HH Biotechnology (HHBT) 10-Q 2008 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

T	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period September 30, 2008
¨	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 registrant 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.   
Yesx   No¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-3 of the Exchange Act). (check one)

Large accelerated filer  ¨   Accelerated filer¨   Non-accelerated filer  ¨   Smaller reporting company  x

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 November 12, 2008, there were 11,759,966 shares of common stock outstanding.

FORM 10-Q
GREAT CHINA INTERNATIONAL HOLDINGS, INC.

TABLE OF CONTENTS Page

PART I.	Item 1. Financial Information	3
	Balance Sheet as of September 30, 2008 (Unaudited) and December 31, 2007	3
	Statements of Operations for the Three-Month and Nine-Month Periods Ended September 30, 2008 and 2007 (Unaudited)	4
	Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2008 and 2007 (Unaudited)	5
	Notes to the Financial Statements	6
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	25
	Item 4T. Controls and Procedures	25
PART II.	Other Information	25
	Item 6. Exhibits	26
	Signatures	27

2

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	September 30, 2008		December 31, 2007
	(Unaudited)
ASSETS
Current assets:
Cash and equivalents	$	7,417,041	$	10,044,579
Accounts receivable, net		304,385		325,058
Receivable on disposal of subsidiaries		--		30,701,957
Other receivable, net		128,028		1,070,863
Properties held for resale		6,911,150		7,696,437
Total current assets		14,760,604		49,838,893
Property and equipment, net		1,070,001		1,095,007
Properties held for rent		50,755,355		49,537,329
Total assets	$	66,585,959	$	100,471,229
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term loans	$	21,652,400	$	25,231,297
Accounts payable and accrued expenses		4,429,318		8,615,415
Other payable		1,651,865		5,723,489
Payable to a former subsidiary		768,287		10,494,449
Commission payable		1,784,080		8,898,502
Advances from buyers		1,904,587		2,034,019
Taxes payable		8,812,204		8,552,316
Total current liabilities		41,002,741		69,549,487
Long term debt, net		--		5,486,968
Total liabilities		41,002,741		75,036,455
Stockholders' equity:
Common stock, $.001 par value 50,000,000 shares
authorized, 11,759,966 issued and outstanding		11,760		11,760
Additional paid in capital		4,566,156		4,562,855
Statutory reserve		638,128		638,128
Other comprehensive income		2,193,113		1,468,546
Retained earnings		18,174,061		18,753,485
Total stockholders' equity		25,583,218		25,434,773
Total liabilities and stockholders' equity	$	66,585,959	$	100,471,229

The accompanying notes are integral part of these unaudited consolidated financial statements.

3

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND 2007
(UNAUDITED)

	Three month periods ended September 30,						Nine month periods ended September 30,
	2008			2007			2008			2007
Revenues
Real estate sales	$	816,571		$	709,419		$	3,035,256		$	2,334,219
Rental and management fee income		1,539,255			1,195,996			4,453,451			4,058,230
Total revenues		2,355,825			1,905,415			7,488,707			6,392,449
Cost of revenues		1,157,439			664,227			3,174,119			3,896,087
Gross profit		1,198,387			1,241,189			4,314,588			2,496,362
Operating expenses
Selling expenses		3,893			3,354			85,981			77,074
General and administrative expenses		822,270			5,059,096			2,926,827			7,253,434
Agent fee		--			2,649,007			--			2,649,007
Depreciation and amortization		754,306			635,280			2,214,530			1,750,523
Total operation expenses		1,580,469			8,346,737			5,227,338			11,730,038
Loss from operations		(382,082	)		(7,105,549	)		(912,750	)		(9,233,676	)
Other income (expense)
Land leveling income (expense)		--			--			(391,400	)		5,960,265
Gain on settlement of debt		--			15,918,226			1,087,805			15,918,226
Gain on interest expense waived		1,002,805			--			1,002,805			--
Loss on terminated project		--			(1,311,323	)		--			(1,510,865	)
Other income, net		555,012			(753,474	)		699,092			(229,638	)
Interest and finance costs		(655,295	)		(2,155,487	)		(2,064,619	)		(3,450,746	)
Total other income (expense)		902,523			11,697,942			333,327			16,687,242
Income (loss) before income taxes		520,441			4,592,394			(579,424	)		7,453,567
Provision for income taxes		164,030			2,532,595			--			3,548,240
Income (loss) from operations		356,411			2,059,799			(579,424	)		3,905,327
Discontinued operations
Gain from entity held for sale		--			--			--			211,059
Net income (loss)		356,411			2,059,799			(579,424	)		4,116,386
Other comprehensive income:
Foreign currency translation adjustment		91,224			277,707			724,567			507,427
Net comprehensive income (loss)		447,635			2,337,506			145,144			4,623,813
Net income (loss) per share from continued operations
Basic	$	0.03		$	0.18		$	(0.05	)	$	0.33
Diluted	$	0.03		$	0.18		$	(0.05	)	$	0.33
Net income per share from discontinued operations
Basic	$	--		$	--		$	--		$	0.02
Diluted	$	--		$	--		$	--		$	0.02
Net income (loss) per share
Basic	$	0.03		$	0.18		$	(0.05	)	$	0.35
Diluted	$	0.03		$	0.18		$	(0.05	)	$	0.35
Weighted average number of shares outstanding
Basic		11,759,966			11,759,966			11,759,966			11,759,966
Diluted		11,760,410			11,759,966			11,759,966			11,759,966

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND 2007
(UNAUDITED)

