U.S. SECURITIES AND
EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ]
     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
        June 30, 2007 [     ]
     TRANSITION REPORT
        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File No.
0-23015 GREAT CHINA
INTERNATIONAL HOLDINGS, INC.(Exact name of small business issuer as specified in its
charter) Nevada
     
     87-0450232(State or Other Jurisdiction of
        Incorporation or Organization)
     
     (IRS Employer Identification No.)  C Site 25-26F
Presidential Building, No. 69 Heping North StreetHeping District,
Shenyang 110003, Peoples Republic of China(Address of Principal Executive Offices)  0086-24-22813888
(Issuers telephone number)  Not Applicable
(Former name, address and fiscal year, if changed since last report)  Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [ X ] No [    ] Indicate by check mark whether registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule
12b-2 of the Exchange Act). [    ] Large accelerated filer [     ] Accelerated filer [ X ]
Non-accelerated filer Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).   Yes [    ] No [ X ] State the number of shares outstanding of each of the issuers
classes of common equity:  As of June 30, 2007, there were 11,782,036 shares of common
stock outstanding.




FORM 10-QGREAT CHINA INTERNATIONAL
HOLDINGS, INC. TABLE OF CONTENTS PagePART I.
     Item 1.  Financial InformationBalance Sheet as of June 30, 2007 (Unaudited) andDecember 31, 2006
     3Statements of Operations for the Six MonthsEnded June 30, 2007 and 2006 (Unaudited)
     5Statements of Operations for the Three MonthsEnded June 30, 2007 and 2006 (Unaudited)
     6Statements of Cash Flows for the Six MonthsEnded June 30, 2007 and 2006 (Unaudited)
     7Notes to the Financial Statements
     8Item 2.  Managements Discussion and Analysis of
Financial Condition and Results of Operations
     22Item 3.  Quantitative and Qualitative DisclosuresAbout Market Risk
     29Item 4.  Controls and Procedures
     30PART II.
     Other Information
     30Item 1A.  Risk Factors
     30Item 5. Other Information
     30Item 6.  Exhibits
     31Signatures
     31 2




GREAT CHINA INTERNATIONAL HOLDINGS, INC.
                                        CONDENSED CONSOLIDATED BALANCE SHEET
                                       JUNE 30, 2007 AND DECEMBER 31, 2006 2007
     
     2006(Unaudited)ASSETSCurrent assets:Cash and equivalents
     $2,866,409
        
     
     $1,769,744Accounts receivableTrade, net of allowance of $770,798 and $1,443,476, respectively
     739,227
        
     
     1,454,164Advances to suppliers
     4,868,122
        
     
     1,089,048Advances to employees
     14,273
        
     
     5,473Deposits
     3,274,629
        
     
     1,636,942Properties held for resale
     9,545,386
        
     
     10,620,550Assets held for sale, net of impairment of $199,542 at June 30, 2007
     6,816,875
        
     
     9,372,189Prepaid expenses
     14,658
        
     
     86,617Total current assets
        
        
     
        28,139,579
        
     
     26,034,727Property and equipment:Land and buildings
     55,454,560
        
     
     49,988,841Motor vehicles
     697,286
        
     
     679,453Office furniture and equipment
     466,468
        
     
     340,61856,618,314
        
     
     51,008,912Less accumulated depreciation
     (8,482,381
        )
     
     (7,114,334
        )48,135,933
        
     
     43,894,578Total assets
     $76,275,512
        
     
     $69,929,305 See accompanying notes to the consolidated financial statements. 3




GREAT CHINA INTERNATIONAL HOLDINGS, INC.
                                        CONDENSED CONSOLIDATED BALANCE SHEET
                                        JUNE 30, 2007 AND DECEMBER 31, 2006 2007
     
     2006(Unaudited)LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable and accrued expenses
        
        
     $
        9,475,556
        
     
     $
        10,554,995Deposits held
        
        
     
        705,078
        
     
     767,481Advances from buyers
     2,181,506
        
     
     3,004,011Amounts due to related companies
     6,118
        
     
     695,002Taxes payable
     3,354,441
        
     
     1,083,765Short-term loans
     48,707,349
        
     
     51,308,184Current portion of long-term debt
     664,574
        
     
     428,076Total current liabilities
        
        
     
        65,094,622
        
     
     
        67,841,514Long term debt, net of current portion shown above
        
        
     
        9,017,317
        
     
     
        1,999,465Total liabilities
     74,111,939
        
     
     69,840,979Stockholders equity:Common stock,  $.001 par value 50,000,000 shares authorized,11,782,036 issued and outstandingat June 30, 2007 and December 31, 2006
     11,783
        
     
     11,783Additional paid in capital
     4,542,308
        
     
     4,542,308Retained deficit
     (3,088,582
        )
     
     (4,934,109
        )Accumulated other comprehensive income
     698,064
        
     
     468,344Total stockholders equity
     2,163,573
        
     
     88,326Total liabilities and stockholders equity
     $76,275,512
        
     
     $69,929,305 See accompanying notes to the consolidated financial statements. 4




GREAT CHINA INTERNATIONAL HOLDINGS, INC.
                                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
                                                     (UNAUDITED) 2007
     
     2006RevenuesSales
        
        
     $
        1,624,800
        
     
     $
        4,525,578Rental and management fee income
     2,862,234
        
     
     2,557,353Total revenues
     4,487,034
        
     
     7,082,931ExpensesCost of properties sold
     1,690,952
        
     
     3,404,100Building management expenses
     1,540,908
        
     
     644,701Operating and selling expenses
     73,721
        
     
     60,218Administrative expenses
     2,194,338
        
     
     2,226,801Depreciation and amortization
     1,115,243
        
     
     1,126,853Total expenses
     6,615,162
        
     
     7,462,673Income (loss) from operations
     (2,128,127
        )
     
     (379,742
        )Other income (expense)Other income
     6,484,101
        
     
     95,149Impairment loss
     (199,542
        )
     
     --Interest and finance costs
     (1,295,259
        )
     
     (2,213,443
        )Total other income (expense)
     4,989,300
        
     
     (2,118,294
        )Income (loss) before income taxes
     2,861,172
        
     
     (2,498,036
        )Provision for income taxes
     1,015,645
        
     
     --Net income (loss)
     1,845,527
        
     
     (2,498,036
        )Other comprehensive income (loss):Foreign currency translation adjustment
     229,720
        
     
     66,217Total comprehensive income (loss)
     $2,075,247
        
     
     $(2,431,819
        )Basic and diluted net income (loss) per common share
     $0.16
        
     
     $(0.22
        )Weighted average basic and diluted shares outstanding
     11,782,036
        
     
     11,268,609 See accompanying notes to the consolidated financial statements. 5




GREAT CHINA INTERNATIONAL HOLDINGS, INC.
                                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 FOR THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006
                                                     (UNAUDITED) 2007
     
     2006RevenuesSales
        
        
     $
        1,391,785
        
     
     $
        3,168,334Rental and management fee income
     1,503,961
        
     
     1,231,527Total revenues
     2,895,746
        
     
     4,399,861ExpensesCost of properties sold
     1,477,679
        
     
     2,049,553Building management expenses
     1,312,126
        
     
     269,323Operating and selling expenses
     55,479
        
     
     20,368Administrative expenses
     1,815,557
        
     
     1,457,164Depreciation and amortization
     534,922
        
     
     640,556Total expenses
     5,195,763
        
     
     4,436,964Income (loss) from operations
     (2,300,017
        )
     
     (37,103
        )Other income (expense)Other income
     4,534,832
        
     
     (23,117
        )Impairment loss
     --
        
     
     --Interest and finance costs
     (701,136
        )
     
     (882,266
        )Total other income (expense)
     3,833,696
        
     
     (905,383
        )Income (loss) before income taxes
     1,533,679
        
     
     (942,486
        )Provision for income taxes
     537,557
        
     
     --Net income (loss)
     996,122
        
     
     (942,486
        )Other comprehensive income (loss):Foreign currency translation adjustment
     196,309
        
     
     8,425Total comprehensive income (loss)
     $1,192,431
        
     
     $(934,061
        )Basic and diluted net income (loss) per common share
     $0.08
        
     
     $(0.08
        )Weighted average basic and diluted shares outstanding
     11,782,036
        
     
     11,439,751 6




GREAT CHINA INTERNATIONAL HOLDINGS, INC.
                                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
                                                     (UNAUDITED) 2007
     
     2006Cash flows from operating activities:Net income (loss)
     $1,845,527
        
     
     $(2,498,036
        )Adjustments to reconcile net income (loss) to operating activities -Depreciation and amortization
     1,181,407
        
     
     1,126,853Reduction in (provision for) doubtful accounts
     (671,009
        )
     
     --Gain on disposal of fixed assets
        
        
     
        --
        
     
     
        (103,043
        )Impairment loss
        
        
     
        199,542
        
     
     
        --Non-cash stock compensation expense
     --
        
     
     377,875Changes in assets and liabilities:(Increase) decrease in -Accounts receivable and other receivable
     (260,541
        )
     
     (831,050
        )Advances to suppliers
     (308,112
        )
     
     (771,533
        )Refunds due from contractors
     --
        
     
     3,536,692Prepaid expenses
     71,959
        
     
     1,322,280Accounts payable and other payables
     (1,079,438
        )
     
