Xinyuan Real Estate Co Ltd
Annual Report 2016

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One) ¨REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Fiscal Year Ended December 31, 2016. OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period From To OR ¨SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report Commission file number: 001-33863 XINYUAN REAL ESTATE CO., LTD.(Exact name of Registrant as specified in its charter) N/A(Translation of Registrant’s name into English) Cayman Islands(Jurisdiction of incorporation or organization) 27/F, China Central Place, Tower II79 Jianguo Road, Chaoyang DistrictBeijing 100025People’s Republic of China(Address of principal executive offices) Yuan (Helen) ZhangXinyuan Real Estate Co., Ltd.27F, China Central Place, Tower II,79 Jianguo Road, Chaoyang DistrictBeijing 100025People’s Republic of ChinaTel: (86-10) 8588-9255Fax: (86-10) 8588-9300 (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)  Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredAmerican Depositary Shares, each representing twocommon shares, par value US$0.0001 per share New York Stock Exchange Securities registered or to be registered pursuant to Section 12(g) of the Act: None(Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None(Title of Class) Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of the period covered by theannual report. 131,426,741 common shares, par value US$0.0001 per share, as of December 31, 2016. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934. Yes ¨ No x Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes x No ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP xInternational Financial Reporting Standards as issued by theInternational Accounting Standards Board ¨Other ¨ If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected tofollow. Item 17 ¨ Item 18 ¨ If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨No x (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨  Table of Contents Page Introduction1Forward-Looking Statements2PART I 3Item 1.Identity of Directors, Senior Management and Advisers3Item 2.Offer Statistics and Expected Timetable3Item 3.Key Information3A.Selected financial data3B.Capitalization and Indebtedness7C.Reasons for the Offer and Use of Proceeds7D.Risk Factors7Item 4.Information on the Company39A.History and Development of the Company39B.Business Overview39C.Organizational Structure79D.Property, plant and equipment79Item4A.Unresolved Staff Comments79Item 5.Operating and Financial Review and Prospects79A.Operating Results79B.Liquidity and Capital Resources118C.Research and Development, Patent and Licenses, etc.127D.Trend Information127E.Off-Balance Sheet Arrangements127F.Tabular Disclosure of Contractual Obligations128G.Safe Harbor131Item 6.Directors, Senior Management and Employees131A.Directors and Senior Management131B.Compensation133C.Board Practices142D.Employees145E.Share Ownership145Item 7.Major Shareholders and Related Party Transactions147A.Major Shareholders147B.Related Party Transactions147C.Interests of Experts and Counsel149Item 8.Financial Information149A.Consolidated Statements and Other Financial Information149B.Significant Changes149Item 9.The Offer and Listing150A.Offer and Listing Details150B.Plan of Distribution150C.Markets150D.Selling Shareholders150E.Dilution150F.Expenses of the Issue150  Item 10.Additional Information151A.Share Capital151B.Memorandum and Articles of Association151C.Material Contracts153D.Exchange Controls154E.Taxation155F.Dividends and Paying Agents159G.Statement by Experts159H.Documents on Display160I.Subsidiary Information160Item 11.Quantitative and Qualitative Disclosures about Market Risk160Item 12.Description of Securities other than Equity Securities162PART II 164Item 13.Defaults, Dividend Arrearages and Delinquencies164Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds164Item 15.Controls and Procedures164PART III 167Item 16.[Reserved]167Item 16A.Audit Committee Financial Expert167Item 16B.Code of Ethics167Item 16C.Principal Accountant Fees and Services167Item 16D.Exemptions from the Listing Standards for Audit Committees167Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers168Item 16F.Change in Registrant’s Certifying Accountant168Item 16G.Corporate Governance168Item 16H.Mine Safety169Item 17.Financial Statements169Item 18.Financial Statements169Item 19.Exhibits170  INTRODUCTION Unless otherwise indicated and except where the context otherwise requires, references in this annual report on Form 20-F to: ·“we,” “us,” “our company,” “our,” “the Group” or “Xinyuan” refers to Xinyuan Real Estate Co., Ltd., its predecessor entities and itssubsidiaries; ·“shares” or “common shares” refers to our common shares, par value US$0.0001 per share; ·“ADSs” refers to our American depositary shares, each of which represents two common shares, and “ADRs” refers to the Americandepositary receipts that evidence our ADSs; ·“China” or “PRC” refers to the People’s Republic of China, excluding, for the purposes of this Form 20-F only, Taiwan, Hong Kong andMacau; ·“U.S” or “United States” refers to the United States of America; ·“GFA” refers to gross floor area. The amounts for “total GFA” in this annual report are the amounts of total saleable residential andcommercial GFA and are derived on the following basis: ·for properties that are sold, the stated GFA is based on the sales contracts relating to such property; GFA may be adjusted based on finalexamination upon delivery of the property; ofor unsold properties that are completed or under construction, the stated GFA is calculated based on the detailed constructionblueprint and the calculation method approved by the PRC government for saleable GFA, after necessary adjustments; and ofor properties that are under planning, the stated GFA is based on the land grant contract and our internal projection; ·“RMB” or “Renminbi” refers to the legal currency of China and “US$” or “U.S. dollars” refers to the legal currency of the United States;and ·“sq.m” refers to square meters used as unit of area. At present, there is no uniform standard to categorize the different types and sizes of cities in China. In this annual report, we refer to certain largerand more developed cities as tier I, tier II and tier III cities based on the categorization used by the CIHAF Valuation Report on Real Estate Investment inPRC Cities published by China Real Estate Business, an authoritative real estate publication in China, YUBO Media and Institute of Finance and TradeEconomics of Chinese Academy of Social Sciences. Facts and statistics in this annual report relating to China, the Chinese economy and the China property development industry are sourced fromvarious publicly available government and official sources, as indicated herein. We believe that the sources of this information are appropriate sources forsuch information. However, we cannot independently verify any of such information. This annual report includes our audited consolidated financial statements for the years ended December 31, 2014, 2015 and 2016 and as ofDecember 31, 2015 and 2016. Our financial statements and other financial data included in this annual report are presented in U.S. dollars. Our business andoperations are primarily conducted in China through our PRC subsidiaries. The functional currency of our PRC subsidiaries is RMB. Since 2012, we haveexpanded to the U.S. market through our subsidiaries in the U.S. The functional currency of our U.S. subsidiaries is the U.S. dollar. The financial statements ofour PRC subsidiaries are translated into U.S. dollars, using published exchange rates in China, based on (i) year-end exchange rates for assets and liabilitiesand (ii) average yearly exchange rates for revenues and expenses. Capital accounts are translated at historical exchange rates when the transactions occurred.The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in our shareholders’ equity.We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollar or RMB, as the case may be, at anyparticular rate or at all. See “ITEM 3. KEY INFORMATION-A.Selected Financial Data-Exchange Rate Information. 1  Our common shares are traded on the New York Stock Exchange (the “NYSE”), in the form of ADS under the symbol “XIN.” Each ADS representstwo common shares. The closing price of our ADSs on the NYSE as of March 17, 2017 was $4.55 per ADS. FORWARD-LOOKING STATEMENTS This annual report contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical factsare forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results,performance or achievements to be materially different from those expressed or implied by the forward-looking statements. You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “is expected to,” “anticipate,” “aim,”“estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions or negatives of such expressions. Theseforward-looking statements include, among others, statements about: ·our anticipated growth strategies; ·our future business development, results of operations and financial condition; ·our expectations with respect to our ability to acquire adequate suitable land use rights for future development; and ·our belief with respect to market opportunities in, and growth prospects of, our target market cities in China and our targeted areas in theUnited States. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that webelieve may affect our financial condition, results of operations, business strategy and financial needs. However, a number of known and unknown risks,uncertainties and other factors could affect the accuracy of these statements. Among the important factors to consider in evaluating our forward-lookingstatements are: ·our ability to continue to implement our business model successfully; ·our ability to secure adequate financing for our project developments; ·our ability to successfully sell or complete our property projects under construction and planning; ·our ability to enter into new geographic markets or new lines of business and expand our operations; ·the marketing and sales ability of our third-party sales agents; ·the performance of our third party contractors; ·laws, regulations and policies relating to real estate developers and the real estate industry in the markets in which we operate; ·our ability to obtain permits and licenses to carry on our business in compliance with applicable laws and regulations; ·competition from other real estate developers; ·the growth of the real estate industry in the markets in which we operate; and ·fluctuations in general economic and business conditions in the markets in which we operate. 2  You should read thoroughly this annual report and the documents that we refer to herein with the understanding that our actual future results may bematerially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements. Other sectionsof this annual report include additional factors which could adversely impact our business and financial performance, including the risks outlined under“ITEM 3. Key Information - D. Risk Factors”. Moreover, we operate in an evolving environment. New risk factors emerge from time to time and it is notpossible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, orcombination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. This annual report may also contain third party data relating to the real estate industry in China that includes projections based on a number ofassumptions. The real estate industry in China may not grow at the rates projected by market data, or at all. The failure of our markets to grow at projectedrates may have a material adverse effect on our business and the market price of our ADSs. Furthermore, if one or more of the assumptions underlying themarket data turn out to be incorrect, the actual results may differ from the projections based on these assumptions. You should not place undue reliance onthese forward looking statements. You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this annual reportrelate only to events or information as of the date on which the statements are made in this annual report. We undertake no obligation to update or revise anyforward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by applicable securities laws. PART I ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not Applicable. ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE Not Applicable. ITEM 3.KEY INFORMATION A.Selected financial data Our Selected Consolidated Financial Data The following selected consolidated statements of comprehensive income and other financial data for the years ended December 31, 2014, 2015 and2016, other than earnings per ADS data, and the consolidated balance sheet data as of December 31, 2015 and 2016 have been derived from our auditedconsolidated financial statements which are included elsewhere in this annual report. Our audited consolidated financial statements have been prepared andpresented in accordance with United States generally accepted accounting principles, or U.S. GAAP. Except for changes in operating subsidiaries, ourconsolidated financial statements have been prepared as if our current corporate structure had been in existence throughout the relevant periods. Our selected consolidated statements of comprehensive income data for the years ended December 31, 2012 and 2013 and our selected consolidatedbalance sheet data as of December 31, 2012, 2013 and 2014 have been derived from our audited consolidated financial statements included in prior years'annual reports. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our auditedconsolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report. 3  Years ended December 31, 2012 2013 2014 2015 2016 US$ US$ US$ US$ US$ (in thousands except share, per share and per ADS data) Consolidated Statements of Comprehensive Income Total revenue 914,799 897,738 919,748 1,164,324 1,561,625 Total costs of revenue (634,763) (598,740) (677,582) (891,334) (1,203,636)Selling and distribution expenses (17,942) (20,724) (39,494) (52,126) (58,214)General and administrative expenses (38,829) (64,498) (105,622) (115,329) (120,416)Operating income 223,265 213,776 97,050 105,535 179,359 Net income 158,108 126,356 48,496 66,481 79,463 Net income/(loss) attributable to non-controlling interest (1,110) - 19 1 (6,485)Net income attributable to Xinyuan Real Estate Co., Ltd.shareholders 156,998 126,356 48,515 66,482 72,978 Earnings per share -Basic 1.09 0.87 0.32 0.47 0.55 -Diluted 1.08 0.85 0.29 0.45 0.53 Shares used in computation -Basic 144,258,862 145,733,028 151,935,765 142,625,427 133,261,510 -Diluted 144,731,014 149,464,556 177,118,235 146,487,949 137,653,029 Earnings per ADS(1) -Basic 2.18 1.74 0.64 0.93 1.10 -Diluted 2.17 1.70 0.58 0.91 1.06 (1)Earnings per ADS are calculated based on each ADS representing two common shares. 4  Years ended December 31, 2012 2013 2014 2015 2016 US$ US$ US$ US$ US$ Cash dividends declared per ADS 0.16 0.20 0.20 0.20 0.30 Years ended December 31, 2012 2013 2014 2015 2016 Other Operating Data Number of projects launched 1 4 9 6 4 Aggregate GFA delivered(1) (m2) 512,988 940,005 374,615 560,232 1,278,492 (1)Delivery occurs when we have obtained all the completion acceptance certificates required by the PRC government in respect of the apartment anddeliver full access to the apartment, such as the keys, to the buyer. The following table presents a summary of our consolidated balance sheet data as of December 31, 2012, 2013, 2014, 2015 and 2016: As of December 31, 2012 2013 2014 2015 2016 US$ US$ US$ US$ US$ (in thousands, except share, per share and per ADS data) Consolidated Balance Sheet Data(1) Cash and cash equivalents 496,205 587,119 140,495 387,528 578,244 Restricted cash 145,730 250,098 368,874 363,137 328,499 Deposits for land use rights 44,547 297,389 299,739 46,199 153,252 Real estate property under development(2) 722,819 932,519 1,714,575 1,887,322 1,719,135 Total current assets 1,526,343 2,244,528 3,070,459 3,262,964 3,931,445 Total assets 1,566,381 2,382,100 3,231,526 3,561,387 4,236,445 Total current liabilities 735,115 807,373 1,592,633 1,650,883 2,060,609 Long-term bank loans 35,000 32,804 52,296 13,860 235,885 Other long-term debt - 536,943 576,204 910,008 974,791 Common shares 15,358 15,828 15,831 15,835 16,051 Total Xinyuan Real Estate Co., Ltd. shareholders’ equity 781,538 952,636 960,612 935,952 916,152 (1)Financial information for PRC subsidiaries is first prepared in RMB and then translated into U.S. dollars for assets and liabilities at the year-endexchange rate and, for revenues and expenses at the yearly average exchange rate. The rates used are set forth in the table below. Capital accountsare translated at their historical exchange rates when the transactions occurred. 5  As of and for the Year Ended December 31, 2012 2013 2014 2015 2016 Period-end US$: RMB exchange rate 6.2855 6.0969 6.1190 6.4936 6.9370 Period average US$: RMB exchange rate 6.3124 6.1956 6.1424 6.2272 6.6401 As of March 17, 2017, the US$: RMB exchange rate was 6.9000. (2)Includes real estate property under development recorded under current assets and non-current assets. Exchange Rate Information Our financial statements and other financial data included in this annual report are presented in U.S. dollars. Our business and operations areprimarily conducted in China through our PRC subsidiaries. The functional currency of our PRC subsidiaries is RMB. The financial statements of our PRCsubsidiaries are translated into U.S. dollars, using published exchange rates in China, based on (i) year-end exchange rates for assets and liabilities and (ii)average yearly exchange rates for revenues and expenses. Capital accounts are translated at historical exchange rates when the transactions occurred. Theeffects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in our shareholders’ equity. Wemake no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB at any particular rate,including the rate stated below. The RMB is not freely convertible into foreign currency. The PRC government imposes control over its foreign currency reserves in part throughdirect regulation of the conversion of the RMB into foreign exchange and through restrictions on foreign trade. Since 2005, the People’s Bank of China (the“PBOC”), has allowed the RMB to fluctuate within a narrow and managed band against a basket of foreign currencies, according to market demand andsupply conditions. The PBOC announces the RMB closing price each day and that rate serves as the mid-point of the next day’s trading band. The following table sets forth, for each of the periods indicated, the low, average, high and period-end noon buying rates in New York City for cabletransfers, in RMB per U.S. dollar. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annualreport or will use in the preparation of periodic reports or other information to be provided to you. Noon Buying Rate(1) Period End Average(2) Low High (RMB Per US$1.00) Year 2012 6.2301 6.3093 6.2221 6.3449 2013 6.0537 6.1412 6.0537 6.2438 2014 6.2046 6.1620 6.0402 6.2591 2015 6.4778 6.2827 6.1870 6.4896 2016 6.9430 6.6400 6.4480 6.9580 Month September 2016 6.6685 6.6702 6.6600 6.6790 October 2016 6.7735 6.7303 6.6685 6.7819 November 2016 6.8837 6.8402 6.7534 6.9195 December 2016 6.9430 6.9198 6.8771 6.9580 January 2017 6.8768 6.8907 6.8360 6.9575 February 2017 6.8665 6.5260 6.8517 6.8821 March 2017 through March 17, 2017 6.0000 6.8328 6.0000 6.9132 6  (1)The noon buying rate refers to the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board. (2)Annual averages are calculated by averaging the exchange rates on the last business day of each month or the elapsed portion thereof during therelevant year-long period. Monthly averages are calculated using the average of the daily rates during the relevant period. B.Capitalization and Indebtedness Not Applicable. C.Reasons for the Offer and Use of Proceeds Not Applicable. D.Risk Factors Risks Related to Our Business Our business is sensitive to the current global economic crisis. A severe or prolonged downturn in the global economy could materially and adversely affectour revenues and results of operations. Continued concerns about the systemic impact of potential long-term and wide-spread recessions, energy costs, geopolitical issues, unstable creditmarkets and financial conditions, volatile oil prices and the global housing and mortgage markets have led to periods of significant economic instability,diminished liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economyand expectations of slower global economic growth going forward. Economic conditions in China are sensitive to global economic conditions, and it is impossible to predict how the Chinese economy will develop inthe future. Any slowdown in China’s economic development might lead to tighter credit markets, increased market volatility, sudden drops in business andconsumer confidence and dramatic changes in business and consumer behaviors. In response to their perceived uncertainty in economic conditions,consumers might delay, reduce or cancel purchases of homes, and our homebuyers may also defer, reduce or cancel purchases of our units. We haveexperienced some volatilities in demand from time to time in the recent years due to the strict mortgage policy and other measures taken by the PRCgovernment to slow down the rapid increase in housing prices. We remain optimistic about the Chinese economy, but to the extent any fluctuations in theChinese economy significantly affect homebuyers’ demand for our units or change their spending habits, our results of operations may be materially andadversely affected. The PRC economy also faces challenges in the short to medium term. Continued turbulence in the international markets and prolonged declines inconsumer spending, including home purchases, as well as any slowdown of economic growth in China, may adversely affect our liquidity and financialcondition. With our expansion into the U.S. market in 2012, we will be increasingly sensitive to the general economic conditions in the U.S. and industryconditions of the U.S. housing market in particular. The U.S. housing industry is highly cyclical and is significantly affected by changes in industryconditions, as well as in global and local economic conditions, such as changes in employment and income levels, availability of financing for buyers,interest rates, levels of new and existing homes for sale demographic, trends and housing demand. The U.S. market experienced a significant downturn inrecent years. Although certain markets in the U.S. are recovering, including New York, the duration and ultimate speed of recovery remain uncertain.Deterioration in industry conditions in the U.S. or in broader economic conditions could have additional material adverse effects on our business expansionin the U.S. and financial results. 7  We are a holding company that depends on dividend payments from our subsidiaries for funding. We are a holding company established in the Cayman Islands and operate most of our business and operations through our subsidiaries in China.Therefore, our ability to pay dividends to our shareholders and to service our indebtedness outside of China depends significantly upon dividends that wereceive from our subsidiaries in China. To the extent our U.S. operation continues to grow, we may in the future also depend on dividends from our U.S.subsidiaries. If our subsidiaries incur indebtedness or losses, such indebtedness or losses may impair their ability to pay dividends or other distributions to us.As a result, our ability to pay dividends and to service our indebtedness will be restricted. Regulations in China currently permit payment of dividends onlyout of accumulated profits as determined in accordance with accounting standards and regulations in China. Each of our PRC subsidiaries, including whollyforeign-owned enterprises and domestic companies, is required to set aside at least 10.0% of its after-tax profit based on PRC accounting standards each yearto its statutory capital reserve fund until the cumulative amount of such reserves reaches 50.0% of its respective registered capital and, with the approval of ashareholder meeting or general shareholder meeting, a PRC subsidiary may set aside a certain amount of after-tax profit to its general reserves. As ofDecember 31, 2016, our statutory reserves amounted to US$ 96.0 million. Our statutory reserves are not distributable as cash dividends. Dividends paid bythe PRC subsidiaries may also be subject to PRC withholding tax. In addition, restrictive covenants in bank credit facilities, other long-term debt agreements,joint venture agreements or other agreements that we or our subsidiaries currently have or may enter into in the future may also restrict the ability of oursubsidiaries to make contributions to us and our ability to receive distributions. Therefore, these restrictions on the availability and usage of our major sourceof funding may impact our ability to pay dividends to our shareholders and to service our indebtedness. Our business requires access to substantial financing. Our failure to obtain adequate financing in a timely manner could severely adversely (1) restrict ourability to complete existing projects, expand our business, or repay our obligations and (2) affect our financial performance and condition. Our property development business is capital intensive. To date, we have funded our operations primarily through bank borrowings, proceeds fromsales and pre-sales of our properties and proceeds from issuance of equity and debt securities. We obtain commercial bank financing for our projects throughcredit lines extended on a case-by-case basis. Our ability to secure sufficient financing for land use rights acquisition and property development andrepayment of our existing onshore and offshore debt obligations depends on a number of factors that are beyond our control, including lenders’ perceptionsof our creditworthiness, sufficiency of the collateral, if any, market conditions in the capital markets, investors’ perception of our securities, the PRCeconomy and PRC government regulations that affect the availability and cost of financing for real estate companies or property purchasers. Since 2003, PRC commercial banks have been prohibited, under the guidelines of the PBOC, from advancing loans to fund the payment of land userights. We generate significant cash flow through pre-sales, which are subject to government restrictions. In particular, PRC regulations on the pre-sales ofproperties generally provide that the proceeds from the pre-sales of a real estate project may only be used for the construction of such project. Any additionalpotential government restrictions on pre-sales could significantly increase our financing needs. Moreover, our ability to move cash through inter-companytransfers or transfer funds from onshore subsidiaries to our offshore parent company is limited by PRC government regulations, which limits our ability to useexcess cash resources in one subsidiary to fund the obligations of another subsidiary or our offshore parent company. In addition, reserve requirementapplicable to PRC commercial banks generally limit, and any increases in such reserve requirements could further limit, the amount of commercial bankcredit available to businesses in China, including us. Furthermore, various other PRC regulations restrict our ability to raise capital through external financing and other methods, including, withoutlimitation, the following: ·we cannot borrow from a PRC bank for a particular project if we do not have the land use rights certificate for that project; ·we cannot pre-sell uncompleted residential units in a project prior to achieving certain development milestones specified in relatedregulations; ·we cannot borrow from a PRC bank for a particular project unless we fund at least 35% of the total investment amount of that project fromour own capital; ·property developers are strictly restricted from using the proceeds from a loan obtained from a local bank to fund property developmentsoutside the region where that bank is located; and 8  ·PRC banks are prohibited from accepting properties that have been vacant for more than three years as collateral for loans. As of December 31, 2016, our contractual obligations amounted to US$ 2,827.9 million, primarily arising from contracted construction costs orother capital commitments for future property developments and debt obligations. Of this amount, US$1,365.3 million was due within one year. There can be no assurance that our internally generated cash flow and external financing will be sufficient for us to meet our contractual andfinancing obligations in a timely manner. Due to the current measures imposed by the PRC government (as well as other measures that may be imposed in thefuture) which limit our access to additional capital, as well as restrictions imposed on our conduct under existing debt arrangements, we cannot assure youthat we will be able to obtain sufficient funding to finance intended purchases of land and land use rights, develop future projects or meet other capital needsas and when required at a commercially reasonable cost or at all. Our failure to obtain adequate financing in a timely manner and on reasonable terms couldseverely adversely (1) restrict our ability to complete existing projects, expand our business, or repay our obligations and (2) affect our cash flow, liquidity,financial performance and condition. If we are unable to successfully manage our expansion into other cities in China, we will not be able to execute our business plan. Historically, our business and operations was concentrated in Zhengzhou. Since 2006, we have expanded our residential property developmentoperations into other high growth cities, including Beijing, Shanghai, Tianjin, Chengdu in Sichuan Province, Hefei in Anhui Province, Jinan in ShandongProvince, Suzhou, Kunshan and Xuzhou in Jiangsu Province, Zhengzhou and Xingyang in Henan Province, Sanya in Hainan Province, Changsha in HunanProvince, and Xi’an in Shaanxi Province. We plan to expand into other cities as suitable opportunities arise. The development of real estate projects in othercities will impose significant demands on our management and other operational resources. Moreover, we will face additional competition and will need toestablish brand recognition and market acceptance for our developments in these new markets. Each of these cities has its own unique market conditions,customer requirements and local regulations related to the local real estate industry. If we are unable to successfully develop and sell projects outside of ourexisting markets, our future growth may be limited and we may not generate adequate returns to cover our investments in these new markets. In addition, ifwe expand our operations to other cities with higher land prices, our costs may increase, which may lead to a decrease in our profit margin, or impairmentsresulting from land value decreases. We are still in the early stages of expanding into the U.S. market, a market in which we have limited development experience and which may require us tospend significant resources, and there can be no assurance that we will be able to succeed in the U.S. market or in other markets into which we expand. While our primary focus continues to be residential real estate markets in high growth tier 1 and tier 2 cities in China, in 2012 we expanded to theU.S. market and have opportunistically secured five real estate properties. Two of these projects were acquired for resale and were sold out in early 2015. Theother projects include an on-going residential ground-up development project in Brooklyn, New York (named “New York Oosten”), and two newly acquiredland parcels in Manhattan, New York and in Flushing, Queens, New York. We are in the early stage of expanding into the U.S. and there can be no assurancethat we will be able to succeed in the U.S. market. We have limited experience in the U.S. real estate market and may not be able to develop and implement aneffective property development process appropriate for the U.S. market. In addition, given our limited experience in the U.S. market, it may be difficult for usto accurately forecast our future revenues and expenses related to existing and future projects in the U.S. Our ability to locate appropriate future projects inthe U.S. and generate future revenues from such projects may require us to expend significant capital and management resources. In addition, our ability to develop a successful U.S. property developments business will depend on a number of factors outside of our control,including the status of the U.S. economy in general and in our target markets, consumer confidence levels, unemployment levels, interest rates and the abilityof potential purchasers to obtain mortgage financing. Future increase in interest rates, decreased availability of mortgage financing or of certain mortgageprograms, higher down payment requirements or increased monthly mortgage costs may lead to reduced demand by potential purchasers for any propertieswe may develop in the U.S. Moreover, for the New York Oosten project and the two new projects, as pre-sale proceeds before the units’ title conveyancescannot be used to finance project construction according to local laws and regulations, we are financing their development through internal funds and bankloans, causing us to utilize more of our own funds to undertake larger construction debt obligations and to bear higher borrowing costs. 