	2008			2007
Cash flows from operating activities:
Net income (loss)	$	(579,424	)	$	4,116,386
Adjustments to reconcile net income (loss) to operating activities -
Depreciation and amortization		2,214,530			1,750,523
Gain on interest expense waived		(1,002,805	)		--
Gain on settlement of debt		(1,087,448	)		(15,918,226	)
Provision for doubtful accounts		92,379			3,665,323
Loss on termination of project		--			1,510,865
Non-cash stock compensation expense		3,301			--
(Increase) decrease in current assets:
Accounts receivable and other receivable		31,677,751			(943,016	)
Advances to suppliers		--			1,039,581
Properties held for resale		1,271,326			1,219,604
(Increase) decrease in current liabilities:
Accounts payable and other payables and accrued expenses		(24,082,976	)		688,569
Advances from buyers		(259,448	)		(728,514	)
Income and other taxes payable		21,601			4,632,604
Net cash provided by operating activities from continuing operations		8,235,786			1,033,699
Net cash provided by operating activities from discontinued operations		--			17,056,254
Net cash provided by operating activities		8,235,786			18,089,952
Cash flows from investing activities:
Construction in progress		(34,409)			7,861,324
Purchase of property & equipment		(48,292	)		(6,182,583	)
Net cash provided by/(used in) investing activities		(82,701	)		1,678,741
Cash flows from financing activities:
Loan proceeds		--			5,333,333
Loan repayments		(10,886,967	)		(22,005,151	)
Advances to directors and affiliated companies		--			(671,489	)
Net cash in financing activities		(10,886,967	)		17,343,307
Effect of exchange differences		106,344			748,950
Net increase/(decrease) in cash and cash equivalents		(2,627,538	)		3,174,336
Cash and cash equivalents, beginning of period	$	10,044,579		$	1,769,744
Cash and cash equivalents, end of period	$	7,417,041		$	4,944,080
Supplemental disclosures of cash flow information:
Interest paid	$	3,516,313		$	1,951,286
Income taxes	$	97,428		$	380,888

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

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. On September 15, 2005, the Company changed its name to Great China International Holdings, Inc.

Beijing Xinchao Property Company Limited (“Beijing Xinchao”) was registered in Beijing on March 27, 2008. Beijing Xinchao was 100% owned by Shenyang Xinchao with a registered capital amounting to $4,255,440 (RMB 29,800,000) and a defined period of existence of 10 years. Beijing Xinchao was disposed of in May 2008 for the amount of $4,255,440 and no gain/loss was recognized in the disposal. The disposal amount was fully received on September 30, 2008.

On August 7, 2007, the Company completed the acquisition of all of the issued share capital of Loyal Best Property Development Limited (“Loyal Best”), a Hong Kong limited company, from Gentle Knight Limited.

Loyal Best was the sole owner of an entity called Shenyang Loyal Best Hunnan Property Development Limited (“Shenyang Loyal Best”), a wholly owned foreign enterprise that was a party to a Confirmation Letter of Auction with respect to a parcel of land located at the center area of Hunnan New Zone in the city of Shenyang, China. Immediately after acquisition, the Company decided to sell Loyal Best at a gain.

The Company, through its wholly-owned subsidiary - Silverstrand, transferred 100% of the issued share capital of Loyal Best Property Development Limited to Celebrities Real Estate Development Group Co., Ltd. in exchange for the payment of approximately $48.70 million(360 million Chinese yuan). The transaction was closed on December 15, 2007. As of September 30, 2008, the Company fully received the selling amount of disposal on Loyal Best.

The Company engages in the development and sale of high quality real estate properties and developed residential and commercial properties includes Maryland building, President Buildings, Qiyun new village, Peacock Garden, and Chenglong Garden. The Company also engages in rental of commercial buildings 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.

2. Summary of significant accounting policies

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The Company’s functional currency is the Chinese Renminbi (CNY); however the accompanying consolidated financial statements have been translated and presented in United States Dollars ($) on the basis set forth below.

The following is a summary of significant accounting policies:

Unaudited Interim Financial Information- The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results for any future period. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the fiscal year ended December 31, 2007. The results of the nine month period ended September 30, 2008 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2008.

6

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

Principles of Consolidation– The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances within the Company are eliminated in consolidation.

Allowance for Doubtful Accounts- The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and other receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of September 30, 2008 and December 31, 2007, the Company reserved $5,613,432 and $5,174,895 respectively.

Properties held for sale– The Company capitalizes as properties held for sale, the direct construction and development costs, property taxes, interest incurred on costs related to land under development and other related costs (i.e. engineering, surveying, landscaping, etc.) until the property reaches its intended use. At September 30, 2008 and December 31, 2007, properties held for sale amounted to $6,911,150 and $7,696,437, respectively.

Properties held for rental– Properties include buildings held for rental and land use rights, which are being depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line basis over 20-26 years

As of September 30, 2008 and December 31, 2007 properties held for rental consist of the following:

	9-30-2008	12-31-2007
Buildings and land use rights	62,738,561	58,825,103
Accumulated depreciation	(11,983,206)	(9,287,774)
	50,755,355	49,537,329

Depreciation expense for the nine month periods ended September 30, 2008 and 2007, totaled $2,035,936 and $1,712,665, respectively.

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 over useful lives as follows:

Buildings	8-26 years
Leasehold improvements	20 years
Equipment	5 years
Motor vehicles	5 years
Office furniture and fixtures	5 years

7

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

As of September 30, 2008 and December 31, 2007 Property, Plant & Equipment consist of the following:

	9-30-2008			12-31-2007
Building	$	365,512		$	342,713
Automobile		1,213,881			1,115,768
Office equipment & Furniture		433,059			36,168
Construction in progress		35,112			--
Others		15,851			10,930
		2,063,415			1,855,579
Accumulated depreciation		(993,414	)		(760,572	)
Property and equipment, net	$	1,070,001		$	1,095,007

Depreciation expense for the nine month periods ended September 30, 2008 and 2007, totaled $178,594 and $37,858 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 nine month periods ended September 30, 2008, 2007 and 2006.