     148,660Deposits held
     (62,403
        )
     
     --Advances from buyers
     (822,506
        )
     
     397,566Properties held for resale
     1,075,164
        
     
     2,621,976Restricted cash
     --
        
     
     482,548Income and other taxes payable
     2,270,676
        
     
     (231,781
        )Net cash provided by (used in) operating activities
     3,440,266
        
     
     5,579,007Cash flows from investing activities:Construction in progress
     (1,115,190
        )
     
     (71,303,978
        )Sales of fixed assets
     --
        
     
     198,511Purchases of fixed assets
     (5,422,762
        )
     
     (587,846
        )Net cash (used in) investing activities
     (6,537,952
        )
     
     (71,693,313
        )Cash flows from financing activities:Proceeds from stock issuance, net of offering costs
     --
        
     
     2,478,280Loan proceeds
     7,591,864
        
     
     --Loan repayments
     (2,938,349
        )
     
     (6,285,860
        )Advances from (to) directors and affiliated companies
     (688,884
        )
     
     60,079,856Net cash (used in) financing activities
     3,964,631
        
     
     56,272,276Effect of exchange differences
     229,720
        
     
     66,217Net (decrease) in cash and cash equivalents
     1,096,665
        
     
     (9,775,813
        )Cash and cash equivalents, beginning of period
     1,769,744
        
     
     10,896,807Cash and cash equivalents, end of period
     $2,866,409
        
     
     $1,120,994Supplemental disclosures of Cash Flow information:Interest paid, net of capitalized amounts
     $980,259
        
     
     $1,090,277Income taxes paid
     $378,621
        
     
     $249,262 See accompanying notes to the consolidated financial statements. 7




GREAT CHINA INTERNATIONAL HOLDINGS, INC.
                               NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                                  JUNE 30, 2007 1.     Description
of business Nature of
organization Great  China  International
 Holdings,  Inc.,  (the  Company) was  incorporated  in the State of Nevada on
     December  4, 1987,  under the name of Quantus  Capital,  Inc.,  and in 1992,  it
changed its name to Red Horse      Entertainment  Corporation.  Effective July 5, 2005,
 the Company  completed the  acquisition of  Silverstrand      International  Holdings
 Limited  (Silverstrand),   a  Hong  Kong  limited  liability  company,  by  issuing
     10,102,333  shares of its common voting stock to the former  stockholders  of
Silverstrand in exchange for all      of the capital  stock of  Silverstrand.  For
financial  reporting  purposes the  acquisition  was treated as a      recapitalization
 of  Silverstrand.  On  September  15,  2005,  the  Company  changed  its name to Great
China      International  Holdings,  Inc.  Prior to its  acquisition  of  Silverstrand,
 the  Company  was not engaged in      active business operations. Silverstrand  was  incorporated  on
September  30, 2004 in Hong Kong  Special  Administrative  Region,  in the      Peoples
Republic of China (PRC) with an authorized capital of $12,820,513  (HK$100,000,000)
 divided in 100      million ordinary shares of par value $0.12 per share. During  October  of  2004,
 Silverstrand  acquired  all  of  the  outstanding  capital  of  Shenyang  Maryland
     International  Industry Co.,  Limited  (Shenyang  Maryland) for  $5,000,000,
 payable to its former owners as      follows: 
     Jiang Fang as to $4,350,000;
     Jiang Peng as to $500,000; and,
     Pay $50,000 to each of Duan Jing Shi, Li Guang Hua and Wang Li Rong This transaction was treated as a
recapitalization  of Shenyang Maryland for financial  reporting purposes and      the
excess purchase was treated as dividends to shareholders. On  November  23, 2004 the  Ministry
of Commerce  and  Business  Registration  issued a business  registration
     certificate approving Shenyang Maryland reclassification to a wholly owned foreign
enterprise. Pursuant to several agreements
dated December 8, 2005 and December 28, 2005, the Company, through its
subsidiaries, agreed to acquire in 2006 a 100 percent interest in the land use
rights for the Xita Project. First, pursuant to a sale and purchase agreement
dated December 8, 2005, subsequently amended on December 28, 2005, the Company
agreed to acquire, through Shenyang Maryland, 70 percent of the equity interest in
Shenyang Xinchao Development Co. Limited (Xinchao), a Sino-Foreign joint
venture corporation that owns approximately 66 percent of the land use rights of
the Xita Project, from Shenyang Yunfeng Real Estate Development Co., Limited (Yunfeng).
The Company agreed to acquire the remaining 30 percent equity interest in Xinchao
through Silverstrand from Sapphire Corporation Limited (formerly: I.R.E. Corporation
Limited) (Sapphire), an unrelated Singapore corporation, pursuant an agreement
dated December 28, 2005. The  remaining  approximately  34%
 interest  in the land use rights of the Xita  Project is held by  Shenyang      Yindu
Property Co.,  Limited  (Yindu),  also a  Sino-Foreign  joint  venture.  Pursuant to
agreements  dated      December 28, 2005,  Shenyang  Maryland  agreed to acquire a 70
percent  interest in 8




Yindu
from  Yungfeng,  and      Silverstrand  agreed to  acquire a 30%  interest  in Yindu
 from  Sapphire.  Following  the  closing  of these      transactions,  which is expected
to occur in 2007,  the Company held,  through its  subsidiaries,  100 percent
     interest in the land use rights comprising the Xita Project. Shenyang
 Xin Chao  Property  Company  Limited  (Xinchao)  was  registered  on August 16, 2005
in  Shenyang,      Liaoning  Province,  in the PRC with a  registered  capital  of
 $12,330,456  (Rmb.100,000,000)  and a defined      period of  existence  of 11 years to
August  15,  2016.  Xin Chao was  formed  to  develop a certain  tract of      property
 located in the Heping District of Shenyang,  and will feature a construction  area of
almost 500,000      square meters with a linear site area of approximately 101,000 square
meters. Shenyang
 Yindu Property  Company  Limited  (Yindu) was registered on August 16, 2005 in
Shenyang,  Liaoning      Province,  in the PRC with a  registered  capital  of
 $6,615,228  (Rmb.50,000,000)  and a  defined  period of      existence  of 11 years to
August 15,  2006.  Yindu was formed to develop a certain  tract of property  located
     in Xita District of Shenyang, China. Shenyang
Jitian Property Company Limited  (Jitian) was registered on February 22, 2006 in
Shenyang  Liaoning      Province,  in the PRC with a registered capital of $616,523
 (Rmb.5,000,000) and a defined period of existence      of 15 years to February 22, 2021.
On March 7, 2006,  the  registered  capital  increased to  $20,000,000  from
     $616,523.  Jitian was formed to develop a certain  tract of property  located in
Chessboard  Mountain  Tourism      Development District of Shenyang, China. In
 December,  2006,  Silverstrand  completed  an  agreement  for the  sale of all of the
 outstanding  equity      interest in Shenyang Jitian Property Company, Ltd., (Jitian). Under
the  agreement  Beijing  Capital  Land  Limited  and Reco  Ziyang  Pte  Limited
 purchased  Jitian  from      Silverstrand  in exchange for a total cash payment of
$1,399,970  and  assumption of all bank debt incurred by      Jitian in  connection  with
the  acquisition  of Galaxy  Bay,  which will  result in a release  of  guaranties
     provided by Shenyang Maryland. The
 Company  engages  in the  development  and  sale of  high  quality  private  residential
 properties  and      commercial  buildings for lease in the City of Shenyang,  China.
 Shenyang  Maryland,  the Companys  indirect      wholly-owned  subsidiary,  was one of
the first  private  property  developers  and  retailers in China,  and,      according
to the statistical  information on sales of construction  area as published by Shenyang
 Statistical      Authority, Shenyang Maryland was the ninth largest private property
developer in Shenyang City in 2004. 2.     Going
concern The
 Company  was in  default  on  $32,959,318  of bank  loans as of June 30,  2007  (Note
8). As a result the      Company also had a working  capital  deficit of  $36,955,043  as
of June 30, 2007.  The  Companys  ability to      continue  as a going  concern  is
 dependent  on the  ability to  renegotiate  an  extension  of the bank debt
     maturities  and to continue to maintain  a profitable  level of  operations.
 These issues raise doubts      about the Companys  ability to continue as a going
 concern.  Management  is in the on-going process of attempting  to raise  additional
 capital      through debt and equity offerings and is also negotiating a settlement of these delinquent
debts (Note 11).  On July 30, 2007, the Company entered into an agreement to purchase the auctioned
delinquent debts totaling $24,636,535 (RMB 187,730,400), including interest in arrears of $1,834,698
(RMB 13,980,400) at a purchase consideration of $7,461,942 (RMB 56,860,000). The
financial  statements do not give effect to any  adjustments  which would be necessary
 should the Company      be unable to continue as a going  concern and  therefore be
required to realize its assets and  discharge  its      liabilities  in the normal course
of business at amounts  different  from those  reflected in these  financial
     statements. 9




