SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-Q

                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                      For Quarter Ended SEPTEMBER 30, 1996


                         HENG FAI CHINA INDUSTRIES, INC.
             (Exact name of Registrant as specified in its charter)

          DELAWARE                   0-7619                     93-063633
(State Or Other Jurisdiction      (Commission                 (IRS Employer
      Of Incorporation)           File Number)              Identification No.)

 650 West Georgia Street, Suite 1600, P.O. Box 11586,            V6B 4N8
                Vancouver, B.C. CANADA                        (Postal Code)
       (Address Of Principal Executive Offices)    

Registrant's telephone number, including area code       (604) 685-8318


Indicate by check mark whether  Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the preceding 12 months (or for such shorter period that Registrant was required
to file such reports) and (2) has been subject to such filing  requirements  for
the past 90 days.

                                Yes _X_   No ___


As of  December  17,  1996,  there  were  11,986,814  shares of common  stock of
Registrant outstanding.


<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.

                                    FORM 10-Q

                                     FOR THE

                        QUARTER ENDED SEPTEMBER 30, 1996

                                      INDEX

PART I.  FINANCIAL INFORMATION                                            PAGE

Item 1.  Financial Statements.........................................      1

         Condensed Consolidated Balance Sheets as at
         September 30, 1996 and December 31, 1995.....................      2

         Condensed Consolidated Statements of Operations for the
         nine and three months ended September 30, 1996 and 1995......      3

         Condensed Consolidated Statements of Cash Flows for the
         nine months ended September 30, 1996 and 1995................      4

         Notes to Condensed Consolidated Financial Statements.........      5

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations..........................     12

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings............................................     15
Item 2.  Changes in Securities........................................     15
Item 3.  Defaults Upon Senior Securities..............................     15
Item 4.  Submission of Matters to a Vote of Securityholders...........     15 

Item 5.  Other Information............................................     15
Item 6.  Exhibits and Reports on Form 8-K.............................     15

Signature Page........................................................ Last Page

                                        i


<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

     The following financial statements of Heng Fai China Industries,  Inc. (the
"Company") are provided herewith:

     (a)  Condensed  Consolidated  Balance  Sheets as at September  30, 1996 and
          December 31, 1995;

     (b)  Condensed  Consolidated  Statements  of  Operations  for  each of nine
          months ended September 30, 1996 and September 30, 1995 and each of the
          three months ended September 30, 1996 and 1995;

     (c)  Condensed  Consolidated  Statements of Cash Flows for each of the nine
          months ended September 30, 1996 and September 30, 1995; and

     (d)  Notes to the Condensed Consolidated Financial Statements.


                                       1
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                             (United States Dollars)

<TABLE>
<CAPTION>
                                                      Notes              As at                      As at
                                                      -----              -----                      -----
                                                                  September 30, 1996          December 31, 1995
                                                                  ------------------          -----------------
<S>                                                    <C>               <C>                         <C>       
CURRENT ASSETS
   Cash and cash equivalents                                             $  264,430                  $   55,001
   Available-for-sale securities                        4                   408,739                     480,835
   Accounts receivable                                                      144,344                      29,307
   Prepaids and other current assets                                      1,234,143                      31,365
   Inventories                                          5                 2,438,241                     154,370
                                                                         ----------                  ----------
                                                                          4,489,897                     750,878
                                                                         
PROPERTY, net                                           6                 3,371,935                     857,548
                                                                         
PREPAID RENTAL                                                               93,788                     115,430
                                                                         ----------                  ----------
       Total Assets                                                      $7,955,620                  $1,723,856
                                                                         ==========                  ==========
                                                                         
CURRENT LIABILITIES                                                      
   Accounts payable                                                         101,968                     165,652
   Bank overdraft                                                             4,357                        --
   Short-term borrowings                                8                 1,357,967                      60,120
   Margin loan payable                                  9                   268,465                     274,420
   Interest payable                                                          39,785                      32,983
   Security deposits payable                                                 10,754                      10,095
   Accrued expenses                                                         247,429                     116,718
   Due to related parties                                                 1,710,385                      22,005
   Due to PRC joint venture partners                   10                 1,530,747                        --
   Current portion of mortgage                                               17,203                      17,325
                                                                         ----------                  ----------
                                                                          5,289,060                     699,318
LONG-TERM LIABILITIES                                                    
   Mortgages payable                                                        968,242                     975,108
   Long-term payable                                                         91,415                      91,415
   Minority interest                                                        858,061                        --
                                                                         ----------                  ----------
                                                                          7,206,778                   1,765,841
                                                                         ----------                  ----------
                                                                         
