Great China International Holdings, Inc.

UNITED STATES

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, 2008

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

	for the transition period from to

Commission File No. 0-23015

GREAT CHINA INTERNATIONAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

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

C Site 25-26F Presidential Building, No. 69 Heping North Street

Heping District, Shenyang 110003, Peoples Republic of China

(Address of Principal Executive Offices)

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

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

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).
Yes ¨ No x

State the number of shares outstanding of each of the issuer’s classes of common equity: As of August 8, 2008, there were 11,759,966 shares of common stock outstanding.

FORM 10-Q
GREAT CHINA INTERNATIONAL HOLDINGS, INC.


TABLE OF CONTENTS		Page



PART I.	Item 1. Financial Information	3

	Balance Sheet as of June 30, 2008 (Unaudited) and December 31, 2007	3

	Statements of Operations for the Three-Month and Six-Month Periods Ended June 30, 2008 and 2007 (Unaudited)	4

	Statements of Cash Flows for the Six-Month Periods Ended June 30, 2008 and 2007 (Unaudited)	5

	Notes to the Financial Statements	6

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	24

	Item 4T. Controls and Procedures	24

PART II.	Other Information	25

	Item 6. Exhibits	25

	Signatures	26

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2008 AND DECEMBER 31, 2007

	June 30, 2008		December 31, 2007
	(Unaudited)
ASSETS
Current assets:
Cash and equivalents	$	10,985,244	$	10,044,579
Accounts receivable, net		211,023		325,058
Receivable on disposal of subsidiaries		--		30,701,957
Other receivable, net		160,946		1,070,863
Properties held for resale		7,451,835		7,696,437

Total current assets		18,809,048		49,838,893

Property and equipment, net		52,398,626		50,632,336

Deferred tax assets		164,030		--

Total assets	$	71,371,704	$	100,471,229

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term loans	$	17,945,700	$	25,231,297
Accounts payable and accrued expenses		7,119,511		8,615,415
Other payable		1,561,749		5,723,489
Payable to disposed subsidiaries		766,186		10,494,449
Commission payable		1,784,080		8,898,502
Advances from buyers		1,990,051		2,034,019
Taxes payable		8,704,598		8,552,316
Current portion of long-term debt		5,836,000		--

Total current liabilities		45,707,874		69,549,487

Long term debt, net		--		5,486,968


Total liabilities		45,707,874		75,036,455

Stockholders' equity:
Common stock, $.001 par value 50,000,000 shares
authorized, 11,759,966 issued and outstanding		11,760		11,760
Additional paid in capital		4,566,156		4,562,855
Statutory reserve		638,128		638,128
Other comprehensive income		2,630,135		1,468,546
Retained earnings		17,817,650		18,753,485

Total stockholders' equity		25,663,830		25,434,773

Total liabilities and stockholders' equity	$	71,371,704	$	100,471,229

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

GREAT CHINA INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2008 AND 2007
(UNAUDITED)

	Three month periods ended June 30,						Six month periods ended June 30,
	2008			2007			2008			2007
Revenue
Real estate Sales	$	743,298		$	1,391,785		$	2,218,685		$	1,624,800
Rental and management fee income		1,470,838			1,503,961			2,914,196			2,862,234

Total revenues		2,214,136			2,895,746			5,132,881			4,487,034

Cost of revenue		1,063,061			2,789,805			2,016,680			3,231,860

Gross profit		1,151,075			105,941			3,116,201			1,255,174

Operating expenses
Selling expenses		36,788			55,479			82,088			73,721
General and administrative expenses		723,473			1,815,557			2,104,557			2,194,338
Depreciation and amortization		730,659			534,922			1,460,224			1,115,243

Total operating expenses		1,490,920			2,405,958			3,646,869			3,383,302

Loss from operations		(339,844	)		(2,300,017	)		(530,668	)		(2,128,127	)