As of September 30, 2008 fixed assets totaling $27,616,605 have been pledged as security to various banks in respect of borrowings totaling $21,652,400.

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.

As of September 30, 2008 and December 31, 2007, the Company had $35,112 and $0 construction-in-progress balance respectively.

8

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

Revenue Recognition

Real estate sales

Real estate sales are reported in accordance with the provisions of SFAS No. 66, “Accounting for Sales of Real Estate”. Profit from the sales of development properties, less 5% business tax, is recognized by the full accrual method when the sale is consummated. A sale is not considered consummated until (1) the parties are bound by the terms of a contract, (2) all consideration has been exchanged, (3) any permanent financing for which the seller is responsible has been arranged, (4) all conditions precedent to closing have been performed, (5) the seller does not have substantial continuing involvement with the property, and (6) the usual risks and rewards of ownership have been transferred to the buyer. Sales transactions not meeting all the conditions of the full accrual method are accounted for using the deposit method of accounting. Under the deposit method, all costs are capitalized as incurred, and payments received from the buyer are recorded as a deposit liability. Real estate rental income, less 5% business tax, is recognized on the straight-line basis over the terms of the tenancy agreements.

For land sales, the Company recognizes the revenue when title of the land development right is transferred and collectability is assured.

For the reimbursement on infrastructure costs, the Company recognizes the income (loss), which is at the fair market value agreed between the Company and the PRC government, when they enter into a binding agreement with the government agreeing on the reimbursement.

Real Estate Capitalization and Cost Allocation

Real estate held for development or sale consists of residential and commercial units under construction and units completed.

Real estate held for development or sale is stated at cost or estimated net realizable value, whichever is lower. Costs include land and land improvements, direct construction costs and development costs, including predevelopment costs, interest on indebtedness, real estate taxes, insurance, construction overhead and indirect project costs. Selling and advertising costs are expensed as incurred. Total estimated costs of multi-unit developments are allocated to individual units based upon specific identification methods.

If the real estate is determined to be impaired, it will be written down to its fair market value. Real estate held for development or sale costs include the cost of land use rights, land development and home construction costs, engineering costs, insurance costs, wages, real estate taxes, and interest related to development and construction. All costs are accumulated by specific projects and allocated to residential and commercial units within the respective projects. The Company leases the land for the residential unit sites under land use rights with various terms from the government of the PRC. The Company evaluates the carrying value for impairment based on the undiscounted future cash flows of the assets. Write-downs of inventory deemed impaired would be recorded as adjustments to the cost basis. No depreciation is provided for construction in progress.

Capitalization of Interest

In accordance with SFAS 34, interest incurred during construction is capitalized to construction in progress. All other interest is expensed as incurred. During the nine month periods ended September 30, 2008, the Company did not have any construction therefore no interest was capitalized.

9

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

Other income

Other income consists of land leveling income, which was a one-time service performed pursuant to the request by our customer and gain on settlement of debt. These revenues are recognized when the services have been performed and the settled amount has been paid 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 of the Company have been translated at year- end exchange rates, while revenues and expenses have been translated at average exchange rates in effect during the year. Resulting cumulative translation adjustments have been recorded as other comprehensive income (loss) as a separate component of stockholders' equity.

Equity 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.

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.

Concentrations of business and credit risk – Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base, most of which are in China.

The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

Recent accounting pronouncements– In September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on financial statements.

In September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)’ This Statement improves financial reporting by requiring an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a

10

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:

a.   A brief description of the provisions of this Statement

b.   The date that adoption is required

c.   The date the employer plans to adopt the recognition provisions of this Statement, if earlier.

The requirement to measure 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. The management is currently evaluating the effect of this pronouncement on financial statements.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements”. This Statement amends ARB 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company’s fiscal year beginning October 1, 2009. Management is currently evaluating the effect of this pronouncement on financial statements.

In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The new standard also improves transparency about the location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under Statement 133; and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows. Management is currently evaluating the effect of this pronouncement on financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This Statement replaces SFAS No. 141, Business Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after Company’s fiscal year beginning October 1, 2009. While the Company has not yet evaluated this statement for the impact, if any, that SFAS No. 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any

11

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

acquisitions after September 30, 2009. The management is currently evaluating the effect of this pronouncement on financial statements.

In May 0f 2008, FSAB issued SFASB No.162, The Hierarchy of Generally Accepted Accounting Principles. The pronouncement mandates the GAAP hierarchy reside in the accounting literature as opposed to the audit literature. This has the practical impact of elevating FASB Statements of Financial Accounting Concepts in the GAAP hierarchy. This pronouncement will become effective 60 days following SEC approval. The company does not believe this pronouncement will impact its financial statements.

In May of 2008, FASB issued SFASB No. 163, Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60. The scope of the statement is limited to financial guarantee insurance (and reinsurance) contracts. The pronouncement is effective for fiscal years beginning after December 31, 2008. The company does not believe this pronouncement will impact its financial statements.

Reclassifications– Certain amounts in the 2007 financial statements have been reclassified to conform to the 2008 presentation. These reclassifications had on effect on previously reported results of operations or retained earnings.

3. Receivable on disposal of subsidiaries

The amount of receivable on disposal of subsidiary as of September 30, 2008 and December 31, 2007 are $0 and $30,701,957, respectively. The receivable balance was non interest bearing, unsecured and due on demand. The Company received the entire balance on disposal of subsidiary amounting to $30,701,957 in the nine-month period ended September 30, 2008.