9  Furthermore, any change in federal income tax laws that increase the effective costs of owning a home would have an adverse effect on the demandfor homes in the U.S. which could negatively affect any properties we may develop in the U.S. Current U.S. tax laws generally permit significant expensesassociated with owning a home, principally mortgage interest expenses and real estate taxes, to be deducted for the purposes of calculating an individual'sU.S. federal and, in some cases, state taxable income. Various proposals have been publicly discussed to limit mortgage interest deductions and to limit theexclusion of gain from the sale of a principal residence. If any such proposals were enacted without offsetting provisions, the after-tax costs of owning a homein the U.S. would increase for many potential customers. Enactment of any such proposals may have an adverse effect on the homebuilding industry ingeneral, as the loss of or reduction of homeowner tax deductions could decrease the demands for new homes. In 2014, we acquired 100% share of a Malaysian company, which owns offshore landfill development rights for a total area of 170 acres(approximately 687,966 square meters). While we plan to allocate US$50 million for land reclamation costs in total, we have no development experience inMalaysia, nor have we ever engaged in landfill reclamation projects. All of our prior operations have involved real estate development undertaken on rawland, and we cannot assure you that we will be able to successfully complete the required landfill reclamation. Moreover, given our lack of prior experiencein Malaysia, it also may be difficult for us to develop and implement an effective property development process appropriate for the Malaysian market, toaccurately forecast our future revenues and expenses related to projects in Malaysia, and we could be required to expend significant capital and managementresources to develop and generate future revenues from such projects. As of the end of 2016, we obtained a Traffic Impact Assessment exemption with respectto the land reclamation stage, and governmental approvals of the land surveying and master development plan. We may be unable to acquire desired development sites at commercially reasonable costs. Our revenue depends on the completion and sale of our projects, which in turn depends on our ability to acquire development sites. Our land costsare a major component of our cost of real estate sales and increases in such costs could diminish our gross margin. In China, the PRC government controls thesupply of land and regulates land sales and transfers in the secondary market. As a result, the policies of the PRC government, including those related to landsupply and urban planning, affect our ability to acquire, and our costs of acquiring, land use rights for our projects. In recent years, the PRC government hasintroduced various measures attempting to moderate investment in the property market in China. Although we believe that these measures are generallytargeted at the luxury property market and speculative purchases of land and properties, we cannot assure you that the PRC government will not introduceother measures in the future that would adversely affect our ability to obtain land for development. We currently acquire our development sites primarily bybidding for government land, supplemented in some instances by direct negotiations with local governments prior to land auctions or by entity acquisition.Under current regulations, land use rights acquired from government authorities for commercial and residential development purposes must be purchasedthrough a public tender, auction or listing-for-sale. Competition in these bidding processes has resulted in higher land use rights costs for us over the past fewyears. In addition, we may not successfully obtain desired development sites due to the increasingly intense competition in the bidding processes. To theextent we acquire land use rights through acquisition, we could be exposed to risks generally associated with entity acquisitions and our costs could increase.Moreover, the supply of potential development sites in any given city will diminish over time, and we may find it increasingly difficult to identify andacquire attractive development sites at commercially reasonable costs in the future. 10  We may not be able to procure land successfully or receive expected return through our direct negotiation land acquisition model. Beginning the second half of 2012, we developed a model to acquire certain land use rights in the PRC through direct negotiation with localgovernments prior to land auctions in response to local governments' need for funding undeveloped land preparation. Under the direct negotiation model, weenter into a framework cooperation agreement with the local government, pursuant to which we provide land planning advice to the local government withrespect to a particular piece of undeveloped land that the government plans to develop. Based on the government's land development plan, the underlyingland may be divided into several tranches to be developed on a tranche by tranche basis. Following the government's land development plan, we providefunding in terms of advances to the government for land preparation of a particular tranche approximately three to six months before the land auction for thattranche. The advance payment usually ranges from 20% to 50% of the estimated opening auction price. The final disposition of the tranche occurs throughpublic auction. Pursuant to the framework cooperation agreement, if we successfully acquire the land through the auction, the advance payment becomes partof the land transfer payment. If we fail to acquire the land, we are refunded the advance payment with an annual interest rate of approximately 10% to 15%.We believe that under these models, we are often in a better position to identify and undertake initial planning with respect to targeted parcels as a result ofdirect involvement in and interaction with the government regarding the development stage of undeveloped lands. We entered into one frameworkcooperation agreement with a local government in 2014, none in 2015, and none in 2016, relating to prospective land parcel planning and preparation,pursuant to which we paid advances in the aggregate amount of US$209.2 million in 2014, US$83.4 million in 2015, and US$255.1 million in 2016 . Theseadvances have been transferred to land cost where our auction bids were successful, or will be so transferred assuming future auction bids for the relevantparcels are successful. In 2013, we chose not to participate in the bidding for one parcel of land in Jiangsu Province through this negotiated land acquisitionmodel and the advance payments for this parcel were refunded to us, with interest. The land preparation process may be delayed after we have provided an advance payment, placing undue burden on our cash flow. In addition, asthe procurement of land is eventually conducted through the standard auction process, we may not be able to successfully acquire the land for which we haveprovided advance payment. In that case, we may have lost other opportunities for which we could have deployed the funds used to make the advancepayment. If we fail to acquire any land for which we have made an advance payment, we cannot assure you that we will be able to receive the expected returnon the advance payment or that there will not be any delay in receiving the refund. Furthermore, any change in government regulations regarding directnegotiation with the government could restrict our use of this business model in the future. We rely on third-party contractors. Substantially all of our project construction and related work are outsourced to third-party contractors. We are exposed to risks that the performanceof our contractors may not meet our level of standards or specifications. Negligence, delay or poor work quality by contractors may result in defects in ourbuildings or residential units, which could in turn cause us to suffer financial losses, harm our reputation or expose us to third-party claims. If the performanceof any third party contractor is not satisfactory or is delayed, we may need to replace such contractor or take other actions to remedy the situation, whichcould adversely affect the cost and construction progress of our projects. Moreover, the completion of our property developments may be delayed. Inaddition, we work with multiple contractors on different projects and we cannot guarantee that we can effectively monitor their work at all times. Althoughour construction and other contracts contain provisions designed to protect us, we may be unable to successfully enforce these rights and, even if we are ableto successfully enforce these rights, the third-party contractors may not have sufficient financial resources to compensate us. Moreover, the contractors mayundertake projects from other property developers, engage in risky undertakings or encounter financial or other difficulties, such as supply shortages, labordisputes or work accidents, which may cause delays in the completion of our property projects or increases in our costs. For the years ended December 31,2015 and 2016, no late delivery expenses were incurred. In addition, consistent with what we believe is the customary industry practice in China, ourcontractors typically do not maintain insurance coverage on our properties under construction. We cannot assure you that we will not have similar incidents or uninsured losses in the future, which could have a material adverse effect on ourbusiness, financial condition and results of operations. We may be unable to complete our property developments on time or at all. The progress and costs for a development project can be adversely affected by many factors, including, without limitation: ·delays in obtaining necessary licenses, permits or approvals from government agencies or authorities; 11  ·shortages of materials, equipment, contractors and skilled labor or increased labor or raw material costs; ·disputes with our third-party contractors; ·failure by our third-party contractors to comply with our designs, specifications or standards; ·difficult geological situations or other geotechnical issues; ·onsite labor disputes or work accidents; and ·natural catastrophes or adverse weather conditions, including strong winds, storms, floods, and earthquakes. Any construction delays, or failure to complete a project according to our planned specifications or budget, may delay our property sales, whichcould adversely affect our revenues, cash flows and our reputation. Under PRC laws and regulations and our pre-sale contracts, we are required to compensate purchasers for late delivery of or failure to complete ourpre-sold units. If the delay extends beyond the contractually specified period, the purchasers may become entitled to terminate the pre-sale contracts andclaim damages. Proceeds from pre-sale of our properties are an important source of financing for our property developments. Under PRC laws, we are not permitted tocommence pre-sales until we have completed certain stages of the construction process for a project. Consequently, a significant delay in the construction ofa project could restrict our ability to pre-sell our properties, which could extend the recovery period for our capital outlay. This, in turn, could have anadverse effect on our cash flow, business and financial position. Changes of laws and regulations with respect to pre-sales may adversely affect our cash flow position and performance. We depend on cash flows from pre-sale of properties as an important source of funding for our property development projects. Under current PRClaws and regulations, property developers must fulfill certain conditions before they can commence pre-sale of the relevant properties and may only use pre-sale proceeds to finance the construction of the specific developments. On August 5, 2005, the PBOC issued a report entitled “2004 Real Estate FinancingReport,” in which it recommended that the practice of pre-selling uncompleted properties be discontinued because, according to the report, such activitycreates significant market risks and generates transactional irregularities. Although this PBOC recommendation was directly adopted by the PRC nationalgovernment and had no enforceability, the local provinces and cities have been delegated the power to enact and implement local pre-sale rules. A number ofcities in which we are operating business have established local rules and conditions for the pre-sale permits application, especially for the custody of pre-sale funds. For example, on August 1, 2016, the Tianjin government promulgated a notice requiring that, before any pre-sale permit application is submitted,a real estate developer must open a custody account at a commercial bank, and enter into a tripartite custody agreement with the relevant governing authorityand the commercial bank to monitor the use of pre-sale funds. Such local regulatory measures have not materially affected or restricted our operation or ouruse of pre-sale funds yet. However, we cannot assure you that the PRC national government or the local governmental authorities will not implement furtherrestrictions on the pre-sale of properties, which may affect our cash flow position and force us to seek alternative sources of funding for much of our propertydevelopment business. The results of our operations may fluctuate from period to period as we derive our revenue principally from the sale of properties and we rely on our unsoldinventory of units. We derive the majority of our revenue from the sale of properties that we have developed. Our results of operations tend to fluctuate from period toperiod due to a combination of factors, including the overall schedule of our property development projects, the timing of the sale of properties that we havedeveloped, the size of our land bank, our revenue recognition policies and changes in costs and expenses, such as land acquisition and construction costs.The number of properties that we can develop or complete during any particular period is limited due to the size of our land bank, the substantial capitalrequired for land acquisition and construction, as well as the development periods required before positive cash flows may be generated. We recognize ourreal estate revenue based on the full accrual method and the percentage of completion method, both of which require us to estimate total costs and revenuewhich may be reviewed or revised periodically and may result in changes from period to period. In addition, several properties that we have developed or thatare under development are large scale and developed in multiple phases over the course of one to several years. The selling prices of the residential units inlarger scale property developments tend to change over time, which may impact our sales proceeds and, accordingly, our revenues for any given period. 12  The recognition of our real estate revenue and costs is dependent upon our estimation of our total project revenue and costs. We recognize our real estate revenue based on the full accrual method and the percentage of completion method depending on the estimated projectconstruction period and timing of collection of sales prices. See “ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS - A. OperatingResults - Critical Accounting Policies.” Under both methods, revenue and costs are calculated based on an estimation of total project costs and total projectrevenues, which are revised on a regular basis as the work progresses. Any material deviation between actual and estimated total project revenues and costsmay result in an increase, a reduction or an elimination of reported revenues or costs from period to period, which will affect our gross profit and net income. We face risks related to our back-to-back loans. Since expanding our operations into the U.S. market in 2012, we became and will continue to be in increasing need of U.S. dollar financings withrespect to project developments and future expansions. We currently satisfy our U.S. dollar denominated financing requirements through four ways:dividends distributions from our PRC subsidiaries, which are subject to 10% withholding tax payment, back-to-back loan arrangements, high yield bondissuances and construction loan financing from U.S. local banks. Under back-to-back loan arrangements, our PRC subsidiaries make deposits denominated inRMB into banks in China as collateral to request the banks in China to issue standby letters denominated in U.S. dollars in the same amount as the RMBcollateral to their outbound branches, and our project companies outside the PRC enter into loans denominated in U.S. dollars with such outbound branchesin the same amount specified in such standby letters Pursuant to the Provisions on the Administration of Foreign Exchange for Cross-border Guaranteeissued by the State Administration of Foreign Exchange of the People’s Republic of China (the “SAFE”), effective June 1, 2014, SAFE registrationrequirements apply to overseas back-to-back loan arrangements and the use of proceeds of such loans must comply with certain requirements. Any change inlaws or regulations to restrict or forbid back-to-back loan transactions in the future may adversely affect our non-PRC companies' financing. In addition, weare exposed to exchange rate fluctuation and foreign exchange control risks under the current back-to-back loan model, which may adversely affect ourbusiness condition and results of operation. We are subject to certain restrictive covenants and risks normally associated with debt financing which may limit our ability to take certain corporateactions, including incurring additional debt, which could materially and adversely affect our business and financial condition. We are subject to certain restrictive covenants in our loan agreements with certain commercial banks. Certain loan agreements contain covenantsproviding that, among other matters, we or our relevant PRC operating subsidiaries may not enter into mergers, joint ventures or restructurings, decrease ourregistered share capital, transfer material assets, including shares of subsidiaries, engage in material investments, liquidate, change our shareholding, ordistribute dividends without the relevant lenders’ prior written consent or unless we fully settle the outstanding amounts under the relevant loan agreements.In addition, certain of our loan agreements contain cross default clauses. If any cross default occurs, these banks are entitled to accelerate payment of all orany part of the loan under their relevant loan agreements and to enforce all or any of the security for such loans. Further, the onshore corporate bonds issuedby Xinyuan (China) Real Estate, Ltd., our wholly-owned PRC subsidiary, contain restrictions on certain business activities of Xinyuan (China) Real Estate,Ltd. when in default on payment of interest or principal, including, among others, limitations on distributions of net income, limitations on certainexpenditures, or business combination transactions. Our future bank and other borrowings may contain similar restrictions or cross-default provisions. 13  Our outstanding debt securities also contain certain covenants that restrict our ability to take other corporate actions. The indentures governing our13% Senior Notes issued in December 2013 (the “June 2019 Senior Secured Notes”), our 8.125% Senior Notes issued in August 2016 (the “August 2019Senior Secured Notes”)and our 7.75% Senior Notes issued in February 2017 (the "February 2021 Senior Secured Notes") contain covenants that, among otherthings, restrict the ability of the Company and its restricted subsidiaries (as defined in the relevant indenture) to incur additional debt or issue preferred stock,to make certain payments or investments, to pay dividends,to purchase or redeem capital stock, sell assets, or make certain other payments, subject to certainqualifications and exemptions and satisfaction of certain conditions. As a result of any such covenants in current or future financing documents, our ability to pay dividends or other distributions on our common sharesand ADSs may be limited. Such covenants may also restrict our ability to raise additional capital in the future through bank borrowings, mortgage financings,and debt and equity issuances and may restrict our ability to engage in some transactions that we believe to be of benefit to us. The occurrence of any of theabove events may have a material adverse effect on our business, financial condition and operating results, as well as cash flow and cash that is available fordistributions. In addition, our obligations under the June 2019 Senior Secured Notes, the August 2019 Senior Secured Notes and the February 2021 SeniorSecured Notes are guaranteed by various of our subsidiaries, and the guarantee by our wholly-owned subsidiary, Xinyuan Real Estate, Ltd., or Xinyuan Ltd,which indirectly holds all of our assets and operations in China is secured by a pledge of our shares of the other guarantor subsidiaries (other than the sharesof Xinyuan International (HK) Property Co., Limited). If we default under any of the Notes, the holders thereof may enforce their claims against those shares.In such an event, the holders of the Notes could gain ownership of the shares of Xinyuan Ltd., and, as a result, own and control all of our subsidiaries inChina. We conduct substantially all of our operations in China, and if we default under any of the Notes, we could lose control or ownership of our assets andoperations in China. We rely on our key management members. We depend on the services provided by key management members. Competition for management talent is intense in the property developmentsector. In particular, we are highly dependent on Mr. Yong Zhang, our founder and Chairman, and Mr. Yong Cui, our President. We do not maintain keyemployee insurance. In the event that we lose the services of any key management member, we may be unable to identify and recruit suitable successors in atimely manner or at all, which will adversely affect our business and operations. Moreover, we may need to employ and retain more management personnel tosupport an expansion into high growth cities on a much larger geographical scale as well as our expansion in the U.S. and other areas. If we cannot attract andretain suitable personnel, especially at the management level, our business and future growth will be adversely affected. We provide guarantees for the mortgage loans of our customers which expose us to risks of default by our customers. We pre-sell properties before actual completion and, in accordance with PRC industry practice, our customers’ mortgage banks require us toguarantee our customers’ mortgage loans. Typically, we provide guarantees to PRC banks with respect to loans procured by the purchasers of our propertiesfor the total mortgage loan amount until the completion of the registration of the mortgage with the relevant mortgage registration authorities, whichgenerally occurs within six to 12 months after the purchasers take possession of the relevant properties. In line with what we believe to be industry practice,we rely on the credit evaluation conducted by mortgagee banks and do not conduct our own independent credit checks on our customers. The mortgageebanks typically require us to maintain, as restricted cash, up to 10% of the mortgage proceeds paid to us as security for our obligations under such guarantees.If a purchaser defaults on its payment obligations during the term of our guarantee, the mortgagee bank may deduct the delinquent mortgage payment fromthe security deposit. If the delinquent mortgage payments exceed the security deposit, the banks may require us to pay the excess amount. If multiplepurchasers default on their payment obligations, we will be required to make significant payments to the banks to satisfy our guarantee obligations. Factorssuch as a significant decrease in housing prices, increase in interest rates or the occurrence of natural catastrophes, among others, could result in a purchaserdefaulting on its mortgage payment obligations. If we are unable to resell the properties underlying defaulted mortgages on a timely basis or at prices higherthan the amounts of our guarantees and related expenses, we will suffer financial losses. We paid US$1,478,386, US$555,969 and US$1,820,324 to satisfyguarantee obligations related to customer defaults for the years ended December 31, 2014, 2015 and 2016. 14  As of December 31, 2015 and 2016, our outstanding guarantees in respect of our customers’ mortgage loans amounted to US$1,513.7 million andUS$1,672.9 million, respectively. If substantial defaults by our customers occur and we are called upon to honor our guarantees, our financial condition, cashflow and results of operations will be materially adversely affected. Our level of indebtedness could have an adverse effect on our financial condition, diminish our ability to raise additional capital to fund our operationsand limit our ability to explore business opportunities. As of December 31, 2016, the outstanding balance of our total indebtedness amounted to US$2,093.9 million. Our level of indebtedness could havean adverse effect on us. For example, it could: ·require us to dedicate a large portion of our cash flow from operations as well as the proceeds of certain financings and asset dispositions tofund payments on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and othergeneral corporate purposes; ·make it more difficult for us to satisfy our obligations under our debt securities and other indebtedness; ·increase our vulnerability to adverse general economic or industry conditions; ·limit our flexibility in planning for, or relating to, changes in our business or the industry in which we operate; ·limit our ability to raise additional debt or equity capital in the future or increase the cost of such funding; ·restrict us from making strategic acquisitions, exploring business opportunities or selling assets; ·place us at a competitive disadvantage compared to any competitors that have less debt; and ·make it more difficult for us to satisfy our obligations with respect to our debt. Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future, which in turn isdependent on various factors. For a discussion of these factors, see "Item 5, "Operating and Financial Review and Prospects - A. Operating Results - PrincipalFactors Affecting Our Results of Operations."" Our financing costs are subject to changes in interest rates. The rates of interest payable on our PRC long-term bank loans are adjustable based on the range of 111% to 195% of the PBOC benchmark rate,which fluctuates from time to time. The PBOC benchmark rate for a one year loan was 4.35% as of October 24, 2015. As of December 31, 2016, the principalamount of our aggregate outstanding variable rate debt was US$405.0 million. A hypothetical 1% increase in annual interest rates would increase our interestexpenses by US$4.1 million based on our debt level at December 31, 2016. In connection with our U.S. projects, we anticipate entering into U.S. dollardenominated loans in the future, which will subject us to additional interest rate fluctuation risks, including fluctuations of London Interbank Offered Rate("LIBOR"). We are subject to potential environmental liability. We are subject to a variety of laws and regulations concerning the protection of health and the environment. The particular environmental laws andregulations that apply to any given development site vary significantly according to the site’s location and environmental condition, the present and formeruses of the site and the nature of the adjoining properties. Environmental laws and conditions may result in delays, may cause us to incur substantialcompliance and other costs and can prohibit or severely restrict project development activity in environmentally-sensitive regions or areas. Although theenvironmental investigations conducted by local PRC environmental authorities have not revealed any environmental liability that we believe would have amaterial adverse effect on our business, financial condition or results of operations to date, it is possible that these investigations did not reveal allenvironmental liabilities and that there are material environmental liabilities of which we are unaware. We cannot assure you that future environmentalinvestigations will not reveal material environmental liability. Also, we cannot assure you that the PRC, U.S. or Malaysian governments will not change theexisting laws and regulations or impose additional or stricter laws or regulations, the compliance of which may cause us to incur significant capitalexpenditure. See “ITEM 4. INFORMATION ON THE COMPANY-B.Business Overview-Environmental Matters.” 15  Our business expansion and business diversification requires proper allocation of our management resources and qualified employees. In 2012, we embarked on four new residential development projects in China, including our first development project in the satellite area of Beijing.We also began to manage our first wholly owned retail project, Xinyuan Priority Lifestyle Shopping Center, located in Zhengzhou, Henan Province. Inaddition, we expanded our operations into the U.S. market, including a development project in New York, and two resale projects in Reno, Nevada andIrvine, California. In October 2013, we completed our acquisition of Jiangsu Jiajing Real Estate Co., Ltd. ("Jiangsu Jiajing"), for the purpose of acquiring theland and residential real estate construction in progress held by it. As of December 31, 2014, we also completed our acquisition of Sanya Beida Science andTechnology Park Industrial Development Co., Ltd. and Shanghai Junxin Real Estate Company, for the purpose of acquiring the land held by such companiesin Sanya and Shanghai, respectively. In December 2014, we also acquired 100% of the shares of a Malaysian company, which owns offshore landfilldevelopment rights for a total area of 170 acres (approximately 687,966 square meters.). On March 2 and May 15, 2015, we acquired 82% and 18% of theequity interests, respectively, in Shandong Renju Real Estate Co., Ltd. for the purpose of acquiring the land held by it in Jinan. As of December 31, 2016, wealso completed our acquisition of Beijing Ruihao Rongtong Real Estate Co., Ltd. and Hunan Erli Real Estate Co., Ltd., for the purpose of acquiring the landheld by such companies in Beijing and Changsha, respectively. In January 2016, we acquired a parcel of land in midtown Manhattan, New York with grossfloor area approximately 9,755 square meters.In August 2016, we acquired another parcel of land in in Flushing, Queens, New York with gross floor area ofapproximately 34,615 square meters. These newly developed projects, with more diversified business focuses in terms of market regions and types ofbusiness, demand proper allocation of our management resources. In addition, our Malaysia acquisition, which involves land reclamation activities in whichwe have no prior experience and which presents risks we have not previously encountered or dealt with, may require additional skill sets on the part of ourmanagement. If our management fails to satisfy these increased demands, we may not be able to carry out our business expansion and project developmentsuccessfully. In addition, if we are unable to recruit or retain a sufficient number of qualified employees for the continuation and expansion of our business,our business and prospects may be adversely affected. New lines of business or new products and services may subject us to additional risks. From time to time, we may implement new lines of business or offer new products and services within existing lines of business. See Item 4.“Information on the Company – B. Business Overview” for information regarding our Online to Offline (O2O), cinema businesses and our blockchain-powered real estate finance technology platform under development. There are substantial risks and uncertainties associated with these efforts, particularly ininstances where the markets are not fully developed. There may be license and compliance requirements regarding new lines of business, including specialrequirements for foreign-invested enterprises. The development and marketing of new lines of business or new products and services could distract ourmanagement from our core business. In addition, we may invest significant time and resources into these new lines of business or new products and services.Initial timetables for the introduction and development of new lines of business or new products and services may not be achieved and price and profitabilitytargets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may alsoimpact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business or new product or servicecould have a significant impact on the effectiveness of our system of internal control. Failure to successfully manage these risks in the development andimplementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations and financialcondition. 