Other income (expense)
Gain on settlement of debt		--			--			1,075,843			--
Other income, net		4,843			4,534,832			(235,715	)		6,484,101
Impairment loss		--			--			--			(199,542	)
Interest and finance costs		(609,439	)		(701,136	)		(1,409,324	)		(1,295,259	)

Total other income (expense)		(604,596	)		3,833,696			(569,196	)		4,989,300

Income (loss) before income taxes		(944,440	)		1,533,679			(1,099,865	)		2,861,172

Provision for income taxes		(202,900	)		537,557			(164,030	)		1,015,645

Net income (loss)		(741,540	)		996,122			(935,834	)		1,845,527

Other comprehensive income:
Foreign currency translation adjustment		493,543			196,309			1,161,590			229,720

Net comprehensive income (loss)		(247,997	)		1,192,431			225,755			2,075,247

Net income (loss) per share - basic and diluted	$	(0.06	)	$	0.08		$	(0.08	)	$	0.16

Weighted average number of shares - outstanding basic and diluted		11,759,966			11,782,036			11,759,966			11,782,036

Basic and diluted weighted average shares outstanding are the same as there is no antidilutive effect.

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

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

	2008			2007
Cash flows from operating activities:
Net income (loss)	$	(935,834	)	$	1,845,527
Adjustments to reconcile net income (loss) to operating activities -
Depreciation and amortization		1,460,224			1,181,407
Deferred tax assets		(164,030	)		(671,009	)
Gain on settlement of debt		(1,075,843	)		--
Provision for doubtful accounts		149,427			--
Allowance for Xita project		--			199,542
Non-cash stock compensation expense		3,301			--
(Increase) decrease in current assets:
Accounts receivable and other receivable		31,720,942			(260,541	)
Advances to suppliers		--			(308,112	)
Prepaid expenses		--			71,959
Properties held for resale		713,750			1,075,164
(Increase) decrease in current liabilities:
Accounts payable and other payables and accrued expenses		(22,392,727	)		(1,079,438	)
Deposits held		--			(62,403)
Advances from buyers		(168,530	)		(822,506	)
Income and other taxes payable		(161,997	)		2,270,676


Net cash provided by operating activities		9,148,681			3,440,266


Cash flows from investing activities:
Construction in progress		--			(1,115,190	)
Purchase of property & equipment		(46,217	)		(5,422,762	)


Net cash used in investing activities		(46,217	)		(6,537,952	)


Cash flows from financing activities:
Loan proceeds		--			7,591,864
Loan repayments		(8,643,184	)		(2,938,349	)
Advances to directors and affiliated companies		--			(688,884	)


Net cash provided by /(used in) financing activities		(8,643,184	)		3,964,631


Effect of exchange differences		481,386			229,720


Net increase in cash and cash equivalents		940,666			1,096,665

Cash and cash equivalents, beginning of period	$	10,044,579		$	1,769,744


Cash and cash equivalents, end of period	$	10,985,244		$	2,866,409


Supplemental disclosures of Cash Flow information:
Interest paid	$	75,420		$	980,259

Income taxes	$	1,106,490		$	378,621

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

GREAT CHINA INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008

1.	Description of business

Nature of organization

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

Silverstrand was incorporated on September 30, 2004 in Hong Kong Special Administrative Region, in the People’s Republic of China (“PRC”) with an authorized capital of $12,820,513 divided into 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:


	Ÿ	Jiang Fang as to $4,350,000;
	Ÿ	Jiang Peng as to $500,000; and,
	Ÿ	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 the reclassification of Shenyang Maryland as 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 acquired, 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 acquired the remaining 30 percent equity interest in Xinchao through Silverstrand from Sapphire Corporation Limited on December 28, 2005.

The remaining approximately 34 percent 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 acquired 70 percent interest in Yindu from Yungfeng, and Silverstrand acquired 30 percent interest in Yindu from Sapphire. Following the closing of these transactions, the Company holds, through its subsidiaries, 100 percent interest in the land use rights comprising the Xita Project.