4. Properties held for resale

Properties held for resale at September 30, 2008 and December 31, 2007 by project are as follows:

	9-30-2008		12-31-2007
Qiyun New Village	$	1,359,920	$	1,595,366
Peacock Garden		246,628		231,244
Chenglong Garden		4,644,028		5,250,960
President Building		218,426		204,801
Maryland Building		268,080		251,358
Others		174,068		162,708
Total	$	6,911,150	$	7,696,437

The Company introduced a “Five-year Trial Accommodation Scheme” (the “Scheme”) to attract potential buyers when initial sales at the project did not meet expectations. Under the Scheme, property buyers were required to pay a 10% refundable deposit based on the sale price of the property or $6,039 (RMB50,000) and another 20%, based on the sale price of the property which is non-refundable, over 5 years by monthly installments, totaling 30% throughout the trial period. The remaining 70% of the consideration is due and payable immediately after the trial period when the property buyers exercise their option whether or not to complete the purchase. If the buyer chooses not to buy the property, the 10% refundable deposit or $6,039 (RMB 50,000) is refunded to the buyers (less any unpaid rental due) and monthly installments received over the 5-year trial period will have been recognized as rental income in the year in which they arose.

12

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

As of September 30, 2008 and December 31, 2007, $880,678 and $733,774 worth of properties held for sale in Qiyun New Village were occupied by individuals who agreed to buy the properties without having fully paid the purchase consideration. $245,467 and $196,103 was included in advance from buyers for this Scheme as of September 30 2008 and December 31, 2007.

5. Accounts payable and accrued expenses

Accounts payable and accrued expenses consisted of following as of September 30, 2008 and December 31, 2007:

	9-30-2008		12-31-2007
Accounts payable	$	4,306,315	$	6,090,281
Payroll and welfare payable		100,503		71,090
Interest and other accrued expenses		22,500		2,454,044
Total	$	4,429,318	$	8,615,415

6. Tax payables

Tax payables consist of the following as of September 30, 2008 and December 31, 2007:

	9-30-2008		12-31-2007
			(Audited)
Income tax payable	$	5,905,120	$	5,944,954
Business tax		590,099		519,634
Land appreciate payable		2,199,939		2,069,781
Other levies		117,046		17,947
Total	$	8,812,204	$	8,552,316

7. Bank loans, Short-term and long-term loans

Short-term loans as of September 30, 2008 and December 31, 2007 are comprised as follow:

Nature	Due on		Interest per Annum		9-30-2008		12-31-2007
Bank loan – in default		12-31-2004		7.56%	$	--	$	9,931,413
Bank loan		10-23-2008		10.206%		15,800,400		14,814,815
		Various dates till
Mortgage loans		6-12-2023		4.2%		--		485,069
Bank loans		6-12-2009		9.711%		5,852,000		--
Total					$	21,652,400	$	25,231,297

The Company acted as an agent and borrowed mortgage loans amounting to $485,069 as of December 31, 2007 under its employees’ names using properties held by the Company. All balances of mortgage loans were cleared as of March 31, 2008 and the pledged assets were released. As of September 30, 2008 and December 31, 2007,

13

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

the carrying values of stock of properties of $0 and $484,764 have been pledged for the Company’s mortgage loans.

As of September 30, 2008 and 2007, the Company incurred interest expense amounting to $2,083,416 and $3,450,746, respectively.

On June 22, 2006 the Company entered into a settlement agreement with a bank with respect to $8,230,453 of past due notes. In accordance with the settlement agreement, up to $1,228,163 loan interest accrued as of December 31, 2007 may be waived if the Company repays the loan principle per the installments schedule. The Company is required to pay back the loan principal in three installments in which the entire bank loan will be paid off on September 20, 2008.

The Company paid three installments on time per the agreement. The outstanding interest for the said loan was partially waived by the bank in the amount of $1,002,805 based on the agreement and the Company paid off the rest to the bank as of September 30, 2008. The $1,002,805 waived interest expense was recognized as other income as of September 30, 2008.

The Company had a default loan amounting to $23,166,667 with due dates in 2003 and 2004. The defaulted loans borrowed from Industrial and Commercial Bank of China was assigned to a third party. The Company entered into an agreement with the third party on July 30, 2007 to buy back the loans for $7,581,333. As of September 30, 2007, the total consideration of $7,581,333 was fully paid. According to the agreement, the outstanding interest payable associated with the non-performing loan amounting to $439,014 was also forgiven as of December 31, 2007. The assets pledged with the loan were released before the year ended 2007. As of September 30, 2007, the Company realized gain on settlement of debt amounted to $15,918,226.

8. Long-term debts — secured

Nature	Due on		Interest per Annum		9-30-2008		12-31-2007
Bank loans		6-12-2009		9.711%	$	--	$	5,486,968
Total					$	--	$	5,486,968

On June 18, 2007 the Company obtained a loan from a bank for $5,486,968 at an interest rate of 8.775% before September 15, 2007 and 9.711% after September 15, 2007, and is due on June 12, 2009. The loan is secured by fixed assets and land use rights the Company owns. The long-term debt is due on June 12, 2009. The loan is reclassified as short-term loan as of September 30, 2008.

9. Statutory Reserve

In accordance with the Chinese Company Law, the Company has established a policy to reserve 10% of its annual net income as statutory reserve. The Company reserved $0 and $638,128 as of September 30, 2008 and December 31, 2007 respectively.