STOCKHOLDERS' EQUITY (DEFICIT)                                           
   Preferred stock, $10 par value,                                       
       500,000 shares authorized,                                        
       none issued                                                                                         --
   Share capital, $.01 par value,                                        
       30,000,000 shares authorized,                                     
       11,686,814 and 10,859,542                                         
       shares issued and outstanding                   11                   116,868                     108,595
   Contributed surplus                                                    4,385,272                   2,812,546
   Unrealized loss on available-for-sale securities     4                   (28,777)                    (43,941)
   Cumulative exchange adjustments                                           11,952                       6,968
   Accumulated deficit                                                   (3,736,473)                 (2,222,586)
                                                                         ----------                  ----------
                                                                            748,842                     661,582
   Common stock issued for consulting services                           
       to be received                                   7                      --                      (703,567)
                                                                         ----------                  ----------
       Total stockholders' equity                                           748,842                     (41,985)
                                                                         ----------                  ----------
Total liabilities and stockholders' equity                               $7,955,620                  $1,723,856
                                                                         ==========                  ==========
</TABLE>

   See accompanying notes to the Condensed Consolidated Financial Statements.

                                       2
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                             (United States Dollars)

<TABLE>
<CAPTION>
                                                       Nine            Nine              Three          Three
                                                      Months          Months            Months          Months
                                                       Ended           Ended             Ended          Ended
                                                    September 30,   September 30,   September 30,   September 30,
                                       Notes            1996            1995             1996           1995
                                                    ------------    ------------    ------------    ------------
<S>                                                 <C>             <C>                   <C>       <C>         
Revenues
   Rental income                                    $    253,154    $    270,332          83,504    $     98,836
   Sales                                                 346,930         148,141         172,135          92,921
   Investment income                                      30,942           6,793           4,666           1,503
   Laundry and interest income                             4,826            --             1,845            --
   Foreign exchange gain                                    --           (34,002)           --           (41,492)
                                                    ------------    ------------    ------------    ------------
       Total Revenues                                    635,852         391,264         262,150         151,768
                                                    ------------    ------------    ------------    ------------
Expenses
   Cost of goods sold                                    321,737         127,281         167,399          77,919
   Depreciation                                           46,579          44,570          22,507          20,959
   Legal and professional expenses                        29,650          54,287           2,999          12,706
   Consulting fees                        7            1,295,395       1,004,175           5,000         726,250
   Interest expenses                                     141,365          73,814          74,328          27,874
   Land lease                                             60,662          61,078          20,131          20,983
   Real estate management fees                            10,331          12,253           3,514           3,269
   Other administrative expenses                         275,677         147,698         170,267          61,860
                                                    ------------    ------------    ------------    ------------
       Total Expenses                                  2,181,396       1,525,156         466,145         951,820
                                                    ------------    ------------    ------------    ------------

Loss before income taxes and
   minority interests                                 (1,545,544)     (1,133,892)       (203,995)       (800,052)

Provision for income tax                                    --              --              --              --
                                                    ------------    ------------    ------------    ------------
                                                      (1,545,544)     (1,133,892)       (203,995)       (800,052)

Minority interests                                        31,657            --            31,657            --
                                                    ------------    ------------    ------------    ------------

Net income (loss)                                   $ (1,513,887)   $ (1,133,892)   $   (172,338)   $   (800,052)
                                                    ============    ============    ============    ============ 

Net income (loss) per share                         $       (.14)   $       (.11)   $       (.02)   $       (.08)
                                                    ============    ============    ============    ============ 

Weighted average common
   shares outstanding                                 10,961,587      10,766,428      11,022,783      10,445,207
                                                    ============    ============    ============    ============ 
</TABLE>

     See accompanying notes to Condensed Consolidated Financial Statements.