16  We may fail to obtain or maintain, or may experience material delays in obtaining, necessary government approvals for any major property development,which will adversely affect our business. The real estate industry is strictly regulated by the PRC government. Property developers in China must abide by various laws and regulations,including implementation rules promulgated by local governments to enforce these laws and regulations. Before commencing, and during the course of,development of a property project, we need to apply for or renew various licenses, permits, certificates and approvals, including but not limited to, land userights certificates, construction site planning permits, construction work planning permits, construction permits, pre-sale permits and completion acceptancecertificates. We need to satisfy various requirements to obtain these approval certificates and permits, and to meet specific conditions in order for thegovernment authorities to renew relevant approval certificates and permits. To date, we have not encountered serious delays or difficulties in the process ofapplying for or renewing these approval certificates and permits, but we cannot guarantee that we will not encounter serious delays or difficulties in thefuture. In the event that we fail to obtain the necessary governmental approvals for any of our major property projects, or a serious delay occurs in thegovernment’s examination and approval process, we may not be able to maintain our development schedule and our business and cash flows may beadversely affected. Regulations in the U.S. could increase the cost and limit the availability of our project development in the U.S. and adversely affect our business orfinancial results. As we expand our business into the U.S. market, we are subject to extensive and complex regulations in the U.S. that affect land development andhome construction, including zoning, density restrictions, building design and building standards. These regulations often provide broad discretion to theadministering governmental authorities as to the conditions we must meet prior to being approved, if approved at all. We are subject to determinations bythese authorities as to the adequacy of water and sewage facilities, roads and other local services. New housing developments may also be subject to variousassessments for public improvements. Any of these regulatory issues can limit or delay construction and increase our operating costs. We are also subject to avariety of local, state and federal laws and regulations concerning protection of health, safety and the environment. These matters may result in delays, maycause us to incur substantial compliance, remediation, mitigation and other costs or subject us to costs from fines, penalties and related litigation. These lawsand regulations can also prohibit or severely restrict development and homebuilding activity in environmentally sensitive areas. Increases in the price of raw materials or labor costs may increase our cost of sales and reduce our earnings. We outsource the design and construction of our projects under development to third-party service providers. Our third-party contractors areresponsible for providing labor and procuring almost all of the raw materials used in our project developments. Our PRC construction contracts typicallyprovide for fixed or capped payments, but the payments are subject to changes in PRC government-suggested prices for certain raw materials we use, such assteel and cement. Any increase in labor costs or other costs which may result in adjustments in payments under any of our construction contracts could resultin an increase in our construction costs. In the event that the price of any raw materials, including cement, concrete blocks and bricks, increase in the future,such increase could be passed on to us by our contractors, and our construction costs would increase accordingly. Passing such increased costs to ourcustomers may result in reduced sales and delay our ability to complete sales for our projects. Any input cost increase could reduce our earnings to the extentwe are unable to pass these increased costs to our customers. Retail and commercial investment properties and properties held for sale are generally illiquid investments and the lack of alternative uses of suchproperties could limit our ability to respond changes in the performance of our properties. As of December 31, 2016, we had approximately 47,109 and 115,374 square meters of retail investment properties in Zhengzhou and Shaanxiprovince, in China, respectively. As of December 31, 2016, we also have four projects under construction at which we plan to develop commercial propertyfor lease with a planned GFA of approximately 50,591 square meters. We anticipate that we may prudently and gradually increase our retail and commercialinvestment properties as appropriate opportunities arise in the future. Any form of real estate investment is difficult to liquidate and, as a result, our ability tosell our properties in response to changing economic, financial and investment conditions is limited. In addition, we may also need to incur operating andcapital expenditures to manage and maintain our properties, or to correct defects or make improvements to these properties before selling them. We cannotassure you that we can obtain financing at a reasonable cost for such expenditures, or at all. 17  Furthermore, aging of retail and commercial investment properties or properties held for sale, changes in economic and financial conditions orchanges in the competitive landscape in the PRC or U.S. property markets, may adversely affect the amounts of rentals and revenue we generate from, as wellas the fair value of, these properties. However, our ability to convert any of these properties to alternative uses is limited as such conversion requiresextensive governmental approvals in the PRC or may require zoning or other approvals in the U.S. and involves substantial capital expenditures for thepurpose of renovation, reconfiguration and refurbishment. We cannot assure you that such approvals and financings can be obtained when needed. These andother factors that impact our ability to respond to adverse changes in the performance of our retail and commercial investment properties, as well as propertiesheld for sale, may adversely affect our business, financial condition, cash flow and results of operations. We may engage in joint ventures, which could result in unforeseen expenses or disruptive effects on our business. From time to time, we have engaged and may consider engaging in joint ventures with other businesses to develop a property. Any joint venture thatwe determine to pursue will be accompanied by a number of risks. We may not be in a position to exercise sole decision-making authority regarding the jointventures. We may not be able to control the quality of products produced by the joint venture. Depending on the terms of the joint venture agreement, wemay require the consent of our joint venture partners for the joint venture to take certain actions, such as making distributions to the partners. A joint venturepartner may encounter financial difficulties and become unable to meet obligations with regard to funding of the joint venture. In addition, our joint venturepartners and the joint ventures themselves may hold different views or have different interests from ours, and therefore may compete in the same market withus, in which case our interest and future development may be materially adversely affected. Any future acquisitions could expose us to unforeseen risks or place additional strain on the management and other resources. In 2014, we completed our acquisition of 100% of the equity interests in Sanya Beida Science and Technology Park Industrial Development Co.,Ltd. and Shanghai Junxin Real Estate Company, for the purpose of acquiring the land held by such companies in Sanya and Shanghai, respectively. InDecember 2014, we also completed the acquisition of 100% of the equity interests in XIN Eco Marine Group Properties Sdn Bhd (formerly named as EMGGroup Properties Sdn Bhd), a Malaysian company which, through a subsidiary, holds offshore landfill development rights for a total of 170 acres(approximately 687,966 square meters) of land. On March 2 and May 15, 2015, we acquired 82% and 18% of the equity interests, respectively, in ShandongRenju Real Estate Co., Ltd. for the purpose of acquiring the land held by it in Jinan. As of December 31, 2016, we also completed our acquisition of BeijingRuihao Rongtong Real Estate Co., Ltd. and Hunan Erli Real Estate Co., Ltd., for the purpose of acquiring the land held by such companies in Beijing andChangsha, respectively. As part of our business strategy, we regularly evaluate investments in, or acquisitions of, subsidiaries, joint ventures, and we expectthat we will continue to make such investments and acquisitions in the future. Any potential future acquisition may be accompanied by a number of risks,including risks relating to the evolving legal landscape in China. An acquired business may underperform relative to expectations or may expose us tounexpected liabilities. Acquisitions of entities that own real estate may involve risks in addition to the risks inherent in a real estate acquisition, because theacquisition of an entity generally includes all of the liabilities of the entity — known and unknown, fixed and contingent — rather than only the liabilitiesrelated to the real estate. These liabilities, which could be material, may include liabilities not disclosed by the seller of the entity or not discovered duringour due diligence. In addition, the integration of any acquisition could require substantial management attention and resources. If we were unable tosuccessfully manage the integration and ongoing operations, or hire and retain additional personnel necessary for the running of the expanded business, theresults of our operations and financial performance could be adversely affected. Acquisitions may result in the incurrence and inheritance of debts and other liabilities, assumption of potential legal liabilities in respect of theacquired businesses, and incurrence of impairment charges related to goodwill and other intangible assets, any of which could harm our businesses, financialcondition and results of operations. In particular, if any of the acquired businesses fails to perform as we expect, we may be required to recognize a significantimpairment charge, which may materially and adversely affect our businesses, financial condition and results of operations. As a result, there can be noassurance that we will be able to achieve the strategic purpose of any acquisition, the desired level of operational integration or our investment return target. 18  Our failure to successfully manage our business expansion, would have a material adverse effect on our results of operations and prospects. Our expansion has created, and will continue to place, substantial demand on our resources. Managing our growth and integrating the acquiredbusinesses will require us to, among other things: ·comply with the laws, regulations and policies applicable to the acquired businesses, including obtaining timely approval for the real estateconstruction as required under the PRC law; ·maintain adequate control on our business expansion to prevent, among other things, project delays or cost overruns; ·manage relationships with employees, customers and business partners during the course of our business expansion; ·attract, train and motivate members of our management and qualified workforce to support successful business expansion; ·access debt, equity or other capital resources to fund our business expansion, which may divert financial resources otherwise available forother purposes; ·divert significant management attention and resources from our other businesses; and ·strengthen our operational, financial and management controls, particularly those of our newly acquired subsidiaries, to maintain thereliability of our reporting processes. Any difficulty meeting the foregoing or similar requirements could significantly delay or otherwise constrain our ability to implement ourexpansion plans, or result in failure to achieve the expected benefits of the combination or acquisition or write-offs of acquired assets or investments, whichin turn would limit our ability to increase operational efficiency, reduce costs or otherwise strengthen our market position. Failure to obtain the intendedeconomic benefits from the business expansion could adversely affect our business, financial condition, results of operations and prospects. In addition, wemay also experience mixed results from our expansion plans in the short term. Regulations in the PRC may make it more difficult for us to pursue growth through acquisitions. On August 8, 2006, six PRC regulatory agencies, including the China Securities Regulatory Commission , promulgated the Regulations on Mergersand Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and was amended on June22, 2009. Among other things, the M&A Rules and regulations and rules concerning mergers and acquisitions established additional procedures andrequirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. For example, the M&A Rules requirethat the Ministry of Commerce of the People’s Republic of China (the“MOFCOM”) be notified in advance of any change-of-control transaction in which aforeign investor takes control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisionson Thresholds for Prior Notification of Concentrations of Undertakings, issued by the PRC State Council on August 3, 2008, are triggered. According to theImplementing Rules Concerning Security Review on the Mergers and Acquisitions by Foreign Investors of Domestic Enterprises issued by MOFCOM inAugust 2011, mergers and acquisitions by foreign investors involved in an industry related to national security are subject to strict review by MOFCOM.These rules also prohibit any transactions attempting to bypass such security review, including by controlling entities through contractual arrangements. Webelieve that our business is not in an industry related to national security. However, we cannot preclude the possibility that MOFCOM or other governmentagencies may publish interpretations contrary to our understanding or broaden the scope of such security review in the future. Although we have no currentplans to do so, we may elect to grow our business in the future in part by directly acquiring complementary businesses in China. Complying with therequirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtainingapproval from MOFCOM, may delay or inhibit our ability to complete such transactions. 19  Our development plan may be adversely affected in the event that relocation issues related to government housing expropriations are not successfullysettled by the relevant PRC governmental authorities. We acquire property for development through bidding, auctions and listing procedures held by the government or through acquisitions of thirdparties. Some of the property we acquire from the government may have been made available through expropriation. On January 21, 2011, the PRC StateCouncil issued the Regulations on the Expropriation and Compensation of Houses on State-owned Land, which provides that government entities at the cityand county level are responsible for overseeing housing expropriation and compensation within their respective administrative regions. The regulationsmandate that a compensation agreement be entered into between the relevant housing expropriation department and the entities or individuals whose houseshave been expropriated addressing, among others things, the mode of payment and the amount of compensation, the period of payment, the removalexpenses, temporary placement or transitional housing expenses, losses from the closure of business operations, the time period within which the entities orindividuals must vacate the expropriated premises, the type of transitional accommodation and the period of transition. The compensation payable may notbe less than the market value of property of a similar nature as of the date when the expropriation notice was issued. Under the regulations, propertydevelopers are prohibited from participating in the relocation arrangements. Given the fact that the completion of the relocation procedures is the conditionprecedent for the relevant PRC governmental authorities to grant land use rights, any failure of the PRC governmental authorities in handling the relocationissues may cause substantial delays in the granting process of land use rights. If we cannot obtain the land use rights from the relevant governmentalauthorities in time, our development plan may be delayed and we may not be able to complete the development and sell the property according to plan. Thiswill, in turn, adversely affect our business operations. We do not have insurance to cover potential losses and claims. We do not maintain insurance policies for properties that we have delivered to our customers, and we maintain only limited insurance coverageagainst potential losses or damages with respect to our properties in the PRC before their delivery to customers. Although we require our contractors to carryinsurance, we believe most of our contractors do not comply with this requirement. Our contractors may not be sufficiently insured themselves or have thefinancial ability to absorb any losses that arise with respect to our projects or pay our claims. In addition, there are certain types of losses, such as losses dueto earthquakes, which are currently uninsurable in China. While we believe that our practice is in line with the general practice in the PRC propertydevelopment industry, there may be instances when we will have to internalize losses, damages and liabilities because of the lack of insurance coverage,which may in turn adversely affect our financial condition and results of operations. In addition, while we carry limited insurance on our operations in theU.S., such insurance may not be adequate to compensate us for any losses, damages and liabilities we might incur with regard to our properties. We may suffer a penalty or even forfeit land to the PRC government if we fail to comply with procedural requirements applicable to land grants from thegovernment or the terms of the land use rights grant contracts. According to the relevant PRC laws and regulations, if we fail to develop a property project according to the terms of the land use rights grantcontract, including those relating to the payment of land premiums, specified use of the land and the time for commencement and completion of the propertydevelopment, the PRC government may issue a warning, may impose a penalty or may order us to forfeit the land. Specifically, under current PRC laws andregulations, if we fail to pay land premiums in accordance with the payment schedule set forth in the relevant land use rights grant contract, the relevant PRCland bureau may issue a warning notice to us, impose late payment penalties or even require us to forfeit the related land to the PRC government. The latepayment penalties are usually calculated based on the overdue days for the land premium payments. Furthermore, if we fail to commence development withinone year after the commencement date stipulated in the land use rights grant contract, the relevant PRC land bureau may issue a warning notice to us andimpose an idle land fee on the land of up to 20% of the land premium. If we fail to commence development within two years, the land will be subject toforfeiture to the PRC government, unless the delay in development is caused by government actions or force majeure. Even if the commencement of the landdevelopment is compliant with the land use rights grant contract, if the developed GFA on the land is less than one-third of the total GFA of the project thatshould have been under construction and development or the total capital invested is less than one-fourth of the total investment of the project and thesuspension of the development of the land continues for more than one year without government approval, the land will also be treated as idle land and besubject to penalty or forfeiture. 20  We cannot assure you that circumstances leading to significant delays in our own land premium payments or development schedules or forfeiture ofland will not arise in the future. If we pay a substantial penalty, we may not be able to meet pre-set investment targeted returns for a given project and ourfinancial conditions could be adversely affected. If we forfeit land, we will not only lose the opportunity to develop the property projects on such land, butmay also lose a significant portion of the investment in such land, including land premium deposits and the development costs incurred. Any non-compliant GFA of our uncompleted and future property developments will be subject to governmental approval and additional payments. The local government authorities inspect property developments after their completion and issue the completion acceptance certificates if thedevelopments are in compliance with the relevant laws and regulations. If the total constructed GFA of a property development exceeds the GFA originallyauthorized in the relevant land grant contracts or construction permit, or if the completed property contains built-up areas that do not conform with the planauthorized by the construction permit, the property developer may be required to pay additional amounts or take corrective actions with respect to such non-compliant GFA before a completion acceptance certificate can be issued to the property development. We have obtained completion acceptance certificates for all of our completed properties as of December 31, 2016. However, we cannot be certainthat local government authorities will not determine that the total constructed GFA upon completion of our existing projects under development or anyfuture property developments exceed the relevant authorized GFA. Any such non-compliance could lead to additional payments or penalty, which wouldadversely affect our financial condition. We have not incurred material amounts of any such payments or penalties since the founding of our company. We may not be able to continue obtaining qualification certificates, which will adversely affect our business. Real estate developers in the PRC must obtain a formal qualification certificate in order to carry on a property development business in the PRC.According to the PRC regulations issued in 2000 on qualification of property developers, a newly established property developer must first apply for atemporary qualification certificate with a one-year validity, which can be renewed for not more than two years. If, however, the newly established propertydeveloper fails to commence a property development project within the one-year period during which the temporary qualification certificate is in effect, itwill not be allowed to renew its temporary qualification certificate. All qualification certificates are subject to renewal on an annual basis. Under governmentregulations, developers must fulfill all statutory requirements before they may obtain or renew their qualification certificates. In accordance with theprovisions of the rules on the administration of qualifications, the real estate developer qualifications are classified into four classes and the approval systemfor each class is tiered. A real estate developer may only engage in the development and sale of real estate within the scope of its qualification certificate. Forinstance, a class I developer is not restricted to the scale of real estate projects to be developed and may undertake real estate development projects anywherein the country, while a class II or below developer may undertake projects with a gross area of less than 250,000 square meters per project and the specificscope of business must be as confirmed by the local construction authority. See “ITEM 4. INFORMATION ON THE COMPANY - B. Business Overview –Regulation - China -Regulations on Qualifications of Developer.” There can be no assurance that some of our project companies that are in the process of applying for or renewing proper qualification certificates willbe able to obtain such certificates on a timely basis to commence their planned real estate projects development on schedule. There can be no furtherassurance that we and our project companies will continue to be able to extend or renew the qualification certificates or be able to successfully upgrade thecurrent qualification class to a higher qualification. If we or our project companies are unable to obtain or renew qualification certificates, the PRCgovernment will refuse to issue pre-sale and other permits necessary for the conduct of the property development business, and our results of operations,financial condition and cash flows will be adversely affected. In addition, if any of our project companies engages in the development and sale of real estateoutside the scope of its qualification certificate, it may be ordered to rectify such conduct within a prescribed period, be fined up to RMB100,000, or evenhave its qualification certificate and business license revoked. 21  Our failure to assist our customers in applying for property ownership certificates in a timely manner may lead to compensatory liabilities to our customers. We are statutorily required to meet various PRC regulation requirements within 90 days after delivery of property, or such other period contractedwith our customers, in order for our customers to apply for their property ownership certificates, including passing various governmental clearances,formalities and procedures. Under our typical sales contract, we are liable for any delay in the submission of the required documents as a result of our failureto meet such requirements, and are required to compensate our customers for delays. In the case of delays of submission of required documents, we arerequired under contracts with our customers to pay compensation to our customers and our reputation and results of operations may be adversely affected. The property development business is subject to claims under statutory quality warranties. Under PRC law, all property developers in the PRC must provide certain quality warranties for the properties they construct or sell. We are requiredto provide these warranties to our customers. Generally, we receive quality warranties from our third-party contractors with respect to our property projects. Ifa significant number of claims were brought against us under our warranties and if we were unable to obtain reimbursement for such claims from third-partycontractors in a timely manner or at all, or if the money retained by us to cover our payment obligations under the quality warranties was not sufficient, wecould incur significant expenses to resolve such claims or face delays in remedying the related defects, which could in turn harm our reputation, andmaterially adversely affect our business, financial condition and results of operations. We may become involved in legal and other proceedings from time to time and may suffer significant liabilities or other losses as a result. We have in the past, and may in future, become involved in disputes with various parties relating to the acquisition of land use rights, thedevelopment and sale of our properties or other aspects of our business and operations. These disputes may lead to legal or other proceedings and may resultin substantial costs and diversion of resources and management’s attention. Disputes and legal and other proceedings may require substantial time andexpense to resolve, which could divert valuable resources, such as management time and working capital, delay our planned projects and increase our costs.Third parties that are found liable to us may not have the resources to compensate us for our incurred costs and damages. We could also be required to paysignificant costs and damages if we do not prevail in any such disputes or proceedings. In addition, we may have disagreements with regulatory bodies in thecourse of our operations, which may subject us to administrative proceedings and unfavorable decrees that result in pecuniary liabilities and cause delays toour property developments. See “ITEM 8. FINANCIAL INFORMATION - A. Consolidated Statements and Other Financial Information - Legal Proceedings”. The relevant PRC tax authorities may challenge the basis on which we have been paying our land appreciation tax obligations and our results ofoperations and cash flows may be affected. Under PRC laws and regulations, our PRC subsidiaries engaging in property development are subject to land appreciation tax ("LAT"), which islevied by the local tax authorities. All taxable gains from the sale or transfer of land use rights, buildings and their attached facilities in the PRC are subject toLAT at progressive rates ranging from 30% to 60%. Exemptions are available for the sale of ordinary residential properties if the appreciation values do notexceed certain thresholds specified in the relevant tax laws. Gains from the sale of commercial properties, luxury residential properties and villas are noteligible for this exemption. We have accrued LAT payable on our property sales and transfers in accordance with the progressive rates specified in relevant tax laws, lessamounts previously paid under the levy method applied by relevant local tax authorities. However, provision for LAT requires our management to use asignificant amount of judgment with respect to, among other things, the anticipated total proceeds to be derived from the sale of the entire phase of theproject or the entire project, the total appreciation of project value and the various deductible items. Given the time gap between the point at which we makeprovisions for and the point at which we settle the full amount of LAT payable, the relevant tax authorities may not necessarily agree with our apportionmentof deductible expense or other bases on which we calculate LAT. As a result, our LAT expenses as recorded in our financial statements of a particular periodmay require subsequent adjustments. If the LAT provisions we have made are substantially lower than the actual LAT amounts assessed by the tax authoritiesin the future, our results of operations and cash flows will be materially and adversely affected. For a range of reasonably possible losses in excess of theamounts we have accrued for LAT, to the extent such estimates are determinable, see Note 15 of our Consolidated Financial Statements in this report. 22  Our operations may be affected by the real property taxes to be imposed by the PRC government. In another attempt to cool the real estate market, the PRC government has been considering imposing real property tax on a nationwide scale andhas designated Shanghai and Chongqing as trial regions. In response, on January 27, 2011, both Shanghai and Chongqing promulgated local rules regardingthe imposition of real property tax, with such rules taking effect on January 28, 2011, with Chongqing amending its rules on January 13, 2017. On February20, 2013, the PRC State Council, in an executive meeting, stated a new policy regarding the real property tax that the government would select more trialregions for the real property tax that year. However, no other trial region has been publicized yet. Real property tax regulations may eventually be officiallypromulgated at the national level; any such regulation could significantly impact the real estate market. In light of these developments, we cannot guaranteethat our operations will not be adversely affected. We may be required to pay additional corporate income taxes in China. Based on the levy method applied by the Zhengzhou local tax bureau before 2011, our subsidiaries in Zhengzhou were paying corporate incometax, or CIT, on a deemed profit basis, where taxable income was deemed to be 15% of cash receipts, regardless of actual income generated in that year. Thelocal tax authorities may challenge our basis as compared to the actual income basis. Accordingly, we may be subject to CIT on our actual taxable income.We have made provision for the amount of applicable CIT calculated in accordance with the relevant PRC tax laws and regulations, but we paid CIT eachyear as required by the local tax authorities. We cannot guarantee that we will not be required to pay additional taxes in accordance with the PRC tax lawsand regulations or that our accrued deferred tax liabilities will be sufficient to cover any additional CIT payments we will be required to pay in the futurewith respect to past financial periods. Dividends we receive from our PRC subsidiaries located in the PRC may be subject to PRC withholding tax. The PRC Corporate Income Tax Law, or the CIT Law, and the Implementation for the CIT Law issued by the PRC State Council became effective asof January 1, 2008. The CIT Law provides that a maximum income tax rate of 20% may be applicable to dividends payable to non-PRC investors that are“non-resident enterprises,” to the extent such dividends are derived from sources within the PRC, and the PRC State Council has reduced such rate to 10%through the Implementation for the CIT Law. We are a Cayman Islands holding company and substantially all of our income may be derived from dividendswe receive from our PRC subsidiaries. Thus, dividends paid to us by our subsidiaries in China may be subject to the 10% income tax if we are considered a“non-resident enterprise” under the CIT Law. If we are required under the CIT Law to pay income tax for any dividends we receive from our PRC subsidiaries,it will materially and adversely affect the amount of dividends received by us from our PRC subsidiaries. Under an arrangement between China and Hong Kong, such dividend withholding tax rate is reduced to 5% if the beneficial owner of the dividendsis a Hong Kong tax resident enterprise which directly owns at least 25% of the PRC company distributing the dividends and has owned such equity for atleast 12 consecutive months before receiving such dividends. According to the Circular of the State Administration of Taxation on How to Understand andIdentify “Beneficial Owner” under Tax Treaties, effective on October 27, 2009, and the Announcement of the State Administration of Taxation on theDetermination of “Beneficial Owners” in the Tax Treaties, effective on June 29, 2012, an applicant for treaty benefits, including benefits under thearrangement between China and Hong Kong on dividend withholding tax, that does not carry out substantial business activities or is an agent or a conduitcompany may not be deemed as a “beneficial owner” of the PRC subsidiary and therefore, may not enjoy such treaty benefits. According to Announcement ofthe State Administration of Taxation on Issues Concerning the Recognition of Beneficial Owners in Entrusted Investments, effective on June 1, 2014, non-residents may be recognized as “Beneficial Owners” and enjoy the treaty benefits for the income derived from the PRC from specified investments. However,we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferentialwithholding tax rate of 5%. 