Shenyang Xinchao Property Company Limited (“Shenyang 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. 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, 2016.Xinchao and Yindu were 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. The local government of Heping District of Shenyang received back the land use rights of the Xita project because of new developing plan of the district. Heping District refunded the land usage right paid by Xinchao and reimbursed the development cost incurred by Xinchao.

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

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

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”). Immediately after acquisition, the Company decided to sell Loyal Best at a gain.

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

The Company engages in the development and sale of high quality real estate properties and developed residential and commercial properties includes Maryland building, President Building, Qiyun New Village, Peacock Garden, and Chenglong Garden. The Company also engages in rental of commercial buildings in the City of Shenyang, China. Shenyang Maryland, the Company’s indirect wholly-owned subsidiary, was one of the first private property developers and retailers in China.

2.	Summary of significant accounting policies

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

The following is a summary of significant accounting policies:

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

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

Allowance for Doubtful Accounts - The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and other receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of June 30, 2008 and December 31, 2007, the Company reserved $5,657,780 and $5,174,895 respectively.

Properties held for sale – The Company capitalizes as properties held for sale, the direct construction and development costs, property taxes, interest incurred on costs related to land under development and other related costs (i.e. engineering, surveying, landscaping, etc.) until the property reaches its intended use. At June 30, 2008 and December 31, 2007, properties held for sale amounted to $7,451,835 and $7,696,437, respectively.

Property and equipment – Property and equipment is being depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line basis over useful lives as follows:

	Building and land use rights	8 - 26 years
	Leasehold improvements	20 years
	Equipment	5 years
	Motor vehicles	5 years
	Office furniture and fixtures	5 years

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

	6-30-2008		12-31-2007
			(Audited)
Building	$	62,391,540	$	58,605,918
Automobile		1,210,562		1,115,768
Office equipment & Furniture		430,474		948,066
Others		15,603		10,930

		64,588,179		60,680,682

Accumulated depreciation		12,189,553		10,048,346

Property and equipment, net	$	52,398,626	$	50,632,336

Depreciation expense for the six month periods ended June 30, 2008 and 2007 and totaled $1,460,224 and $1,115,243 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 six month periods ended June 30, 2008, 2007 and 2006.

As of June 30, 2008 fixed assets totaling $36,245,512 have been pledged as securities to various banks in respect of borrowings totaling $23,781,700.

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

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

As of June 30, 2008 and December 31, 2007, the Company had no construction-in-progress balance.

Revenue Recognition

Real estate sales

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

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

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

Real Estate Capitalization and Cost Allocation

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

If the real estate is determined to be impaired, it will be written down to its fair market value. Real estate held for development or sale costs include the cost of land use rights, land development and home construction costs, engineering costs, insurance costs, wages, real estate taxes, and interest related to development and

construction. All costs are accumulated by specific projects and allocated to residential and commercial units within the respective projects. The Company leases the land for the residential unit sites under land use rights with various terms from the government of the PRC. The Company evaluates the carrying value for impairment based on the undiscounted future cash flows of the assets. Write-downs of inventory deemed impaired would be recorded as adjustments to the cost basis. No depreciation is provided for construction in progress.

Capitalization of Interest

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

Other income

Other income consists of land leveling income, which was one-time service performed which was requested by our customers and gain on settlement of debt. These revenues are recognized when the services have been performed and the settled amount has been paid in accordance with the terms of the agreement.

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

Assets and liabilities of the Company have been translated at year- end exchange rates, while revenues and expenses have been translated at average exchange rates in effect during the year. Resulting cumulative translation adjustments have been recorded as other comprehensive income (loss) as a separate component of stockholders' equity.

Equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of the financial statements into the reporting currency (“US Dollars”) are dealt with as an exchange fluctuation reserve in shareholders’ equity.