                                       3

<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (United States Dollars)

<TABLE>
<CAPTION>
                                                                              Nine                 Nine       
                                                                             Months               Months
                                                                              Ended                Ended
                                                                           September 30,       September 30,
                                                              Notes            1996                 1995
                                                              -----        ------------        ------------
<S>                                                           <C>           <C>                 <C>         
CASH FLOW FROM OPERATING ACTIVITIES                                                           
   Net income (loss)                                                        $(1,513,887)        $(1,133,892)
   Adjustments to reconcile loss to net cash                                                  
       used for operating activities:                                                         
       Depreciation and amortization                                             68,221              44,570
       Consulting fees paid in common stock                                   1,295,395           1,004,175
       Adjustments of trading securities to fair value                           72,096                --
       Minority interest                                                         31,657                --
   Changes in working capital components:                                                     
       Trading securities                                                          --              (502,847)
       Accounts receivable                                                     (115,037)            (22,737)
       Prepaid and other current assets                                         (65,465)           (132,589)
       Inventories                                                               82,583             (90,978)
       Accounts payable                                                        (158,835)             76,146
       Interest payable                                                           6,802              11,179
       Security deposits payable                                                    659                (669)
       Accrued expenses                                                          84,233             203,651
       Exchange difference                                                       22,659              18,693
                                                                            -----------         -----------
Net cash used in operating activities                                          (188,919)           (525,298)
                                                                            -----------         -----------
                                                                                              
CASH FLOW FROM INVESTING ACTIVITIES                                                           
   Purchase of a subsidiary company                              12          (1,228,036)           (130,939)
                                                                            -----------         -----------
Net cash used in investing activities                                        (1,228,036)           (130,939)
                                                                            -----------         -----------
                                                                                              
CASH FLOW FROM FINANCING ACTIVITIES                                                           
   Issue of shares                                                                 --               300,000
   Margin loan payable                                                           (5,955)            253,891
   Repayment of mortgage                                                         (6,988)            (24,439)
   Advances (repayment) of related party advances                             1,587,099             (15,930)
   Short-term borrowings raised                                                  47,871                --
   Bank overdraft raised                                                          4,357                --
                                                                            -----------         -----------
Net cash provided by financing activities                                     1,626,384             513,522
                                                                            -----------         -----------
                                                                                              
Net increase (decrease) in cash and cash equivalents                            209,429            (142,715)
                                                                            -----------         -----------
                                                                                              
Cash and cash equivalents:                                                                    
   Beginning of the period                                                       55,001             191,731
                                                                            -----------         -----------  
   End of the period                                                            264,430              49,016
                                                                            ===========         ===========
                                                                                              
ANALYSIS OF THE BALANCES OF CASH AND                                                          
   CASH EQUIVALENTS                                                                           
   Bank Balances and Cash                                                       264,430              49,016
                                                                            -----------         -----------
                                                                                264,430              49,016
                                                                            ===========         ===========
                                                                                              
   Non-cash financing activities:                                                             
       Issuance of common stock for consultancy services                    $   581,000                --
       Issuance of common stock for acquisition                             $ 1,000,000                --

</TABLE>
                                                                          
   See accompanying notes to the Condensed Consolidated Financial Statements.

                                       4
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United States Dollars)


1.   BASIS OF PRESENTATION

          In June 1994, Heng Fai China Industries,  Inc. (the "Company") entered
     into a business  combination  with Vancouver Hong Kong  Properties  Limited
     ("Vancouver  Hong  Kong"),  which owns and  operates a  residential  rental
     property in North Vancouver,  British  Columbia.  The business  combination
     resulted in the shareholders of Vancouver Hong Kong being issued 10,357,700
     shares of common stock (the  "Common  Stock") and  10,357,700  common stock
     purchase  warrants  (the  "Warrants")  of the  Company.  As a  part  of the
     business  combination,  a company  related to Vancouver Hong Kong agreed to
     subscribe for 1,500,000  shares of Common Stock and 1,500,000  common stock
     purchase  warrants for an aggregate of  US$120,000  in cash.  The foregoing
     share  numbers  are  before  the  effects  of  the   Company's   subsequent
     one-for-four reverse stock split and a one-for-ten reverse stock split. The
     business combination was accounted for as a reverse acquisition whereby the
     purchase  method of accounting  was used with Vancouver Hong Kong being the
     accounting parent. Accordingly,  results of operations for periods prior to
     the reverse  acquisition  are those of Vancouver Hong Kong, and the results
     of Alpine's  operations  are  included  only from the date of such  reverse
     acquisition.