23  We may be deemed a PRC resident enterprise under the CIT Law and be subject to the PRC taxation on our worldwide income. The CIT Law also provides that enterprises established outside of China whose “de facto management bodies” are located in China are considered“resident enterprises” and are generally subject to the uniform 25% corporate income tax rate as to their worldwide income (including dividend incomereceived from subsidiaries). Under the Implementation for the CIT Law, “de facto management body” is defined as a body that has material and overallmanagement and control over the manufacturing and business operations, personnel and human resources, finances and treasury, and acquisition anddisposition of properties and other assets of an enterprise. Under the Notice on the Issues Regarding Recognition of Overseas Incorporated DomesticallyControlled Enterprises as PRC Resident Enterprises Based on the De Facto Management Body Criteria, or Circular 82, which was retroactively effective asof January 1, 2008, an overseas incorporated, domestically-controlled enterprise will be recognized as a PRC resident enterprise if it satisfies certainconditions. Further, the State Administration of Taxation (the “SAT”) issued the Administrative Measures of Enterprise Income Tax of Chinese-controlledOffshore Incorporated Resident Enterprises (Trial), or Bulletin 45, which became effective on September 1, 2011, and was amended on April 17, 2015, toprovide further guidance on the implementation of Circular 82. Bulletin 45 clarified certain issues relating to the determination of PRC tax residententerprise status, post-determination administration and the authorities responsible for determining offshore-incorporated PRC tax resident enterprise status.Bulletin 45 specifies that when provided with a copy of a Chinese tax resident determination certificate issued by the in-charge tax authorities from anoffshore-incorporated PRC tax resident enterprise, the payer should not withhold 10% income tax when paying Chinese-sourced dividends, interest androyalties to the offshore incorporated PRC tax resident enterprise. However, as Circular 82 and Bulletin 45 only apply to enterprises incorporated under lawsof foreign jurisdictions that are controlled by PRC enterprises or groups of PRC enterprises, it remains unclear how the tax authorities will determine thelocation of “de facto management bodies” for overseas incorporated enterprises that are controlled by individual PRC residents or non-PRC enterprises suchas our company. It is still unclear whether PRC tax authorities would require us to be treated as a PRC resident enterprise. If we are treated as a residententerprise for PRC tax purposes, we will be subject to PRC tax on our worldwide income at the 25% uniform tax rate, which could have an impact on oureffective tax rate and an adverse effect on our net income and results of operations, although dividends distributed from our PRC subsidiaries to us could beexempt from Chinese dividend withholding tax, since such income is exempted under the new CIT Law to a PRC resident recipient. Dividends payable by us to our non-PRC investors and gain on the sale of our ADSs may become subject to taxes under PRC tax laws. Under the Implementation for the CIT Law, a PRC income tax rate of 10% is applicable to dividends payable to investors that are “non-residententerprises,” which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevantincome is not effectively connected with the establishment or place of business, to the extent such dividends have their sources within the PRC. Similarly,any gain realized on the transfer of ADSs by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sourceswithin the PRC. For non-PRC individual investors, under the PRC Individual Income Law, there could be a PRC income tax at a rate of 20% for suchdividends or gains. If we are considered a PRC “resident enterprise,” it is unclear whether dividends we pay with respect to our ADSs, or the gain you mayrealize from the transfer of our ADSs, would be treated as income derived from sources within the PRC and be subject to PRC tax. If we are required under theImplementation for the CIT Law to withhold PRC income tax on dividends payable to our non-PRC investors that are “non-resident enterprises,” or non-PRCindividuals, or if you are required to pay PRC income tax on the transfer of our ADSs, the value of your investment in our ADSs may be materially andadversely affected. 24  Indirect Transfers of Equity Interests in PRC Tax Resident Enterprises by Non-resident Enterprises May Cause Uncertainty on Tax Liabilities. Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or Circular698, issued by the State Administration on Taxation on December 10, 2009 with retroactive effect from January 1, 2008, where a non-PRC tax residententerprise transfers the equity interests of a PRC tax resident enterprise indirectly by disposing of the equity interests of an overseas holding company(exclusive of trading the stocks of a PRC tax resident enterprise in a public capital market), gains derived from such indirect transfer may be subject to PRCwithholding tax at a rate of up to 10%. On February 3, 2015, the State Administration on Taxation further issued the Announcement of the StateAdministration of Taxation on Several Issues concerning the Enterprise Income Tax on the Indirect Transfers of Properties by Non-Resident Enterprises, orCircular 7.According to Circular 7, where a non-resident enterprise indirectly transfers equity interests or other properties of PRC tax resident enterprises, orPRC Taxable Property, to avoid its tax liabilities by implementing arrangements without reasonable commercial purpose, such indirect transfer shall berecharacterized and recognized as a direct transfer of PRC Taxable Property. As a result, gains derived from such indirect transfer and attributable to PRCTaxable Property may be subject to PRC withholding tax at a rate of up to 10%. In the case of an indirect transfer of “property of establishments” of a foreignenterprise in the PRC, the applicable tax rate would be 25%. Circular 7 imposes tax filing obligations with respect to such indirect transfers on both parties tothe transfer transaction, compared to merely the transferor as required by Circular 698, as well as the PRC tax resident entity being indirectly transferred. Inaddition, as a general principle, the State Administration on Taxation also issued the Administration of General Anti-Tax Avoidance (Trial Implementation),or GATA, which became effective on February 1, 2015 and empowers the PRC tax authorities to apply special tax adjustments for “tax avoidancearrangements”. There is uncertainty as to the application of Circular 698 and Circular 7 and GATA. For example, it may be difficult to evaluate whether or not thetransaction has a reasonable commercial purpose, and such evaluation may be based on ambiguous criteria which have not been formally declared or statedby tax authorities. As a result, any of our disposals or acquisitions of the equity interests of non-PRC entities which indirectly hold PRC Taxable Property orany offshore transaction related to PRC Taxable Property, including potential overseas restructuring, might be deemed an indirect transfer under PRC taxregulations. However, since both Circular 698 and Circular 7 specify that they do not apply if a non-resident enterprise obtains the proceeds from indirecttransfer of Chinese taxable property by trading stocks of a listed foreign enterprise in the open market, for most of our investors, who either are notenterprises, or are non-resident enterprises but only trade stocks in the open market, they will not be required to pay tax under Circular 698 or Circular 7, orGATA. If the value of our brand or image diminishes, it could have a material adverse effect on our business and results of operations. We intend to continue promoting the “Xinyuan” brand in selected cities in our target markets by delivering quality products and attentive realestate-related services to our customers. Our brand is integral to our sales and marketing efforts. Our continued success in maintaining and enhancing ourbrand and image depends to a large extent on our ability to satisfy customer needs by further developing and maintaining the quality of our services acrossour operations, as well as our ability to respond to competitive pressures. If we are unable to satisfy customer needs or if our public image or reputation wereotherwise hindered, our business transactions with our customers may decline, which could in turn adversely affect our results of operations. We may be required to record impairment charges in the future. If the projected profitability of a given project deteriorates due to a decline in the pace of unit sales, a decline in selling prices, or some other factor,such project is reviewed for possible impairment by comparing the estimated future undiscounted cash flows for the project to its carrying value. If theestimated future undiscounted cash flows are less than the project’s carrying value, the project is written down to its estimated fair value. If businessconditions deteriorate, there is a potential risk that impairment charges will be recorded, which may have a material adverse effect on our results of operation. Any unauthorized use of our brand or trademark may adversely affect our business. We own trademarks for "鑫苑" in the form of Chinese characters and our company logo in the PRC,U.S., UK, EU, New Zealand, Australia, Singaporeand Korea. We rely on those countries' intellectual property and anti-unfair competition laws and contractual restrictions to protect brand name andtrademarks. We believe our brand, trademarks and other intellectual property rights are important to our success. Any unauthorized use of our brand,trademarks and other intellectual property rights could harm our competitive advantages and business. Historically, China has not protected intellectualproperty rights to the same extent as the United States or the Cayman Islands, and infringement of intellectual property rights continues to pose a serious riskof doing business in China. Monitoring and preventing unauthorized use is difficult. The measures we take to protect our intellectual property rights may notbe adequate. Furthermore, the application of laws governing intellectual property rights in China and abroad is uncertain and evolving, and could involvesubstantial risks to us. If we are unable to adequately protect our brand, trademarks and other intellectual property rights, our reputation may be harmed andour business may be adversely affected. 25  In the PRC, the registration and protection of a company’s corporate name is regional and limited to its related industry. Although we haveregistered our corporate name “Xinyuan” in certain provinces where we operate, we cannot prevent others from registering the same corporate name in otherprovinces or in other industries. If another company is the first to register “Xinyuan” as its corporate name in a province other than Beijing, Tianjin, HenanProvince, Shandong Province, Jiangsu Province, Anhui Province , Sichuan Province, Hunan Province, and Shaanxi Province or in another industry, we willhave to adopt another corporate name if we plan to enter that market or industry. We may be subject to additional payments of statutory employee benefits. According to PRC laws and local regulations, we are required to pay various statutory employee benefits, including pensions, housing fund, medicalinsurance, work-related injury insurance, unemployment insurance and childbearing insurance to designated government agents for the benefit of all ouremployees. Since the PRC Social Insurance Law came into effect on July 1, 2011, the legal framework regulating employee social insurance has been furtherstrengthened. Currently, we pay statutory employee benefits based on the contribution ratio stipulated by local governments and also accrue provisions forunpaid employee benefits based on relevant central government regulations. We may be required by the relevant PRC authorities to pay the unpaidemployee benefits within a designated period. We cannot be certain that such accrued amounts will be sufficient to meet any additional employee benefitpayments that we are required to make in the future. If we provide seller financing, we face the risk that our homebuyers may default in their obligations, which could result in a delay of revenue recognitionand could negatively affect our financial results. During part of the years 2011 and 2012, due to the restrictions of mortgages to second home buyers, we employed seller-financed contractarrangements under which a homebuyer could pay the purchase price for the residential unit in installment payments. Since the second quarter of 2014, wehave also utilized seller-financed contracts as a competitive advantage, and we expect to continue to do so in the foreseeable future. We perform creditchecks on homebuyers to whom we offer seller-financed arrangements. However, there is no assurance that the data provided will be completely accurate orcurrent. Moreover, there is limit as to the extensiveness of the investigation we are able to conduct with respect to each homebuyer. Our checks in the pastmay not have revealed and any checks in the future may not reveal all the matters that an in-depth independent investigation performed by a bank orspecialist whose primary business is credit review could uncover. Our risk of monetary loss under any seller-financed agreement is mitigated by the homebuyer's deposit we hold as collateral and our retention ofpossession and title to the apartments until the purchase price is paid in full. However, if any homebuyer to whom we have offered seller-financedarrangement defaults, our ability to recognize revenue from the sale of the affected apartment will be delayed, we may incur additional expenses in selling theapartment and our financial results could be adversely affected. Our property development schedule may be delayed and our development costs may increase as a result of delayed governmental demolition andresettlement processes if we were to acquire land requiring demolition of existing properties. According to the Regulations on the Expropriation and Compensation of Houses on State-owned Land, local PRC governments are responsible forthe expropriation and compensation of houses on State-owned land and may authorize entities like us to carry out the expropriation and compensation work.However, in practice, we may be required to pay the corresponding demolition and resettlement costs. If the party subject to expropriation is not satisfiedwith the compensation, an administrative reconsideration or an administrative action can be brought, which may delay the project. Our practice generally hasbeen to acquire land where demolition of existing properties and resettlement of residents is not required. However, if we were to acquire land where suchactions are required, issues in the demolition and resettlement processes may affect our reputation, increase our costs and delay the pre-sales of the relevantproject, which may in turn adversely affect our business, financial position and operational performance. 26  To the extent demolition and resettlement are required in any of our future property developments, we may be required to compensate existingresidents an amount calculated in accordance with local resettlement compensations standards. These local standards may change from time to time withoutadvance notice. If such compensation standards are changed to increase the compensation we are required to pay, our land acquisition costs may increase,which could adversely affect our financial condition and results of operations. In respect of projects in which the resettlement cost are borne by us, if we orthe local government fail to reach an agreement over the amount of compensation with any existing owner or resident, any party may apply to the relevantauthorities for a ruling on the compensation amount. Dissenting owners and residents may also refuse to relocate. Any administrative process or resistance orrefusal to relocate may delay our future project development schedules, and an unfavorable final ruling may result in us paying more than the amountrequired by the local standards. Any occurrence of the above factors may result in increases in our future development costs, which can adversely affect ourcash flows, financial condition and results of operations. We could be adversely affected by potential violations of the U.S. Foreign Corrupt Practices Act. The U.S. Foreign Corrupt Practices Act, or FCPA, generally prohibits companies and their intermediaries from making improper payments to publicofficials for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption laws. We operate and retainemployees in China, the United States and Malaysia, and we rely on our management structure, regulatory and legal resources and effective operation of ourcompliance program to direct, manage and monitor the activities of our employees. Despite our training, oversight and compliance programs, we cannotassure you that our internal control policies and procedures always will protect us from deliberate, reckless or inadvertent acts of our employees or agents thatcontravene on compliance policies or violate applicable laws. Our continued expansion in China and U.S. could increase the risk of such violations in thefuture. Expansion into other countries could expose us to additional anti-bribery or anti-corruption laws, and we could face additional risks if expand ouroperations into countries where the compliance culture is less robust. Violations of the FCPA, or allegations of such violations, could disrupt our businessand result in a material adverse effect on our results of operations or financial condition. Risks Relating to the Residential Property Industry in China Our operations are highly subject to government policies and regulations in the real estate market. Since 2010 the PRC government has been tightening its control of the real estate market with the aim of curbing increases in property prices whilealso, since early 2015, trying to stimulate the market to reduce inventory.A number of rules and regulations have been set forth by various PRC authoritiesconcerning the real estate market. See “ITEM 4. INFORMATION ON THE COMPANY - B. Business Overview – Regulation – China - Regulations on RealEstate Financing”, “ITEM 4. INFORMATION ON THE COMPANY - B. Business Overview – Regulation – China - Regulations on Housing Prices and RealEstate Tax”, and “ITEM 4. INFORMATION ON THE COMPANY - B. Business Overview – Regulation – China - Regulations on Housing Supply andImproving the Healthy Development of the Real Estate Market” for more details on some of the PRC regulations. Since 2016, the local governments of several cities in the PRC have implemented a series of measures designed to stabilize the growth of theproperty market on a more sustainable level. Such tightening measures have affected some of the cities where we operate, including Zhengzhou, Suzhou,Chengdu, Jinan, Tianjin, Beijing and Changsha. These measures regulate various aspects of the property market, including: (i) land acquisition financing (forexample, Zhengzhou has raised the land bidding deposit to 100%), (ii) pre-sale management (for example, Jinan sets new application requirements for pre-sale permits), (iii) sale price restriction (for example, Suzhou requires developers to file sale prices at the price filing systems of relevant authorities), (iv)purchaser qualification (for example, a Jinan regulation provides that local residents are eligible to purchase no more than two residential properties whilequalified non-residents are eligible to purchase only one residential property) and (v) purchaser financing (for example, both Zhengzhou and Suzhou haveraised down-payment ratios for first and second home owners). These local measures may also cause adverse and material impacts on our business operationsand financial results. 27  However, the full effect and extent of these policies on the real estate industry and our business will depend in large part on the implementation andinterpretation of the circulars by governmental agencies, local governments and banks involved in the real estate industry. The PRC government’s policiesand regulatory measures on the PRC real estate sector could limit our access to required financing and other capital resources, adversely affect the propertypurchasers’ ability to obtain mortgage financing or significantly increase the cost of mortgage financing, reduce market demand for our properties andincrease our operating costs. We cannot be certain that the PRC government will not issue additional and more stringent regulations or measures or thatagencies and banks will not adopt restrictive measures or practices in response to PRC governmental policies and regulations, which could substantiallyreduce pre-sales of our properties and cash flow from operations and substantially increase our financing needs, which would in turn materially and adverselyaffect our business, financial condition, results of operations and prospects. The PRC government has adopted various measures to regulate foreign investment in the property development industry and may adopt further restrictivemeasures in the future. The PRC government has implemented a number of regulations and measures governing foreign investment in the property development industry. In July 2006, the Ministry of Housing and Urban-Rural Development of the PRC (the “MOHURD”), the National Development and ReformCommission (the “NDRC”), the PBOC, the State Administration for Industry and Commerce, or the SAIC, and the SAFE, issued the Opinions on Regulatingthe Entry and Administration of Foreign Investment in the Real Estate Market, which impose significant requirements on foreign investment in the PRC realestate sector. For instance, these opinions set forth requirements for the procedures to set up a foreign-invested real estate enterprise (“FIREE”) and thethresholds for a FIREE to borrow domestic or overseas loans. In addition, since June 2007, a FIREE approved by local authorities is required to file suchapprovals with the MOFCOM or its provincial branches. On August 19, 2015, six PRC regulatory agencies, including the MOHURD and the SAFE,promulgated the Notice on Adjusting Policies on Entry and Administration of Foreign Investment in the Real Estate Market, or Circular 122, whichsimplified some requirements and lowered the entry thresholds for foreign investors to raise funds by domestic or foreign loans in the real estate market.Despite the influences of Circular 122, we cannot assure that any FIREE that we establish, or whose registered capital we increase, will be able to completethe filing procedures with MOFCOM in time or otherwise fully comply with those specific requirements set for FIREEs. On December 24, 2011, the MOFCOM and the NDRC jointly issued the Catalogue of Industries for Guiding Foreign Investment (2011 Revision), orthe Catalogue 2011, which took effect on January 30, 2012. Consistent with the provisions of a prior catalogue, Catalogue 2011 restricts the constructionand operation of high-end residential and commercial properties by foreign investment entities. Further, on March 10, 2015, the Catalogue of Industries forGuiding Foreign Investment (2015 Revision), or Catalogue 2015, was issued and supersedes the Catalogue 2011. Compared with its 2011 revision, thedevelopment of tracts of land, the construction and operation of high-end hotels, office buildings, international conference centers, and real estateintermediary/agency business have been removed from the category under which foreign investment is restricted, with the construction and operation oflarge-scale scheme parks remaining in the category. Despite the changes in various sectors in Catalogue 2015, the requirement of obtaining approval at the relevant level of the MOFCOM remains. ThePRC government’s restrictive regulations and measures could increase our operating costs in adapting to these regulations and measures, limit our access tocapital resources or even restrict our business operations. We cannot be certain that the PRC government will not issue additional and more stringentregulations or measures, which could further adversely affect our business and prospects. We face intense competition from other real estate developers. The property industry in the PRC is highly competitive. In the high growth cities we focus on, local and regional property developers are our majorcompetitors, and an increasing number of large state-owned and private national property developers have started entering these markets. Many of ourcompetitors, especially the state-owned and private national property developers, are well capitalized and have greater financial, marketing and otherresources than we have. Some also have larger land banks, greater economies of scale, broader name recognition, a longer track record and more establishedrelationships in certain markets. In addition, the PRC government’s recent measures designed to reduce land supply further increased competition for landamong property developers. 28  Competition among property developers may result in increased costs for the acquisition of land for development, increased costs for raw materials,shortages of skilled contractors, oversupply of properties, decrease in property prices in certain parts of the PRC, a slowdown in the rate at which newproperty developments will be approved and/or reviewed by the relevant government authorities and an increase in administrative costs for hiring orretaining qualified personnel, any of which may adversely affect our business and financial condition. Furthermore, property developers that are bettercapitalized than we are may be more competitive in acquiring land through the auction process. If we cannot respond to changes in market conditions aspromptly and effectively as our competitors or effectively compete for land acquisitions through the auction systems, our business and financial conditionwill be adversely affected. In addition, risk of property over-supply is increasing in parts of China, where property investment, trading and speculation have become overlyactive. We are exposed to the risk that in the event of actual or perceived over-supply, property prices may fall drastically, and our revenue and profitabilitywill be adversely affected. Our sales, revenues and operations will be affected if our customers are not able to secure mortgage financing on attractive terms, if at all. A majority of the purchasers of our residential properties rely on mortgages to fund their purchases. If the availability or attractiveness of mortgagefinancing is reduced or limited, many of our prospective customers may not desire or be able to purchase our properties and, as a result, our business, liquidityand results of operations could be adversely affected. Among other factors, the availability and cost of mortgage financing may be affected by changes inPRC regulations or policies or changes in interest rates. The circulars issued by the PRC State Council and related measures taken by local governments and banks have restricted and may continue torestrict the ability of purchasers to qualify for or obtain mortgage financing. Since January 26, 2011, for a household purchasing a second residentialhousehold property with mortgage financing, the down payment must be at least 60% of the purchase price and the interest rate for the mortgage on suchproperty must be at least 1.1 times the benchmark interest rate. The notice of the General Office of the PRC State Council promulgated on February 26, 2013authorized local counterparts of the PBOC to further increase down payment ratios and interest rates for loans to purchase second properties in accordancewith the price control policies and targets of the corresponding local governments. For instance, on April 7, 2013, Beijing promulgated new rules regardinghousing fund loans, which increased the minimum down payment to 70% of the purchase price for a household purchasing a second residential householdproperty with housing fund loans. On September 29, 2014, the PBOC and the CBRC issued the Circular of PBOC and CBRC on Further Improving Financial Services for Housing,among other incentive policies, which specifies that the minimum down payment is 30% of the purchase price for purchasers of a first residential property fortheir households, and the minimum loan interest rate is 70% of the benchmark rate, to be decided by banking financial institutions in light of risk conditions.For purchasers of a second residential property for their households who have paid off the loan that financed their first house and reapply for a loan to financean ordinary commodity house for the purpose of improving their living conditions, the loan policies for a first house will apply. In light of the weakening in the property market in China, on March 30, 2015, the PBOC, the MOHURD and CBRC jointly issued the Circular onIssues concerning Individual Residential Mortgage Policies in an effort to stimulate the market. The circular reduces the minimum down payment ratios from30% to 20% for first home buyers who use the housing provident fund for their purchase and from 60% to 40% for second home buyers with outstandingmortgages who apply for another mortgage. In addition, the circular provides that home buyers who use the housing provident fund for their home purchaseare only required to pay a minimum down payment of 30% for their purchase of a second house if all loans are settled on their first home. Further, on August27, 2015, the MOHURD, the Ministry of Finance of the PRC (the “MOF”) and the PBOC jointly issued the Circular on Adjusting the Minimum DownPayment for the Purchase of Houses by Individuals on the Housing Provident Fund Loans, which provides that home buyers who use the housing providentfund for their home purchase are only required to pay a minimum down payment of 20% for their purchase of a second house if all loans are settled on theirfirst home. 29  On February 1, 2016, the PBOC and the CBRC jointly issued a notice which provides that in cities where restrictions on purchase of residentialproperty are not being implemented, the minimum down payment ratio for a personal housing commercial loan obtained by a household for purchasing itsfirst ordinary residential property is, in principle, 25% of the property price, which can be adjusted down by 5% by local authorities. For existing residentialproperty household owners who have not fully repaid previous loans and are further obtaining personal housing commercial loans to purchase an additionalordinary residential property for the purpose of improving living conditions, the minimum down payment ratio must not be no less than 30% which is lowerthan the previous requirement of no less than 40%. We cannot predict how long these policies will continue or what other action, if any, the banks in cities in which we operate may take. In addition, from 2013, PRC banks have tightened the conditions on which mortgage loans are extended to home buyers by comparing theanticipated monthly repayment of the mortgage loan with the individual borrower’s monthly income and other measures. Therefore, mortgage loans for homebuyers have been subject to longer processing periods or even denied by the banks. We monitor our homebuyers’ outstanding mortgage loans on an ongoingbasis via our management reporting procedures and have taken the position that contracts with underlying mortgage loans with processing periods exceedingone year cannot be recognized as revenue under the percentage of completion method. As a result, we reversed contracted sales of the amounts related toapartments for which mortgage loans with processing periods exceeding one year when recognizing revenue under the percentage of completion method. Risks Relating to China PRC economic, political and social conditions as well as government policies can affect our business. The PRC economy differs from the economies of most developed countries in many aspects, including: ·political structure; ·degree of government involvement; ·degree of development; ·level and control of capital reinvestment; ·control of foreign exchange; and ·allocation of resources. The PRC economy has been transitioning from a centrally planned economy to a more market-oriented economy. For more than two decades, thePRC government has implemented economic reform measures emphasizing utilization of market forces in the development of the PRC economy. Althoughwe believe these reforms will have a positive effect on China’s overall and long-term development, we cannot predict whether changes in the PRC economic,political and social conditions, laws, regulations and policies will have any adverse effect on our current or future business, financial condition or results ofoperations. Changes in foreign exchange regulations may adversely affect our ability to transfer funds and subsequently impact the results of our operations. We currently receive most of our revenues from operations in the PRC and such revenues are denominated in RMB. The PRC government regulatesthe conversion between RMB and foreign currencies. Over the years, the PRC government has significantly reduced its control over routine foreign exchangetransactions under current accounts, including trade and service related foreign exchange transactions and payment of dividends. Under current foreignexchange regulations in China, subject to the relevant registration at the SAFE, we will be able to pay dividends in foreign currencies, without prior approvalfrom the SAFE, by complying with certain procedural requirements. However, the SAFE recently started to restrict such foreign exchange transactions.Among other things, the SAFE issued the Circular on Further Promoting the Reform of Foreign Exchange Administration and Improving Examination ofAuthenticity and Compliance on January 26, 2017, pursuant to which the SAFE restated the procedures and reemphasized the principles for the banks tofollow during its review of certain cross-border profit remittance.There can be no assurance that the PRC government will not take more restricted foreignexchange policies regarding debt service and payment of dividends in foreign currencies in the future. In addition, foreign exchange transactions by our PRCsubsidiaries under capital accounts continue to be subject to certain foreign exchange controls and require the approval of, or registration with, PRCgovernmental authorities. There can be no assurance that these PRC laws and regulations on foreign investment will not cast uncertainties on our financingand operating plans in China. Changes in PRC foreign exchange policies might have a negative impact on our ability to service our foreign currency-denominated indebtedness and to distribute dividends to our shareholders in foreign currencies. 