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

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

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

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

within those fiscal years. The management is currently evaluating the effect of this pronouncement on financial statements.

In September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)’ This Statement improves financial reporting by requiring an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:

a. A brief description of the provisions of this Statement

b. The date that adoption is required

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

The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on financial statements.

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

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

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This Statement replaces SFAS No. 141, Business Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to

evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after Company’s fiscal year beginning October 1, 2009. While the Company has not yet evaluated this statement for the impact, if any, that SFAS No. 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after September 30, 2009. The management is currently evaluating the effect of this pronouncement on financial statements.

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

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

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

3.	Receivable on disposal of subsidiaries

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

4.	Properties held for resale

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

	6-30-2008		12-31-2007
			(Audited)
Qiyun New Village	$	1,511,068	$	1,595,366
Peacock Garden		245,953		231,244
Chenglong Garden		5,036,016		5,250,960
President Building		217,829		204,801
Maryland Building		267,347		251,358
Others		173,623		162,708

Total	$	7,451,836	$	7,696,437

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

As of June 30, 2008 and December 31, 2007, $879,468 and $733,774 worth of properties held for sale in Qiyun New Village were occupied by individuals who agreed to buy the properties without having fully paid the purchase consideration. $245,467 and $196,103 was included in advance from buyers for this Scheme as of June 30 2008 and December 31, 2007.

5.	Accounts payable and accrued expenses

Accounts payable and accrued expenses comprised of following as of June 30, 2008 and December 31, 2007:

	6-30-2008		12-31-2007
			(Audited)
Accounts payable	$	4,312,505	$	6,090,281
Payroll and welfare payable		102,512		71,090
Interest and other accrued expenses		2,704,494		2,454,044

Total	$	7,119,511	$	8,615,415

6.	Tax payables

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

	6-30-2008		12-31-2007
			(Audited)
Income tax payable	$	5,927,621	$	5,944,954
Business tax		516,255		519,634
Land appreciate payable		2,189,650		2,069,781
Other levies		71,072		17,947

Total	$	8,704,598	$	8,552,316

7.	Short-term loans

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

Nature			6-30-2008		12-31-2007
					(Audited)
Bank loan – in default	12-31-2004	7.56%	$	2,188,500	$	9,931,413
Bank loan	10-23-2008	10.206%		15,757,200		14,814,815
	Various dates till
Mortgage loans	6-12-2023	4.2%		--		485,069

Total			$	17,945,700	$	25,231,297

The Company acted as an agent and borrowed mortgage loans amounting $485,069 as of December 31, 2007 under its employees’ name using properties held by the Company. All balances of mortgage loans were cleared as of March 31, 2008 and the pledged assets were released too. As of June 30, 2008 and December 31, 2007, the carrying values of stock of properties of $0 and $484,764 have been pledged for the Company’s mortgage loans.

On June 22, 2006 the Company entered into a settlement agreement with a bank with respect to $8,230,453 of past due notes. In accordance with the terms of this settlement agreement, $1,228,163 loan interest accrued as of December 31, 2007 may be waived if the Company repays the loan principle per the installments schedule. The Company is required to pay back the loan principal in a three step installments started with the first payment amounting $685,871 due on December 20, 2007 according to the agreement. The Company paid the first installment on time as of December 31, 2007. The 2nd and 3rd instalments are approximately $5 million (RMB 35 million) is due in June, 2008 and $2.86 million (RMB 20 million) is due on September 2008. Assets of the Company are pledged against these bank loans. Subsequently on April 15, 2008, the Company paid the loan principle off amounting to $5,712,000 (RMB 40,000,000).

As of June 30, 2008 and 2007, the Company incurred interest expense amounting $1,409,324 and $1,295,259 respectively.