          As of September 4, 1996, the Company  entered into an agreement,  (the
     "Agreement")  with Monkey King Group pursuant to which Worldwide  Container
     Company  Ltd.  ("Worldwide"),  a wholly  owned  subsidiary  of the Company,
     acquired  from the  Seller a 70%  interest  in Wuhan  Container  Co.,  Ltd.
     ("Wuhan") in exchange for 727,272 shares of the Company's restricted common
     stock. Wuhan is a People's Republic of China state company which was formed
     to engage in the  design,  manufacture,  lease and repair of  standard  and
     non-standard containers and related steel structure products.

          The closing of the Agreement was conditioned  upon the approval of the
     Board of  Directors  of the Company as well as the  Company's  satisfactory
     completion  of a due diligence  review of Wuhan.  On September 19, 1996 the
     Company's Board approved the Agreement,  completed its due diligence review
     of Wuhan and  directed  the  issuance  of the Shares to Hubei  Monkey  King
     Investment & Development Corporation ("HMK").


                                       5
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United States Dollars)


1.   BASIS OF PRESENTATION - Continued

          The condensed  consolidated  financial statements include the accounts
     of  the  Company  and  its   wholly-owned   subsidiaries.   The   condensed
     consolidated financial statements included herein have been prepared by the
     Company,  without  audit,  pursuant  to the  rules and  regulations  of the
     Securities  and  Exchange  Commission.  Certain  information  and  footnote
     disclosures   normally  included  in  financial   statements   prepared  in
     accordance  with  generally  accepted   accounting   principles  have  been
     condensed or omitted pursuant to such rules and  regulations,  although the
     Company  believes that the disclosures are adequate to make the information
     presented not misleading.  The condensed  consolidated financial statements
     and the notes thereto should be read in conjunction  with the  consolidated
     financial  statements  included in the Company's Annual Report on Form 10-K
     for the year ended December 31, 1995.

          In the opinion of the  management  of the  Company,  the  accompanying
     condensed   consolidated   financial   statements   contain  all  necessary
     adjustments  to  present  fairly the  financial  position,  the  results of
     operations and cash flows for the periods  reported.  All adjustments are a
     normal recurring nature.

          The  results  of  operations  for  the  nine  months  periods  are not
     necessarily indicative of the results to be expected for the full year.

 2.  CONTINUING OPERATIONS

          These  consolidated  financial  statements  have been  prepared on the
     going concern  basis of  accounting  which assumes the Company will realize
     its assets and discharge its  liabilities in the normal course of business.
     The Company is currently  operating  at a loss and has a deficiency  in net
     tangible  assets.  Should  the  Company  be unable to  continue  as a going
     concern it may be required to realize its assets and settle its liabilities
     at amounts substantially different from the current carrying values.

          The  Company's  ability to continue as a going concern is dependent on
     continued financial support from its principal shareholder who has signed a
     letter of financial support to the Company.


                                       6
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United States Dollars)


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          The accompanying  consolidated financial statements have been prepared
     in accordance with accounting  principles  generally accepted in the United
     States.  The following  sets forth the  significant  accounting  principles
     utilized in the preparation of the consolidated financial statements:

          Use  of  estimates  -  The  preparation  of  financial  statements  in
     conformity  with  generally   accepted   accounting   principles   requires
     management  to make  estimates  and  assumptions  that affect the  reported
     amounts of assets and liabilities, and the disclosures of contingent assets
     and liabilities at the date of the financial  statements,  and the reported
     amounts of  revenues  and  expenses  during the  reporting  period.  Actual
     results could differ from these estimates.

          Principles of  consolidation - The consolidated  financial  statements
     include the accounts of Heng Fai China Industries, Inc. and all significant
     subsidiaries.  All significant intercompany  transactions and balances have
     been eliminated.

          Cash and cash equivalents - Cash and cash equivalents  include cash on
     hand and short-term bank deposits.

