 66% of the rights granted under the Xita Project confirmation letter, from Shenyang Yunfeng Real Estate Development Co. We agreed to acquire the remaining 30% equity interest in Shenyang Xinchao Development Company through our direct subsidiary, Silverstrand International Holdings, from I.R.E. Corporation Limited, an unrelated Singapore corporation. The remaining approximately 34% interest in the rights granted under the Xita Project confirmation letter is held by Shenyang Yindu Property Company, also a Sino-Foreign joint venture. Pursuant to agreements dated December 28, 2005, Shenyang Maryland International agreed to acquire a 70% interest in Shenyang Yindu Property Company from Shenyang Yunfeng Real Estate Development Co., and Silverstrand International Holdings agreed to acquire a 30% interest in Shenyang Yindu Property Company from I.R.E. Corporation. These transactions closed at the end of December 2005, so that we now hold through our subsidiaries 100 percent interest in the land comprising the Xita Project.

The purchase price for the interests acquired from I.R.E. Corporation is the assumption of the obligations under joint venture arrangements, which is a total of $5.5 million for both joint ventures. The purchase price for Shenyang Yunfeng Real Estate Development Co.’s interest in Shenyang Xinchao Development Company, is approximately $8.6 million, which was paid by a cash payment of $5 million by Shenyang Maryland International in December 2005, and by the assumption of the obligation of Shenyang Yunfeng Real Estate Development Co. to make additional contributions to the joint venture in the amount of $3.6 million (which Shenyang Maryland International made to Shenyang Xinchao Development Company in December 2005).

The terms of the Xita Project confirmation letter provide that, in order for the rights granted under the confirmation letter to fully vest, the owners of the project rights must pay a total of approximately $88 million for the Xita property. To date, of this amount, a total of approximately $4.0 million has been paid. In December 2005, we obtained bank financing in the principal amount of $14.8 million to make our initial cash payment in connection with the Shenyang Xinchao Development Company acquisition and the additional capital contributions in connection with this acquisition. In 2006, the loan accrued interest at a rate of 7.254% per annum, with all principal and interest due December 31, 2006. We obtained from the bank an extension of the maturity date to November 7, 2007, but in exchange the interest rate increased to 8.19% per annum. We sought the participation of one or more partners in a joint venture to provide the financing necessary to advance the project, but did not identified any joint venture partners or established terms for a joint venture arrangement. In 2007 the Company ceased development on the Xita Project and began negotiations to sell its assets and rights in the Xita Project.

(3)   Results of Operations

Comparison of operations for the three months ended March 31, 2007 with the three months ended March 31, 2006:

The Company earned net income of $849,405 for the three months ended March 31, 2007 compared to a net loss of $(1,537,841) for 2006, representing an increase of $2,387,246. Components of sales and expenses resulting in this increase in net income are discussed below.

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Sales revenues decreased by $1,124,229 or 83% quarter-on-quarter to $233,015 for the three months ended March 31, 2007 compared to 2006 of $1,357,244. Rental and management fee income increased by $32,447 or 2% to $1,358,273 during the quarter ended March 31, 2007 from $1,325,826 for the comparable period in 2006. These changes are mainly attributable to:

— Significant decrease in sales of Chenglong Garden by $992,575 or 81%;

— Decreases in gross floor area sold by 1,833 square meters quarter-on-quarter to 159 square meters for the quarter ended March 31, 2007 compared to 1,992 square meters in 2006;

— The number of units sold decreased by 7 units or 88% quarter-on-quarter to 1 units for the quarter ended March 31, 2007 compared to 8 units in 2006;

— Increases management fee income by $30,845 or 8%; and

— No new development projects were introduced during 2006 or 2007.

Cost of properties sold decreased by $1,065,715 or 83% during the quarter ended March 31, 2007, as compared to the corresponding period in 2006. This was primarily attributable to a 92% decrease in the gross floor area sold as described above.

Building management expenses decreased by $146,596 or 39% primarily due to lower utility costs achieved under a new air conditioning maintenance and service contract.

Operating and selling expenses decreased by $21,608 or 54% to $18,242 for the quarter ended March 31, 2007 as compared to $39,850 for the quarter ended March 31, 2006. The decrease is mainly due to a decrease in property sales activity.

General and administrative expenses decreased by $390,856 or 51% to $378,781 during the three months ended March 31, 2007 compared to $769,637 for the three months ended March 31, 2006. The decrease is due to an increase in legal and professional fees of $271,087 offset by recovery of doubtful accounts of $685,825.

Depreciation expense increased by $36,174 or 7% to $580,321 for the quarter ended March 31, 2007, compared to $544,147 for the corresponding period in 2006.