The Company had a default loan amounting to $23,166,667 with due dates in 2003 and 2004. The defaulted loans borrowed from Industrial and Commercial Bank of China was assigned to a third party. The Company entered into an agreement with the third party on July 30, 2007 to buy back the loans for $7,581,333. As of September 30, 2007, the total consideration of $7,581,333 was fully paid. According to the agreement, the outstanding interest payable associated with the non-performing loan amounting to $439,014 was also forgiven as of December 31, 2007. The assets pledged with the loan were released before the year ended 2007. As of December 31, 2007, the Company realized gain on settlement of debt amounted to $11,115,201.

8.	Long-term debts — secured

Nature			6-30-2008		12-31-2007
					(Audited)
Bank loan – Long Term	6-12-2009	9.711%	$	--	$	5,486,968

Bank loan - Current	6-12-2009	9.711%		5,836,000		--

Total			$	5,836,000	$	5,486,968

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

9.	Statutory Reserve

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

10.	Gain on Settlement of Debt

In January 2008, the Company received the final judgment from Supreme People’s Court 2007 (No. 97) dated on December 21, 2007 regarding the law suit between Shenyang Normal College, Shenyang Maryland (a wholly owned subsidiary of the Company) and Jiangsu Province Suzhong Construction Group, Ltd. The judgment of Supreme Court is the final judgment per Chinese law.

The judgments are summarized that Shenyang Maryland should pay Shenyang Normal College $650,265 (RMB 5,210,454) along with the interest calculated from June 2, 2000 to the payment date using the interest rate of six-month loan per People’s Bank of China. The interest shall be paid within 15 days after the judgment takes effect. The corresponding interest expense calculated was RMB 2,152,262 ($300,822) from June 2, 2000 to January 20, 2008 per judgment. According to the judgment, the accounts payable shall be released after Shenyang Maryland pays the $650,265 payable with interest in the amount of $300,822.

The Company has paid off the balance payable to the Shenyang Normal College with interest per judgment on January 20, 2008.

The gain on settlement of debt as of June 30, 2008 was calculated as follows:


Debt recorded as of December 31, 2007	RMB 14,561,185

Minus: Amount should pay per final judgment	(5,210,454	)

Interest calculated per final judgment	(2,152,262	)


Gain on settlement of debt as of June 30, 2008	RMB 7,198,469

	US$ 1,075,843

11.	Stock Options

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


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

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


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

Options outstanding at June 30, 2007 and related weighted average price and intrinsic value is as follows:

Exercise Prices				Total Weighted Average Exercise Price			Weighted Average Exercise Price		Aggregate Intrinsic Value
$	4.65	10,000	0.29	$	2.33	7,083	$	2.33		--
$	0.65	10,000	0.79	$	0.33	2,083	$	0.33	$	4,200

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

Options	Shares
Outstanding at January 1, 2007	173,568
Granted	10,000
Exercised	--
	173,568
Forfeited or expired
Outstanding at December 31, 2007	10,000
Granted	10,000
Exercised	--
Forfeited or expired	--
Outstanding at June 30, 2008	20,000
Exercisable at June 30, 2008	9,166

12.	Disposal of subsidiary

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

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

13.	Income Tax

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

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

	6-30-2008	6-30-2007

US current income tax expense (benefit)
Federal	$ --	$ --
State	--	--

HK current income tax expense	--	--
PRC current income tax expense	(164,030)	1,015,645

Total provision for income tax	$ (164,030)	$ 1,015,645

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


	6-30-2008	6-30-2007
Tax expense (credit) at statutory rate - federal	34%	34%
State tax expense net of federal tax	6%	6%
Changes in valuation allowance	(40%)	(40%)
Foreign income tax - HK	0%	0%
Foreign income tax - PRC	(25%)	30%
Tax expense at actual rate	(15%)	35%

United States of America

As of June 30, 2008, the Company in the United States had approximately $83,748 in net operating loss carry forwards available to offset future taxable income. Federal net operating losses can generally be carried forward 20 years. The deferred tax assets for the United States entities at June 30, 2008 consists mainly of net operating loss carry forwards and were fully reserved as the management believes it is more likely than not that these assets will not be realized in the future.