3.     Summary
of significant accounting policies The
financial  statements are prepared in accordance  with  accounting  principles  generally
 accepted in the      United States of America and the following is a summary of
significant accounting policies: Basis
of presentation- The accompanying condensed consolidated financial statements have
been prepared in compliance with Rule 10-01 of Regulation S-X and U.S. generally
accepted accounting principles, but do not include all of the information and
disclosures required for audited financial statements. These statements should
be read in conjunction with the condensed consolidated financial statements and
notes thereto included in the Companys latest Annual Report on Form 10-K for
the year ended December 31, 2006. In the opinion of management, these statements
include all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation of the results of operations, financial position and
cash flows for the interim periods presented. Operating results for the six
months ended June 30, 2007 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2007. The
factors  discussed in Footnote 2 above raise  substantial doubt about the Company's
ability to continue as      a going concern.  The financial  statements do not include
any adjustments  that might result from the outcome      of this uncertainty. Consolidation
policy  All significant inter-company transactions and balances within the
Company are eliminated in consolidation. Cash
and equivalents  The Company considers all highly liquid debt instruments
purchased with maturity period of three months or less to be cash equivalents.
The carrying amounts reported in the accompanying consolidated balance sheet
for cash and cash equivalents approximate their fair value. Substantially all of
the Companys cash is held in the PRC and is not protected by FDIC or any other form
of insurance. Accounts
receivable- Provision is made against accounts receivable to the extent which they
are considered to be doubtful. Accounts receivable in the balance sheet is
stated net of such provision. As of June 30, 2007 and December 31, 2006, the
provision for doubtful debts amounted to $718,582 and $1,443,476
respectively. Related
companies  A related company is a company in which a director has a beneficial
interest in and in which the Company has significant influence. Advances
from buyers  Advances from buyers represents prepayments from buyers on properties on
which sales revenues have not yet been recognized for financial reporting purposes. Properties
held for sale Properties held for sale are comprised of properties held
for sale and repossessed properties held for resale and are stated at the lower
of cost or net realizable value. Cost includes acquisition costs of land use
rights, development expenditures, interest costs and any overhead costs incurred
in bringing the developed properties to their present location and condition. Net
realizable value is determined by reference to management estimates based on
prevailing market conditions. Management evaluates the market value of its
properties on an annual basis by comparing selling prices of its properties with
those of other equivalent properties in the vicinity offered by other
developers. Management
 reduces the estimated market value by anticipated  selling expenses and associated taxes
to derive      the net realizable value. 10




Assets
held for sale Assets held for sale are comprised of land use rights and
associated costs of development for the Xita project, which had previously been
classified as construction in progress as of December 31, 2006. During 2007
the Company determined that the Company would cease development on this project
and sell the associated assets. Based on the estimated fair value of the assets
held for sale an impairment loss of $199,542 has been recorded during the six months
ended June 30, 2007. Shenyang
 Heping  District  Investment  Promotion  Bureau,  the Agency  overseeing the development
of the Xita      District,  greatly  expanded the magnitude and concept of the Xita
 Project.  The Agency  reached an agreement      to compensate the Company  $4,360,693
 (RMB  33,228,480) to take possession of the land use rights to the Xita      Project and
reimburse the Company  $1,620,102 (RMB 12,345,180) for expenses  incurred on the project.
 On July      20, 2007, the local government  approvals and procedures  completed the
transfer of the land use rights to the      local  government and the Company  received
 compensation  amounting to $4,360,693  (RMB  33,228,480)  and the      reimbursement of
$1,620,102 (RMB 12,345,180) was received on July 31, 2007. Property
and equipment Property and equipment is being depreciated over the estimated useful
lives of the related assets. Depreciation is computed on the straight-line
basis for both financial and income tax reporting purposes over useful lives as
follows: Building and land use rights
     8-26 yearsLeasehold improvements
     20 yearsEquipment
     5 yearsMotor vehicles
     5 yearsOffice furniture and fixtures
     5 years Depreciation
expense for the six months ended June 30, 2007 and 2006 totaled $1,115,243 and $1,126,853
     respectively. Repairs
and maintenance costs are normally charged to the statement of operations in the year in
which they      are incurred. In situations where it can be clearly demonstrated that the
expenditure has resulted in an      increase in the future economic benefits expected to
be obtained from the use of the asset, the expenditure      is capitalized as an
additional cost of the asset. Property
and equipment are evaluated  annually for any impairment in value.  Where the
 recoverable  amount of      any property and equipment is determined to have declined
below its carrying  amount,  the carrying  amount is      reduced to reflect the decline
in value.  There were no property and equipment  impairments  recognized during      the
years ended December 31, 2006, 2005 and 2004. As
of June 30, 2007 fixed assets  totaling  $44,202,455  have been pledged as  securities
 to various banks in      respect of borrowings totaling $53,956,693 and mortgage loans
of $4,432,518. 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 11




costs
and      associated taxes. In the case of construction in progress,  management takes
into  consideration the estimated      cost to complete the project when making the lower
of cost or market calculation. Income
Recognition Revenue from the sale of properties is recognized when the following
four criteria are met: (1) a sale is consummated (2) the buyers initial and
continuing investments are adequate to demonstrate a commitment to pay for the
property, (3) the sellers receivable is not subject to future subordination and
(4) the seller has transferred to the buyer the usual risks and rewards of
ownership in a transaction that is in substance a sale and does not have a
substantial continuing involvement with the property. Rental
and building  management  income comprises rental and building  management income from
Qiyun New Garden      and President  Building.  Rental income is recognized on an accrual
basis as the rents and management fees are      earned. Interest
income is recognized when earned,  taking into account the average principal amounts
 outstanding and      the interest rates applicable. Cost
of sales The cost of sales includes the carrying amount of the properties being sold
and the business taxes paid by the Company in connection with the sales.
Business taxes included in cost of sales were $1,816,218 and $398,796 for the
six months ended June 30, 2007 and 2006, respectively. Other
income Other income consists of primarily services performed on behalf of the
purchasers of Jitian. These revenues are recognized when the services have been
performed in accordance with the terms of the agreement. Foreign
currencies- The Companys principal country of operations is in The Peoples Republic of
China. The financial position and results of operations of the Company are determined
using the local currency (Renminbi or Yuan) as the functional currency. The
results of operations denominated in foreign currency are translated at the average
rate of exchange during the reporting period. Assets
and  liabilities  denominated  in foreign  currencies at the balance  sheet date are
 translated at the      market rate of exchange  ruling at that date.  The  registered
 equity  capital  denominated in the functional      currency  is  translated  at the
 historical  rate of  exchange  at the  time  of  capital  contribution.  All
     translation  adjustments  resulting  from the  translation  of the  financial
 statements  into the  reporting      currency (US Dollars) are dealt with as an
exchange fluctuation reserve in shareholders equity. Historically
 the local  currencys  exchange  rate had been  unofficially  tied to the US Dollar at a
rate of      approximately  8.28 Yuan per US  Dollar.  Effective  July 21,  2005,  the
Yuan was  revalued  to an  effective      exchange  rate of  approximately  8.11 Yuan per
US Dollar.  Subsequent  to the  revaluation  the Yuan has been      allowed to float
within a specified range. As of June 30, 2007 the exchange rate was 7.62 Yuan per US
Dollar. Taxation Taxation on overseas profits has been calculated on the estimated assessable profits
for the year at the rates of taxation prevailing in the countries in which the
Company operates. Provision for The Peoples Republic of China enterprise
income tax is calculated at the prevailing rate based on the estimated assessable
profits less available tax relief for losses brought forward. 12




Enterprise
income tax Under the Provisional Regulations of The Peoples Republic of China
Concerning Income Tax on Enterprises promulgated by the State Council and which
came into effect on January 1, 1994, income tax is payable by enterprises at a
rate of 33% of their taxable income. Preferential tax treatment may, however, be
granted pursuant to any law or regulations from time to time promulgated by the
State Council. Enterprise
 income tax  (EIT) is  provided  on the basis of the  statutory  profit for  financial
 reporting      purposes,  adjusted  for income and expense  items,  which are not
 assessable  or  deductible  for income tax      purposes. Value
added tax The Provisional Regulations of The Peoples Republic of China
Concerning Value Added Tax promulgated by the State Council came into effect on
January 1, 1994. Under these regulations and the Implementing Rules of the
Provisional Regulations of the PRC Concerning Value Added Tax, value added tax
is imposed on goods sold in or imported into the PRC and on processing, repair and
replacement services provided within the PRC. Value
added tax payable in The Peoples  Republic of China is charged on an aggregated  basis
at a rate of 13%      or 17%  (depending  on the type of goods  involved) on the full
price  collected for the goods sold or, in the      case of taxable  services  provided,
 at a rate of 17% on the charges for the taxable services  provided,  but      excluding,
 in respect of both goods and  services,  any amount paid in respect of value added tax
included in      the price or charges,  and less any  deductible  value added tax already
 paid by the taxpayer on purchases of      goods and services in the same financial year. United
States income taxGreat China International Holdings, Inc., the U.S. holding
company, does not accrue income taxes on foreign earnings as there is no
intention at the current time to transfer any of these earnings to the holding
company. Should earnings be transferred to the U.S. holding company, they
would be subject to U.S. Corporate income taxes at rates approximating 40%. In
2006, the Financial  Accounting  Standards  Board (FASB) issued FIN 48, which  clarifies
the application of      SFAS 109 by  defining  a  criterion  that an  individual  income
 tax  position  must meet for any part of the      benefit of that position to be
recognized in an  enterprises  financial  statements and provides  guidance on
     measurement,  derecognition,  classification,  accounting  for interest and
 penalties,  accounting in interim      periods,  disclosure and transition. In
accordance with the transition provisions,  the company adopted FIN 48      effective
January 1, 2007. The
 Company  recognizes  that  virtually  all  tax  positions  in the PRC are  not  free  of
some  degree  of      uncertainty due to tax law and policy changes by the state.
 However,  the Company cannot reasonably  quantify      political risk factors and thus
must depend on guidance issued by current state officials. Based
on all known facts and  circumstances  and current tax law, the company  believes  that
the total amount      of  unrecognized  tax benefits as of June 30, 2007,  is not
material to its results of  operations,  financial      condition or cash flows.  The
company also believes that the total amount of  unrecognized  tax benefits as of
     June 30,  2007,  if  recognized,  would not have a material  effect on its
 effective  tax rate.  The  Company      further  believes  that  there are no tax
 positions  for which it is  reasonably  possible,  based on current      Chinese tax law
and policy,  that the unrecognized tax benefits will  significantly  increase or decrease
over      the next 12 months  producing,  individually or in the aggregate,  a material
effect on the companys  results      of operations, financial condition or cash flows. 13