30  In addition, on August 29, 2008, the SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administrationof Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or the Circular 142, a notice with respect to the administration ofRMB converted from foreign exchange capital contributions of a foreign invested enterprise. As a result, unless otherwise permitted by PRC laws orregulations, such converted amount can only be applied to activities within the approved business scope of the relevant foreign-invested enterprise andcannot be used for domestic equity investment or acquisition. As restricted by the notice, we may not be able to use RMB converted from foreign exchangecapital contributions to fund our PRC subsidiaries.On March 30, 2015, the SAFE issued the Circular on Reforming the Administration Approach Regardingthe Foreign Exchange Capital Settlement of Foreign-invested Enterprises, or Circular 19, which became effective on June 1, 2015 and replaced Circular 142.Circular 19 provides that, the conversion of the Renminbi capital from foreign currency registered capital of foreign-invested enterprises may be at foreign-invested enterprises’ discretion, which means that the foreign currency registered capital of foreign-invested enterprises for which the rights and interests ofmonetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry of monetary contribution has been registered) can besettled at the banks based on the actual operational needs of the enterprises. On June 9, 2016, the SAFE issued the Circular on Reforming and RegulatingPolicies on the control over Foreign Exchange Settlements under Capital Accounts, or Circular 16. Circular 16 provides that domestic enterprises may gothrough foreign exchange settlement formalities for their foreign debts at their discretion. However, Circular 19 and Circular 16 do not materially influencethe restriction on the use of foreign currency registered capital for foreign-invested enterprises, including prohibit foreign-invested enterprises from, amongother things, using Renminbi capital converted from its foreign currency registered capital for expenditures beyond its business scope. PRC regulations relating to the establishment of offshore special purpose companies by PRC residents limit our ability to inject capital into our PRCsubsidiaries, limit our PRC subsidiaries’ ability to distribute profits to us or otherwise adversely affect us. On July 4, 2014, the SAFE issued the Circular on the Administration of Foreign Exchange Issues Related to Overseas Investment, Financing andRoundtrip Investment by Domestic Residents through Offshore Special Purpose Vehicles, or the Circular 37, which replaced the former circular commonlyknown as “Circular 75” promulgated on October 21, 2005. The Circular 37 requires PRC residents to register with the competent local SAFE branch inconnection with their direct establishment or indirect control of an offshore special purpose vehicle, for the purpose of overseas investment and financing,with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests. The Circular 37 further requiresamendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capitalcontribution by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests ina special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from makingprofit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may berestricted in its ability to contribute additional capital into its PRC subsidiary. 31  Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion offoreign exchange controls. On February 13, 2015, the SAFE issued the Circular of the State Administration of Foreign Exchange on Further Simplifying andImproving the Direct Investment-related Foreign Exchange Administration Policies, which became effective on June 1, 2015, or the Circular 13. The Circular13 together with Circular of the SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, or the Circular59 which issued on November 19, 2012 and took effect on December 17, 2012, simplifies and exempts certain registration procedures relating to specialpurpose vehicles. For example, Circular 59 provides that PRC residents can set up offshore special purpose vehicles before obtaining SAFE registration.Circular 59 makes registration possible for those round-trip special purpose vehicles that should have but failed to register as required by Circular 75 orCircular 37 but indicates that the SAFE will penalize such offenders; such penalties can be severe, including a fine amounting to a certain percentage of allfunds remitted by the onshore subsidiary to the special purpose vehicles after November 1, 2005, and possible criminal prosecution. Circular 13 furtherprovides that SAFE approval for both domestic and overseas direct investment, and registration of in-kind contribution or acquisition of Chinese parties’equities by foreign investors shall no longer be required. Additionally, as a result of uncertainty concerning the reconciliation of these notices with other approval or registration requirements, it remainsunclear how these notices, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by therelevant government authorities. We believe that all of our shareholders who were PRC citizens or residents at the time of our initial public offeringcompleted their required registrations with the SAFE in accordance with Circular 75 before the promulgation of Circular 37 prior to, and immediately after,the completion of our initial public offering. As a publicly traded company in the U.S., we may not at all times know of the identities of all of our beneficialowners who are PRC citizens or residents, and we may have little control over either our present or prospective direct or indirect PRC resident beneficialowners or the outcome of such registration procedures. We cannot assure that the SAFE registrations of our present beneficial owners or future beneficialowners who are PRC citizens or residents have been or will be amended to reflect, among others, the shareholding information or equity investments requiredby the Circular 37, Circular 59 and Circular 13 at all times. The failure or inability of these PRC resident beneficial owners to comply with applicable SAFEregistration requirements may subject us to the sanctions described above, including sanctions which may impede our ability to contribute the additionalcapital from our proceeds of any future offerings to our PRC subsidiaries, and our PRC subsidiaries' ability to pay dividends or distribute profits to us. Interpretation of PRC laws and regulations involves uncertainty. Our core business is conducted within China and is governed by PRC laws and regulations. The PRC legal system is based on written statutes, andprior court decisions can only be used as a reference. Since 1979, the PRC government has promulgated laws and regulations in relation to economic matterssuch as foreign investment, corporate organization and governance, commerce, taxation and trade, with a view to developing a comprehensive system ofcommercial law, including laws relating to property ownership and development. However, due to the fact that these laws and regulations have not been fullydeveloped, and because of the limited volume of published cases and the non-binding nature of prior court decisions, interpretation of PRC laws andregulations involves a degree of uncertainty. Some of these laws may be changed without being immediately published or may be amended with retroactiveeffect. Depending on the government agency or how an application or case is presented to such agency, we may receive less favorable interpretations of lawsand regulations than our competitors, particularly if a competitor has long been established in the locality of, and has developed a relationship with, suchagency. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. All theseuncertainties may cause difficulties in the enforcement of our land use rights, entitlements under its permits, and other statutory and contractual rights andinterests. The PRC national and regional economies may be adversely affected by a recurrence of epidemic. Certain areas of China, including the high growth cities where we operate, are susceptible to epidemics such as Severe Acute Respiratory Syndrome,or SARS, avian or swine influenza. A recurrence of SARS, avian or swine influenza or any epidemic in these cities or other areas of China could result inmaterial disruptions to our property developments, which in turn could materially and adversely affect our financial condition and results of operations. 32  We may face PRC regulatory risks relating to our equity compensation plans. On February 15, 2012, the SAFE promulgated the Notice on the Administration of Foreign Exchange Matters for Domestic IndividualsParticipating in the Stock Incentive Plans of Overseas Listed Companies, or the Stock Option Notice, which replaced the previous Application Procedures ofForeign Exchange Administration for Domestic Individuals Participating in Employee Stock Holding Plan of Overseas-Listed Company promulgated by theSAFE on March 28, 2007. Under the Stock Option Notice, if a PRC resident participates in any employee stock incentive plan of an overseas listed company,a qualified domestic PRC agent or the PRC subsidiary of such overseas listed company must, among other things, file, on behalf of such individual, anapplication with the SAFE or its local counterpart to obtain approval for an annual allowance with respect to the foreign exchange in connection with thestock holding, unit holding, share option exercises, or the holding of other types of equities permitted by PRC law. Concurrently, the qualified domestic PRCagent or the PRC subsidiary must also obtain approval from the SAFE or its local counterpart to open a special foreign exchange account at a PRC domesticbank to hold the funds required in connection with the stock acquisition or option exercise, any returned principal or profits upon the sale of shares, anydividends issued on the stock and any other income or expenditures approved by the SAFE or its local counterpart. In addition, the PRC agent or the PRCsubsidiary is required to amend the SAFE registration with respect to the stock options or other awards granted if there is any material change to the stockoptions or other awards, the PRC agent or the PRC subsidiary, the overseas listed company, or any other material changes. If we, or any of these personsmentioned above, fail to comply with the relevant rules or requirements, we may be subject to penalties, and may become subject to more stringent reviewand approval processes with respect to our foreign exchange activities, such as our PRC subsidiaries’ dividend payment to us or borrowing foreign currencyloans, all of which may adversely affect our business and financial condition. Our auditor, like other independent registered public accounting firms operating in China, is not permitted to be subject to full inspection by the PublicCompany Accounting Oversight Board, and as such, investors may be deprived of the benefits of such inspection. Our independent registered public accounting firm that issues the audit reports included in our annual reports filed with the U.S. Securities andExchange Commission, or SEC, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public CompanyAccounting Oversight Board (United States), or PCAOB, is required by the laws of the United States to undergo regular inspections by the PCAOB to assessits compliance with the laws of the United States and professional standards. Because our auditor is located in China, a jurisdiction where the PCAOB iscurrently unable to conduct full inspections without the approval of the PRC authorities, our auditor, like other independent registered public accountingfirms operating in China, is currently not subject to regular full inspections by the PCAOB. Inspection of other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and qualitycontrol procedures, which may be addressed as part of the inspection process to improve future auditor quality. The inability of the PCAOB to conduct fullinspections of independent registered public accounting firms operating in China makes it more difficult to evaluate the effectiveness of our auditor’s auditprocedures or quality control procedures. As a result, investors may be deprived of the benefits of the PCAOB inspections. Investors may lose confidence inour reported financial information and procedures and the quality of our financial statements. We may be adversely affected by the settlement order between the SEC and certain PRC-based accounting firms, including our independent registeredpublic accounting firm. In December 2012, the SEC instituted proceedings under Rule 102(e)(1)(iii) of the SEC’s Rules of Practice against five PRC-based accounting firms,including our independent registered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulationsthereunder by failing to provide to the SEC the firms’ work papers related to their audits of certain PRC-based companies that are publicly traded in theUnited States. Rule 102(e)(1)(iii) grants the SEC the authority to deny to any person, temporarily or permanently, the ability to practice before the SEC whois found by the SEC, after notice and opportunity for a hearing, to have willfully violated any such laws or rules and regulations. On January 22, 2014, aninitial administrative law decision was issued, censuring these accounting firms and suspending four of the five firms from practicing before the SEC for aperiod of six months. Four of these PRC-based accounting firms appealed to the SEC against this decision and, on February 6, 2015, each of the four PRC-based accounting firms agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC.The firms' ability to continue to serve all their respective clients is not affected by the settlement. The settlement requires the firms to follow detailedprocedures to seek to provide the SEC with access to Chinese firms' audit documents via the CRSC. If the firms do not follow these procedures, the SEC couldimpose penalties such as suspensions, or it could restart the administrative proceedings. The settlement did not require the firms to admit to any violation oflaw and preserves the firms' legal defenses in the event the administrative proceeding is restarted. We are not involved in the proceedings brought by the SECagainst the accounting firms. However, our independent registered public accounting firm is one of the four accounting firms subject to the settlement order.We may therefore be adversely affected by any failure of our independent registered public accounting firm to satisfy its obligations pursuant to thesettlement, along with other U.S.-listed companies audited by them. 33  In addition, on May 26, 2015, the PRC Ministry of Finance issued Notice on the Interim Provisions on the Audits Conducted by Accounting Firmsconcerning the Overseas Listing of Chinese Domestic Companies, or Circular 9, which became effective on July 1, 2015. In accordance with Circular 9,auditors based outside of China, including our independent registered public accounting firm, are required to cooperate with mainland Chinese auditors withrequisite qualifications and enter into written arrangements with mainland Chinese auditors in order to conduct audit work for overseas listed mainlandChinese companies, and auditors based outside of China shall undertake the auditing responsibilities which may be incurred. Hence, our independentregistered public accounting firm may need to establish appropriate arrangements with mainland Chinese auditors in order to continue to audit our financialstatements, which may be difficult in light of the SEC’s administrative proceedings and the settlement described above. If our auditor were unable to havealternate support or cooperation arrangements or otherwise were unable to address issues related to the production of documents pursuant to the settlementorder in the SEC proceedings and we were unable to timely find another independent registered public accounting firm to audit and issue an opinion on ourfinancial statements, our financial statements could be determined to not be in compliance with the requirements of the Securities Exchange Act of 1934, asamended (the “Exchange Act”). Such a determination could ultimately lead to delisting of our ADSs from the NYSE or deregistration from the SEC, or both. Risks Related to Our ADSs The market price for our ADSs may be volatile. The market price for our ADSs may be volatile and subject to wide fluctuations in response to factors such as actual or anticipated fluctuations in ourquarterly operating results, changes in financial estimates by securities research analysts, changes in the economic performance or market valuations of otherreal estate developers, announcements by us or our competitors of material acquisitions, strategic partnerships, joint ventures or capital commitments,fluctuations of exchange rates between RMB and the U.S. dollar, release of transfer restrictions on our outstanding shares or ADSs, and economic or politicalconditions in China. In addition, the performance and fluctuation in market prices of other companies with business operations located mainly in China thathave listed their securities in the United States may affect the volatility in the price of and trading volumes of our ADSs. Furthermore, the securities markethas from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. Thesemarket fluctuations may also materially and adversely affect the market price of our ADSs. We may raise additional capital through the sale of additional equity or debt securities, which could result in additional dilution to our shareholders, orimpose upon us additional financial obligations. We may require additional cash resources to finance our continued growth or other future developments, including any investments or acquisitionswe may decide to pursue. The amount and timing of such additional financing needs will vary principally depending on the timing of our propertydevelopments, investments and/or acquisitions, and the amount of cash flow from our operations. If our resources are insufficient to satisfy our cashrequirements, we may seek to sell additional equity or debt securities. On September 19, 2013, we issued 12,000,000 common shares, as well as a convertiblenote (which was redeemed on November 21, 2014) to TPG Asia VI SF. Pte. Ltd. (“TPG Asia”) (the “Convertible Note”). Sales of additional equity orconvertible securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt serviceobligations and could result in operating and financing covenants that would restrict our operations, including our ability to pay dividends or redeem stock.We cannot guarantee that financing will be available in amounts or on terms acceptable to us, if at all. 34  Substantial future sales or the perception of sales of our ADSs in the public market could cause the price of our ADSs to decline. Sales of our ADSs or common shares in the public market, or the perception that such sales could occur, could cause the market price of our ADSs todecline. As of December 31, 2016, we had 131,426,741 common shares outstanding, including 79,854,044 common shares represented by 39,927,022 ADSs.All ADSs are freely transferable without restriction or additional registration under the Securities Act of 1933, as amended, or the Securities Act, those held byaffiliates which are subject to volume and other restrictions as applicable under Rule 144 under the Securities Act. . The remaining common sharesoutstanding are available for sale, subject to any volume and other restrictions as applicable under Rule 144. According to an amended Schedule 13D filedby TPG Asia in November 2014, TPG Asia holds 12,000,000 of our outstanding common shares. We have filed a resale registration statement covering theresale in the United States of ADS representing the common shares issued to TPG Asia. To the extent that common shares (in the form of ADSs) are sold intothe market, the market price of our ADSs could decline. The interests of our major shareholders may not be aligned with the interests of our other shareholders. As of March 1, 2017, Mr. Yong Zhang, Chairman of our board of directors, and Ms. Yuyan Yang, also a board member, beneficially owned 21.4%and 19.9%, respectively of our share capital. As of March 1, 2017, TPG Asia beneficially owned 8.2% of our share capital. Accordingly, they have substantialinfluence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directorsand other significant corporate actions. This concentration of ownership by our major shareholders may result in actions being taken even if opposed by ourother shareholders. In addition, it may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of anopportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our ADSs. If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results orprevent fraud We are subject to reporting obligations under U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, or theSarbanes-Oxley Act, adopted rules requiring most public companies to include a management report on such company’s internal controls over financialreporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting. Inaddition, an independent registered public accounting firm must attest to and report on the effectiveness of the company’s internal controls over financialreporting. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even if our managementconcludes that our internal controls over financial reporting is effective, our independent registered public accounting firm may still issue a report that isqualified or adverse if it believes that the design or implementation of our internal controls is not effective, or if it interprets the relevant requirementsdifferently from us. If we fail to maintain effective internal control over financial reporting in the future, our management and our independent registered publicaccounting firm may not be able to conclude that we have effective internal control over financial reporting at a reasonable assurance level. Moreover, effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important to help preventfraud. As a result, our failure to maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability ofour financial statements, which in turn could harm our business and negatively impact the trading price of our ADSs. Furthermore, we have incurred andexpect to continue to incur considerable costs and devote significant management time and efforts and other resources to comply with Section 404 of theSarbanes-Oxley Act. We are a foreign private issuer with the meaning of the rules under the Exchange Act, as such we are exempt from certain provisions applicable to U.S.domestic public companies. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulationsin the United States that are application to US domestic issuers, including: ·the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current report on Form 8-K; 35  ·the section of the Exchange Act regulating the solicitation of proxies, consents or authorizations respect of a security registered under theExchange Act; ·the section of the Exchange Act requiring directors, officers and 10% holders to file public reporting of their stock ownership and tradingactivities and imposing liability on insiders who profit from trades made in a short period of time; ·the selective disclosure rules under Regulation FD restricting issuers from selectively disclosing material nonpublic information. We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. We publish our results on a quarterly basis aspress releases, distributed pursuant to the rules and regulations of the NYSE. Press releases relating to financial results and material events are also furnishedto the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC is less extensive and less frequent compared to thatrequired to be filed with the SEC by U.S. domestic issuers. We are a “foreign private issuer” for purposes of the New York Stock Exchange corporate governance requirements, as a result of which public investorsmay not have as many protections as they would if we were a US domestic public company. As a foreign private issuer, we may rely on home country corporate governance practices instead of certain of the NYSE corporate governancerequirements. We are incorporated under the laws of the Cayman Islands; under Cayman Island law we are not required to adopt or maintain certain of theNYSE corporate governance rules. The NYSE requirements with which we are not required to comply include rules requiring that: ·a majority of our board of directors consist of independent directors; ·our compensation committee be composed entirely of independent directors; ·our governance and nominating committee be composed entirely of independent directors; ·the members of our audit committee satisfy certain independence criteria in addition to those of SEC Rule 10A-3; ·our shareholders approve the adoption or material revision of any equity compensation plan; and ·our shareholders approve certain issuances of our equity securities. We are currently following home country practice on the requirements described above. Accordingly, a majority of our board of directors iscomposed of management or former management directors. Each of our compensation committee and governance and nominating committee include non-independent directors. In addition, we are not required to put forward for a shareholder vote new equity plans or change to existing equity plans or othersignificant share issuance. For a more detailed discussion of the ways in which our corporate governance differs from that of a U.S. domestic company listedon the NYSE, see “Item 16G. Corporate Governance”. As a result of our use of the “home country practice” exception from the NYSE corporate governancerules, you do not have same shareholder protections as you would if we were a U.S. domestic public company. We are not required to follow customary practices applicable to U.S. domestic companies with respect to determining and disclosing executivecompensation. As a foreign private issuer, we are not subject to many of the corporate governance requirements and disclosure requirements relating to executivecompensation matters under the U.S. securities laws. 36  Under our compensation committee charter, only 50% of members of the committee at any time (less than a majority) must be independent ofmanagement, while a U.S. domestic issuer is required to form a compensation committee composing entirely of independent directors. We are also notrequired to and do not report compensation of senior management or directors on an individual basis. As a result, investors are not able to access forthemselves appropriateness or reasonableness of the amount or form of compensation for individual executives. The SEC has a new adopted rule fordisclosure of a chief executive officer pay relative to that of the median total compensation for employees, although the rule is under review. The rule will notapply to foreign private issuers. The SEC also has pending a proposed rule for disclosure of exclusive officers' compensation compared to the issuer's totalshareholder return. As proposed, this rule would not apply to foreign private issuers. We have entered into agreements that provide for the payment of annual bonuses based on a percentage of net income to certain of our executiveofficers. In other cases we have made arrangements or established bonuses plans that provide for the payment of performance bonuses to employees,including executive officers, based on assessment of their contributions to our business development, improvement of operation management, as well as fundfinancing activities. These accrual and payments could result in a decrease of our net profit attributable to public shareholders. You may not have the same voting rights as the holders of our common shares and may not receive voting materials in time to be able to exercise your rightto vote. Holders of our ADSs will not be able to exercise voting rights attaching to the common shares evidenced by our ADSs on an individual basis.Holders of our ADSs appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the common shares represented bythe ADSs. Holders of ADSs may not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or persons who hold theirADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. As soon as practicable after the depositaryreceives from us a notice of a shareholders’ meeting, the depositary will distribute to registered holders of ADRs a notice stating (a) such information as iscontained in such notice and any solicitation materials, (b) that each registered holder on the record date set for such purpose will, subject to any applicableprovisions of Cayman Islands law, be entitled to instruct the depositary as to the exercise of the voting rights and (c) the manner in which such instructionsmay be given, including instructions to give a discretionary proxy to a person designated by us. The depositary will not itself exercise any voting discretionin respect of any common shares nor will it provide any instructions with respect to the common shares represented by any ADSs for which votinginstructions were not timely and properly received. There can be no guarantee that registered holders of ADRs will receive the notice described above withsufficient time to enable them to return any voting instructions to the depositary in a timely manner. To the extent you hold your ADSs through a bank,broker or other nominee, you will be relying upon such institutions with respect to voting matters. You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on UnitedStates or other foreign laws against us or our management named in the annual report. We are incorporated in the Cayman Islands and conduct substantially all of our operations in China through our wholly-owned subsidiaries inChina. Most of our assets are located in China. In addition, many of our directors and senior executive officers reside within China and some or all of theassets of those persons are located outside of the United States. As a result, it may not be possible to affect service of process within the United States orelsewhere outside China upon our directors and senior executive officers, including with respect to matters arising under U.S. federal securities laws orapplicable state securities laws. Even if you are successful in bringing an action of this kind, the respective laws of the Cayman Islands and China may renderyou unable to enforce a judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the Cayman Islands ofjudgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreigncourt of competent jurisdiction without retrial on the merits. Moreover, our PRC counsel has advised us that the PRC does not have treaties with the UnitedStates or many other countries providing for the reciprocal recognition and enforcement of judgment of courts. 37  You may not be able to participate in rights offerings and may experience dilution of your holdings as a result. We may from time to time distribute rights to our shareholders, including rights to acquire our securities. Under the deposit agreement for the ADSs,the depositary will not offer those rights to ADS holders unless both the rights and the underlying securities to be distributed to ADS holders are eitherregistered under the Securities Act or are exempt from registration under the Securities Act with respect to all holders of ADSs. We are under no obligation tofile a registration statement with respect to any such rights or underlying securities or to endeavor to cause such a registration statement to be declaredeffective. In addition, we may not be able to take advantage of any exemptions from registration under the Securities Act. Accordingly, holders of our ADSsmay be unable to participate in our rights offerings and may experience dilution in their holdings as a result. You may be subject to limitations on transfer of your ADSs. Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to timewhen it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers ofADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of anyrequirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law thanunder U.S. law, you may have less protection of your shareholder rights than you would under U.S. law. Our corporate affairs are governed by our memorandum and articles of association and by the Companies Law (2016 Revision) and common law ofthe Cayman Islands. The rights of shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciaryresponsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law ofthe Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which haspersuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directorsunder Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the CaymanIslands have a less developed body of securities laws as compared to the United States, and provide significantly less protection to investors. In addition,Cayman Islands companies may not have standing to initiate a shareholder derivative action before the federal courts of the United States. In mergers and acquisitions where the merged company or consolidated company will continue to be a Cayman Islands entity, dissentingshareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands courts)if they follow required procedures, subject to certain exceptions. However, these rights have never been tested before the Cayman Islands court and as aresult, they may not be comparable to the appraisal rights that would ordinarily be available to dissenting shareholders of a U.S. company. As a result of all of the above, our public shareholders may have more difficulty in protecting their interests through actions against ourmanagement, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States. Our articles of association may contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our common sharesand ADSs. Our amended and restated articles of association contain provisions limiting the ability of others to acquire control of our company or cause us toengage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at apremium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction.For example, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix theirdesignations, powers, preferences, privileges and relative participating, optional or special rights and their qualifications, limitations or restrictions,including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rightsassociated with our common shares, in the form of ADSs or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent achange in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of ourADSs may fall and the voting and other rights of the holders of our common shares and ADSs may be materially and adversely affected. 