Other income increased to $1,949,269 in 2007 from $15,223 in 2006 due primarily to revenues earned under a development contract with the new owners of the Jitian Project of $1,935,533.

Interest and financing costs decreased by $737,054 to $594,123 for the quarter ended March 31, 2007, as compared to $1,331,177 for the quarter ended March 31, 2006. The decrease was primarily due to loan closing costs of $183,555 incurred during 2006.

(4)   Liquidity and Capital Resources

Net cash flows provided by (used in) operating activities for the three months ended March 31, 2007, and 2006 were $655,890 and $(5,528,119), respectively. The increase in funds provided

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by was primarily due to increase in other revenue offset by an increase in accounts receivable during the quarter ended March 31, 2007 as compared to significant advances to contractors that were made during the quarter ended March 31, 2006.

Net cash flows used in investing activities for the three months ended March 31, 2007, was $664,304 compared to $236,215 for the three months ended March 31, 2006. The investing activity change was primarily construction in progress with the Xita construction project.

Net cash flows used in financing activities for the quarter ended March 31, 2007, was $1,152,963 compared to net cash used in financing activities of $3,905,989 for the quarter ended March 31, 2006 representing substantial repayments of borrowings in 2006 compared to 2007.

Current liabilities exceeded current assets by $40,981,918 as of March 31, 2007. The working capital deficit was incurred primarily due to $50,536,176 of short-term bank loans, which included $35,032,300 of bank loans currently in default.

Due to frequent changes in government fiscal and bank lending policies in the past 15 years as well as other administrative controls from time to time in China, it is not uncommon for many companies to find themselves holding overdue loans borrowed from the banks, although the initial intention between the borrowers and lenders was for terms with longer maturity period. Under the circumstances, most lending banks had and have usually worked sympathetically and closely with borrowers for loan extension or restructuring for a shorter period within the administrative guidelines of the government. As State policies are issued outside the control of the banks in China and form part of the macro and micro-economic measures, many bankers and their customers are often stuck in the situation, thus they are generally more tolerant and supportive to overdue loans than their counterparts in Western economies; they will work hard to deal with the situation provided the borrowers are responsible and have good relationship with the lenders.

As of March 31, 2007, the Company’s subsidiary, Shenyang Maryland International Industry Co. Limited (“Maryland”), has ongoing discussions with lending banks to renegotiate various matured bank loans totaling $35,032,300 with the following relevant banks:

1.   The Bank of China: As of March 31, 2007, bank loans from the Bank of China totaled $7,751,938. The loans were originally extended for the development of the President Building in 2000. While the bank had originally agreed orally on a 10-year long-term loan period for the project, in 2002, owing to a change in lending policy, the Bank changed the terms of the loans into short-term development loans. Since the maturity of the various loans by December 31, 2004, Maryland commenced ongoing negotiation with the Bank of China for an extension of the loans. Due to the initial verbal agreement and a credible relationship over the years, the Bank has agreed to renegotiate a settlement term. As of July 13, 2006, the Company has received a written notice from the Bank of China explaining the situation.

2.   The Agricultural Bank of China: As of March 31, 2007, bank loans from the Agricultural Bank of China totaled $2,248,062. The loans were originally extended for the development of Chenglong Garden. Since the loans matured on December 21, 2005, Maryland has commenced ongoing negotiation with the Agricultural Bank of China for a short-term loan extension for another one-year term.

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3.   The Industrial and Commercial Bank of China (ICBC): As of March 31, 2007, the bank loans from the ICBC totaled $25,032,300 and were originally extended for the development of the Chenglong Garden in 2001. Since the loans had matured at the end of 2003, Maryland has commenced ongoing negotiations for an extension of the loans. As part of the listing procedures on the Stock Exchange of Hong Kong, reorganization and restructuring, certain of the loans totaling $22,448,320 were sold to the Great Wall Asset Management Limited. On January 5, 2006, Great Wall Asset Management Limited issued a notification letter to Maryland that certain loans totaling $22,448,320 has been assigned from the ICBC. The Great Wall Asset Management Limited and Maryland are conducting ongoing negotiation on the terms and repayment schedules of the assigned loans. The terms and repayment schedules requires approval from various government bureaus, and, accordingly, Maryland believed the negotiation could be closed by the end of 2006, but negotiations are still ongoing. On June 22, 2006, Maryland has also negotiated a settlement repayment schedule with ICBC on the remaining loans totaling $7,992,326. Under the negotiated terms of the repayment schedule, Maryland will be required to make quarterly installment repayments commencing from June 30, 2006 until June 30, 2007. As of March 31, 2007, Maryland has paid $5,434,782 to ICBC in installments on the repayment plan and has two remaining payments of $1,278,772 that are due on March 31, 2007 and June 30, 2007. When Maryland shall have fully repaid the last installment on or before June 30, 2007, accrued accumulated interest totaling $1,150,895 will be waived by ICBC.

