Earnings of Beijing Capital Co Ltd, the investment arm of the Beijing municipal government, dropped 12.38 percent for the year to December 2003.

The company said the result included a provision for the troubled investment in China Southern Securities Co Ltd and the impact of SARS on its tourism operation.

Net income dropped to 403.52 million yuan (US$48.62 million) from 460.52 million yuan the year before.

Revenues rose 15.26 percent to 234.20 million yuan from 203.19 million yuan.

The company proposed a dividend of 0.315 yuan a share.

Beijing Capital, which is focused on utilities and tourism, made a provision of 59.40 million yuan for its investment in the brokerage house China Southern Securities, which was taken over in January by the Chinese stock market regulator and the Shenzhen municipal government for being heavily in debt.

Beijing Capital holds 10.41 percent of China Southern Securities as the biggest shareholder.

The firm said tourism revenue fell 24.25 percent to 57.79 million yuan from a year earlier, citing the SARS epidemic that killed 774 people worldwide.

SARS forced Beijing Capital Xindadu Hotel, a four-star hotel owned by the company, to end its operation in April and May last year, causing the hotel to lose 14.47 million yuan for the whole year.

The revenue from utilities operations rose 39.02 percent to 176.41 million yuan as the toll road fee for the Jingtong Expressway in Beijing increased 27.38 percent to 161 million yuan.

Beijing Capital said it would expand its water treatment and water supply operations this year.

Qiu Yanying, an analyst with China Securities Co Ltd, said waste water treatment will be a new driver for the firm's revenue growth in the coming years.

"Beijing hosting the 2008 Olympic Games will prompt the municipal government to step up environmental protections," he said.

"China wouldn't afford to host a dirty Olympic Games."

Last year, Beijing Capital set up a waste treatment plant in Beijing, which is capable of disposing of 1.2 million cubic meters of waste water a day.

The plant now accounts for 80 percent of the waste water treatment in Beijing.

Local-currency Class-A shares in Beijing Capital closed 2.52 percent higher at 12.19 yuan on the Shanghai stock market yesterday.

(Shanghai Daily March 3, 2004)