          Inventories - Inventories  relating to the Company's cement operations
     are  stated at the lower of cost  (determined  on the  first-in,  first-out
     method) or market. Cost includes material and conversion cost.

          Trading-securities - Equity securities  purchased  principally for the
     purpose of resale in the near term are classified as trading securities and
     are measured at fair value,  with  unrealized  gains and losses included in
     earnings. Fair values are determined based on quoted prices.

          Investment  securities  - The Company has  classified  the  marketable
     equity securities it holds as available-for-sale.  Accordingly, pursuant to
     Statement  of Financial  Accounting  Standard  No. 115 the  securities  are
     measured at fair value, with unrealized gains and losses, net of applicable
     taxes, reported as a separate component of equity.


                                       7
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United States Dollars)


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

          Depreciation  is provided  to write off the cost of fixed  assets over
     their estimated useful lives as follows:

                   Building                  5% declining balance

                   Leasehold improvements    amortized  over  the  term  of  the
                                             lease  which  expires  May 31, 2032
                                             using the straight line method

                   Electric equipment        5 years straight line

                   Furniture and equipment   10 years straight line

                   Motor vehicles            5 years straight line

                   Plant and machinery       10 years straight line

          No depreciation is provided in respect of construction in progress.

          Foreign currency  translation - Financial  statements of international
     subsidiaries  are translated  into U.S.  dollars using the exchange rate at
     each balance sheet date for assets and liabilities  and a weighted  average
     exchange  rate for each period for revenue  and  expenses.  Where the local
     currency is the functional currency,  translation  adjustments are recorded
     as a separate component of shareholders'  equity.  Where the U.S. dollar is
     the  functional   currency,   the  financial  statements  of  international
     subsidiaries are translated at historical rates and translation adjustments
     are recorded in income.

4.   AVAILABLE-FOR-SALE SECURITIES

          The cost and  approximate  market value of  investment  securities  at
     September 30, 1996 were as follows:

                                      Gross           Estimated       Carrying 
                                      -----           ---------       --------
                        Cost      Unrealized Loss     Fair Value        Value
                        ----      ---------------     ----------        -----
  Corporate equity
  securities          $525,184        116,445          408,739         408,739
                      ========        =======          =======         =======


                                       8
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United States Dollars)


4.   AVAILABLE-FOR-SALE SECURITIES - Continued

          The Company  acquired  the  investment  securities  for cash  financed
     partially by the  Company's  internal  resources  and partially by a margin
     loan (See Note 9).

          These  investment  securities  are not subject to any  contractual  or
     statutory  resale  restrictions  and any  portion  of  these  stock  can be
     reasonably expected to qualify for sale within one year.

5.   INVENTORIES

     Inventories by major categories are summarized as follows:

                                       September 30, 1996     December 31, 1995
                                       ------------------     -----------------
     Raw materials and supplies             $2,097,135              $ 67,253
     Work-in-progress                          142,179                67,591
     Finished goods                            198,927                19,526
                                             ---------               -------
              Total inventories              2,438,241               154,370
                                             =========               =======

6.   PROPERTY

     The components of property are as follows:

                                        September 30, 1996    December 31, 1995
                                        ------------------    -----------------
     Building                                1,837,654           $  722,538
     Leasehold improvements                    548,333              548,333
     Furniture and equipment                    36,210                 --
     Plant and machinery                     1,673,423                 --
     Motor vehicles                             31,763                 --
     Construction-in-progress                    1,265                 --
                                             ---------              -------
             Total                           4,128,648            1,270,871
                                                            
     Less:   accumulated depreciation                       
               and amortization                756,713              413,323
                                             ---------              -------
                                             3,371,935              857,548
                                             =========              =======


                                       9
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United States Dollars)



7.   DEFERRED EXPENDITURE

          In June 1995,  the Company  entered into a consulting  agreement  with
     previously  unaffiliated  parties  pursuant  to which it  receives  various
     investor  relations  and  financial   advisory  services.   The  consulting
     agreement has a term of 12 months,  subject to earlier  termination thereof
     or renewal for subsequent periods.  Pursuant to the terms of the agreement,
     the Company:  (a) in June 1995,  issued to the  consultant  an aggregate of
     260,000  shares of its common  stock and (b) is  obligated  to issue to the
     consultant  20,000 shares of its common stock each month during the term of
     the agreement. The consulting agreement expires in June 1997.