Earnings
Per Share Basic earnings per share is computed by dividing net income by the
weighted-average number of common shares outstanding during the period. Diluted
earnings per share is computed by dividing net income by the weighted-average number
of common shares and dilutive potential common shares outstanding during the period. As
of June 30, 2007 and December 31, 2006, there were no outstanding securities or other
contracts to issue      common stock, such as options, warrants or conversion rights,
which would have a dilutive effect on earnings      per share as the effect of options
outstanding at that time was anti- dilutive. Fair
value of financial instruments The carrying amounts of certain financial instruments,
including cash, accounts receivable, commercial notes receivable, other
receivables, accounts payable, commercial notes payable, accrued expenses, and
other payables approximate their fair values as at June 30, 2007 and December 31,
2006, because of the relatively short-term maturity of these instruments. Use
of estimates The preparation of financial statements in accordance with generally
accepted accounting principles require management to make estimates and
assumptions that affect reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Stock
based compensation In December 2004, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123(R),
Share-Based Payment. SFAS 123(R) replaces SFAS No. 123, Accounting for
Stock-Based Compensation, and supersedes Accounting Principles Board(APB)
Opinion No. 25, Accounting for Stock Issued to Employees. Effective January 1,
2006, the Company adopted Statement of Financial Accounting Standard No. 123(R),
Share-Based Payment, (SFAS No. 123(R)), using the modified prospective
transition method. SFAS No. 123(R) requires equity-classified share-based payments to
employees, including grants of employee stock options, to be valued at fair
value on the date of grant and to be expensed over the applicable vesting
period. Under the modified prospective transition method, share-based awards
granted or modified on or after January 1, 2006, are recognized in compensation
expense over the applicable vesting period. Also, any previously granted
awards that are not fully vested as of January 1, 2006 are recognized as
compensation expense over the remaining vesting period. No retroactive or
cumulative effect adjustments were required upon The Companys adoption of SFAS No.
123(R). Prior
to adopting SFAS No. 123(R),  The Company accounted for its fixed-plan  employee stock
options using the      intrinsic-value  based method  prescribed by Accounting
 Principles Board Opinion No. 25, Accounting for Stock      Issued to Employees,  (APB
No. 25) and related  interpretations.  This method required  compensation expense
     to be recorded on the date of grant only if the current  market  price of the
 underlying  stock  exceeded the      exercise price. Had the Company elected the fair
value  provisions of SFAS No. 123(R),  The Companys 2005 net      earnings  and net
 earnings  per share  would not have  differed  from the  amounts  actually  reported  as
no      share-based payments were made during this period. The
fair value of each option  award is estimated on the date of grant using a Black  Scholes
 option  pricing      model that uses the  assumptions  noted in the table below.
 Because Black  Scholes  option  valuation  models      incorporate ranges of assumptions
for inputs, those ranges are disclosed.  Expected  volatilities are based on      implied
 volatilities  from traded  options on the  Companys  stock,  historical  volatility of
the Companys      stock,  and other  factors.  The  Company  uses  historical  data to
estimate  option  exercise  and  employee      termination  within the valuation model;
 separate groups of employees 14




that
have similar  historical  exercise      behavior are considered  separately for valuation
 purposes.  The expected term of options  granted is derived      from the output of the
option  valuation  model and  represents  the period of time that  options  granted are
     expected  to be  outstanding;  the range given below  results  from  certain  groups
of  employees  exhibiting      different  behavior.  The risk-free rate for periods
within the contractual life of the option is based on the      U.S. Treasury yield curve
in effect at the time of grant. Expected volatility
     25%Weighted-average volatility
     25%Expected dividends
     0%Expected term (in years)
     1 to 5 yearsRisk-free rate
     4.5% A
summary of option activity under the Plan as of June 30, 2007, and changes during the
six months then      ended is presented below: Options
     Shares
     Weighted-AverageExercisePrice
     Weighted-AverageRemainingContractualTerm
     AggregateIntrinsicValueOutstanding at January 1, 2007
     
     
     
        173,568
        
     $
        5.88
        
     
        6.67
        
     $
        --Granted
     --
        
     $--Exercised
     --
        
     $--Forfeited or expired
     173,568
        
     $5.88
        
     6.67
        
     $--Outstanding at June 30, 2007
     --
        
     $--
        
     
        
     $--Exercisable at December 31, 2006
     --
        
     $--
        
     
        
     $-- A
summary of the status of the Companys nonvested shares as of June 30, 2007, and
changes during the six      months then ended, is presented below: Nonvested Shares
     Shares
     Weighted-AverageGrant DateFair ValueNonvested at January 1, 2007
     
     
     
        10,000
        
     
        $    1.08Granted
     --
        
     $        --Vested
     --
        
     $        --Forfeited
        
        
     
        (10,000)
        
     
        $    1.08Nonvested at June 30, 2007
        
       
     
        --
        
     
        $        -- On
March 3, 2006 the Company issued to its Chief Executive  Officer options to purchase
 572,491 shares of its      common  stock at a purchase  price of $6.00 per share.  The
options  vest in five equal  increments  beginning      with the  date of  issuance  in
 March  2006  and the  following  four  anniversary  dates.  The  options  are
     exercisable  over a term of five years from the date of  vesting.  In March 2007 the
Chief  Executive  Officer      left the Company and agreed to surrender 114,498 of vested
option shares. On
March 15, 2006 the Company  issued to an employee  options to purchase  245,350  shares
of its common stock      at a purchase price of $6.00 per share. The options vest in five
equal  increments  beginning with the date of      issuance in March 2006 and the
following four  anniversary  dates.  The 15




options
are exercisable over a term of      five years from the date of vesting.  In November
 2006 the  employee  left the Company and during 2007 agreed      to surrender 49,070 of
vested options shares. On
May 18, 2006 the Company issued to its Chief  Financial  Officer  options to purchase
 10,000 shares of its      common stock at a purchase  price of $11.00 per share.  The
options  vest  immediately  upon  issuance and are      exercisable  over the one year
period from the date of  issuance.  The Chief  Financial  Officer  subsequently      left
the Company and has surrendered all options that were issued. On
October 1, 2006 the Company  issued to an employee  options to purchase  10,000  shares
of its common stock      at a  purchase  price of $7.00 per  share.  The  options  vest
in one year from the date of  issuance  and are      exercisable over the one year period
from the date of issuance.  These options were  subsequently  surrendered      in
February 2007. Recent
accounting pronouncements In February 2006, the FASB issued Statement No. 155, Accounting
for Certain Hybrid Financial Instruments(SFAS No. 155), which amends FASB
Statements No. 133 and 140. This Statement permits fair value remeasurement for
any hybrid financial instrument containing an embedded derivative that would
otherwise require bifurcation, and broadens a Qualified Special Purpose Entitys
(QSPE) permitted holdings to include passive derivative financial
instruments that pertain to other derivative financial instruments. This
Statement is effective for all financial instruments acquired, issued or subject to
a remeasurement event occurring after the beginning of an entitys first fiscal year
beginning after September 15, 2006. This Statement has no current
applicability to the Companys financial statements. Management plans to
adopt this Statement on January 1, 2007 and it is anticipated that the initial
adoption of this Statement will not have a material impact on the Companys
financial position, results of operations, or cash flows. In
March 2006, the FASB issued Statement No. 156, Accounting for Servicing of
Financial Assets  an amendment of FASB Statement No. 140(SFAS No. 156).
This Statement is effective for fiscal years beginning after September 15,
2006. This Statement requires that all separately recognized servicing assets and
servicing liabilities be initially measured at fair value, if practicable. This
Statement has no current applicability to the Companys financial statements.
Management plans to adopt this Statement on January 1, 2007 and it is
anticipated that the initial adoption of this Statement will not have a material
impact on the Companys financial position, results of operations, or cash flows. In
June 2006, the FASB issued Interpretation 48, Accounting for Uncertainty in Income Taxes(FIN 48),
an interpretation of FASB Statement No. 109, Accounting for Income Taxes.FIN 48
clarifies the accounting and reporting for income taxes where interpretation
of the law is uncertain. FIN 48 prescribes a comprehensive model for the
financial statement recognition, measurement, presentation and disclosure of
income tax uncertainties with respect to positions taken or expected to be
taken in income tax returns. FIN 48 is effective for fiscal years beginning
after December 15, 2006. This Statement has no current applicability to the
Companys financial statements. Management adopted this Statement on January 1, 2007
and the initial adoption of FIN 48 did not have a material impact on the
Companys financial position, results of operations, or cash flows. In
September 2006, the FASB issued Statement No. 157, Fair Value Measurements(SFAS No. 157).
SFAS No. 157 addresses how companies should measure fair value when they are
required to use a fair value measure for recognition or disclosure purposes under
GAAP. SFAS No. 157 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value 16