38  We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. holders of ourADSs or common shares. Based on the composition of our assets and income and the current expectations, while not free from doubt, we believe that we were not a “passiveforeign investment company,” or PFIC, for U.S. federal income tax purposes for our taxable year ending December 31, 2016 and we do not expect to becomea PFIC with respect to our current taxable year or the foreseeable future. The determination of our PFIC status is dependent upon the composition of ourincome and assets and such determination must be made at the close of each taxable year. Accordingly, we cannot assure you that we were not a PFIC for theyear 2016 or will not be a PFIC for our current taxable year ending December 31, 2017 or any future taxable year. A non-U.S. corporation will be considered aPFIC for any taxable year if either (1) at least 75% of its gross income is passive income or (2) at least 50% of the value of its assets is attributable to assetsthat produce or are held for the production of passive income. If we were treated as a PFIC for any taxable year during which a U.S. person held an ADS or acommon share, certain adverse U.S. federal income tax consequences could apply to such U.S. person. See “ITEM 10. ADDITIONAL INFORMATION-E.Taxation-U.S. Federal Income Taxation-Passive Foreign Investment Company.” ITEM 4.INFORMATION ON THE COMPANY A.History and Development of the Company We are a Cayman Islands holding company and conduct business primarily through our operating subsidiaries in China. Our group is a developer oflarge scale residential real estate projects targeted at middle-income consumers. We were founded by Mr. Yong Zhang, our Chairman, and commencedoperations since 1997 in Zhengzhou, the provincial capital of Henan Province. We initially operated principally in tier II and tier III cities, but since 2006,we have expanded into strategically selected high growth cities in China. In 2012, we acquired a parcel of land in Beijing. In 2014, we acquired a parcel ofland in Shanghai, representing an opportunistic acquisition in a satellite city or suburb of a tier 1 city in China. In 2012, we also expanded our business to theU.S. residential real estate market and acquired three projects in Reno, Nevada, Irvine, California and Brooklyn, New York. In 2014, we acquired 100% of theshares of a Malaysian company, which is engaged in land reclamation development for a total area of 170 acres (approximately 687,966 square meters.) InJanuary 2016, we acquired a parcel of land in midtown Manhattan, New York with gross floor area of approximately 9,755 square meters.In August 2016, weacquired another parcel of land in in Flushing, Queens, New York with gross floor area of approximately 34,615 square meters. Our company was incorporated in the Cayman Islands on March 26, 2007. Our company operates under Cayman Islands Companies Laws (2016Revision). Our registered address is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104Cayman Islands. Our principal executive offices are located at 27/F, China Central Place, Tower II, 79 Jianguo Road, Chaoyang District, Beijing 100025,People’s Republic of China. Our telephone number at this address is (86) 10 8588-9200 and our fax number is (86) 10 8588-9300. For a discussion of our capital expenditures for the last three fiscal years, see “ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS- B. Liquidity and Capital Resources - Capital Expenditures..” Shareholder inquiries should be directed to us at the address and telephone number of our principal executive offices set forth above. Our website iswww.xyre.com. The information contained on our website does not form part of this annual report. B.Business Overview We are a real estate developer and property manager that primarily focuses on residential properties in high growth tier 1 and tier 2 cities in China.Our standardized and scalable model emphasizes rapid asset turnover, efficient capital management and strict cost control. 39  We focus on developing large scale quality residential projects, which typically consist of multiple residential buildings that include multi-layerapartment buildings, sub-high-rise apartment buildings or high-rise apartment buildings. Several of our projects include auxiliary services and amenities suchas retail outlets, leisure and health facilities, kindergartens and schools. We also develop small scale residential properties. Our developments aim atproviding middle-income consumers with a comfortable and convenient community life. In addition, we provide property management services for ourdevelopments and other real estate-related services to our customers. We acquire development sites in China primarily through public auctions ofgovernment land, direct negotiations and more recently entity acquisitions (to access land rights held by such entities). These acquisition methods allow usto obtain unencumbered land use rights to unoccupied land without the need for additional demolition, re-settlement or protracted legal processes to obtaintitle. As a result, we are able to commence construction relatively quickly after we acquire a site for development. We have expanded our business and operations significantly during the past three years. The number of projects we had under constructionincreased from 11 projects with a total GFA of 2,038,586 square meters as of December 31, 2013, to 17 projects with a total GFA of 3,566,254 square metersas of December 31, 2016. We have 7 additional projects with a total GFA of 572,670 square meters under planning as of December 31, 2016. As of December31, 2016, we have completed 41 projects with a total GFA of approximately 5,756,611 square meters and comprising a total of 67,824 units, more than 97.1%of which have been sold. For the three years ended December 31, 2014, 2015 and 2016, our revenues were US$919.7 million, US$1,164.3 million andUS$1,561.6 million respectively. Our net income for the same periods was US$48.5 million, US$66.5 million and US$79.5 million, respectively. While our primary focus is increasingly on residential real estate development in high growth tier 1 and tier 2 cities in China, we see potentialopportunities for residential projects in the United States that might be attractive to both Chinese and U.S. buyers. In 2012, we acquired a real estate projectportfolio in Reno, Nevada, comprised of 325 finished lots and 185 acres of undeveloped land for approximately US$7.4 million. We had released all parcelsof the total portfolio and recognized revenue in the amount of US$ nil and US$0.8 million as of December 31, 2014 and 2015. In 2012, we paid US$10.0million to acquire 15 finished luxury condominium units in Irvine, California and sold all the 15 units as of December 31, 2015. In 2012, we also acquired an8,094 square meters parcel of land in the Williamsburg neighborhood of Brooklyn, New York for US$54.2 million, on which we plan to build 216condominium units with net sellable floor area of approximately 37,078 square meters. Our New York Oosten project started construction in November 2013.In January 2016, we also acquired a parcel of land in midtown Manhattan, New York, for US$57.5 million. The land allows for approximately 9,755 squaremeters gross buildable development. In August 2016, acquired a parcel of land located at Flushing, Queens, New York for US$66.0 million. The land allowsfor a mixed use development comprising approximately 34,615 square meters with approved plans. In 2014, we acquired 100% share of a Malaysian company, which owns offshore landfill reclamation rights for a total of 170 acres (approximately687,966 square meters). We will continue to seek for high growth opportunities globally. We also plan to retain and develop commercial portions of some of our properties as shopping malls, supermarkets or hotels and to lease and managethose properties ourselves. As of the date of this annual report, we have completed two of such projects, including Xinyuan Priority Lifestyle ShoppingCenter with a total GFA of approximately 47,000 square meters, located in Zhengzhou city, Henan Province and Xi’an Xinyuan Metropolitan ShoppingCenter with a total GFA of approximately 115,000 square meters, located in Xi’an city, Shaanxi Province. As of the date of this annual report, we have fourprojects under construction in which we will retain approximately 51,000 square meters of GFA for development as commercial properties held for lease. Since 2014, we have also made efforts to diversify our marketing efforts. Since the second half of 2014, we began to leverage our industrialexperience to promote Online to Offline (O2O) services to potential buyers of our projects. These services aim to utilize online marketing tools in the realestate industry. For example, we established a WeChat-based public account to sell our units in 2014, and we launched a smartphone app in 2015 to sellunits. We also built a social networking platform of communities to which we provide property management services. We are also exploring the applicationof blockchain technology in the real estate sector. We believe that internet and technology marketing offers the potential for new profit growth opportunities. Additionally, we are exploring other opportunities to develop real estate related products and services that will complement our core real estatedevelopment portfolio in China, which include property management services and a joint venture with a cinema company for movie theater development.We believe such initiatives can attract greater interest and support for our projects as well as enhance brand visibility and our overall competitivepositioning. 40  Our Markets We currently operate in thirteen markets in China - Beijing, Shanghai, Tianjin, Chengdu in Sichuan Province, Hefei in Anhui Province, Jinan inShandong Province, Suzhou, Kunshan and Xuzhou in Jiangsu Province, Zhengzhou (including Xingyang) in Henan Province, Sanya in Hainan Province,Changsha in Hunan Province, and Xi’an in Shaanxi Province. During 2016, we also operated in three locations in the U.S. - Irvine, California; Reno, Nevadaand New York. The following table sets forth the numbers of our projects and the total GFA in each location indicated as of December 31, 2016. Properties underConstruction(m 2 ) Propertiesunderplanning(m 2 ) Propertiesheld for sale(m 2 ) Completedprojects(m 2 ) Total number of projects Total GFA(m 2 ) China Beijing 102,300 - 133,050 2 235,350 Chengdu 211,381 - - 448,042 3 659,423 Zhengzhou 1,266,126 332,700 - 2,563,395 34 4,162,221 Jinan 644,309 - - 997,435 6 1,641,744 Hefei - - - 145,455 1 145,455 Suzhou - - - 781,334 5 781,334 Kunshan 371,157 - - 497,938 3 869,095 Xuzhou 130,170 - - 101,821 2 231,991 Sanya 122,124 - - - 1 122,124 Shanghai - - - 57,778 1 57,778 Changsha 251,754 93,300 - - 2 345,054 Xi'an(1) 290,663 - - - 1 290,663 Tianjin 278,570 - - - 1 278,570 Total 3,566,254 528,300 - 5,726,248 62 9,820,802 The U.S. Irvine(2) 2,865 1 2,865 Nevada(3) N/A 1 N/A New York 44,370 30,363 3 74,733 Total 3,566,254 572,670 2,865 5,756,611 67 9,898,400 (1)On February 23, 2016, upon the amendment of Shaanxi Zhongmao Economy Development Co., Ltd.’s articles of association, the Company obtainedcontrol over Shaanxi Zhongmao Economy Development Co., Ltd., which was previously accounted under equity method investment (see Note 9).(2)The finished condominium project is located in Irvine, California, United States. We acquired 15 units with a total GFA of 2,865 square meters out ofthe total 72 units from a major U.S. developer in August 2012. All units were sold as of December 31, 2015.(3)Northern Nevada Land Portfolio is a project portfolio comprised of 325 finished lots and 185 acres of undeveloped land at eight different sites in thenorthern Nevada region near the Reno-Spark metropolitan area. All lots and acres were sold as of December 31, 2015. For a discussion of revenues from each geographical segment in each of 2014, 2015 and 2016, see “ITEM 5. OPERATING AND FINANCIALREVIEW AND PROSPECTS - A. Operating Results - Discussion of Segment Operations.” 41  Our Property Projects Overview We offer the following four main types of real estate property products: ·multi-layer apartment buildings, which, in China, are typically 6 stories or less and normally require nine to 12 months to construct after weobtain the related construction permit; ·sub-high-rise apartment buildings, which, in China, are typically 7 to 11 stories and normally require 12 to 18 months to construct after weobtain the related construction permit; ·high-rise apartment buildings, which, in China, are typically 12 to 33 stories and normally require 18 to 24 months to construct after weobtain the related construction permit; and ·offices, mixed-use and commercial properties which we have offered since 2012. Our projects are in one of the following five stages or categories: ·properties under construction, comprising properties for which the construction permits have been obtained; ·properties under planning, comprising properties for which we have entered into land grant contracts and are in the process of obtainingthe required permits to begin construction; ·completed projects, comprising projects for which construction has been completed; ·properties held for lease, comprising projects for which construction has been completed and which we plan to hold and manage and; ·properties held for sale, comprising land and properties which we purchase and hold for sale. Properties under Construction and Properties under Planning The following table sets forth each of our properties currently under construction or planning as of December 31, 2016: Project Name Location Type ofProducts(1) Construction Commencement Date Pre-saleCommencementDate (2) TotalSite Area(m 2 ) TotalGFA(m 2 ) TotalNumberOfUnits (3) NumberOf UnitsSold GFASold (m 2 ) Zhengzhou Xindo Park Zhengzhou C 01/2015 04/2015 40,218 144,432 2,170 1,101 71,232 Xingyang Splendid II Zhengzhou MU 12/2014 12/2014 60,556 137,209 1,575 660 54,410 Jinan Royal Palace Jinan H 02/2014 01/2014 140,155 449,650 6,512 2,821 249,150 Xuzhou Colorful City Xuzhou M/H 06/2013 11/2013 45,046 130,170 1,453 840 78,570 Kunshan Royal Palace Kunshan M/S/H 10/2013 11/2013 145,776 279,953 2,592 2,523 263,553 Chengdu ThrivingFamily Chengdu H 06/2014 09/2014 75,008 211,381 2,588 1910 146,081 Changsha XinyuanSplendid Changsha H/C 08/2014 11/2014 89,460 251,754 2,952 2,043 189,054 SanyaYazhou Bay No.1 Sanya MU 11/2014 11/2014 78,765 122,124 1,575 296 17,224 Xi'an Metropolitan(4) Xi'an MU 12/2014 12/2014 85,118 290,663 2,629 2,049 212,763 Jinan Xin Central Jinan MU 05/2015 05/2015 51,352 194,659 2,715 1,914 114,559 Henan Xin Central I(ZhengzhouNangangliu Project) Zhengzhou H 07/2015 07/2015 86,781 262,208 3,177 2,162 204,508 Zhengzhou Fancy City(Zhengzhou Jiaotongcollege project) Zhengzhou H 09/2015 10/2015 50,656 166,760 1,725 1,310 134,160 Tianjin Spring RoyalPalace Tianjin M/H 10/2015 10/2015 263,519 278,570 2,205 922 110,069 ZhengzhouInternational New CityI (Zhengzhou Shilipuproject) Zhengzhou H 08/2016 09/2016 89,088 361,645 3,125 592 49,945 Kunshan Xindo Park Kunshan H/C 07/2016 07/2016 47,523 91,204 1,083 334 31,504 Zhengzhou Fancy CityII (South) Zhengzhou H 06/2016 06/2016 27,486 84,065 766 525 53,165 Henan Xin Central II Zhengzhou H 09/2016 10/2016 37,126 109,807 1,355 95 9,007 Subtotal 1,413,633 3,566,254 40,197 22,097 1,988,954  Zhengzhou Fancy CityII (North) Zhengzhou H TBD TBD 30,175 119,600 TBD - - ZhengzhouInternational New CityI (Zhengzhou Shilipuproject) Zhengzhou H TBD TBD 41,821 175,700 TBD - - Xingyang Splendid III Zhengzhou H TBD TBD 47,709 37,400 TBD - - Beijing Liyuan project Beijing H TBD TBD 46,769 102,300 TBD - - Changsha New project Changsha H TBD TBD 32,158 93,300 TBD - - Hudson New York S TBD TBD - 9,755 TBD - - Flushing New York MU TBD TBD - 34,615 TBD - - Subtotal 198,632 572,670 Total 1,612,265 4,138,924 40,197 22,097 1,988,954 42  (1)“M” refers to multi-layer buildings, “H” refers to high-rise buildings, “S” refers to sub-high-rise buildings, “C” refers to commercial properties and“MU” refers to office, mixed-use and commercial properties.(2)Pre-sale commencement dates refer to dates on which we began or expect to begin pre-sale activities after receiving the relevant pre-sale permits. Fora discussion of pre-sales, see "Pre-sales, Sales and Marketing," below.(3)“TBD” refers to “to be determined.”(4)On February 23, 2016, upon the amendment of the Shaanxi Zhongmao Economy Development Co., Ltd.’s articles of association, the Companyobtained control over Shaanxi Zhongmao Economy Development Co., Ltd., which was previously accounted under equity method investment (seeNote 9 of our Consolidated Financial Statements in this report). Properties under Construction Zhengzhou, Henan Province Zhengzhou Xindo Park (commercial). The land is located south of Bairong Road and west of Daxue Road in Zhengzhou, This project covers a sitearea of 40,218 square meters and is expected to have a total GFA of 144,432 square meters, of which 110,077 square meters are for office buildings and34,355 square meters are for retail stores. We acquired the site in September 2013, commenced construction of this project in January 2015, and expect todeliver units in 2017. This project, when completed, will consist of 2,170 units. We started pre-sales in April 2015, and as of December 31, 2016, we had sold1,101 units with a total GFA of 71,232 square meters. Xingyang Splendid II. Xingyang Splendid II is located south of Zhengshang Road in Xingyang. This project covers a site area of 60,556 squaremeters and is expected to have a total GFA of 137,209 square meters, of which 119,596 square meters are for high-rise buildings and 17,613 square meters arefor retail stores. We acquired the site of 7,577 square meters in November 2013 and 52,979 square meters in August 2014, commenced construction of thisproject in December 2014, and expect to deliver units in 2017. This project, when completed, will consist of 1,575 units. We started pre-sales in December2014, and as of December 31, 2016, we had sold 660 units with a total GFA of 54,410 square meters. Henan Xin Central I. The land is located south of Bairong Road and west of Xingyuan Road in Zhengzhou, and is currently under construction. Itwill cover a site area of 86,781 square meters and is expected to have a total GFA of 262,208 square meters. We acquired the site in December 2014 andcommenced construction in July 2015, and expect to deliver units in 2017. This project, when completed, will consist of 3,177 units. We started pre-sales inJuly 2015, and as of December 31, 2016, we had sold 2,162 units with a total GFA of 204,508 square meters. 43  Zhengzhou Fancy City I. The land is located south of Dingsheng Road and west of Siji Road, in Zhengzhou. This project covers a site area of 50,656square meters and is expected to have a total GFA of 166,760 square meters. We acquired the site in December 2014 and commenced construction inSeptember 2015, and expect to deliver units in 2017. This project, when completed, will consist of 1,725 units. We started pre-sales in October 2015, and asof December 31, 2016, we had sold 1,310 units with a total GFA of 134,160 square meters. Zhengzhou Fancy City II (South). The land is located west of Songshan Road within the 4th Ring Road in Zhengzhou, and the area surrounding thisproject is located conveniently near urban transportation, as well as commercial and community services. This project covers a site area of 27,486 squaremeters and is expected to have a total GFA of 84,065 square meters. We acquired the site in January 2016 and commenced construction in June 2016, andexpect to deliver units in 2018. This project, when completed, will consist of 766 units. We started pre-sales in June 2016, and as of December 31, 2016, wehad sold 525 units with a total GFA of 53,165 square meters. Zhengzhou International New City I. The land is located within the south 3rd Ring Road in Zhengzhou, and is conveniently located near theZhengzhou line 2 subway station. It covers a site area of 89,088 square meters and is expected to have a total GFA of 361,645 square meters. We acquired thesite in February 2016 and commenced construction in August 2016, and expect to deliver units in 2018. This project, when completed, will consist of 3,125units. We started pre-sales in September 2016, and as of December 31, 2016, we had sold 592 units with a total GFA of 49,945 square meters. Henan Xin Central II. The land is located south of Bairong Road and Xingyuan Road in Zhengzhou. It covers a site area of 37,126 square meters andis expected to have a total GFA of 109,807 square meters. We acquired the site in December 2014 and commenced construction in September 2016, andexpect to deliver units in 2018. This project, when completed, will consist of 1,355 units. We started pre-sales in October 2016, and as of December 31, 2016,we had sold 95 units with a total GFA of 9,007 square meters. Jinan, Shandong Province Jinan Royal Palace. Jinan Royal Palace is located south of Qingyuan Road and east of Lashanhe Road in the Huaiyin District in Jinan. This projectcovers a site area of 140,155 square meters and is expected to have a total GFA of 449,650 square meters, of which 396,668 square meters are for high-risebuildings, 28,700 square meters are for retail stores and 24,281 square meters are for basements. We acquired the site in November 2013, commencedconstruction of this project in February 2014, and began to deliver units in 2016. This project, when completed, will consist of 6,512 units. We started pre-sales in June 2014, and as of December 31, 2016, we had sold 2,821 units with a total GFA of 249,150 square meters. Jinan Xin Central. Jinan Xin Central is located south of Huayuan Road and west of Huaxin Road in Jinan. This project covers a site area of 51,352 squaremeters and is expected to have a total GFA of 194,659 square meters, of which 99,310 square meters are for high-rise buildings, 32,635 square meters are forretail stores, 50,982 square meters are for office buildings, 6,231 square meters are for public rental housing and 5,501 square meters are for basements. Weacquired the site in March 2015, commenced construction of this project in May 2015, and began to deliver units in 2016. This project, when completed, willconsist of 2,715 units. We started pre-sales in May 2015, and as of December 31, 2016, we had sold 1,914 units with a total GFA of 114,559 square meters. Xuzhou, Jiangsu Province Xuzhou Colorful City. Xuzhou Colorful City is located south of Kuangshan Road in the Quanshan District in Xuzhou. This project covers a site areaof 45,046 square meters and is expected to have a total GFA of 130,170 square meters, of which 17,630 square meters are for multi-layer buildings, 93,514square meters are for high-rise buildings, 7,024 square meters are for retail stores and 12,002 square meters are for basements. We acquired the site inDecember 2011, commenced construction of this project in June 2013, and began to deliver units in 2016. This project, when completed, will consist of1,453 units. We started pre-sales in November 2013, and as of December 31, 2016, we had sold 840 units with a total GFA of 78,570 square meters. 44  Kunshan, Jiangsu Province Kunshan Royal Palace.Kunshan Royal Palace is located east of Xihuan Road and south of Guiyi Road in the Huaqiao Town in Kunshan. Thisproject covers a site area of 145,776 square meters and is expected to have a total GFA of 279,953 square meters, of which 65,180 square meters are for multi-layer buildings, 205,444 square meters are for high-rise buildings and 9,329 square meters are for retail stores. We acquired the site in October 2013,commenced construction of this project in October 2013, and began to deliver units from 2015. This project, when completed, will consist of 2,592 units. Westarted pre-sales in November 2013, and as of December 31, 2016, we had sold 2,523 units with a total GFA of 263,553 square meters. Kunshan Xindo Park. Kunshan Xindo Park is located in the Huaqiao area of Kunshan, which is within the Shanghai Outer Ring Expressway. Thisproject covers a site area of 47,523 square meters and is expected to have a total GFA of 91,204 square meters, of which 72,872 square meters are for high-risebuildings and 18,332 square meters are for retail stores. We acquired the site in April 2016, commenced construction of this project in July 2017, and expectto deliver units in 2018. This project, when completed, will consist of 1,083 units. We started pre-sales in July 2017, and as of December 31, 2016, we hadsold 334 units with a total GFA of 31,504 square meters. Chengdu, Sichuan Province Chengdu Thriving Family. Chengdu Thriving Family is located in the Huayangyixin Community of Chengdu. This project covers a site area of75,008 square meters and is expected to have a total GFA of 211,381 square meters, of which 176,617 square meters are for high-rise buildings and 34,764square meters are for retail stores. We acquired the site in January 2014, commenced construction of this project in June 2014, and began to deliver units in2016. This project, when completed, will consist of 2,588 units. We started pre-sales in September 2014, and as of December 31, 2016, we had sold 1,910units with a total GFA of 146,081square meters. Changsha, Hunan Province Changsha Xinyuan Splendid. Changsha Xinyuan Splendid is located on Dongfanghong South Road in the Yuelu District of Changsha. This project covers asite area of 89,460 square meters and is expected to have a total GFA of 251,754 square meters, of which 229,549 square meters are for high-rise buildingsand 22,205 square meters are for retail stores. We acquired the site in March 2014, commenced construction of this project in August 2014, and began todeliver units in 2016. This project, when completed, will consist of 2,952 units. We started pre-sales in November 2014, and as of December 31, 2016, we hadsold 2,043 units with a total GFA of 189,054 square meters. Sanya, Hainan Province Sanya Yazhou Bay No.1. Sanya Yazhou Bay No.1 is located in the Creative Industry Park in the Yacheng Town of Sanya. This project covers a sitearea of 78,765 square meters and is expected to have a total GFA of 122,124 square meters, of which 105,194 square meters are for high-rise buildings, 9,760square meters are for multi-layer buildings and 2,208 square meters are for retail stores. We acquired the site in January 2014, commenced construction of thisproject in November 2014, and began to deliver units in 2016. This project, when completed, will consist of 1, 575 units. We started pre-sales in November2014, and as of December 31, 2016, we had sold 296 units with a total GFA of 17,224 square meters. Xi’an, Shaanxi Province Xi’an Metropolitan. Xi’an Metropolitan is located north of Fenghe Road in Xi'an. This project covers a site area of 85,118 square meters and isexpected to have a total GFA of 290,663 square meters, of which 207,080 square meters are for high-rise buildings, 16,223 square meters are for retail stores,and 67,360 square meters are for office buildings. We acquired the site in July 2014, commenced construction of this project in December 2014, and began todeliver units in 2016. This project, when completed, will consist of 2, 629 units. Pre-sales started in December 2014, and as of December 31, 2016, 2,049units with a total GFA of 212,763 square meters had been sold. 45  Tianjin Tianjin Spring Royal Palace. The land is located in Sicundian Town in the Wuqing District of Tianjin, and is currently under planning. This projectcovers a site area of 263,519 square meters and is expected to have a total GFA of 278,570 square meters, of which 149,677 square meters are for high-risebuildings, 5,197 square meters are for retail stores, 123,696 square meters are for multi-layer building. We acquired the site in November 2014, commencedconstruction in October 2015, and expect to deliver units in 2017. This project, when completed, will consist of 2,205 units. Pre-sales started in October2015, and as of December 31, 2016, 922 units with a total GFA of 110,069 square meters had been sold. Properties under Planning Zhengzhou Fancy City II (North). The land is located west of Songshan Road within the 4th Ring Road in Zhengzhou, which is conveniently nearurban transportation, as well as commercial and community services. This project is currently under planning. It will cover a site area of 30,175 square metersand is expected to have a total GFA of 119,600 square meters. We acquired the site of 30,175 square meters in January 2016. Zhengzhou International New City II. The land is located within the south 3rd Ring Road in Zhengzhou and is conveniently located near theZhengzhou line 2 subway station. This project is currently under planning. It will cover a site area of 41,821 square meters and is expected to have a totalGFA of 175,700 square meters. We acquired the site of 41,821 square meters in July 2016. Xingyang Splendid III. The land is located south of Zhengshang Road in Xingyang, and is currently under planning. It will cover a site area of47,709 square meters and is expected to have a total GFA of 37,400 square meters. We acquired the site in September 2013. Beijing Liyuan project. The land is located in Liyuan Town in the southern area of Tongzhou District, and is currently under planning. It will covera site area of 46,769 square meters and is expected to have a total GFA of 102,300 square meters. We acquired the site in April 2016. Changsha New Project. The land is located in the downtown area of Changsha city with comprehensive community facilities and educationalresources, and is currently under planning. It will cover a site area of 32,158 square meters and is expected to have a total GFA of 93,300 square meters. Weacquired the site of 32,158 square meters in September 2016. Hudson Garden Project. The land is located on 10th Avenue and between 44th Street and 45th Street, in midtown Manhattan, and is currently underplanning. It is expected to have a total GFA of 9,755 square meters. We acquired the site in January 2016. Flushing Project. The land is located at 135-35 Northern Blvd in Flushing, Queens, New York, and is currently under planning. It is expected tohave a total GFA of 34,615 square meters. We acquired the site in August 2016. 