10. Gain on Settlement of Debt

In January 2008, the Company received the final judgment from Liaoning Province People’s Superior Court 2007 (No. 97) dated on December 21, 2007 regarding the law suit between Shenyang Normal College, Shenyang Maryland (a wholly owned subsidiary of the Company) and Jiansu Province Suzhong Construction Group, Ltd. The final judgment stated that Shenyang Maryland should pay Shenyang Normal College RMB 5,210,454 along with the interest calculated from June 2, 2000 to the payment date using the interest rate of six-

14

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

month loan per People’s Bank of China. The interest payable calculated was RMB 2,152,262 as of March 31, 2008. As of December 31, 2007, the payable to Shenyang Normal College was RMB 14,561,185 (approximately $1,997,510). The gain on settlement of debt as of September 30, 2008 was calculated as follows:

	Amount
Debt recorded as of December 31, 2007		RMB            14,561,185
Minus: Amount should pay per final judgment		(5,210,454	)
Interest calculated per final judgment		(2,152,262	)
Gain on settlement of debt as of September 30, 2008		RMB            7,198,469
		US$            1,087,805

11. Loss on Termination Project

On July 20, 2007, Xinchao and Yindu ceased development on Xi Ta project and disposed of the associated assets. Shenyang Heping District Investment Promotion Bureau, the agency overseeing development of the Xi Ta area, is expanding the project and, as a consequence of the expansion, reached an agreement with the Company to re-acquire the land use rights for the Xita Project in exchange for refunding the land transfer fee of $4,437,397 and reimbursing the Company for amounts expended on the development in the amount of $1,646,024. On July 20, 2007, the local government approvals and procedures were completed for transferring the land use rights back to the local government and the Company received reimbursement of the land transfer fee and the amount expended on the development in August 2007. As of September 20, 2007, the Company’s loss on termination of the project amounted to $1,510,865.

12. Stock Options

On January 31, 2008, the Company issued a non-incentive stock option for 10,000 shares to a non-employee director with an exercise price of $0.65 that will expire on January 31, 2010. The options vested and became exercisable over a term of two years. Compensation expense as of September 30, 2008 related to the outstanding stock options was $3,301.

Risk-free interest rate	2.00%
Expected life of the options	2 year
Expected volatility	121.79%
Expected dividend yield	0 %

On January 31, 2007, the Company issued a non-incentive stock option for 10,000 shares to a non-employee director with an exercise price of $4.65 which will expire on January 31, 2009. The options vested and became exercisable over a term of two years. Compensation expense as of September 30, 2007 related to the outstanding stock options was $20,524.

Risk-free interest rate	2.00%
Expected life of the options	2 year
Expected volatility	83.76%
Expected dividend yield	0 %

15

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

Options outstanding at September 30, 2008 and related weighted average price and intrinsic value is as follows:

Exercise Prices		Total Options Outstanding		Weighted Average Remaining Life (Years)		Total Weighted Average Exercise Price		Options Exercisable		Weighted Average Exercise Price		Aggregate Intrinsic Value
$	4.65		10,000		0.16	$	2.33		7,083	$	2.33		--
$	0.65		10,000		0.66	$	0.33		2,083	$	0.33	$	1,000

A summary of option activity as of September 30, 2008, and changes during the periods then ended is presented below:

Options	Shares
Outstanding at January 1, 2007	173,568
Granted	10,000
Exercised	--
Forfeited or expired	173,568
Outstanding at December 31, 2007	10,000
Granted	10,000
Exercised	--
Forfeited or expired	--
Outstanding at September 30, 2008	20,000
Exercisable at September 30, 2008	11,667

13. Disposal of subsidiary

Beijing Xinchao was registered in Beijing on March 27, 2008, which was 100% owned by Shenyang Xinchao with a registered capital amounting to $4,255,440 (RMB 29,800,000) and a defined period of existence of 10 years.

Soon after Beijing Xinchao registered, the Company changed its business development plan in Beijing City and disposed of Beijing Xinchao in May 2008 in the amount of $4,255,440 (RMB29,800,000). No gain/loss of the disposal was realized. Beijing Xinchao had no operations before disposal. The disposal amount was fully received on September 30, 2008.

14. Income Tax

The Company is registered in the State of Nevada and has operations primarily in three tax jurisdictions – the People’s Republic of China, Hong Kong and the United States. For operations in the US, the Company has incurred net accumulated operating losses for income tax purposes. The Company believes that it is more likely than not that these net accumulated operating losses will not be utilized in the future. Therefore, the Company has provided full valuation allowance for the deferred tax assets arising from the losses at these locations as of September 30, 2008. Accordingly, the Company has no net deferred tax assets.

16

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

The provision for income taxes from continuing operations on income consists of the following for the years ended September 30, 2008 and 2007:

	9-30-2008	9-30-2007
US current income tax expense (benefit)
Federal	$                     --	$                     --
State	--	--
HK current income tax expense	--	--
PRC current income tax expense	--	3,548,240
Total provision for income tax	$                     --	$       3,548,240

The following is a reconciliation of the provision for income taxes at the U.S. federal income tax rate to the income taxes reflected in the Statement of Operations:

	9-30-2008	9-30-2007
Tax expense (credit) at statutory rate - federal	34%	34%
State tax expense net of federal tax	6%	6%
Changes in valuation allowance	(40%)	(40%)
Foreign income tax - HK	17.5%	17.5%
Valuation allowance	(17.5%)	(17.5%)
Foreign income tax - PRC	(25%)	30%
Tax expense at actual rate	(25%)	47%

United States of America

As of September 30, 2008, the Company in the United States had approximately $120,325 in net operating loss carry forwards available to offset future taxable income. Federal net operating losses can generally be carried forward 20 years. The deferred tax assets for the United States entities at September 30, 2008 consists mainly of net operating loss carry forwards and were fully reserved as the management believes it is more likely than not that these assets will not be realized in the future.

The following table sets forth the significant components of the net deferred tax assets for operation in the US as of September 30, 2008 and December 31, 2007.