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


	6-30-2008	12-31-2007
		(Audited)
Net operation loss (gain) carry forward	$ (362,588)	$ (278,840)
Total deferred tax assets	149,585	121,111
Less: valuation allowance	(149,585)	(121,111)
Net deferred tax assets	$ --	$ --

Hong Kong

As of June 30, 2008, the Company in the Hong Kong had approximately $121,693 in net operating loss carry forwards available to offset future taxable income. There is no time limit for the losses to carry forward. The deferred tax assets for the Hong Kong entities at June 30, 2008 consists mainly of net operating loss carry forwards and were fully reserved as the management believes it is more likely than not that these assets will not be realized in the future.

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


	6-30-2008	12-31-2007
		(Audited)
Net operation loss (gain) carry forward	$ (121,693)	$ 23,722,801
Total deferred tax assets	21,296	--
Less: valuation allowance	(21,296)	--
Net deferred tax assets	$ --	$ --

Aggregate net deferred tax assets

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


	6-30-2008	12-31-2007
		(Audited)
Aggregate:
Total deferred tax assets	$ 170,881	$ 121,111
Less: valuation allowance	(170,881)	(121,111)
Net deferred tax assets	$ --	$ --

14.	Other comprehensive income

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



	Balance as of December 31, 2006	$ 468,344
	Change for 2007	1,000,202

	Balance as of December 31, 2007	1,468,546
	Change in 2008	1,161,590

	Balance as of June 30, 2008	$ 2,630,135

15.	Segment Information

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

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

	6-30-2008			12-31-2007
				(Audited)
Revenues from unafiliated customers:
Selling of properties	$	2,218,685		$	4,378,993

Rental income & Management fee		2,914,196			5,296,634


Consolidated	$	5,132,881		$	9,675,627

Operating income (loss):
Selling of properties	$	1,305,391		$	708,291

Rental income & Management fee		(1,323,113	)		494,988
Corporation (1)		(512,946	)		(7,098,244	)


Consolidated	$	(530,668	)	$	(5,894,965	)

Net income (loss) before taxes:

Selling of properties	$	1,305,391		$	2,637,332

Rental income & Management fee		(1,323,113	)		494,988

Corporation (1)		(1,082,142	)		(1,177,571	)

Consolidated	$	(1,099,865	)	$	1,954,749

Identifiable assets:

Selling of properties	$	7,524,740		$	5,350,282

Rental & management fee		52,484,435			49,953,769

Corporation (1)		11,362,529			45,167,178

Consolidated	$	71,371,704		$	100,471,229

Depreciation and amortization:
Selling of properties	$	--		$	--

Rental & management fee		1,453,275			2,326,018

Corporation (1)		6,949			17,703

Consolidated	$	1,449,047		$	2,343,721

Capital expenditures:
Selling of properties	$	--		$	79,187

Rental & management fee		--			5,765,432

Corporation (1)		42,217			4,878,509

Consolidated	$	42,217		$	10,723,128

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

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

(1)	Caution Regarding Forward-Looking Information

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

Any statements in this discussion that are not historical facts are forward-looking statements that involve risks and uncertainties; actual results may differ from the forward-looking statements. Sentences or phrases that use such words as “believes”, “anticipates”, “plans”, “may”, “hopes”, “can”, “will”, “expects”, “is designed to”, “with the intent”, “potential” and others indicate forward-looking statements, but their absence does not mean that a statement is not forward-looking. Factors that could have a material and adverse impact on actual results are described under the heading “Risk Factors” in our annual report on Form 10-KSB, filed with the Securities and Exchange Commission on April 16, 2007, and under the caption “Item 1A. Risk Factors” below. We do not undertake any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

(2)	Executive Summary

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

Great China Holdings has five completed real estate projects located in the city of Shenyang in which it has been selling and/or leasing units:


	Ÿ	President Building comprises three blocks of commercial buildings, including two commercial towers, situated in Shenyang City, Heping North Street, which is the financial district of Shenyang. While the original intention was to sell a majority of the office buildings, management subsequently decided to retain most of the properties for leasing purposes. The buildings maintain a high occupancy rate with tenants that are primarily international companies, 25 of which are Fortune 500 companies. Great China Holdings’ head office is situated on the 25th and 26th Floors of President Building.