measurements. SFAS No. 157 is
effective for fiscal years beginning after November 15,
 2007, with earlier adoption permitted.  Management is    assessing the impact of the
adoption of this Statement. In
September 2006, the FASB issued Statement No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans(SFAS No. 158), an amendment
of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires (a) recognition
of the funded status (measured as the difference between the fair value of the
plan assets and the benefit obligation) of a benefit plan as an asset or liability
in the employers statement of financial position, (b) measurement of the funded
status as of the employers fiscal year-end with limited exceptions, and (c) recognition
of changes in the funded status in the year in which the changes occur through
comprehensive income. The requirement to recognize the funded status of a benefit
plan and the disclosure requirements are effective as of the end of the
fiscal year ending after December 15, 2006. The requirement to measure the
plan assets and benefit obligations as of the date of the employers fiscal
year-end statement of financial position is effective for fiscal years ending
after December 15, 2008. This Statement has no current applicability to the
Companys financial statements. Management plans to adopt this Statement on
December 31, 2006 and it is anticipated the adoption of SFAS No. 158 will not
have a material impact to the Companys financial position, results of operations, or
cash flows. In
 September   2006,  the  Securities   Exchange   Commission   issued  Staff   Accounting
  Bulletin No. 108      (SAB No. 108).  SAB No. 108  addresses  how the effects of
prior year  uncorrected  misstatements  should be      considered  when  quantifying
 misstatements  in  current  year  financial  statements.  SAB No. 108  requires
     companies  to quantify  misstatements  using a balance  sheet and income  statement
 approach  and to evaluate      whether either  approach  results in  quantifying an
error that is material in light of relevant  quantitative      and qualitative  factors.
 When the effect of initial  adoption is material,  companies will record the effect
     as a cumulative  effect  adjustment to beginning of year retained  earnings and
disclose the nature and amount      of each  individual  error  being  corrected  in the
 cumulative  adjustment.  SAB No. 108  will be  effective      beginning  January 1,
 2007 and it is anticipated  that the initial  adoption of  SAB No. 108  will not have a
     material impact on the Companys financial position, results of operations, or cash
flows. In
 February  2007,  the FASB  issued  Statement  No. 159 The Fair  Value  Option  for
 Financial  Assets and      Financial  Liabilities  (SFAS 159).  This  statement
 permits  companies to choose to measure many  financial      assets and  liabilities  at
fair value.  Unrealized  gains and losses on items for which the fair value option
     has been elected are reported in earnings.  SFAS 159 is effective for fiscal years
 beginning  after  November      15, 2007. The Company is currently assessing the impact
of SFAS 159 on its consolidated financial statements. SFAS
154 Accounting  Changes and Error  Corrections calls in part for (1) the
cumulative effect o correction      of an error on  periods  prior to those  presented
 to be  reflected  in the  carrying  amounts  of assets and      liabilities as of the
beginning of the first period presented (2) An offsetting  adjustment,  if any, shall be
     made to the  opening  balance of  retained  earnings  for that period and (3)
 financial  statements  for each      individual prior period presented shall be adjusted
to reflect  correction of the  period-specific  effects of      the error.  During the
current  period,  two major  errors were  detected,  the effect of which will be rolled
     back to the appropriate reporting period in accordance with the requirements of this
SFAS. Reclassifications Certain amounts in the 2006 financial statements have been reclassified to conform
to the 2007 presentation. These reclassifications had on effect on previously
reported results of operations or retained earnings. 17




4.     Concentrations
of business and credit risk Substantially
 all of the  Companys  bank accounts are in banks located in the PRC and are not
covered by any      type of protection similar to that provided by the FDIC on funds held
in U.S. banks. The
 Company  provides  credit  in the  normal  course  of  business.  The  Company  performs
 ongoing  credit      evaluations  of its customers  and clients and maintains
 allowances  for doubtful  accounts  based on factors      surrounding the credit risk of
specific customers and clients, historical trends, and other information. Substantially
all of the Company's fixed assets and operations are located in the Peoples Republic of
China. Substantially
all of the Company's profits are generated from operations in mainland China. Payments
of dividends may be subject to government restrictions. 5.     Cash
and equivalents At June 30,  2007 the  Company  held no  restricted  cash  balances.  Pledged  bank
 deposits,  which are now      unrestricted,  bear  interest  at 0.06% per  month and in
 accordance  with the  terms and  conditions  of the      banking  facilities  agreed
with banks to provide  mortgage loan facilities to buyers of properties  developed
     by the Company,  the Company  agreed to place  guarantee fund deposits of not less
than 5% to 10% of the total      outstanding  mortgage  loans  extended to property
 buyers and to  guarantee  the  repayments  of the mortgage      loans.  As of June 30,
2007,  the bank had released  the Company from its loan  guarantees,  and the formerly
     restricted funds have been transferred to an unrestricted bank account at the same
bank. Substantially
 all of the Companys  cash is held in financial  institutions  in the PRC and are
not protected      by FDIC insurance or any other form of guaranteed payment. 6.     Properties
held for resale Properties
held for resale at June 30, 2007 and December 31, 2006 by project are as follows: 2007
     
     2006Qiyun New Village
     
     
     $
        1,791,801
        
             
     $
        1,795,644Peacock Garden
     266,692
        
     
     312,584Chenglong Garden
     6,908,273
        
     
     7,712,615President Building
     195,932
        
     
     412,167Maryland Building
     240,472
        
     
     234,322Others
     142,216
        
     
     153,218Total
     $9,545,386
        
     
     $10,620,550 As
of June 30, 2007 the carrying values of stock of properties of $6,423,151 have been
pledged as security      for the Companys bank loans and mortgage loans. 18




7.     Amounts
due from/(to) directors and related parties The
amounts due from/(to) directors and related parties at June 30, 2007 and December 31,
2006 are as      follows: Amounts due from/(to) directors
     2007
     
     2006Frank Jiang Fang
     
     
     $
        (25,332
        )
       
     $
        (418,708
        )Jiang Peng
     17,258
        
     
     --Duan Jing Shi
     1,969
        
     
     --Wang Li Rong
     (13
        )
     
     --Gong Wang Fu
     --
        
     
     (276,294
        )Amounts due from/(to) affiliates, net
     $(6,118
        )
     
     $(695,002
        ) Amounts
due from/(to) related parties are unsecured, bear no interest, and have no fixed
repayment terms. 8.     Short-term
loans 2007
     
     2006Loans from Banks
     
     
     $
        15,748,031
        
       
     $
        15,658,006Loans from Banks - delinquent
     10,157,480
        
     
     13,859,584Bank loans purchased by asset management company
     22,801,838
        
     
     22,218,670Total current notes payable
     $48,707,349
        
     
     $51,736,260 At
December  31, 2006,  all bank loans and those  purchased  by the asset  management
 company were treated as      short-term  because all bank loans have  matured and
 negotiations,  while  ongoing,  are not settled as to an      extension of the due dates
of the bank loans. The
delinquent notes had due dates ranging from May of 2003 to December of 2006. On
June 22, 2006 the Company  entered into a settlement  agreement  with a bank with respect
to  $8,202,100 of      past due notes. In accordance with the terms of this  settlement
 agreement,  the Company has paid the balance      of $8,202,100 as of June 3-0, 2007.
 According to the settlement,  the bank has agreed to waive  $1,181,102 in      past due
 interest.  The Company is still  waiting for a  confirmation  of the waiver and will
 recognize  the      benefit of this interest waiver once it has received this
confirmation. There
have been  numerous  instances  of events of defaults  arising  from the  non-payment  of
 interest  and      principal in accordance with the terms of the loan  agreements  with
two of the banks.  No definitive  demands      have been made by the banks to foreclose
on the secured  borrowings.  The Company is still in discussions with      the banks to
approve an  extension  of the terms and tenure of the secured  and  unsecured  loans.
 Management      expects that the bank negotiations will result in an extension to bank
debt maturities. The
Company has not accrued any interest on the loans  acquired by the asset  management
 company  since March      21, 2005 as the asset  management  company has agreed to waive
interest on these acquired loans  subsequent to      that date. Interest
is accruing on all other past due loans at rates  ranging  from  6.0535% to 7.533%,  the
rates called      for in the original loan agreements. 19




Substantially all of these loans were collaterialized, however, a significant
portion of the properties held as collateral were subsequently sold by the Company. 9.     Long-term
debts  secured 2006
     