	9-30-2008	12-31-2007
Net operation loss (gain) carry forward	$           (399,164)	$        (278,840)
Total deferred tax assets	159,666	121,111
Less: valuation allowance	(159,666)	(121,111)
Net deferred tax assets	$                  --	$                  --

Hong Kong

As of September 30, 2008, the Company in the Hong Kong had approximately $124,276 in net operating loss carry forwards available to offset future taxable income. There is no time limit for the losses to carry forward. The deferred tax assets for the Hong Kong entities at September 30, 2008 consists mainly of net operating loss carry forwards and were fully reserved as the management believes it is more likely than not that these assets will not be realized in the future.

17

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

The following table sets forth the significant components of the net deferred tax assets for operation in the US as of September 30, 2008 and December 31, 2007.

	9-30-2008	12-31-2007
Net operation loss (gain) carry forward	$           (124,276)	$        23,722,801
Total deferred tax assets	21,748	--
Less: valuation allowance	(21,748)	--
Net deferred tax assets	$                  --	$                  --

People’s Republic of China (PRC)

Pursuant to the PRC Income Tax Laws, the Company's subsidiary is generally subject to Enterprise Income Taxes ("EIT") at a statutory rate of 33%, which comprises 30% national income tax and 3% local income tax. The subsidiary is qualified as a new technology enterprises and under PRC Income Tax Laws, it subject to a preferential tax rate of 18%.

Beginning January 1, 2008, the new Enterprise Income Tax ("EIT") law will replace the existing laws for Domestic Enterprises ("DES") and Foreign Invested Enterprises ("FIEs"). The new standard EIT rate of 25% will replace the 33% rate currently applicable to both DES and FIEs. The two years tax exemption, three years 50% tax reduction tax holiday for production-oriented FIEs will be eliminated. The Company’s applicable EIT rate under new EIT law is 25% which was approved by local Tax department.

As of September 30, 2008 and December 31, 2007, the Company’s PRC subsidiary had net operating loss carry forwards which can be carried forward 5 years to offset future taxable income. The deferred tax assets for Shenyang Maryland, Xinchao and Yindu at September 30, 2008 consist mainly of net operating loss carry forwards and they were fully reserved as the management believes they are more likely than not that these assets will not be realized in the future.

The following table sets forth the significant components of the net deferred tax assets for operation in PRC as of September 30, 2008 and December 31, 2007.

	9-30-2008	12-31-2007
Net operation loss (gain) carry forward	$           6,726,988	$        5,383,109
Total deferred tax assets	964,448	707,372
Less: valuation allowance	(964,448)	(707,372)
Net deferred tax assets	$                  --	$                  --

Aggregate net deferred tax assets

The following table sets forth the significant components of the aggregate net deferred tax assets of the Company as of September 30, 2008 and December 31, 2007:

	9-30-2008	12-31-2007
Aggregate:
Total deferred tax assets	$              1,145,862	$            828,483
Less: valuation allowance	(1,145,862)	(828,483)
Net deferred tax assets	$                  --	$                  --

18

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

15. Other comprehensive income

Balances of related after-tax components comprising accumulated other comprehensive income (loss), included in stockholders’ equity, at September 30, 2008 and December 31, 2007 are as follows:

	2007
Balance as of December 31, 2006	$               468,344
Change for 2007	1,000,202
Balance as of December 31, 2007	1,468,546
Change in 2008	724,567
Balance as of September 30, 2008	$            2,193,113

16. Segment Information

Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About Segments of an Enterprise and Related Information" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

During the years ended September 30, 2008 and December 31, 2007, the Company is organized into two main business segments: (1) Property for sale, (2) Rental income and Income of management fee of commercial buildings. The following table presents a summary of operating information and certain year-end balance sheet information for the nine months ended September 30, 2008 and year ended December 31, 2007:

19

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)

	9-30-2008			12-31-2007
Revenues from unaffiliated customers:
Selling of properties	$	3,035,256		$	4,378,993
Rental income & Management fee		4,453,451			5,296,634
Consolidated	$	7,488,707		$	9,675,627
Operating loss:
Selling of properties	$	486,023		$	708,291
Rental income & Management fee		(41,426	)		494,988
Corporation (1)		(1,440,199	)		(7,098,244	)
Consolidated	$	(912,750	)	$	(5,894,965	)
Net income (loss) before taxes:
Selling of properties	$	(871,536	)	$	2,637,332
Rental income & Management fee		28,650			494,988
Corporation (1)		263,462			(1,177,571	)
Consolidated	$	(579,424	)	$	1,954,749
Net income (loss):
Selling of properties	$	(871,536	)	$	1,122,522
Rental income & Management fee		28,650			494,988
Corporation (1)		263,462			22,708,21
Consolidated	$	(579,424	)	$	24,325,722
Identifiable assets:				28,650
Selling of properties	$	263,462		$	5,350,282
Rental & management fee		(579,424	)		49,953,769
Corporation (1)		7,475,747			45,167,178
Consolidated	$	66,723,822		$	100,471,229
Depreciation and amortization:
Selling of properties	$	--		$	--
Rental & management fee		2,196,386			2,326,018
Corporation (1)		18,144			17,703
Consolidated	$	2,214,530		$	2,343,721
Capital expenditures:
Selling of properties	$	74,119		$	79,187
Rental & management fee		8,582			5,765,432
Corporation (1)		--			4,878,509
Consolidated	$	82,701		$	10,723,128

(1). Unallocated loss from Operating income (loss) and Net income (loss) before taxes are primarily related to general corporate expenses.

20

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.