	Ÿ	Chenglong Garden, situated in Shenyang Huanggu District, comprises 12 blocks of modern apartments consisting of 865 residential apartments, a number of retail shops and ancillary facilities including basement car parking facilities and parks. As of December 31, 2007, 853 units had been sold, and 12 residential units and 3197.78 square meters of commercial space remained available for sale and lease.

	Ÿ	Qiyun New Village is situated along the Nanyun Riverside and consists of 347 residential units, 326 of which had been sold as of December 31, 2007.

	Ÿ	Peacock Garden is situated in Shenyang City, Heping North Street, is in the commercial district of Shenyang and is comprised of 197 low-density residential apartments, 194 of which had been sold as of December 31, 2007.

	Ÿ	The Maryland Building consists of 12,858 square meters of commercial space.

Recent Projects

Xi Ta Project . In December 2005, we, through our subsidiaries Silverstrand and Shenyang Maryland International, acquired Shenyang Xinchao Property Company and Shenyang Yindu Property Company, which together held 100% of the rights granted for a mixed-use development located in the Heping District of Shenyang known as the Xita Urban Reconstruction Project the Xita Project confirmation letter issued by the Heping District Government in 2004. The confirmation letter, as subsequently amended, contemplated a 99,000 square meter project located in the Xi Ta area in the city of Shenyang. Under the confirmation letter we paid a land transfer fee of RMB 33,228,480. Shenyang Heping District Investment Promotion Bureau, which is the agency overseeing development of the Xi Ta area decided to expand the project and, as a consequence of the expansion, reached an agreement with us to reacquire the land use rights for the Xita Project in exchange for refunding the land transfer fee of RMB 33,228,480 (approximately $4,437,397), and reimbursing us for amounts expended on the development in the amount of RMB 12,345,180 (approximately $1,646,024). In July 2007, the local government approvals and procedures were completed for transferring the land use rights back to the local government and we received reimbursement of the land transfer fee of RMB 33,228,480. We received the remaining RMB 12,345,180 in August 2007. We incurred a net loss on the terminated Xi Ta Project of $1,504,604.

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

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

Junhui Development Agreement . In November 2007, our indirect subsidiary, Shenyang Xinchao Property Co., Ltd. (“Xinchao”), entered into a joint development agreement with Beijing Century Junhui Investment Ltd.

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

(3)	Results of Operations

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

The Company incurred net loss of $935,834 for the six months ended June 30, 2008 compared to a net income of $1,845,527 for the six months ended June 30, 2007, representing a decrease of $2,781,361 or 150.71% semiyearly. Components of other net income resulting in this decrease in net income are discussed below.

Revenues increased by $593,885 or 36.55% semiyearly to $2,218,685 for the the six months ended June 30, 2008 compared to the same period of 2007 of $1,624,800. Rental and management fee income increased by $51,962 or 1.82% to $2,914,196 for the six months ended June 30, 2008 from $2,862,234 for the comparable period in 2007. These changes are mainly attributable to the increased sales volume of the remaining building units and the sales of parking lots..

Cost of properties sold decreased by $1,215,180 or 37.60% during June 30, 2008, as compared to the corresponding period in 2007. The decrease is mainly attributable to the increased sales of parking lots of Chenglong Garden which has no cost.

Operating and selling expenses increased by $8,367 or 11.35% to $82,088 for the June 30, 2008 as compared to $73,721 for the corresponding period in 2007. The increase is demanded for business development.