          The value  attributable to the 260,000 shares issued to the consultant
     pursuant to the consulting agreement,  $1,510,600, has been capitalized and
     is being amortized over the 12 month term of the consulting agreement.  The
     value  attributable to the shares of common stock being issued on a monthly
     basis is being  charged  to  expenses  as such  shares of common  stock are
     issued.

8.   SHORT-TERM BORROWINGS

          Short-term  borrowings at September 30, 1996 represent bank overdrafts
     on which the Company pays interest  based on the "best lending" rate in the
     PRC. The effective interest rate at September 30, 1996 was 14.42%.

9.   MARGIN LOAN PAYABLE

          The margin loan payable is to a third party and is  collateralized  by
     the Company's  investment  securities  with a carrying value of US$408,739.
     The loan is  repayable  on  demand  and  bears  interest  at Hong Kong best
     lending rate (12% at September 30, 1996) plus 3.5 per cent per annum.

10.  DUE TO PRC JOINT VENTURE PARTNERS

          These amounts are unsecured, interest-free and have no fixed repayment
     date.


                                       10
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United States Dollars)



11.  SHARE CAPITAL

          The changes in share  capital  during the nine months ended  September
     30, 1996 were as follows:

                                           Common Shares        
                                  ------------------------------
                                     Number of                      Contributed
                                      Shares           Amount         Surplus
                                  ---------------   ------------   -------------

   Balance, December 31, 1995        10,859,542       $108,595      $2,812,546

   Consulting Agreement (Note 7)        100,000          1,000         580,000

   Consideration Shares (Note 1)        727,272          7,273         992,726
                                     ----------        -------       ---------

   Balance, September 30, 1996       11,686,814        116,868       4,385,272
                                     ==========        =======       =========

          As of September 30, 1996, there were outstanding  warrants exercisable
     to purchase  296,443 shares of common stock,  at an exercise price of $3.20
     per share through September 2, 1999.

12.  ANALYSIS  OF NET CASH FLOW OF CASH AND CASH  EQUIVALENTS  IN RESPECT OF THE
     PURCHASE OF A SUBSIDIARY COMPANY

                                                                      US$
                                                                ---------------

     Cash at bank and in hand acquired                                21,940

     Bank borrowings of the company acquired                      (1,249,976)
                                                                  ---------- 
     Net outflow of cash and cash equivalents in respect of
           the purchase of subsidiary companies                   (1,228,036)
                                                                  ========== 


                                       11
<PAGE>

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

Introduction

     The Company  was  originally  incorporated  in 1958 and until June 1994 had
been engaged in business other than those it presently  operates,  or, since its
Alpine  1992  emergence  from  reorganization  under  Chapter  11  of  the  U.S.
Bankruptcy code, had been inactive.

     Vancouver  Hong Kong  owns and  operates  an  apartment  building  in North
Vancouver,  British Columbia,  and until June 1995 the Company's operations were
comprised of that single segment. In January 1995, the Company acquired from Fai
Chan (an  officer,  director  and  principal  stockholder  of the  Company)  the
ownership  of 100% of the  common  stock of Heng Fai China  and Asia  Industries
Limited ("Asia") and Asia's wholly-owned subsidiaries, Heng Fai China Industries
Limited ("China") and Heng Fai Light Products Limited ("Light").  Light, through
its subsidiary Cangzhou Min You Cement Company Limited ("Min You"), obtained the
right to  acquire  the use,  for a period of five  years  commencing  January 1,
11995, of a production line at Min You in the PRC. Min You was entitled to lease
the production line for five years by expending Renmibi ("RMB"), the currency of
the PRC,  RMB 1.2 million on the  expansion  and  modernization  of Min You. The
option was  exercised  and the  required  RMB 1.2 million was expended in fiscal
1995,  and  beginning in June 1995 the  Company's  operations  included a second
business segment, the production and sale of cement.