46  Completed Projects The following table sets forth each of our completed projects as of December 31, 2016. Project Name Location Type of Products Completion Date Total SiteArea (m 2 ) Total GFA(m 2 ) Total Number of Units Number of Units Sold GFA Sold(m 2 ) Zhengzhou Longhai Star Garden Zhengzhou M/H/S 12/2000 11,719 39,975 239 239 39,975 Zhengzhou Xinyuan Splendid: Zhengzhou Xinyuan Splendid 1A Zhengzhou M/S 07/2002 35,444 62,623 484 484 62,623 Zhengzhou Xinyuan Splendid 1B Zhengzhou M 04/2004 21,800 43,673 333 333 43,673 Zhengzhou Xinyuan Splendid 2A Zhengzhou M 04/2003 23,460 39,996 271 271 39,996 Zhengzhou Xinyuan Splendid 2B Zhengzhou M 06/2004 19,295 27,041 86 86 27,041 Zhengzhou Xinyuan Splendid 2C Zhengzhou S 04/2004 9,968 21,748 132 132 21,748 Zhengzhou Xinyuan Splendid 3A3B3C Zhengzhou M/S 08/2005 51,014 114,774 792 792 114,774 Zhengzhou Xinyuan Splendid Haojinge Zhengzhou H 11/2004 8,298 31,089 166 166 31,089 Zhengzhou Xinyuan Splendid City Homestead Zhengzhou M 08/2005 23,606 45,378 369 369 45,378 Subtotal 192,885 386,322 2,633 2,633 386,322 Zhengzhou City Manor Zhengzhou M 03/2006 63,089 118,716 1,633 1,633 118,716 Zhengzhou City Family Zhengzhou M 12/2006 21,380 39,226 720 720 39,226 Zhengzhou Central Garden-East Zhengzhou M/H/S 09/2007 60,849 165,206 1,624 1,624 165,206 Zhengzhou Central Garden-West Zhengzhou M/H/S 09/2007 79,464 190,384 1,796 1,796 190,384 Jinan City Family Jinan M 11/2007 47,411 61,065 785 785 61,065 Suzhou Lake Splendid Suzhou M/H/S 01/2009 130,945 198,113 2,326 2,326 198,113 Hefei Wangjiang Garden Hefei M/H 04/2009 51,939 145,455 1,649 1,649 145,455 Suzhou Colorful Garden Suzhou M/H 04/2009 41,365 81,506 970 970 81,506 Jinan Elegant Scenery Jinan H/S 06/2009 61,502 100,386 1,127 1,127 100,386 Zhengzhou Finance Square Zhengzhou H 06/2009 8,410 67,225 917 917 67,225 Jinan International City Garden Jinan H/S 01/2010 93,928 263,749 4,672 4,635 262,649 Zhengzhou Xinyuan Colorful Garden Zhengzhou M/H 01/2010 74,462 191,891 2,233 2,233 191,891 Zhengzhou YipinXiangshan Phase I Zhengzhou M/ S 12/2009 57,289 94,249 979 979 94,249 Suzhou International City Garden Suzhou H 12/2011 119,089 204,872 2,436 2,435 204,172 Chengdu Xinyuan Splendid I Chengdu H 06/2011 34,007 231,032 4,081 4,081 231,032 Chengdu Xinyuan Splendid II Chengdu H 10/2012 30,497 217,010 2,782 2,782 216,910 Zhengzhou Modern City Zhengzhou H/S 12/2012 60,556 231,733 2,934 2,934 231,733 Xuzhou Colorful Garden Xuzhou M/H 01/2012 46,777 101,821 858 852 100,921 Kunshan International City Garden Kunshan M/H 12/2012 200,008 497,938 5,133 5,129 497,638 Zhengzhou YipinXiangshan Phase II Zhengzhou M/S 01/2013 81,345 199,876 2,209 2,209 199,876 Zhengzhou Century East A Zhengzhou M/H 12/2013 22,418 76,579 765 764 76,379 Zhengzhou Century East B Zhengzhou H 08/2013 51,372 166,288 1,709 1,705 165,888 Zhengzhou Royal Palace Zhengzhou M/H 06/2014 45,716 135,877 2,061 2,061 135,877 Suzhou Xin City Suzhou H 09/2015 51,246 127,212 1,334 1,334 127,312 Jinan Xinyuan Splendid Jinan M/H 10/2015 200,180 572,235 7,387 6,892 563,135 Zhengzhou Xin City Zhengzhou H 03/2016 61,078 211,076 2,639 2,466 205,576 Zhengzhou Thriving Family Zhengzhou H 04/2016 44,169 131,508 1,913 1,693 115,508 Xingyang Splendid I Zhengzhou H 03/2016 40,782 117,264 1,427 842 81,764 Suzhou Lake Royal Palace Suzhou M/H 06/2016 114,624 169,631 1,569 1,438 152,631 Beijing Xindo Park Beijing MU 11/2015 57,862 133,050 1,446 1,367 122,350 Shanghai Royal Palace Shanghai H 07/2016 28,600 57,778 622 535 46,378 New York Oosten New York S 12/2016 8,094 30,363 216 106 12,180 Total 2,295,057 5,756,611 67,824 65,891 5,629,628 47  Zhengzhou Central Garden (East and West). Zhengzhou Central Garden is located on Jinshui Road in the District of Zhengzhou, near the centralbusiness district of Zhengzhou. The projects cover an aggregate area of 140,313 square meters and have an aggregate GFA of 355,590 square meters, of which97,627 square meters are for multi layer buildings, 62,570 square meters are for sub-high-rise buildings, 181,789 square meters are for high-rise buildings and13,604 square meters are for retail stores. The size of the units ranges from studios of approximately 39 square meters to luxury duplex units of approximately175 square meters. We acquired the site in March 2005, commenced construction of Zhengzhou Central Garden (East) in November 2005, started pre-sales inDecember 2005 and delivered it in September 2007. We commenced construction of Zhengzhou Central Garden (West) in December 2005, started pre-salesin January 2006 and delivered it in September 2007. All of the 3,420 saleable units of the projects have been sold. Jinan City Family. Jinan City Family is located on Zhangzhuang Road in the Huaiyin District in Jinan. Jinan City Family covers a site area of47,411 square meters and has a total GFA of 61,065 square meters, of which 60,256 square meters are for multi-layer buildings and 809 square meters are forretail stores. We acquired the site in August 2006, commenced construction of this project in October 2006 and delivered it in November 2007. All of the 785saleable units have been sold. Suzhou Lake Splendid. Suzhou Lake Splendid is located on Tongda Road in the Wuzhong District in Suzhou. Suzhou Lake Splendid covers a sitearea of 130,945 square meters and has a total GFA of 198,113 square meters, of which 98,704 square meters are for multi-layer buildings, 58,449 squaremeters are for sub-high-rise buildings, 35,800 square meters are for high-rise buildings and 5,160 square meters are for retail stores. We acquired the site inJanuary 2007, commenced construction of this project in March 2007, and delivered it in January 2009. As of December 31, 2015, all of the 2,326 saleableunits have been sold. Hefei Wangjiang Garden. Hefei Wangjiang Garden is located on Wangjiang Road in the Baohe District in Hefei. Hefei Wangjiang Garden covers asite area of 51,939 square meters and has a total GFA of 145,455 square meters, of which 9,436 square meters are for multi-layer buildings, 135,157 squaremeters are for high-rise buildings and 862 square meters are for retail stores. We acquired the site in February 2007, commenced construction of this project inMay 2007 and delivered it in April 2009. All of the 1,649 saleable units have been sold. Suzhou Colorful Garden. Suzhou Colorful Garden is located on Xihuan Road in the Jinchang District in Suzhou. This project covers a site area of41,365 square meters and has a total GFA of 81,506 square meters, which consists of 33,231 square meters of multi-layer buildings, 45,801 square meters ofhigh-rise buildings and 2,474 square meters of retail stores. We acquired the site in January 2007, commenced construction of this project in June 2007 anddelivered it in April 2009. As of December 31, 2013, all of the 970 saleable units were sold. Jinan Elegant Scenery. Jinan Elegant Scenery is located on Autoplant Road East of the Tianqiao District in Jinan. Jinan Elegant Scenery covers asite area of 61,502 square meters and has a total GFA of 100,386 square meters, of which 78,862 square meters are for sub-high-rise buildings, 15,763 squaremeters are for high-rise buildings, 5,120 square meters are for retail stores and 641 square meters are for basements. We acquired the site in December 2006,commenced construction of this project in December 2006 and delivered it in June 2009. As of December 31, 2013, all of the 1,127 saleable units were sold. Zhengzhou Finance Square. Zhengzhou Finance Square is located on Jingsan Road of the Jinshui District in Zhengzhou. Zhengzhou FinanceSquare covers a site area of 8,410 square meters and has a total GFA of 67,225 square meters. This project consists of two high-rise buildings. One buildingwith a total GFA of 27,516 square meters is purely for residential use. The other with a total GFA of 39,709 square meters is for both residential andcommercial use. We acquired this site in 2004, commenced construction of this project in November 2006 and delivered it in June 2009. As of December 31,2013, all of the 917 saleable units were sold. 48  Jinan International City Garden. Jinan International City Garden is located on South Industrial Road in the Hitech Industry Park in Jinan. JinanInternational City Garden covers a site area of 93,928 square meters and has a total GFA of 263,749 square meters, of which 178,772 square meters are forhigh-rise buildings, 65,521 square meters are for sub-high-rise buildings, 9,736 square meters are for retail stores and 10,306 square meters are for basements.We acquired the site in August 2007, commenced construction of this project in September 2007, and delivered it in January 2010. As of December 31, 2016,we had sold 4,635 units out of 4,672 saleable units. Zhengzhou Xinyuan Colorful Garden. Zhengzhou Xinyuan Colorful Garden is located on Hezuo Road in the Erqi District in Zhengzhou. It covers asite area of 74,462 square meters and has a total GFA of 191,891 square meters, of which 48,780 square meters are for multi-layer buildings, 139,564 squaremeters are for high-rise buildings and 3,547 square meters are for retail stores. We acquired this site in February 2008, commenced construction of this projectin March 2008 and delivered it in January 2010. As of December 31, 2013, all of the 2,233 saleable units were sold. Zhengzhou Yipin Xiangshan Phase I. Zhengzhou Yipin Xiangshan Phase I is located on Yingcai Street in the Huiji District in Zhengzhou. Thisproject covers a site area of 57,289 square meters, and has a total GFA of 94,249 square meters, of which 26,713 square meters are for multi-layer buildings,62,492 square meters are for sub-high-rise buildings and 5,044 square meters are for retail stores. Jiantou Xinyuan acquired the site in December 2007,commenced construction of this project in April 2008, and started delivery in December 2009. As of December 31, 2013, all of the 979 saleable units weresold. Suzhou International City Garden. Suzhou International City Garden is located on Mayun Road in the Hitech District in Suzhou. It covers a sitearea of 119,089 square meters, and is expected to have a total GFA of 204,872 square meters, 203,882 square meters of which are for high-rise buildings and990 square meters are for retail stores. We acquired the site in September 2007, commenced construction of this project in February 2008, and delivered in2011. This project consisted of 2,436 units. As of December 31, 2016, we had sold 2,435 units with a total GFA of 204,172 square meters. Chengdu Xinyuan Splendid I. Chengdu Xinyuan Splendid I is located on Donghong Road in the Jinjiang District in Chengdu. This project covers asite area of 34,007 square meters, and has a total GFA of 231,032 square meters, consisting of 9 high-rise buildings. We acquired the site in June 2007,commenced construction of this project in November 2007, and started delivery in 2011. This project consisted of 4,081 units. We started pre-sales activitiesin September 2008, and, as of December 31, 2013, all of the 4,081 saleable units were sold. Chengdu Xinyuan Splendid II. Chengdu Xinyuan Splendid II is located on Donghong Road in the Jinjiang District of Chengdu. This project coversa site area of 30,497 square meters, and has a total GFA of 217,010 square meters, consisting of 8 high-rise buildings. We acquired the site in June 2007,commenced construction of this project in February 2010, and delivered it in 2012. This project consisted of 2,782 units. We started pre-sales activities inApril 2010, and, as of December 31, 2013, all of the 2,782 saleable units were sold. Zhengzhou Modern City. Zhengzhou Modern City is located on Longhai Road in the Erqi District in Zhengzhou. This project covers a site area of60,556 square meters and has a total GFA of 231,733 square meters, of which 214,402 square meters are for multi-layer buildings, 12,023 square meters are forretail stores and 4,594 square meters are for basements. We acquired the site in September 2004, commenced construction in January 2010, and starteddelivery in 2012. We acquired the site directly from a private owner rather than by our usual arm’s length auction process, and it took us over five years tocommence construction on this project due to commercial and title issues with the previous private owner, relocation of previous residents, structuredemolition and site preparation, and negotiation with the local government on recovery of relocation costs. This project consisted of 2,934 units. We startedpre-sales in May 2010, and, as of December 31, 2015, all of the 2,934 units were sold. Xuzhou Colorful Garden. Xuzhou Xinyuan Colorful Garden is located north of the Quanshan District in Xuzhou. This project covers a site area of46,777 square meters and has a total GFA of 101,821 square meters, of which 47,983 square meters are for multi-layer buildings, 53,023 square meters are forhigh-rise buildings and 815 square meters are for retail stores. We acquired the site in October 2009, commenced construction of this project in May 2010,and delivered it in 2012. This project consisted of 858 units. We started pre-sales in August 2010 and delivered it in 2012, and as of December 31, 2016, wehad sold 852 units with a total GFA of 100,921 square meters. 49  Kunshan International City Garden.Kunshan International City Garden is located on Lucheng Road in Kunshan of the Jiangsu Province. Thisproject covers a site area of 200,008 square meters and has a total GFA of 497,938 square meters, of which 5,989 square meters are for multi-layer buildings,482,094 square meters are for high-rise buildings and 9,855 square meters are for retail stores. We acquired the site in December 2007, commencedconstruction of this project in July 2008, and delivered it in 2013. This project consisted of 5,133 units. We started pre-sales in September 2008 anddelivered it in 2012, and, as of December 31, 2016, we had sold 5,129 units with a total GFA of 497,638 square meters. Zhengzhou Yipin Xiangshan Phase II. Zhengzhou Yipin Xiangshan Phase II is located on Yingcai Street in the Huiji District in Zhengzhou. Thisproject covers a site area of 81,345 square meters, and has a total GFA of 199,876 square meters, of which 57,178 square meters are for multi-layer buildings,135,535 square meters are for sub-high-rise buildings, 5,479 square meters are for retail stores and 1,418 square meters are for basements. Jiantou Xinyuanacquired the site in April 2008, commenced construction in December 2010, started pre-sales in March 2011 and delivered it in 2013. This project consists of2,209 units. As of December 31, 2015, all of the 2,209 units were sold. Zhengzhou Century East A. Zhengzhou Century East A is located south of Yongping Road and west of Kangping Road in the New-East-ZhengDistrict in Zhengzhou. This project covers a site area of 22,418 square meters and has a total GFA of 76,579 square meters, of which 71,214 square meters arefor high-rise buildings and 5,365 square meters are for retail stores. We acquired the site in September 2009, commenced construction in April 2011, startedpre-sales in November 2012 and delivered it in 2013. This project consists of 765 units. As of December 31, 2016, 764 units had been sold with a total GFAof 76,379 square meters. Zhengzhou Century East B. Zhengzhou Century East B is located west of Dongfeng Road and north of Anping Road in the New-East-Zheng Districtin Zhengzhou. This project covers a site area of 51,372 square meters and has a total GFA of 166,288 square meters, of which 159,419 square meters are forhigh-rise buildings and 6,869 square meters are for retail stores. We acquired the site in October 2009, commenced construction of this project in February2011, and delivered units in 2013. This project consists of 1,709 units. We started pre-sales in June 2011, and as of December 31, 2015, we had sold 1,705units with a total GFA of 165,888 square meters. Zhengzhou Royal Palace. Zhengzhou Century Royal Palace is located south of Nongke Road and east of Wenbo Road in Zhengzhou. This projectcovers a site area of 45,716 square meters and has a total GFA of 135,877 square meters, of which 41,340 square meters are for multi-layer buildings, 88,371square meters are for high-rise buildings, 2,506 square meters are for retail stores and 3,677 square meters are for basements. We acquired the site in December2009, commenced construction of this project in June 2011, and began to deliver units in 2014. This project consists of 2,061 units. We started pre-sales inSeptember 2011, and as of December 31, 2016, all of the 2,061 units were sold. Suzhou Xin City. Suzhou Xin City is located south of Nantiancheng Road in the Xiangcheng District of Suzhou. This project covers a site area of51,246 square meters and is expected to have a total GFA of 127,212 square meters, of which 123,394 square meters are for high-rise buildings and3,818square meters are for retail stores. We acquired the site in September 2012, commenced construction in April 2013, and delivered units in 2015. Thisproject consists of 1,334 units. We started pre-sales in September 2013 and started delivery in 2015, and as of December 31, 2016, all of the 1,334 units weresold. Jinan Xinyuan Splendid. Jinan Xinyuan Splendid is located west of Lishan Road and south of Xiaoqinghe Road in Jinan. This project covers a sitearea of 200,180 square meters, and is expected to have a total GFA of 572,235 square meters, of which 385,664 square meters are for high-rise buildings,87,215 square meters are for multi-layer buildings, 14,622 square meters are for office buildings, 8,704 square meters are for retail stores, 31,167 square metersare for basements, and 44,863 square meters are for public rental housing. We acquired the site in October 2009, commenced construction of this project inMarch 2011, and began to deliver units from 2013. This project consists of 7,387 units. We started pre-sales activities in May 2011, and as of December 31,2016, we had sold 6,892 units with a total GFA of 563,135 square meters. 50  Zhengzhou Xin City. Zhengzhou Xin City is located south of Yongping Road and east of Kangping Road in the New-East-Zheng District ofZhengzhou. This project covers a site area of 61,078 square meters and is expected to have a total GFA of 211,076 square meters, of which 174,287 squaremeters are for high-rise buildings, 10,467 square meters are for retail stores, 4,705 square meters are for basements and 21,617 square meters are for publicrental housing. We acquired the site in December 2011, commenced construction of this project in March 2013, and began to deliver units in 2015. Thisproject consists of 2,639 units. We started pre-sales in September 2013, and as of December 31, 2016, we had sold 2,466 units with a total GFA of 205,576square meters. Zhengzhou Thriving Family. Zhengzhou Thriving Family is located south of Bairong Road and east of Nangang Road in Zhengzhou. This projectcovers a site area of 44,169 square meters and is expected to have a total GFA of 131,508 square meters, of which 113,752 square meters are for high-risebuildings, 1,135 square meters are for retail stores, 3,159 square meters are for basements and 13,462 square meters are for public rental housing. We acquiredthe site in September 2013, commenced construction of this project in April 2014, and began to deliver units in 2016. This project consists of 1,913 units.We started pre-sales in June 2014, and as of December 31, 2016, we had sold 1,693 units with a total GFA of 115,508 square meters. Xingyang Splendid I. Xingyang Splendid I is located south of Zhengshang Road in Xingyang. This project covers a site area of 40,782 square metersand is expected to have a total GFA of 117,264 square meters, of which 90,250 square meters are for high-rise buildings and 27,014 square meters are forpublic rental housing. We acquired the site in November 2013, commenced construction of this project in April 2014,and began to deliver units in 2016.This project consists of 1,427 units. We started pre-sales in May 2014, and as of December 31, 2016, we had sold 842 units with a total GFA of 81,764 squaremeters. Suzhou Lake Royal Palace. Suzhou Lake Royal Palace is located east of Yinshanhu Road and north of Xingguo Road in the Wuzhong economicdevelopment zone in Suzhou. This project covers a site area of 114,624 square meters and is expected to have a total GFA of 169,631 square meters, of which117,517 square meters are for high-rise buildings, 50,713 square meters are for multi-layer buildings and 1,401 square meters are for retail stores. We acquiredthe site in September 2013, commenced construction of this project in April 2014,and began to deliver units in 2016. This project consists of 1,569 units. Westarted pre-sales in July 2014, and as of December 31, 2016 we had sold 1,438 units with a total GFA of 152,631 square meters. Beijing Xindo Park. Beijing Xindo Park is located west of Xinyuan Road in the Daxing District of Beijing. This project covers a site area of 57,862square meters and is expected to have a total GFA of 133,050 square meters, of which 73,864 square meters are for high-rise buildings, 28,450 square metersare for retail stores, 10,080 square meters are for office buildings, 8,269 square meters are for a postal facility, 10,600 square meters are for public rentalhousing and 1,787 square meters are for basements. The postal facility and public rental housing were sold to the government in 2015 pursuant to land grantcontracts. We acquired the site in October 2012, commenced construction of this project in November 2013, and began to deliver units in 2015. This projectconsists of 1,446 units. We started pre-sales in February 2014, and as of December 31, 2016, we had sold 1,367 units with a total GFA of 122,350 squaremeters. Shanghai Royal Palace. Shanghai Royal Palace is located in Zhaoxiang Town in the Qingpu District of Shanghai. This project covers a site area of28,600 square meters and is expected to have a total GFA of 57,778 square meters, of which 45,680 square meters are for high-rise buildings and 12,098square meters are for retail stores. We acquired the site in April 2014, commenced construction of this project in August 2014, and began to deliver units in2016. This project 622 units. We started pre-sales in January 2015, and as of December 31, 2016, we have sold 535 units with a total GFA of 46,378 squaremeters. New York Oosten. The land is located in South Williamsburg in Brooklyn, New York, U.S.A. This project covers a site area of 8,094 square metersand is expected to have a total GFA of 30,363 square meters for sub-high-rise buildings. We acquired the site in September 2012, commenced construction ofthis project in November 2013, and began to deliver units in 2016. This project consists of 216 units. Presales started in June 2014, and as of December 31,2016, 106 units with a total GFA of 12,180 square meters had been sold. Properties Held for Lease Xinyuan Priority Lifestyle Shopping Center. In 2012, we began management of our first owned retail property, Xinyuan Priority Lifestyle ShoppingCenter, located in Zhengzhou city, Henan Province. As part of the Zhengzhou Modern City project, the shopping center has a construction GFA of 47,109square meters. The shopping center formally opened in September 2013 and provides retail services, including fashion and jewelry, leisure andentertainment, food and beverage, supermarket, children's education and other ancillary services, appealing to mid-to-high income customers within a radiusof three to five kilometers. We have set up a team specialized in commercial space planning and execution under the administration of Henan Xin PriorityCommercial Management Co., Ltd, one of our subsidiaries that specializes in retail property management. 51  Xi’an Xinyuan Metropolitan Shopping Center. In 2016, we completed the Xi’an Xinyuan Metropolitan Shopping Center, located in Xi’an, ShaanxiProvince. As part of the Xi’an Metropolitan project, the shopping center has a construction GFA of 115,374 square meters. The Xi’an Metropolitan ShoppingCenter formally opened in December 2016 and provides retail services including fashion, food and beverage, family activity, jewelry and clothing, filmtheater, and education, among other services, appealing to customers within a radius of three to five kilometers. The shopping center is managed by Xi’anXinyuan Metropolitan Business Management Co. Ltd, one of our subsidiaries that specializes in retail property management. Properties Held for Sale Northern Nevada Land Portfolio. The land portfolio is located in the northern Nevada region of the United States near the Reno-Spark metropolitanarea and is comprised of 325 finished lots for single family home communities and custom homes, and 185 acres of semi-developed and undeveloped landsfor residential use. We acquired this land portfolio in 2012 and resold all the finished lots and 185 acres of undeveloped land as of December 31, 2015. Lennox Project. The finished condominium project is located in Irvine, California, United States. We acquired 15 units with a total GFA of 2,865square meters out of the total 72 units from a major U.S. developer in August 2012. We sold all the 15 finished condominium units as of December 31, 2015. Our Property Development Operations in China We have a systematic and standardized process for project development in China, which we implement through several well-defined phases. Asignificant portion of our process is dedicated to land acquisition, which is segmented into three stages: (i) opportunity identification, (ii) initial planningand budgeting and (iii) land acquisition. The following diagram sets forth the key stages of our property development process. LAND ACQUISITION PROCESS Project planningand design ProjectconstructionandManagement Pre-sale, saleandmarketing After-saleand delivery OpportunityIdentification InitialPlanning LandAcquisition -Strategicplanning -Feasibility study -Financialprojection -Outsource architectural andengineering design -Outsourceconstruction -Pre-sale -Delivery-Geographic andmarket analysis -Preliminarydesign -Internalapproval -Design management -Constructionsupervision -Marketing -Registrationassistance-Auctionopportunityresearch -Costing andfinancialevaluation -Biddingprocess -Arrange financing -Quality control -Advertising -Feedbackcollection -Completioninspection -Customerfinancing -Propertymanagement -Landscaping andfixture installation 52  Opportunity Identification The first stage of our development process involves the identification of new opportunities which fit for our strategy in our selected high growthcities around China. Our Land Development Department prepares a strategic plan that specifies our future project development plans and land acquisitionrequirements. They also conduct in-depth demographic and market research regarding our selected cities. We have formulated a set of criteria in selectingsuitable high growth cities to expand our operations based on certain indicators, including, among others: ·middle to upper rankings in economic strength; ·populations above approximately five million; ·clear city development and planning; ·sustainable land supply at reasonable prices for future developments; ·acceptable competition levels in the real estate market; and ·lower level of property speculation. Once a city has been identified as meeting our selection criteria, we research land investment opportunities of various types, including upcomingland auctions in the identified city, and we conduct preliminary analysis on whether the opportunity can meet our project development plans, landacquisition requirements and pre-set investment return criteria. We also conduct in-depth demographic and market research regarding the specific region inwhich the land site is located. Since the second half of 2012, we have developed a new model to acquire land through direct negotiation with local governments prior to landauctions in response to local governments’ need for funding undeveloped land preparation. Under the direct negotiation model, we enter into a frameworkcooperation agreement with the local government, pursuant to which we provide land planning advice to the local government with respect to a particularparcel of undeveloped land that the government plans to develop. Based on the government’s land development plan, the underlying land may be dividedinto several tranches to be developed on a tranche by tranche basis. Following the government's development plan, we will provide funding in the form ofadvance payments to the government for land preparation of a particular tranche of land approximately three to nine months before the land auction for thattranche. The advance payment usually ranges from 20% to 50% of the estimated opening auction price. The final disposition of the tranche occurs throughpublic auction. Pursuant to the framework cooperation agreement, if we successfully acquire the land through the auction, the advance payment will becomepart of the land transfer payment. If we fail to acquire the land, we will be refunded the advance payment with an annual interest rate of approximately 10% to15%. We believe that under the direct negotiation model, we are often in better position to identify and undertake initial planning with respect to targetedparcels as a result of direct involvement in and interaction with the government regarding the development stage of undeveloped lands. We entered into oneframework cooperation agreement with a local government in 2014, which is related to prospective land parcel planning and preparation, pursuant to whichwe paid advances in the aggregate amount of US$209.2 million in 2014, US$83.4 million in 2015, and US$ 255.1 million in 2016, respectively. Theseadvances have been transferred to land cost where our auction bids were successful, or will be so transferred assuming future auction bids for the relevantparcels are successful. In 2014, a total of US$131.5 million of the advance payments related to land parcels successfully acquired were transferred to landcost, including three parcels of land in Xingyang for the amount of US$27.1 million and two parcels of land in Xi’an for US$104.4 million. In 2015, a total ofUS$232.9 million of advance payments related to land parcels successfully acquired were transferred to land cost, including four parcels of land inZhengzhou for the amount of US$180.7 million and two parcels of land in Tianjin for US$52.2 million. In 2016, a total of US$210.0 million of advancepayments related to the remaining land parcels successfully acquired were transferred to land cost, which were six parcels of land in Zhengzhou for theamount of US$210.0 million. We did not enter into any framework agreements in 2015 or 2016. Initial Planning and Budgeting Once a potential opportunity has been identified, our Land Development Department will conduct a feasibility study based on our collected data aswell as preliminary design and pre-planning of the proposed development project on the land site. We will also budget costs and financial requirements forthe proposed project to identify whether the land site is suitable for our requirements. 53  The key factors we consider in land site selection are: ·site area and suitability; ·location within the city; ·neighboring environment and amenities; ·existing or planned infrastructure; ·announced government planning for the vicinity; ·projected cost, investment and financial return ratios; ·competition in the surrounding area; and ·availability of land supply in the surrounding area. We evaluate projects through a rigorous planning and approval process. We consider detailed input from each of our Land DevelopmentDepartment, Budget-Planning-Design Department, Operations Department and Financial Department. The proposed project, once vetted and approved byvarious departments, will be submitted to the investment committee of our board of directors for approval. The initial planning process includes, among other things, strategic planning, market investigation and analysis, feasibility study, preliminarydesign, cost and profit projection and investment approval. In particular, our initial planning includes the engagement of external local design firms to drawup preliminary designs for our proposed projects. In addition, before making any decision to bid for land, we project the financial and cost control metrics forthe proposed projects based on studies of market statistics and other relevant information, and select only those projects that satisfy pre-determinedbenchmarks. Land Acquisition Once we receive approval for a proposed project, we will proceed to bid for the land site. Although we acquire land for development primarilythrough the governmental auction process, if opportunities arise, we will also consider obtaining land use rights from third parties through negotiation,acquisition of entities, co-development or other joint venture arrangements. As of December 31, 2016, we had a total GFA of 3,566,254 square meters for property projects under construction and a total GFA of 572,670 squaremeters for property projects under planning. We continually seek attractive opportunities to acquire development sites which meet our selection criteria. Project Planning and Design Our project planning and design process includes concept and architectural design, construction and engineering design, budgeting, financialanalysis and projections as well as arranging for financing. We believe careful planning is essential to control costs, quality and timing of our projects. We outsource our design work to reputable third-party design firms. Our planning and development team works closely with project managers aswell as our external designers and architects to ensure that our designs comply with PRC laws and regulations, and meet our design and other projectobjectives. Our senior management is also actively involved in the process, especially in the master planning and architectural design of our projects. We useour enterprise resource planning systems to conduct preliminary planning and scheduling for each stage of the development project, including planning ouroutsourcing requirements for the project construction stage. We seek to create a comfortable and convenient middle-class lifestyle concept in our projects by incorporating certain design features, such aslandscaped environments. In determining the architectural designs of our projects, we consider the proposed type of products to be developed as well as thesurrounding environment and neighborhood. 54  In selecting external design firms, we consider, among other things, their reputation for reliability and quality, their track record with us, the designproposed and the price quoted. Design firms can participate in the tender process by our invitation only. Our planning and design team monitors the progressand quality of the design firms to ensure that they meet our requirements. Project Construction and Management We outsource all of our construction work to independent construction companies which are selected mainly through our invitation to tender bidsfor the project. We generally hire one or more contractors for each of our projects, with each contractor responsible for a designated portion of the project on a“turnkey” basis. We have established a selection procedure in order to ensure compliance with our quality and workmanship standards. We take into accountthe construction companies’ professional qualifications, reputation, track record, past cooperation with our project companies and financial condition andresources when inviting candidates to bid. We also review the qualifications and performance of our construction contractors on a semi-annual basis. Weclosely supervise and manage the entire project construction process, utilizing our enterprise resource planning systems to monitor and analyze informationregarding the process on a real-time basis. We collect information throughout the development cycle on the entire project, including information from ourthird-party contractors, to avoid unanticipated delays and cost overruns. Our construction contracts typically provide for limited flexible payments, which provide for adjustments for some types of excess, such as designchanges during construction or changes in government-suggested steel and cement prices, as well as labor costs. The contractors are typically responsible forprocuring the necessary raw materials, as well as providing engineering and construction services. We procure certain ancillary fixtures for installation, suchas elevators, windows and entrance doors. For our purchases of such fixtures, we use a centralized procurement process to help increase our negotiating powerand lower our unit costs. We maintain good relationships with our suppliers and have not encountered any significant supply shortages or disruptions in thepast. Pre-Sales, Sales and Marketing Like other developers, we pre-sell properties prior to the completion of their construction in mainland China. Under PRC pre-sales regulations,property developers must satisfy specific conditions before they can pre-sell their properties under construction. These mandatory conditions include: ·the land premium must have been paid in full; ·the land use rights certificate, the construction site planning permit, the construction work planning permit and the construction permitmust have been obtained; ·at least 25% of the total project development cost must have been incurred; ·the progress and the expected completion and delivery date of the construction must be fixed; ·the pre-sale permit must have been obtained; and ·certain milestones in the construction processes specified by the local government authorities must have been completed. These mandatory conditions are designed to require a certain level of capital expenditure and substantial progress in project construction before thecommencement of pre-sales. Generally, the local governments also require developers and property purchasers to use standard pre-sale contracts preparedunder the auspices of the government. Developers are required to file all pre-sale contracts with local land bureaus and real estate administrations afterentering into such contracts. We maintain an internal marketing and sales force for our development projects. We use outside sales agencies on all of our projects and some of ourprojects also utilize our internal sales. Our marketing and sales teams work closely with each other and with our external sales agents to survey thedemographics for a particular project area to determine the appropriate advertising, promotion, and selling plans for that project. We develop customerawareness through our marketing and promotion efforts and through referrals from satisfied customers. A sales team at each project is responsible forfollowing through on the entire sales process including setting monthly sales targets, controlling prices, implementing special promotions, monitoringexternal sales agency performance, and processing customer feedback. 