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. Factors that could have a material and adverse impact on actual results are described under the heading “Risk Factors” in our annual report on Form 10-KSB, filed with the Securities and Exchange Commission on April 16, 2007, and under the caption “Item 1A. Risk Factors” below. We do not undertake any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

(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 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.

Ÿ	The President Building comprises three blocks of commercial towers located in the financial district, Heping Street, of Shenyang City. While the original intention was to sell the buildings, management subsequently decided to retain most of the properties for leasing purposes. The buildings maintain a high occupancy rate with tenants who are mostly international companies, 25 of them are Fortune 500 companies. Great China International’s head office is situated on the 25/F and 26/F of the President Building.
Ÿ	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.
Ÿ	Qiyun New Village is situated along the Nanyun Riverside and consists of 347 residential units, among which 330 units have been sold, and 2,186 square meters of commercial units.
Ÿ	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 which 194 have been sold.
Ÿ	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.

21

Recent Projects

Xi Ta Project. In December 2005, we, through our subsidiaries Silverstrand and Shenyang Maryland International, acquired Shenyang Xinchao Property Company and Shenyang Yindu Property Company, which together held 100% of the rights granted for a mixed-use development located in the Heping District of Shenyang known as the Xita Urban Reconstruction Project the Xita Project confirmation letter issued by the Heping District Government in 2004. The confirmation letter, as subsequently amended, contemplated a 99,000 square meter project located in the Xi Ta area in the city of Shenyang. Under the confirmation letter we paid a land transfer fee of RMB 33,228,480. Shenyang Heping District Investment Promotion Bureau, which is the agency overseeing development of the Xi Ta area decided to expand the project and, as a consequence of the expansion, reached an agreement with us to reacquire the land use rights for the Xita Project in exchange for refunding the land transfer fee of RMB 33,228,480 (approximately $4,437,397), and reimbursing us for amounts expended on the development in the amount of RMB 12,345,180 (approximately $1,646,024). In July 2007, the local government approvals and procedures were completed for transferring the land use rights back to the local government and we received reimbursement of the land transfer fee of RMB 33,228,480. We received the remaining RMB 12,345,180 in August 2007. We incurred a net loss on the terminated Xi Ta Project of $1,510,865.

Chessboard Mountain. Our subsidiary, Shenyang Jitian Property Company Limited, was established on February 22, 2006 for a new project development known as Chessboard Mountain Residential project located in the Chessboard Mountain International Tourism Development District in Shenyang City. In February 2006, Shenyang Jitian Property Company was confirmed as the highest bidder in a public auction for the Chessboard Mountain Residential project. The total purchase price for the 420,317 square meters land use rights was approximately $56.7 million, which was obtained through bank financing. In December 2006, we completed the sale of Shenyang Jitian Property Company to two unrelated companies in exchange for a total cash payment of $1,399,970 (the amount of our invested capital in Shenyang Jitian Property Company) and assumption of all bank debt incurred in connection with the acquisition of the Chessboard Mountain Residential project. In connection with the sale, Great China’s subsidiary, Shengyang Maryland International Industry Company Limited, entered into a Land Consolidation and Development Agreement with respect to the Chessboard Mountain Residential Project. Under the 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 RMB 104 million ($13.3 million) in staged amounts upon completion of different aspects of the development work provided for by the agreement. As of December 31, 2007, Shenyang Maryland had been paid a total of approximately RMB53.98 million ($7.4 million) under the development agreement.

Loyal Best. On August 7, 2007, Silverstrand completed the acquisition of all of the issued share capital of Loyal Best Property Development Limited (“Loyal Best”), a Hong Kong limited company. Loyal Best was the sole owner of an entity called Shenyang Loyal Best Hunnan Property Development Limited (“Shenyang Loyal Best”), a wholly owned foreign enterprise that is a party to a Confirmation Letter of Auction with respect to a parcel of land located at the center area of Hunnan New Zone in the city of Shenyang, China (the “LB Project”). Silverstrand paid US$4,010,000 to acquire the share capital of Loyal Best and paid and an additional US$20,500,000 to satisfy all director loan notes issued by Loyal Best, which funds were used to make Shenyang Loyal Best’s land transfer fee payment on the project of US$20,000,000. In September 2007, Shenyang Loyal Best closed funding under a bridge loan agreement with Shenyang Huahai International Investment Co., Ltd. (Shenyang Huahai) whereby Shenyang Huahai loaned RMB 450,000,000, or approximately US$60 million, to Shenyang Loyal Best for use in connection with development of the LB Project. In December 2007, Silverstrand completed the sale of all of the share capital of Loyal Best to an unrelated third party in exchange for cash consideration of 360 million Chinese yuan (approximately US$48.7 million) and the assumption by the purchaser of the loan from Shenyang Huahai for development of the LB Project. Of the cash sales price, Silverstrand had received $18 million by December 31, 2007. The balance of approximately $30.7 million was reflected on our year-end financial statements as a receivable and was received by us as of the end of March 2008. In connection with the sale of Loyal Best, we agreed to pay a finder’s fee to an unrelated third party of approximately $8.9 million.

Junhui Development Agreement. In November 2007, our indirect subsidiary, Shenyang Xinchao Property Co., Ltd. (“Xinchao”), entered into a joint development agreement with Beijing Century Junhui Investment Ltd. (“Junhui”), an unrelated third party, pursuant to which each of Xinchao and Junhui agreed to invest RMB 40 million (approximately $US5.4 million) as share capital in a newly-formed entity whose purpose shall be to jointly develop a commercial and residential project in Nanjing Street, Heping District, Shenyang, China. Subsequent to entering into the joint development agreement, Junhui and Xinchao were unsuccessful in obtaining the property for the project and, in accordance with the terms of the joint development agreement, the amount of Xinchao’s investment was refunded.