     2005Long term debts:Bank loan
     $5,249,344
        
     
     --Mortgage loans
     
        4,432,518
        
     
     $2,427,541Less: Current portion of long-term debts
     (664,574
        )
     
     (428,076
        )Long-term debts
     $9,017,317
        
     
     $1,999,405 On
June 18, 2007 the Company  obtained a loan from a bank of  $5,249,344  at 8.775%
 interest  due on June 12,     2009.  The loan is secured by fixed assets and land use
rights. On
April 13,  2007 the Company  obtained a ten year  mortgage  loan  secured by fixed
 assets at 6.04356%  with     monthly payments of $26,277. Maturities
of long-term  debt  including  mortgage  loans for each of the next five years and
thereafter are as     follows: Amount2007
     
     
     $
        664,5742008
     5,677,4202009
     743,4002010
     679,7432011
     201,731Thereafter
     1,714,994$9,681,862 10.    Commitments As
of June 30, 2007 the Company had  $88,748,857  in  commitments  for capital  expenditures
 for  contractual      agreements  related to the  development of the Xita project.  The
Company has reached an agreement to sell its      interests in this development  project,
 which would release the Company from these commitments.  Additionally      the Company
has $4,480,874 of commitments for funding the registered capital of its subsidiaries. On
May 31, 2007,  the Company  entered  into a letter of intent to acquire all of the issued
share  capital of      Loyal Best Property  Development  Limited  (Loyal  Best),  a
Hong Kong limited  company,  from Gentle Knight      Limited (GKL). None of Loyal Best
or its directors is affiliated with the Company or Silverstrand. Loyal
Best is 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  Project).  Shenyang  Loyal Best paid a land  transfer  fee
of  US$20,000,000  for the      Project. 20




Pursuant
to the letter of intent,  the parties  entered into a definitive  agreement  for the
 acquisition  on      June 28, 2007.  The  definitive  agreement  provides for closing of
the  transaction  by August 10, 2007.  The      principal terms of the agreement are: 
The Company will purchase from GKL all of the outstanding shares of Loyal Best for $4,010,000, of
              which $2,580,000 was previously paid as a deposit and the remainder will be paid at the closing.  
The Company will purchase from the directors of Loyal Best at a total price of $20,500,000, all of
              the director loan notes issued by Loyal Best in the aggregate principal amount of $20,000,000, which
              were used to partially finance Shenyang Loyal Bests land transfer fee payment on the Project of
              $20,000,000.  
GKL and the directors selling Loyal Best notes under the agreement can terminate the agreement at
              any time on or before July 20, 2007, by refunding to the Company the $2,580,000 deposit and paying
              to the Company an additional $2,580,000 as a break up fee.  
After July 20, 2007, the parties are obligated to close by August 10, 2007. If for any reason the
              Company fails to close, it will forfeit the deposit. If for any reason GKL or the sellers of the
              Loyal Best director notes fail to close, they are obligated to refund to the Company the $2,580,000
              deposit and pay to Silverstrand an additional $2,580,000.  11.    Subsequent events On
July 20, 2007, the Company,  through its indirect subsidiary Shenyang Maryland
 International Industry Co.,      Limited (Shenyang  Maryland),  received notice of
approval and first payment under a compensation  agreement      that effects disposition
of the Xita Project. In
December 2005,  Shenyang  Maryland and  Silverstrand  International  Holdings,  Limited
acquired all of the      registered  capital of Shenyang  Xinchao Property Company
Limited and Shenyang Yindu Property Company Limited,      which together hold 100% of the
land use rights granted under 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
$4,097,223 (RMB 33,228,480). Shenyang
 Heping  District  Investment  Promotion  Bureau,  the Agency  overseeing the development
of the Xita      District,  greatly  expanded the magnitude and concept of the Xita
 Project.  The Agency  reached an agreement      to compensate the Company  $4,360,693
 (RMB  33,228,480) to take possession of the land use rights to the Xita      Project and
reimburse the Company  $1,620,102 (RMB 12,345,180) for expenses  incurred on the project.
 On July      20, 2007, the local government  approvals and procedures  completed the
transfer of the land use rights to the      local  government and the Company  received
 compensation  amounting to $4,360,693  (RMB  33,228,480)  and the      reimbursement of
$1,620,102 (RMB 12,345,180) was received on July 31, 2007. On
July 30,  2007,  Great China  International  Holdings,  Inc.,  through  its  indirect
 subsidiary  Shenyang      Maryland  entered  into an  agreement  to purchase  the
 auctioned  delinquent debts totaling  $24,636,535  (RMB  187,730,400),      including interest in arrears
of $1,834,698 (RMB 13,980,400) at a purchase consideration of $7,461,942 (RMB 56,860,000). 21




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-K 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 Jitian Property Company Limited, Shenyang Yindu Property       Company
Limited, Shenyang Xinchao Property Company Limited, Loyal Best Property Development 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. 
     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.
     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. 22





     Qiyun New Village is situated along the Nanyun Riverside and consists of
347 residential units, among which 323 units have been sold, and 2,186
square meters of commercial units.
     Peacock Garden is situated in Heping North Street, the commercial
district of Shenyang. Construction was completed in November 2000 and
Peacock Garden comprises 197 low-density residential apartments of which
193 have been sold.
     The Maryland Building consists of 12,858 square meters of commercial
 space among which 11,310 have been sold and other remaining 1,548 square
 meters are held for leasing purposes. Great
China International established Shenyang Jitian Property Company Limited (Jitian) on
February 22,       2006, for a new project development, Chessboard Mountain Residential
project. On February 27, 2006, Jitian       was confirmed as the highest bidder in a
public auction for a residential development project located in       the Chessboard
Mountain International Tourism Development District in Shenyang City. The total purchase
      price for the 420,317 square meters land use rights is approximately $56.7 million.
On May 12, 2006, bank       financing was obtained through a related third party. On May
16, 2006, Jitian obtained Planning Approval       from the relevant local authority for
the project with a total construction area of approximately 891,840       square meters
(9.6 million square feet). On May 28, 2006, construction approval from the relevant local
      authority was obtained by Jitian after which it obtained all necessary documents to
start construction. On       June 28, 2006, construction began on the Chessboard Mountain
Residential project to be known as Galaxy Bay.       Subject to approvals from relevant
local authority, the Company intends to pursue pre-sale of the       residential
properties before the end of 2006. Effective
July 3, 2006, Jitian entered into a loan agreement with the Shenyang City Commercial Bank
whereby       the Bank agreed to provide a loan of up to RMB 550,000,000, or
approximately $68.7 million to Jitian for       the purpose of acquiring the land use
right for the Chessboard Mountain Project. The Loan Agreement has a       term of three
years, and any amounts advanced thereunder bear interest at a rate of 6.633% per annum
and       must be repaid by the end of the term of the Loan Agreement. Under the Loan
Agreement, the Bank is       entitled, in the event of certain events of default
enumerated therein, to adjust the Loan amount under the       agreement or to cancel the
agreement and declare any amounts advanced thereunder due and owing. Shenyang
      Maryland International Industry Co., Ltd., a subsidiary of the Company, has agreed
to guarantee all amounts       owing by Jitian under the Loan Agreement, and Jitian has
mortgaged its title to the Chessboard Mountain       property to the Bank as security for
performance of its obligations under the Loan Agreement. As part of       the Banks
terms and conditions and in further consideration for the extension of the Loan, Jitian
entered       into a Creditors Right Transfer Agreement with Hainan Hexing Industry Co.,
Limited, an unrelated third       party, whereby Jitian, in exchange for the payment of
RMB100 million (approximately $12.6 million) out of       proceeds of the Loan, agreed to
purchase certain creditors rights of Hexing to another unrelated entity,       Shenyang
Night Musical Palace. These credit rights were not believed to be of value and were the
reduction       in the loan proceeds was treated as a loan discount, which was
consequently capitalized as       construction-in-progress. Effective
July 19, 2006, Jitian entered into another loan agreement with Shenyang City Commercial
Bank       whereby the Bank agreed to provide a loan of RMB50,000,000 (approximately US$
6.25 23