General and administrative expenses decreased by $89,781 or 4.09% to $2,104,557 during June 30, 2008 compared to $2,194,338 for June 30, 2007.

Total depreciation expense increased by $344,981 or 30.93% to $1,460,224 for the six months ended June 30, 2008, compared to $1,115,243 for the corresponding period in 2007, since the growth of fixed assets held by the company for business expansion.

Other income, net decreased $6,719,816 or 103.64% to negative $235,715 for the six months ended 2008 from $6,484,101 for the six months ended 2007 due primarily to several non-routine transactions, such as the land leveling income of $6,382,800, gain on settlement of bad debt of $754,873 in second quarter of 2007, however, there are no such great transaction in 2008 except an increase in sundry income by $139,115 compared with the amount for the corresponding period in 2007, and as well as a payment of land leveling expenses of $387,223 in March of 2008.

Interest and financing costs increased by $114,065 to $1,409,324 for the six months ended June 30, 2008 as compared to $1,295,259 for the six months ended June 30, 2007. The increase was primarily due to change of currency exchange rate.

(4)	Cash Flow Discussion

Net cash flows provided by operating activities for June 30, 2008 and 2007 were $9,148,681 and $3,440,266, respectively. The increase in funds provided by was the receivable balance was non interest bearing, unsecured and due on demand. The Company received the entire balance on disposal of subsidiary amounting $30,701,957 in of the six month period ended June 30, 2008.

Net cash flows used in investing activities for June 30, 2008, was negative $ 46,217 compared to negative $6,537,952 of cash flow provided for June 30, 2007. The investing activity change was primarily due to payment of construction in progress of $1,115,190 and purchases of property & equipment of $5,380,412.

Net cash flows used in financing activities for June 30, 2008, was negative $8,643,184 compared to net cash used in financing activities of $3,964,631 for June 30, 2007, the change could be mostly explained by repayments of loans and borrowings to various banks totaling $7,591,864.

(5)	Liquidity and Capital Resources

Current liabilities exceeded current assets by $26,898,826 as of June 30, 2008. The working capital deficit was incurred primarily due to Short Term Loans of 17,945,700. It is has become common practice in China, for banks and companies to renegotiate loan extensions on an annual basis. This is driven by the ever changing banking regulatory environment and a situation where banks are becoming more conservative.

Under the circumstances, most lending banks had and have usually worked sympathetically and closely with borrowers for loan extension or restructuring for a shorter period within the administrative guidelines of the government. As State policies are issued outside the control of the banks in China and form part of the macro and micro-economic measures, many bankers and their customers are often stuck in the situation, thus they are generally more tolerant their counterparts in Western economies. They will work hard to deal with the situation provided the borrowers are responsible and have good relationship with the lenders.

(6)	Contractual Obligations

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

	Total		Less than one year		1-3 Years		Thereafter

Short-Term Debt	$	17,945,700	$	17,945,700	$	--	$	--

Long-Term Debt		5,836,000		5,836,000		--		--

Amounts due to related parties		--		--		--		--

Construction commitments		--		--		--		--
Total Contractual Cash Obligations	$	23,781,700	$	23,781,700	$	--	$	--

Item 3. Quantitative and Qualitative Disclosure About Market Risk

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

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

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

There still exist the phenomena of false advertisements, contract fraud and illegal actions in agent service and logistic administration, which are to be kept within limits in effect. It should not only rely on the self-restriction

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Control over Financial Reporting

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

PART II. OTHER INFORMATION

Item 6. Exhibits

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

Exhibit No.	SEC Ref. No.	Title of Document

31.1	31	The certification of chief executive officer required by Rule 13a-14(a) or Rule 15d-14(a)
31.2	31	The certification of chief financial officer required by Rule 13a-14(a) or Rule 15d-14(a)
32.1	32	The certifications required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350

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 14, 2008		By:		/s/ Jiang Peng
				Jiang Peng, Chairman of the Board (Principal Executive Officer)

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

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