22

(3) Results of Operations

Comparison of operations for September 30, 2008 with September 30, 2007:

The Company incurred net income from operations of $356,411 for the three-month period ended September 30, 2008, compared to net income from operations of $2,059,799 for the comparable period in 2007. For the nine months ended September 30, 2008, the Company has a net loss from operations of $579,424 compared to net income from operations of $4,116,386 for the comparable period in 2007, representing a decrease of $4,695,810 or 114.08%. Components of operating activity resulting in this decrease in net income from operations are discussed below.

Total revenues increased by $1,096,258 or 17.15% to $7,488,707 for the nine months ended September 30, 2008 compared to $6,392,449 for the same period in 2007. For the third quarter of 2008 total revenues were $2,355,825 compared to $1,905,415 for the comparable quarter in 2007. Real estate income during the first nine months of 2008 increased by $701,037 or 30.03% over the same period in 2007, and the rental and management fee income increased by $395,221 or 9.74% during the period in 2008 compared to 2007. These changes are mainly attributable to the increased sales volume of the remaining building units in 2008 compared to 2007.

Cost of properties sold during the third quarter of 2008 increased by $493,212, or 74.25%, over the same period in 2007, which is primarily attributable to the increased maintenance cost of the President Building. However, for the nine months ended September 30, 2008, cost of properties decreased by $721,968, or 18.53%, compared to 2007, which we attribute to the increase in the number of carport sales in 2008, which do not have a separate property cost.

Selling expenses increased by $8,907 or 11.56% to $85,981 for the nine months ended September 30, 2008 compare to $77,074 for the corresponding period in 2007. The increase is attributable to the need for business development during the first six months of 2008, so there was little change in selling expenses in the third quarter of 2008 compared to 2007.

General and administrative expenses decreased by $4,326,607, or 59.65%, to $2,926,827 for the nine months ended September 30, 2008 compared to $7,253,434 for the corresponding period in 2007. General and administrative expenses decreased by $4,236,826, or 83.75%, to $822,270 for the three months ended September 30, 2008 compared to $5,059,096 for the corresponding period in 2007. The primary reason for the decrease in the third quarter of 2008 was an accrual for bad debt in the third quarter of 2007 and consulting fees in 2007.

Agent fee decreased by $2,649,007 or 100% in the third quarter of 2008 compared to the corresponding period in 2007. The agent fee paid in the third quarter of 2007 was a one-time cost arising from the disposal of a subsidiary in that quarter.

Depreciation and amortization expense increased by $464,007, or 26.51%, to $2,214,530 for the nine months ended September 30, 2008, compared to $1,750,523 for the corresponding period in 2007, and increased by $119,026, or 18.74%, to $754,306 for the three months ended September 30, 2008, compared to $635,280 for the corresponding period in 2007. The increase in depreciation and amortization expense is attributable to the growth of fixed assets held by the Company for business operations.

Other income decreased by $16,353,915, or 98.00%, to $333,327 for the nine months ended September 30, 2008 from $16,687,242 in the same period in 2007, and decreased by $10,795,419, or 92.28% to $902,523 for the three months ended September 30, 2008 from $11,697,942 in the same period in 2007. The substantial decrease in other income is due primarily to several non-routine transactions, such as gain on settlement of debt in the amount of $15,918,226 in 2007 and land leveling income of $5,960,265 in 2007.

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(4) Cash Flow Discussion

Net cash flows provided by operating activities for first nine months of September 30, 2008 and 2007 are $8,235,786 and $18,089,952, respectively. The decrease is mainly attributable to the Company receiving $17,056,254 from disposal of a subsidiary in 2007 that did not recur in 2008.

Net cash flows used in investing activities for the first nine months of September 30, 2008, is $82,701compared to $1,678,741 of cash flow provided by investing activities for 2007. The investing activity change was primarily due to reimbursement of a project terminated by the local government resulting in a return top the Company of $7,861,324 in 2007.

Net cash flows used in financing activities for the nine months ended September 30, 2008, was $10,886,967 compared to $17,343,307 for 2007. This change is attributable to lower overall loan repayments in 2008 compared to 2007.

(5) Liquidity and Capital Resources

Current liabilities exceeded current assets by $26,242,138 as of September 30, 2008. The working capital deficit was incurred primarily due to Short Term Loans of 21,652,400. It is has become common practice in China, for banks and companies to renegotiate loan extensions on an annual basis. This is driven by the ever changing banking regulatory environment and a situation where banks are becoming more conservative.

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 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.

(6) Contractual Obligations

The following table is a summary of the Company’s contractual obligations as of September 30, 2008:

	Total		Less than one year		1-3 Years		Thereafter
Short-Term Debt	$	21,652,400	$	21,652,400	$	--	$	--
Long-Term Debt		--		--		--		--
Amounts due to related parties		--		--		--		--
Construction commitments		--		--		--		--
Total Contractual Cash Obligations	$	21,652,400	$	21,652,400	$	--	$	--

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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 overly rapid 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

Item 4T.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the Securities and Exchange Commission (“SEC”), and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, Great China International’s management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, reassessed the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2008. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that Great China International’s disclosure controls and procedures were effective as of the end of the fiscal quarter on September 30, 2008, to ensure that information that is required to be disclosed by Great China International in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within Great China International to disclose information that is otherwise required to be set forth in its periodic reports.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended September 30, 2008, that have materially affected, or are likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 6. 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)
31.2	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: November 14, 2008	By:	/s/ Jiang Peng
		Jiang Peng, Chairman of the Board (Principal Executive Officer)

Date: November 14, 2008	By:	/s/ Sun Dongqing
		Sun Dongqing, Chief Financial Officer (Principal Financial and Accounting Officer)

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