million)
pursuant to a       loan agreement dated for reference on June 28, 2006. The Loan
Agreement has a term of three years,       commencing July 19, 2006, and amounts advanced
thereunder bear interest at a rate of 6.633% and are       required to be repaid by the
end of the term of the Loan Agreement. Under the Loan Agreement, the Bank is
      entitled, in the event of certain events of default enumerated therein, to cancel
the agreement and declare       any amounts advanced thereunder due and owing. Shenyang
Maryland International Industry Co., Ltd. has       agreed to guarantee all amounts owing
by Jitian under the Loan Agreement, and Shenyang Maryland has also       agreed to
mortgage a portion of its property at the President Building project as security for
performance       of its obligations under the Loan Agreement. In
December, 2006, Silverstrand completed an agreement for the sale of all of the
outstanding equity       interest in Shenyang Jitian Property Company, Ltd., (Jitian). Under
the agreement Beijing Capital Land Limited and Reco Ziyang Pte Limited purchased Jitian
from       Silverstrand in exchange for a total cash payment of US$1,399,970 (the amount
of Silverstrands invested       capital in Jitian) and assumption of all bank debt
incurred by Jitian in connection with the acquisition of       Galaxy Bay, which will
result in a release of guaranties provided by Shenyang Maryland International. Shenyang
Xinchao Property Company Limited (Xinchao) was established in August 16, 2005 for a
mixed-use       development, later called the Xita Urban Reconstruction Project. The Xita
project occupies 83,071 square       meters of land with an estimated construction area
of 500,000 square meters. As of December 31, 2006,       Xinchao holds 70% equity
interest in the Xita Project and Shenyang Yindu Property Company Limited       (Yindu),
another subsidiary of Great China International, holds the other 30%. A preliminary plan
of the       Xita project area has been submitted to the district government for
approval. Because the plan was highly       appraised by the government, Xinchao and
Yindu managed to negotiate an expansion of the total development       area to about
double the original size. The government has been following a detailed review process on
this       substantial project, so Xinchao and Yindu do not expect the final plan will be
approved before December       2006, and may not be approved until 2007. Xinchao and
Yindu are in negotiations with a prospective partner       for a joint venture to develop
this project. The formation of the joint venture will depend, in part, on       the
ability of the prospective partner to provide all necessary financing for the
development. Xinchao and       Yindu have not reached any agreement on the joint venture
and cannot predict at this time whether an       acceptable arrangement will be reached
or the timing of any such agreement.   During 2007 the Company       determined that the
Company would cease development on this project and sell the associated assets. Shenyang
Heping District Investment Promotion Bureau, which is the agency overseeing development
of the Xita District is expanding the project and, as a consequence of the expansion,
has reached an agreement with us       to reacquire the land use rights for the Xita
Project in exchange for refunding the land transfer fee of $4,360,693      (RMB 33,228,480), and
reimbursing us for amounts expended on the development in the amount of $1,620,102 (RMB 12,345,180).
      On July 20, 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 $4,360,693 (RMB 33,228,480) and the reimbursement of
$1,620,102 (RMB 12,345,180) was received on July 31, 2007. Great
China International, through its wholly-owned subsidiary, Silverstrand International
Holdings       Limited, entered into a letter of intent dated May 31, 2007 to acquire for
US$24,510,000 all of the issued       share capital of Loyal Best Property Development
Limited (Loyal Best), a Hong Kong 24




limited
company, from       Gentle Knight Limited (GKL), an unrelated third party.  Loyal Best
is 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 Project). The
parties subsequently entered into a definitive agreement with respect to the transaction
dated June 28,       2007, pursuant to which Silverstrand agreed (a) to purchase from GKL
all of the outstanding shares of Loyal       Best for US$4,010,000, of which US$2,580,000
was previously paid as a deposit, and (b) to purchase from the       directors of Loyal
Best at a total price of US$20,500,000, all of the director loan notes issued by Loyal
      Best in the aggregate principal amount of US$20,000,000, which were used to make
Shenyang Loyal Bests land       transfer fee payment on the Project of US$20,000,000. Effective
August 7, 2007, Silverstrand completed the acquisition of the Loyal Best shares from GKL
in       consideration for US$4,010,000, US$2,580,000 of which had previously been paid. (3)   Results
of Operations Comparison of operations for the three months ended June 30, 2007 with the three months ended June 30, 2006: The
Company generated net income of $996,122 for the three months ended June 30, 2007 compared
to a net loss       of $(942,486) for 2006, representing an increase of $1,938,608 or
206% quarter-on-quarter. Components of       sales and expenses resulting in this
increase in net income are discussed below. Sales
revenues decreased by $1,776,549 or 56% quarter-on-quarter to $1,391,785 for the three
months ended       June 30, 2007 compared to 2006 of $3,168,334. Rental and management
fee income increased by $272,434 or 22%       to $1,503,961 during the quarter ended June
30, 2007 from $1,231,527 for the comparable period in 2006.       These changes are
mainly attributable to: 
     Significant decrease in sales of Qiyun New Village by $1,615,407 or 94.5%;
     Decreases in gross floor area sold by 3,742 square meters
              quarter-on-quarter to 1,723 square meters for the quarter ended June 30,
              2007 compared to 5,465 square meters in 2006;
     The number of units sold decreased by 18 units or 55% quarter-on-quarter
              to 9 units for the quarter ended June 30, 2007 compared to 27 units in
              2006;
     Increases in rental income by $214,400 or 26%;
     Increase in building management income by $67,459 or 17%; and
     No new development projects were introduced during 2007. Cost
of properties sold decreased by $571,874 or 28% quarter-on-quarter to $1,477,679 during the quarter
ended June 30, 2007, as compared to the corresponding period in 2006 of $2,049,553. This was primarily attributable to
a 55% decrease in the number of units       sold as described above. 25




Operating
and selling expenses increased by $35,111 or 172% to $55,479 for the quarter ended June
30, 2007       as compared to $20,368 for the quarter ended June 30, 2006. The increase
is mainly due to an increase       advertising expenses. General
and administrative expenses increased by $358,393 or 25% to $1,815,557 during the three
months       ended June 30, 2007 compared to $1,457,164 for the three months ended June
30, 2006. The increase was due to       an increase in Directors fees of $231,972. Depreciation
expense decreased by $105,634 or 16% to $534,922 for the quarter ended June 30, 2007,
compared       to $640,556 for the corresponding period in 2006. Other
income/(expenses) increased to $4,534,832 in 2007 from $(23,117) in 2006 which was due primarily to a land
excavation fee       of $3,901,170. Interest
and financing costs decreased by $181,130 to $701,136 for the quarter ended June 30,
2007, as       compared to $882,266 for the quarter ended June 30, 2006. The decrease was
primarily due to loan repayments       of bank borrowings. Comparison of operations for the six months ended June 30,
2007 with the six months ended June 30, 2006: The
Company generated  net income of $1,845,527 for the six months ended June 30, 2007 compared
to a net loss       of $(2,498,036) for 2006, representing an increase of $4,343,563 or
174% quarter on quarter. Components of       sales and expenses resulting in this
increase in net income are discussed below. Sales
revenues decreased by $2,900,778 or 64% to $1,624,800 for the six months ended June 30,
2007 compared       to 2006 of $4,525,578. Rental and management fee income increased by
$304,881 or 12% to $2,862,234 during       the six months ended June 30, 2007 from
$2,557,353 for the comparable period in 2006. These changes are       mainly attributable
to: 
     Significant decrease in sales of Qiyun New Village by $1,746,971 or 95%;
     Decreases in gross floor area sold by 5,405 square meters
              to 1,881 square meters for the six months ended June 30,
              2007 compared to 7,287 square meters in 2006;
     The number of units sold decreased by 24 units or 80%
              to 10 units for the six months ended June 30, 2007 compared to 34 units in
              2006;
     Increases in rental income by $215,911 or 12%;
     Increase in building management income by $98,304 or 17%; and
     No new development projects were introduced during 2007. 26




Cost
of properties sold decreased by $1,713,148 or 50% to $1,690,952 during the six months ended June 30,
2007, as       compared to the corresponding period in 2006 of $3,404,100. This was primarily
attributable to an 80% decrease in the       number of units sold as described above. Operating
and selling expenses increased by $13,503 or 22% to $73,721 for the six months ended June
30,       2007 as compared to $60,218 for the six months ended June 30, 2006. The
increase is mainly due to increased advertising expenses. General
and administrative expenses decreased by $32,463 or 1% to $2,194,338 during the six
months ended       June 30, 2007 compared to $2,226,801 for the six months ended June 30,
2006. The decrease is due to a       decrease in consulting fees of $502,352 offset by
increases in Directors fees of $231,934 and legal fees of       $284,609. Depreciation
expense decreased by $11,610 or 1% to $1,115,243 for the six months ended June 30, 2007,
      compared to $1,126,853 for the corresponding period in 2006. Other
income increased to $6,484,101 in 2007 from $95,149 in 2006 due primarily to a land
excavation fee of       $5,834,160. Interest
and financing costs decreased by $918,184 to $1,295,259 for the six months ended June 30,
2007, as       compared to $2,213,443 for the six months ended June 30, 2006. The
decrease was primarily due to loan       repayments of bank borrowings. (4)    Liquidity and Capital Resources Net
cash flows provided by (used in) operating activities for the six months ended June 30,
2007, and 2006       were $3,440,266 and $5,579,007, respectively. The increase in funds
provided by was primarily due to       increase in other revenue offset by an increase in
taxes payable during the six months ended June 30, 2007. Net
cash flows used in investing activities for the six months ended June 30, 2007, was
$6,537,952 compared       to $71,693,313 for the six months ended June 30, 2006. The
investing activity change was primarily       completion of construction projects during
2006 and no new projects starting in 2007. Net
cash flows provided by (used in) financing activities for the six months ended June 30,
2007, was       $3,964,631 compared to net cash provided by financing activities of
$56,272,276 for the six months ended       June 30, 2006 representing substantial
advances from directors and affiliated companies in 2006 compared to       2007. Current
liabilities exceeded current assets by $36,955,043 as of June 30, 2007. The working
capital deficit       was incurred primarily due to $32,959,318 of bank loans currently
in default. Due
to frequent changes in government fiscal and bank lending policies in the past 15 years
as well as       other administrative controls from time to time in China, it is not
uncommon for many companies to find       themselves unexpectedly holding overdue loans
borrowed from the banks, although the 27