(5)   Contractual Obligations

The following table is a summary of the Company’s contractual obligations as of March 31, 2007:

	Total		Less than one year		1-3 Years		Thereafter
Short-Term Debt	$	50,536,176	$	50,536,176	$	--	$	--
Long-Term Debt		2,203,871		395,547		856,152		952,172
Amounts due to related parties		537,717		537,717		--		--
Purchase commitments		2,325,581		2,325,581		--		--
Construction commitments		87,016,837		87,016,837		--		--
Total Contractual Cash Obligations	$	142,620,182	$	140,811,858	$	856,152	$	952,172

The construction commitments represent amounts due for the development of the Xita Project. The Company is currently negotiating the sale of its interest in the project including the associated commitments.

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Item 3. Quantitative and Qualitative Disclosure About Market Risk

As an underpinning industry in China, real estate has developed into a crucial pulling force to the all-round growth of national economy with its long-term continuous speedy growth and positive momentum of both production and marketing thrive which have attracted extensive attention both in the domestic and from overseas. A lot of problems and risks arose with the real estate prosperity due to its over speedy development:

The national land is fully controlled by the government, and its price keeps rising in accordance with the supply-demand relationship, which resulted in the over-fast increase of the investment in real estate and the capital pressure. Meanwhile, the adjustment of lending rate increased the risk and pressure of capital operation.

The contradictions of real estate market structure in some regions emerged, among which the contradiction of commodity houses supply structure is conspicuous. On one hand, some large-area residences, high rises and premium projects emerged in endlessly, but they are unsuitable for sale; on the other hand, normal-sized commodity houses and economic and functional houses targeting the low and medium wages earners in the urban area are in short supply. The housing price still rises faster in some cities, the construction of living houses safeguard system lags behind in other cities, which resulted in the disharmony between supply and demand. So the order of real estate market is to be further standardized.

There still exist the phenomena of false advertisements, contract fraud and illegal actions in agent service and logistic administration, which are to be kept within limits in effect. It should not only rely on the self-restriction of real estate enterprises to address all these problems. The credit standing system of real estate market is to be perfected. The operation, supervision and control systems of real estate market are to be further improved.

Item  4. Controls and Procedures

As of March 31, 2007 an evaluation was performed under the supervision and with the participation of Great China's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Great China's disclosure controls and procedures. Based on that evaluation, Great China's management, including the Chief Executive Officer and Chief Financial Officer, concluded that Great China's disclosure controls and procedures were effective. There have been no significant changes in Great China's internal controls or in other factors that could significantly affect internal controls subsequent to the date of the evaluation.

PART II. OTHER INFORMATION

Item  1A. Risk Factors

Any statements in this discussion that are not historical facts are forward-looking statements that involve risks and uncertainties; actual results may differ from the forward-looking statements. Sentences or phrases that use such words as “believes,” “anticipates,” “plans,” “may,” “hopes,” “can,” “will,” “expects,” “is designed to,”“with the intent,” “potential” and others indicate forward-looking statements, but their absence does not mean that a statement is not forward-looking. Forward-looking statements are based on current expectations, estimates,

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and projections as of the date of this report, and they are subject to a number of risks, uncertainties, and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. Such forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in this report and in our annual report on Form 10-K for the year ended December 31, 2006, under the caption “ITEM 1A. RISK FACTORS.” In particular, the matters discussed above under PART I, ITEM 2. MANAGEMENT’S DISCUSSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS should be viewed as creating substantial uncertainty about the Company and its prospects for the future. Any one or a combination of factors could materially affect our operations and financial condition.

Item  6. Exhibits.

Exhibits: Copies of the following documents are included or furnished as exhibits to this report pursuant to Item 601 of Regulation S-K.

Exhibit No.	SEC Ref. No.	Title of Document
31.1	31	The certification of chief executive officer required by Rule 13a-14(a) or Rule 15d-14(a)
31.1	31	The certification of chief financial officer required by Rule 13a-14(a) or Rule 15d-14(a)
32.1	32	The certifications required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350

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SIGNATURES

In accordance with the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GREAT CHINA INTERNATIONAL HOLDINGS, INC.

Date: May 14, 2007	By:	/s/ Frank Jiang
		Frank Jiang, Chief Executive Officer (Principal Financial Officer)

Date: May 14, 2007	By:	/s/ Danny Sui Keung Chau
		Danny Sui Keung Chau, Chief Financial Officer (Principal Financial and Accounting Officer)

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