     As of  September  4, 1996,  the Company  entered  into an  agreement,  (the
"Agreement")  with  Monkey  King Group  pursuant  to which  Worldwide  Container
Company Ltd. ("Worldwide"),  a wholly owned subsidiary of the Company,  acquired
from the  Seller a 70%  interest  in Wuhan  Container  Co.,  Ltd.  ("Wuhan")  in
exchange for 727,272 shares of the Company's restricted common stock. Based upon
negotiations  between  the  Company's  President  and the Monkey  King Group the
Shares were valued at a per share price of $5.50.  Wuhan is a People's  Republic
of China state  company  which was formed to engage in the design,  manufacture,
lease and repair of standard  and  non-standard  containers  and  related  steel
structure  products.  Wuhan commenced trial  production of its containers in the
Spring of 1996.

     The closing of the Agreement was conditioned upon the approval of the Board
of Directors of the Company as well as the Company's satisfactory  completion of
a due  diligence  review of Wuhan.  On September  19, 1996 the  Company's  Board
approved the Agreement, completed its due diligence review of Wuhan and directed
the  issuance  of the  Shares to Hubei  Monkey  King  Investment  &  Development
Corporation ("HMK").

     The  assets  acquired  by the  Company  through  the  acquisition  of a 70%
interest  in  Wuhan  consisted  of  assembly  lines,   plant  and  manufacturing
production  equipment,  power generators and related equipment.  Wuhan presently
owns its manufacturing  plant which is located in the City of Wuhan on the banks
of the Yangtze River and Hanshui River.  The facility  consists of approximately
480,000 square feet which will Wuhan  estimates has a capacity to produce 10,000
containers  on  an  annual  basis.  The  Company  believes  that   approximately
$5,000,000 in capital  improvements  will be required to be made to the plant in
order to reach maximum  capacity.  The Company intends to utilize Wuhan's assets

                                       12
<PAGE>

in order to engage in the full  scale  design,  manufacture  and  production  of
container and related steel structure products.

     The  acquisitions  of Wuhan was accounted for under the purchase  method of
accounting. Under this method, the purchase price is allocated to the fair value
of the net assets acquired and any excess is considered to be goodwill.

     In addition,  the Company only acquired  majority  interests in Wuhan which
requires allocation to the minority holders of their interests in Wuhan's income
and losses.

Results of Operations -  Period Ended September 30, 1996 as Compared to the 
                         Period Ended September 30, 1995

     The  consolidated  sales increased  62.51% in the nine months' period ended
September 30, 1996 to US$636,000 from US$391,000 in the corresponding  period in
1995,  reflecting the  contribution  in sales from Min You. For the nine month's
period September 30, 1996,  approximately  39.81% of the Company's total revenue
was  derived  from the  leasing  of the  apartment  building  while  54.56%  was
contributed  by the sale of cement  products.  Out of the total revenue about 5%
was generated  through  securities  investment  for the nine months period ended
September 30, 1996.

     The statement of operations  include the operation of Wuhan.  There were no
significant  changes in the expenses  attributable to the operation of Vancouver
Hong Kong between the nine months' period of fiscal 1996 and fiscal 1995.

     General corporate  expenses  increased to US$2,181,395 for the period ended
September  30,  1996  from  US$1,525,156  for the  corresponding  period in 1995
resulting from the significant  increase in the consulting expenses and the cost
of cement  production.  The consulting  fees related to an agreement the Company
entered into June 1995 for investor  relations and financial  advisory  services
(see Note 7 of the Notes to the Condensed  Consolidated  Financial  Statements).
Legal and  professional  fees increased for the period ended  September 30, 1996
for the expenses related to the Company's corporate operations.

     The  Company's  net loss  after  minority  interest  for the  period  ended
September 30, 1996 was $1,513,887,  a change of US$379,995  compared to net loss
of US$1,133,892 for the  corresponding  period in 1995. The increases in the net
loss was due to (i) the operating loss for the cement  segment;  and (ii) higher
general corporate expenses, the consulting expenses in particular.

     As at September 30, 1996,  the Company held shares of common stock of three
companies traded on the Stock Exchange of Hong Kong Limited. As of September 30,
1996,  the quoted market price of the shares are, in the  aggregate,  US$116,445
less than their initial  costs.  The  securities are classified as available for
sale and,  accordingly,  the  decrease in their  market  value has been  debited
directly  to  stockholders'  equity  as  a  separate  component  thereof.  These
marketable equity securities are carried at fair value and future changes in the
market value of these securities could materially affect the Company's financial
position.