initial
intention       between the borrowers and lenders was for terms with longer maturity
period. Under the circumstances, most       lending banks had and have usually worked
sympathetically and closely with borrowers for loan extension or       restructuring for
a shorter period within the administrative guidelines of the government. As State
      policies are issued outside the control of the banks in China and form part of the
macro and micro-economic       measures, many bankers and their customers are often stuck
in the situation, thus they are generally more       tolerant and supportive to overdue
loans than their counterparts in Western economies; they will work hard       to deal
with the situation provided the borrowers are responsible and have good relationship with
the       lenders. As
of June 30, 2007, the Companys subsidiary, Shenyang Maryland International Industry Co.
Limited       (Maryland), has on-going discussions with lending banks to renegotiate
various matured bank loans totaling       $48,707,349 with the following relevant banks: 1.  
   The Bank of China: As of June 30, 2007, bank loans from the Bank of China totaled
$7,874,016. The       loans were originally extended for the development of the President
Building in 2000. While the bank had       originally agreed orally on a 10-year
long-term loan period for the project, in 2002, owing to a change in       lending
policy, the Bank changed the terms of the loans into short-term development loans. Since
the       maturity of the various loans by December 31, 2004, Maryland commenced ongoing
negotiation with the Bank of       China for an extension of the loans. Due to the
initial verbal agreement and a credible relationship over       the years, the Bank has
agreed to renegotiate a settlement term. As of December  2006, the Company agreed
      to a debt-restructuring plan to repay the loans over the next three years. Payments
remaining on the       schedule are: 
$1,968,504 in 2007;
$2,624,672 in 2008; and,
$3,280,840 in 2009.  2.  The
Agricultural Bank of China: As of June 30, 2007, bank loans from the Agricultural Bank of
China       totaled $2,283,464. The loans were originally extended for the development of
Chenglong Garden. Since the       loans matured on December 21, 2005, Maryland has
commenced ongoing negotiation with the Agricultural Bank       of China for a short-term
loan extension for another one-year term. 3.  
   The Industrial and Commercial Bank of China (ICBC): As of December 31, 2006, the bank
loans from the       ICBC totaled $25,032,300 and were originally extended for the
development of the Chenglong Garden in 2001.       Since the loans had matured at the end
of 2003, Maryland has commenced ongoing negotiations for an       extension of the loans.
As part of the listing procedures on the Stock Exchange of Hong Kong,
      reorganization and restructuring, certain of the loans totaling $22,801,838 were
sold to the Great Wall       Asset Management Limited. On January 5, 2006, Great Wall
Asset Management Limited issued a notification       letter to Maryland that certain
loans totaling $22,801,838 has been assigned from the ICBC. The Great Wall Asset
Management Limited and Maryland are conducting ongoing negotiation on the terms and
repayment       schedules of the assigned loans. The terms and repayment schedules
requires approval from various       government bureaus, and, accordingly, Maryland
believed the negotiation could be closed by the end of 2006,       but negotiations are
still ongoing. On June 22, 2006, Maryland has also negotiated a settlement repayment
      schedule with ICBC on the remaining loans totaling $7,992,326. Under the negotiated
terms of the repayment       schedule, Maryland will be required to make quarterly
installment repayments commencing from June 30, 2006       until June 30, 2007. Maryland
 has fully the installment repayments before June 30, 2007 and is awaiting       formal
waiver of accrued accumulated interest totaling $1,181,102 ICBC.  On 28




July
30, 2007, Great China       International, through its indirect subsidiary Shenyang
Maryland International Industry Co., Ltd., entered       into an agreement to repurchase
and effectively settle over $24,636,535 of the outstanding debt obligation,       which
includes interest in arrears of $1,834,698, for a total payment of approximately
$7,461,942. 4.  Shenyang
City Commercial Bank: As of June 30, 2007, bank loan from the Shenyang City Commercial Bank amounted to $15,748,031
(RMB 120,000,000).  The loan was intended to finance the renovation of the President Building and to finance the Company's
operations.  This bank borrowing will mature on November 6, 2007. (5)   Contractual
Obligations The
following table is a summary of the Companys contractual obligations as of June 30, 2007: Total
     
     Less thanone year
     
     1-3 Years
     
     ThereafterShort-Term Debt
     
     
     $
        48,707,349
        
     
     $
        48,707,349
        
     
     $
        --
        
             
     $
        --Long-Term Debt
        
        
     9,681,891
        
     
     664,547
        
     
     7,100,563
        
     
     1,916,781Amounts due to related parties
     6,118
        
     
     6,118
        
     
     --
        
     
     --Purchase commitments
     24,510,000
        
     
     24,510,000
        
     
     --
        
     
     --Construction commitments
     88,748,857
        
     
     88,748,857
        
     
     --
        
     
     --Total Contractual Cash Obligations
     $171,654,215
        
     
     $162,636,871
        
     
     $7,100,563
        
     
     $1,916,781  Item 3.
 Quantitative and Qualitative Disclosure About Market Risk As
an underpinning industry in China, real estate has developed into a crucial pulling force
to the all-round growth of national economy with its long-term continuous speedy growth
and positive momentum of both production and marketing thrive which have attracted
extensive attention both in the domestic and from overseas.  A lot of problems and risks
arose with the real estate prosperity due to its over speedy development: The
national land is fully controlled by the government, and its price keeps rising in
accordance with the supply-demand relationship, which resulted in the over-fast increase
of the investment in real estate and the capital pressure. Meanwhile, the adjustment of
lending rate increased the risk and pressure of capital operation. The
contradictions of real estate market structure in some regions emerged, among which the
contradiction of commodity houses supply structure is conspicuous. On one hand, some
large-area residences, high rises and premium projects emerged in endlessly, but they are
unsuitable for sale; on the other hand, normal-sized commodity houses and economic and
functional houses targeting the low and medium wages earners in the urban area are in
short supply.  The housing price still rises faster in some cities, the construction of
living houses safeguard system lags behind in other cities, which resulted in the
disharmony between supply and demand.  So the order of real estate market is to be
further standardized. There
still exist the phenomena of false advertisements, contract fraud and illegal actions in
agent service and logistic administration, which are to be kept within limits in effect.
 It should not only rely on the self-restriction of real estate enterprises to address
all these problems.  The credit standing system of real estate market is to be perfected.
The operation, supervision and control systems of real estate market are to be further
improved. 29




Item  4.
 Controls and Procedures As of June 30, 2007 an evaluation was performed under the supervision and with the participation of Great China's
management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design
and operation of Great China's disclosure controls and procedures.  Based on that evaluation, Great China's
management, including the Chief Executive Officer and Chief Financial Officer, concluded that Great China's
disclosure controls and procedures were effective.  There have been no significant changes in Great China's
internal controls or in other factors that could significantly affect internal controls subsequent to the date of
the evaluation. PART II. OTHER INFORMATION Item  1A.
 Risk Factors Any statements in this discussion that are not historical facts are forward-looking statements that involve risks
and uncertainties; actual results may differ from the forward-looking statements. Sentences or phrases that use
such words as believes, anticipates, plans, may, hopes, can, will, expects, is designed to,
with the intent, potential and others indicate forward-looking statements, but their absence does not mean
that a statement is not forward-looking. Forward-looking statements are based on current expectations, estimates,
and projections as of the date of this report, and they are subject to a number of risks, uncertainties, and
assumptions that could cause actual results to differ materially from those described in the forward-looking
statements.  Such forward-looking statements should, therefore, be considered in light of various important
factors, including those set forth in this report and in our annual report on Form 10-K for the year ended
December 31, 2006, under the caption ITEM 1A. RISK FACTORS.  In particular, the matters discussed above under
PART I, ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS should be
viewed as creating substantial uncertainty about the Company and its prospects for the future.  Any one or a
combination of factors could materially affect our operations and financial condition. Item 5. Other Information On
August 9, 2007, Great China International engaged Henny Wee & Co., as its new independent
accountant.  During the two most recent fiscal years and through the date hereof, neither
Great China International nor any one on behalf of Great China International has
consulted with Henny Wee & Co. regarding the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit opinion that
might be rendered on Great China Internationals financial statements, or any other
matters or reportable events required to be disclosed under Items 304(a)(2)(i) and (ii)
of Regulation S-K. 30




Item  6.
 Exhibits. Exhibits:
 Copies of the following documents are included or furnished as exhibits to this report
pursuant to Item 601 of Regulation S-K. ExhibitNo.
     SEC Ref.No.
     Title of Document31.1
     31
     The certification of chief executive officer required by
        Rule 13a-14(a) or Rule 15d-14(a)31.1
     31
     The certification of chief financial officer required by
        Rule 13a-14(a) or Rule 15d-14(a)32.1
     32
     The certifications required by Rule 13a-14(b) or
        Rule 15d-14(b) and 18 U.S.C. Section 1350 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: August 12, 2007
        
     By:
     
     /s/ Frank JiangFrank Jiang, Chief Executive Officer(Principal Financial Officer)   Date: August 12, 2007
     
     By:
     
     /s/ Wang Li RongWang Li Rong, Chief Financial Officer(Principal Financial and Accounting Officer) 31