                                       13
<PAGE>

     Minority interests was US$31,657 for the nine months period ended September
30, 1996 which was solely the losses of Wuhan shared by the minority  holders of
Wuhan.

     There  was  no   provision   for  income  taxes  of  the  Company  and  its
subsidiaries.  The  subsidiaries in the PRC were either in their first or second
year of the tax holiday.

Liquidity and Capital Resources

     The Company did not generate net profits from  operations  on an accounting
basis for the nine months period ended September 30, 1996.

     Operating  cashflows  for the nine months  period ended  September 30, 1996
were a negative US$188,919.  The Company met its working capital requirements by
(i) utilizing  cash on hand and (ii) proceeds  obtained from bank  overdraft and
other short-term borrowings.

     As discussed in Note 2 of the Notes to the Condensed Consolidated Financial
Statements,  the  Company's  operating  losses  and net asset  deficiency  raise
substantial  doubts  concerning  the  Company's  ability to  continue as a going
concern.  However, the Company's principal shareholder has agreed to continue to
provide the Company with necessary financial support.

Exchange Rate Risk

     As the Company's operations in the PRC increased,  the exposure to exchange
fluctuation has increased.

     The exchange rate between the Renminbi and the U.S.  Dollar ranged  between
RMB 8.5 and RMB 8.2. Since the unification of the two-tier  exchange rate system
effective January 1, 1994, the Renminbi continued to strengthen against the U.S.
Dollar.  Therefore,  management  believes that it is unlikely that there will be
any devaluation of the Renminbi against the U.S. Dollar.  The Company  therefore
does not  anticipate any exchange rate  fluctuation  which would have an adverse
effect on the  financial  performance  and  asset  values  of the  Company  when
measured in terms of United States Dollar.

Inflation

     The general inflation rate in China was approximately 24% and 15% per annum
in 1994 and 1995  respectively.  Accordingly,  the Chinese  government has taken
steps to control inflation by means of credit restrictions, increase in interest
rates and open  market  operations,  which in turn,  may lead a slowdown  of the
Chinese economy.

     As a result of the PRC  inflation,  the Company  experienced  a rise in the
cost of raw  materials  which was the primary cause for the decline in the gross
margins of the cement production in the PRC.


                                       14
<PAGE>

                           PART II. OTHER INFORMATION

Item 1.           Legal Proceedings

                  The  Company  is  not  a  party  to  any  pending  or  ongoing
                  litigation.

Item 2.           Changes in Securities

                  There have been no changes in the  securities  of the  Company
                  required to be disclosed pursuant to this item.

Item 3.           Defaults upon Senior Securities

                  There  has  been  no  material  default  with  respect  to any
                  indebtedness of the Company required to be disclosed  pursuant
                  to this item.

Item 4.           Submission of Matters to a Vote of Securityholders

                  There   have  been  no   matters   submitted   to  a  vote  of
                  securityholders  during the nine months  ended  September  30,
                  1996.

Item 5.           Other Information

                  Not Applicable.

Item 6.           Exhibits and Reports on Form 8-K

         (a)      Exhibits: None.

         (b)      Reports on Form 8-K:

                  Form 8-K  regarding  the  acquisition  of Wuhan KMK  Container
                  Company  Limited  ("Wuhan") was filed on September 20, 1996. A
                  copy of the Stock Purchase  Agreement  between the Company and
                  the Monkey King Group was filed as an appendix. The amendments
                  to the Form 8-K were filed on November  25, 1996 and  December
                  9, 1996,  respectively,  incorporating  the audited  financial
                  statements  of Wuhan as at December 31, 1995 and the pro-forma
                  condensed   balance   sheet  and   statement   of  income  and
                  explanatory  notes and giving effect to the combined  accounts
                  of the Company and Wuhan as  required by the  instructions  to
                  Form 8-K.


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<PAGE>

                                   SIGNATURES



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                                       HENG FAI CHINA INDUSTRIES, INC.




Dated: December 30, 1996               By:   /s/ Robert H. Trapp
                                       -----------------------------------------
                                             Robert H. Trapp
                                             Secretary and Treasurer