55  Most of our customers purchase our properties using mortgage financing. Under current PRC law, the minimum down payment is 20% of the totalpurchase price for the purchase of the first self-use residential unit. The maximum loan-to-value ratio of the mortgage loan is also subject to change accordingto the economic policies of the central and local governments and banks in China. A typical sales transaction in which a portion of the purchase price is financed by a mortgage loan consists of three steps. First, the customer pays adeposit to us. Within a specified number of days after paying the deposit, the customer will sign a purchase contract with us and make a down payment to usin cash. After making the down payment, the customer arranges for a mortgage loan for the balance of the purchase price. Once the loan is approved, themortgage loan proceeds are paid to us directly by the bank. Finally, we deliver the property to the customer. Legal title, as evidenced by a property ownershipcertificate issued by local land and construction bureaus, may not pass for a period of six to twelve months following delivery and acceptance. As is customary in the property industry in China, we provide guarantees to mortgagee banks in respect of the mortgage loans provided to thepurchasers of our properties up until completion of the final registration (also called post-delivery registration) of the mortgage with the relevant mortgageregistration authorities. Guarantees for mortgages on residential properties are typically discharged when the individual property ownership certificates areissued. In our experience, the issuance of the individual property ownership certificates typically takes six to twelve months, so our mortgage guaranteestypically remain outstanding for up to twelve months after we deliver the underlying property. If a purchaser defaults under the loan while our guarantee is in effect, and we repay all debt owed by the purchaser to the mortgagee bank, themortgagee bank must assign its rights under the loan to us. We are entitled to full recourse to the property after the registration of the mortgage. In line withwhat we believe is industry practice, we do not conduct independent credit checks on our customers but rely on the credit checks conducted by themortgagee banks. As of December 31, 2015 and 2016, we guaranteed mortgage loans in the aggregate outstanding amounts of US$ 1,513.7 million andUS$1,672.9million, respectively. After-Sale Services and Delivery We assist customers in arranging for and providing information relating to financing. We also assist our customers in various title registrationprocedures relating to their properties, and we have set up an ownership certificate team to assist purchasers in obtaining their property ownership certificates.We offer various communication channels to customers to provide their feedback about our products or services. We also cooperate with propertymanagement companies that manage our properties and ancillary facilities, such as schools and clubhouses, to handle customer feedback. We endeavor to deliver the units to our customers on a timely basis. We closely monitor the progress of construction of our property projects andconduct pre-delivery property inspections to ensure timely delivery. The time frame for delivery is set out in the sale and purchase agreements entered intowith our customers, and we are subject to penalty payments to the purchasers for any delay in delivery caused by us. Once a property development has beencompleted, has passed the requisite government inspections and is ready for delivery, we notify our customers and hand over keys and possession of theproperties. To ensure quality property management, we provide property management services to purchasers until they have become statutorily entitled to electtheir own property management companies. As of December 31, 2016, owners of all of our developments that had become statutorily entitled to elect theirproperty management companies have continued to choose us to manage their properties. Our property management services include security, landscaping, building management and management of public facilities and equipment, andadditional services, such as cultural activities, housekeeping and repair. We are currently managing approximately 8,992,501 square meters, comprising morethan 76,837 residential units. 56  Our U.S. Property Development Operations We expanded into the U.S. market in 2012. Investment decisions with respect to the U.S. market are carried out through the investment committee ofour board of directors. We currently seek investment opportunities mainly through off-market transactions, including newly constructed residentialcondominium and retail projects and conversion projects. We currently consider the following factors when selecting a project: ·Geographic location. We intend to focus in areas that are economically active and diversified, and attractive to immigrants on the east andthe west coasts. ·Superior risk adjusted financial returns. ·Debt & Equity financing opportunities. We set up a specialized U.S. project team in 2012, comprised of U.S. local consultants and employees with substantial experience and understandingin various areas of the U.S. real estate market. As of December 31, 2016, we have a team of about 20 people in the U.S. Their major responsibilities includeacquisition and financing, project development management, sales and marketing, asset management, retail leasing and accounting. We also work withoutside consultants and agents familiar with the U.S. markets. Our first property development project in the U.S. named New York Oosten is in Brooklyn, New York. We commenced construction of thedevelopment project in November 2013 and marketing and pre-sale of this property in 2014. For the year ended December 31, 2016, revenue was recognizedin the amount of US$152 million for the sales of 106 units. In January 2016, we also acquired a parcel of land in midtown Manhattan, New York, for US$57.5 million. The land allows for approximately 9,755square meters gross buildable development. In August 2016, we acquired a parcel of land located in Flushing, Queens, New York for US$66.0 million. Theland allows for a mixed-use development comprising approximately 34,615 square meters with approved plans. Our Leased Properties and Real Estate Related Services Ancillary to our property development operations, we also lease certain properties, including an elementary school, two basements, five clubhouses,seven parking facilities, eleven kindergartens and two shopping mall. The rental income of our lease operations represented approximately 0.5%, 0.6% and0.4% respectively, of our revenues for the years ended December 31, 2014, 2015 and 2016. We provide property management services through Xinyuan Property Service Co., Ltd. For the years ended December 31, 2014, 2015 and 2016,revenues from our real estate related services represented 2.4%, 2.0% and 2.0%of our total revenue for those periods, respectively. Quality Control We emphasize quality control to ensure that our buildings and residential units meet our standards and provide high quality service. We select onlyexperienced design and construction companies. We provide customers with warranties covering the building structure and certain fittings and facilities ofour property developments in accordance with the relevant regulations. To ensure construction quality, our construction contracts contain quality warrantiesand penalty provisions for poor work quality. In the event of delay or poor work quality, the contractor may be required to pay pre-agreed penalties, damages,as well as compensation we paid to customers for late delivery, under our construction contracts. Our construction contracts do not allow our contractors,without prior consent from us, to subcontract or transfer their contractual arrangements with us to third parties. We typically withhold 5% of the agreedconstruction amount for two to five years after completion of the construction as a deposit to guarantee quality, which provides us assurance for ourcontractors’ work quality. Our contractors are also subject to our quality control procedures, including examination of materials and supplies, on-site inspection andproduction of progress reports. We require our contractors to comply with relevant PRC laws and regulations, as well as our own standards and specifications.Despite the “turnkey” nature of the construction contracts, we closely monitor the construction work for quality, timing and cost control reasons. We alsoemploy independent surveyors to supervise the construction progress. In addition, the construction of real estate projects is regularly inspected andsupervised by PRC governmental authorities. 57  Competition The real estate industry in China is highly competitive. We compete primarily with local and regional property developers. Competitive factorsinclude the geographical location of the projects, the types of products offered, brand recognition, price, design and quality. See “ITEM 3. KEYINFORMATION-D. Risk Factors-Risks Relating to the Residential Property Industry in China-We face intense competition from other real estate developers.”In the cities in which we operate, our major competitors include China Overseas Property Ltd., China Vanke Co., Ltd., Sunshine 100, China Resources LandLimited, Sunac China Holding Limited, Henan Zhengshang Real Estate Co., Ltd., Henan New Greatwall Real Estate Co., Ltd., Longfor Real Estate Co., Ltd,Greenland Group, Tianhong Land, South Asia Group, Rongqiao Group and KWG Property Holding Ltd. In the U.S., we anticipate that our direct competition may come from developers of nearby projects or other local property developers in targetmarkets. In addition, we may also face competition from other Chinese real estate developers expanding or establishing their business in the U.S. Forexample, China Vanke Co., Ltd., the largest real estate development company in China, has also entered the U.S. residential market. Intellectual Property Rights We rely on a combination of trademarks, service marks, domain name registrations, copyright protection and contractual restrictions to establish andprotect our brand name and logos, marketing designs and internet domain names. We have registered the trademark of "鑫苑" and the associated logo for real estate related services in the PRC. We have also applied for the sametrademark for other goods and services directly or indirectly related to our business operations, to strengthen the protection of our trademark and brand. Allthese trademark applications are registered or pending examination and approval. We have also registered the Internet domain name “www.xyre.com” andother related domain names. We also own trademarks for "鑫苑" in the form of Chinese characters and our company logo in the U.S.,UK,EU, New Zealand,Australia,Singaporeand Korea. In the PRC, the registration and protection of a company’s corporate name is regional and limited to its related industry. Although we haveregistered our corporate name “Xinyuan” in certain provinces where we operate, we cannot prevent others from registering the same corporate name in otherprovinces or in other industries. If another company is the first to register “Xinyuan” as its corporate name in a province other than Beijing, Tianjin, HenanProvince, Shandong Province, Jiangsu Province, Anhui Province, Sichuan Province, Hunan Province, and Shaanxi Provinces or in another industry, we willhave to adopt another corporate name if we plan to enter that market or industry. Insurance We obtain insurance against losses or damage to our PRC properties during the construction phase of our projects. We do not maintain insurancepolicies for properties that we have delivered to our customers. Although we require our contractors to maintain insurance coverage on our properties underconstruction, typically they do not do so, which we believe is customary practice in China. We believe that third-party contractors should bear liabilitiesfrom tortious acts or other personal injuries on our project sites. There are certain types of losses, such as losses from natural disasters, terrorist attacks,construction delays and business interruptions, for which insurance is either not available or not available at a reasonable cost. We believe our practice isconsistent with the customary industry practice in China. With respect to our U.S. operations, we follow local requirements and maintain insurance coverage for projects through the end of the construction. 58  Environmental Matters As a developer of property in the PRC, we are subject to various environmental laws and regulations set by the PRC national, provincial andmunicipal governments. These include regulations on air pollution, noise emissions, as well as water and waste discharge. Compliance with existingenvironmental laws and regulations has not had a material adverse effect on our financial condition and results of operations, and we do not believe it willhave such an impact in the future. Our projects are normally required to undergo an environmental impact assessment by government-appointed third parties, and a report of suchassessment needs to be submitted to the relevant environmental authorities in order to obtain their approval before commencing construction. Uponcompletion of each project, the relevant environmental authorities inspect the site to ensure the applicable environmental standards have been compliedwith, and the resulting report is presented together with other specified documents to the relevant construction administration authorities for their approvaland record. Approval of such report by the environmental authorities is required before we can deliver our completed work to our customers. In the past, wehave not experienced any difficulties in obtaining those approvals for commencement of construction and delivery of completed projects. However, wecannot assure you that we will not experience any difficulties in the future. See “ITEM 4. INFORMATION ON THE COMPANY-B.Business Overview-Regulation-Regulations on Environmental Protection in Construction Projects.” In connection with our current and any future properties in the U.S., our relevant property subsidiaries are or will be subject to a variety of local, stateand federal statutes, ordinances, rules and regulations concerning the protection of health and the environment. The particular environmental laws whichapply to any given community and the costs we may incur to comply with such laws, which may be material, will vary according to the site, its location, thesite's environmental conditions and the present and former use of the site. Likewise, the particular procedures and approval or other requirements will varyfrom project to project. Regulation China The PRC government regulates the real estate industry. This section summarizes the principal PRC regulations relating to our business. We operate our business in China under a legal regime consisting of the National People’s Congress, the PRC State Council, which is the highestauthority of the executive branch of the PRC central government, and several ministries and agencies under its authority, including the MOHURD, theMinistry of Land and Resources of the People’s Republic of China (“MLR”), the MOFCOM, the NDRC, the SAIC, and the SAFE, and their respectiveauthorized local counterparts. Regulations on Land The Law of the PRC on Land Administration, promulgated on June 25, 1986 and amended on August 28, 2004 by the Standing Committee ofNational People’s Congress, distinguishes between the ownership of land and the right to use land. All land in the PRC is either state-owned or collectively-owned, depending on location. Generally, land in urban areas within a city or town is state-owned, and all land in the rural areas of a city or town and all ruralland, unless otherwise specified by law, are collectively-owned. Although all land in the PRC is owned by the governments or by the collectives, private individuals and businesses are permitted to hold, lease anddevelop land for a specified term without ever owning the land, the duration of which depends on the use purpose of the land. These rights to use land aretermed land use rights. Under the Interim Regulations of the PRC on Grant and Transfer of the Right to Use State-owned Land in Urban Areas, promulgated on andeffective as of May 19, 1990 by the PRC State Council, enterprises, companies and other organizations which intend to hold, lease and develop the land(each, a “Land User”), pay a premium to the government as consideration for the grant of the land use rights on terms of use prescribed by the government,and a Land User may transfer, lease and mortgage or otherwise commercially exploit the land use rights within such terms of use. The land administrationauthority enters into a contract with the Land User for grant of the land use rights. The Land User pays the grant premium as stipulated in the grant contract.After paying the grant premium in full, the Land User registers with the land administration authority and obtains a land use rights certificate. The certificateevidences the acquisition of the land use rights. 59  The Regulations on the Grant of State-Owned Construction Land Use Rights through Competitive Bidding, Auction and Listing-for-Sale (formerlyknown as the Regulation on the Grant of State-Owned Land Use Rights through Competitive Bidding, Auction and Listing-for-Sale), promulgated by theMLR on May 9, 2002 and amended on September 21, 2007, provides that the land for industrial use (except for mining), commercial use, tourism,entertainment and commodity housing development is granted by way of competitive bidding, public auction or listing-for-sale. The land use rights aregranted to the bidder with the highest bid/tender in accordance with the terms and conditions of the bid/tender, or to the bidder who can best fulfill thecomprehensive evaluation standards of the bid. The successful bidder/tender will then enter into a grant contract with the local land administration authority.Only after the successful bidder/tender has paid the land premium in full under the land grant contract, can the successful bidder/tender apply for the landregistration and obtain the land use right certificate. On September 17, 2015, the MOF and the MLR jointly issued Notice on Further Strengthening the Administration of the Costs and RevenuesAssociated with Land Grant, which provides that in circumstances where premiums are not fully paid according to the terms under the land use rights grantcontract, the MLR shall not issue the relevant land use right certificate for the land as a whole nor issue separate certificates for any portions of the land forwhich the premiums have been paid. The Property Law of the PRC, or the Property Law, promulgated on March 16, 2007 and effective as of October 1, 2007, further clarified land userights in the PRC with the following rules: ·the land use rights for residences will be automatically renewed upon expiry; ·the car parks and garages within the building area planned for vehicle parks must be used to meet the needs of the owners who live in thebuilding first; ·the construction of buildings must abide by relevant laws and regulations with regard to the construction planning and may not affect theventilation of or lighting to the neighboring buildings; and ·where the land use rights for construction use are transferred, exchanged, used as a capital contribution, donated to others or mortgaged, anapplication for modification registration must be filed with the registration department. On February 22, 2016, the Supreme People's Court issued the Interpretations on the Issues Concerning the Implementation of the Property Law ofthe PRC (I), which became effective on March 1, 2016. However, there is no material influence on land use rights. Pursuant to the Notice on Further Strengthening the Administration of the Costs and Revenues Associated with Land Grant, jointly issued by theMOF, the MLR, the PBOC, the Ministry of Supervision and the National Audit Office on November 18, 2009, all payments for land use rights paid forthrough installments must be made in full within one year in principle. In certain circumstances the payment term may be extended to two years upon theapproval of the competent authorities, but the initial installment payment may not be less than 50% of the overall amount owed for the land use rights. Thenotice also provides that the local-level governments should strictly enforce relevant regulations to impose penalties on real estate developers that havedelayed the payment of land premiums or construction for reasons other than force majeure or restrict such developers from acquiring new land during theperiod such payments are delayed. The Circular of the MLR and the MOHURD on Further Strengthening Administration over Land-use and Constructions of Real Estate, promulgatedon September 21, 2010, specifies that when any bidder participates in a competitive bidding, public auction or listing-for-sale, in addition to the provision ofa valid identification certificate and payment of bidding deposit, the bidder shall be also required to submit (i) a letter of commitment specifying that thebidding deposit is not from a bank loan, shareholder loan, etc., and (ii) a credit certificate issued by a commercial financial institution. If the land is left idlefor more than one year by a real estate developer, the developer and its controlling shareholder shall be prohibited from taking part in any competitivebidding, public auction or listing-for-sale for the grant of land use rights. Furthermore, real estate developers must commence the construction of a housingproject within one year from the date of delivery of the land as stipulated in the land grant contract, and complete the construction within three years from thedate of commencement of construction. 60  The Emergency Notice on Further Tightening the Administration on Real Estate Land Use and Reinforcing the Control Results of Real EstateMarket promulgated on July 19, 2012, further emphasized the strict enforcement of current regulations on land grants: ·the plot area ratio for residential land shall not be less than 1.0; ·for all types of housing construction projects, construction work shall be commenced within one year of the date when the land is deliveredas set forth in the land grant contract and shall be completed within three years after its commencement date; ·the bidding deposit for a land grant shall not be less than 20% of the base price; and ·the land grant contract shall be signed within 10 working days after a land grant deal is concluded, a down payment of 50% of the landpremium shall be made within one month after signing the contract, and the remaining payment shall be made in a timely manner inaccordance with the contract; in no event should it be more than one year. On May 22, 2014, the MLR issued the Provisions on the Economical and Intensive Use of Land, which took effect on September 1, 2014. It providesthat commercial land shall be granted via tender, auction and listing process to determine the user and the price. Compensation for all types of land supplyshall not be lower than the minimum standard stipulated by the government. It is prohibited to reduce or relieve the land grant price in a disguised form byway of exchanging projects with land, returning fees after collecting them or granting subsidies or awards. On November 24, 2014, the PRC State Council issued Interim Regulations on Real Estate Registration, which took effect on March 1, 2015. Itstipulates the registration authorities and the procedures for registration of rights of real estate rights, including land use rights, which applies to firstregistration, change of registration, transfer of registration, cancellation of registration, correction of registration, dissidence registration, advance noticeregistration, close-down registration and other affairs concerning registration of real estate. Further, on January 1, 2016, MLR issued Implementing Rules ofthe Interim Regulations on Real Estate Registration, which details the rules of the registration procedures for registration of different kind of rights of realestate. The Administrative Measures for the Preliminary Review of Land Use for Construction Projects, promulgated by the MLR on July 25, 2001, revisedon October 29, 2004, amended on November 12, 2008 and November 29, 2016 and effective on January 1, 2017, simplify the content of preliminary reviewof land for construction, reduce the documents necessary for examination and approval, and improve the efficiency of examination and approval.Furthermore, under the Circular of the Ministry of Land and Resources on Improving and Optimizing the Preliminary Review and Examination of Land Usefor Construction Projects, promulgated on November 30, 2016 and effective as of January 1, 2017, the procedure of preliminary review and examination andapproval of land for construction is requested to be improved and optimized. Where a project does not involve any new land for construction, and isconstructed by use of the approved land for construction within the scope of land for urban construction as determined by the overall planning on landutilization, the preliminary review may not be carried out for the land used for the project. Local Regulations on Land The Measures for Implementation of Land Administration Law of Henan Province, promulgated on September 24, 1999 and amended on November26, 2004 and on November 27, 2009, provide that the entities obtaining state-owned land use rights by means of grant and other means of valuableconsideration may use the land only after paying the required consideration, such as the grant premium, and other relevant fees. 61  The Land Administration Regulations of Jiangsu Province, promulgated on October 17, 2000 and amended on April 16, 2004, provide that thegrant premium of state-owned land use rights must not be less than the lowest price fixed by the provincial government. The specific procedures andmeasures concerning the grant, bid invitation, auction and grant of state-owned land use rights are subject to the regulations of the provincial people’sgovernment. The Measures for Implementation of Guofa No. 28 Intensifying Reform and Strengthening Land Administration of Shandong Province,promulgated on December 27, 2004, provide that the grant premium of state-owned land use rights must not be less than the lowest price fixed by theprovincial government. The Notice on implementing the Decision of Intensifying Reform and Strengthening Land Administration by State Council of Shaanxi Province,promulgated on December 30, 2004, provides that the grant premium of state-owned land use rights shall strictly follow the legal procedure and must not beless than the lowest price fixed by the provincial government. The Measures on the Grant of State-Owned Land Use Rights through Competitive Bidding, Auction and Listing-for-Sale of Jiangsu Province ,promulgated on May 19, 2003 and effective as of July 1, 2003, amended on March 20, 2008, provide that the land price for grant of state-owned land userights by means of competitive bidding, auction and listing-for-sale will be fixed by the local land authority after an institution qualified for land valuationhas carried out the valuation according to the technical guidelines issued by the central and provincial governments. The Measures of Anhui Province for Implementation of the Land Administration Law, promulgated on December 20, 1987 and amended on June 26,2004 and on March 27, 2015, provide that the grant, capital contribution, transfer and mortgage of state-owned land use rights involving land price valuationwill be evaluated by an institution qualified for land valuation and report to the relevant land administration for filing. The Notice on Administration of Land and Resource Credit throughout the Province of Anhui Province, which took effect on January 1, 2017,provides that Anhui Administrative Department of Land and Resources at all levels shall check the land and resource credit of citizens, entities or otherorganizations when granting any administrative permission, determining the qualifications, bidding, purchasing and conducting other relevantadministrative activities. Land grant contracts and other related contacts shall contain the provision concerning the penalty against misconducts. Regulations on Establishment of a Real Estate Development Enterprise Pursuant to the Law of the PRC on Administration of Urban Real Estate, or Urban Real Estate Law, promulgated by the Standing Committee of theNational People’s Congress on July 5, 1994 and amended on August 30, 2007 and on August 27, 2009, a developer is defined as “an enterprise whichengages in the development and sale of real estate for the purposes of making profits.” Under the Regulations on Administration of Development and Operation of Urban Real Estate, or Development Regulations, promulgated by thePRC State Council on July 20, 1998 and amended on January 8, 2011, a real estate development enterprise must satisfy the following requirements: ·has a registered capital of not less than RMB1 million; and ·has four or more full time professional real estate/construction technicians and two or more full time accounting officers, each of whommust hold the relevant qualifications. The Development Regulations also allow people’s governments of the provinces, autonomous regions and/or municipalities directly under thecentral government to impose more stringent requirements regarding the registered capital and qualifications of professional personnel of a real estatedevelopment enterprise according to the local circumstances. To establish a real estate development enterprise, the developer is required to apply for registration with the department of administration of industryand commerce. The developer must also report its establishment to the real estate administration authority in the location of the registration authority within30 days upon receipt of its business license. 62  Xinyuan (China) Real Estate, Ltd., Henan Xinyuan Real Estate Co., Ltd., Suzhou Xinyuan Real Estate Development Co., Ltd., Shandong XinyuanReal Estate Co., Ltd., Xinyuan Real Estate (Chengdu) Co., Ltd. and Zhengzhou Jiantou Xinyuan Real Estate Co., Ltd., Henan XinyuanWanzhuo Real EstateCo., Ltd., Henan Xinyuan Jiye Real Estate Co., Ltd., Zhengzhou Shengdao Real Estate Co., Ltd., Zhengzhou Jiasheng Real Estate Co., Ltd, Suzhou XinyuanWanzhuo Real Estate Co., Ltd., Jinan Xinyuan Wanzhuo Real Estate Co., Ltd., Anhui Xinyuan Real Estate Co., Ltd., Chengdu XinyuanWanzhuo Real EstateCo., Ltd., Beijing XinyuanWanzhong Real Estate Co., Ltd., Kunshan Xinyuan Real Estate Co., Ltd., Jiangsu Jiajing Real Estate Co.,Ltd., Xuzhou XinyuanReal Estate Co., Ltd. Xingyang Xinyuan Real Estate Co., Ltd., Sanya Beida Science and Technology Park Industrial Development Co., Ltd., ChangshaXinyuanWanzhuo Real Estate Co., Ltd., Shanghai Junxin Real Estate Co., Ltd., Tianjin Xinyuan Real Estate Co., Ltd., Henan Xinyuan Guangsheng RealEstate Co., Ltd., Shandong XinyuanRenju Real Estate Co., Ltd., Henan Xinyuan Quansheng Real Estate Co., Ltd.,Zhengzhou Hengsheng Real Estate Co.,Ltd., Henan Xinyuan Shunsheng Real Estate Co., Zhengzhou Xinnan Real Estate Co., Ltd., Hunan Erli Real Estate Co., Ltd.,and Beijing Ruihao RongtongReal Estate Co., Ltd. are registered as real estate development enterprises. Local Regulations on Establishment of a Real Estate Development Enterprise Under the Regulations on Administration of Development of Urban Real Estate of Henan Province promulgated on May 31, 2002 by the StandingCommittee of Henan People’s Congress and amended on January 14, 2005, and July 30, 2010, a real estate development enterprise must satisfy the followingrequirements: ·has a registered capital of not less than RMB2 million; and ·has five or more full time professional real estate/construction technicians and two or more full time accounting officers, each of whom musthold the required qualifications. Under the Regulations on Administration of Development and Operation of Urban Real Estate of Shandong Province, promulgated on October 12,1995 by the Standing Committee of Shandong People’s Congress, and amended on November 25, 2004, a specialized real estate development enterprisemust satisfy the following requirements: ·has a registered capital of no less than RMB10 million; and ·has more than eight full time professional real estate/construction technicians and more than two full time accounting officers, each ofwhom must hold the required qualifications. Under the Measures on Administration of Development and Operation of Urban Real Estate of Anhui Province, promulgated on November 10, 2000by Anhui Provincial People’s Government, and amended on March 12, 2002 and August 10, 2004, a real estate development enterprise established in a citywith districts must have a registered capital of no less than RMB5 million. Regulations on Foreign-Invested Real Estate Enterprise Industrial Restriction Under Catalogue 2015, the development of tracts of land, the construction and operation of high-end hotels, office buildings, internationalconference centers, and real estate intermediary/agency business have been removed from the category under which foreign investment is restricted, with theconstruction and operation of large-scale scheme parks remaining in the category. The construction and operation of golf courses and villas falls within thecategory under which foreign investment is prohibited. The development and construction of ordinary residential properties, together with other types of realestate-related business, are not specifically mentioned in the catalogue. We have been advised by our PRC counsel that this means that they continue to bepermitted by the MOFCOM and the NDRC. Under Announcement of the National Development and Reform Commission and the Ministry of Commerce on Seeking Public Comments for theCatalogue for the Guidance of Foreign Investment Industries, or the Draft Catalogue 2016, the construction and operation of golf courses and villas havebeen removed from the category under which foreign investment is restricted. However, the Draft Catalogue 2016 is still being in the process of discussionand has not been officially enforceable. 63  Xinyuan (China) Real Estate, Ltd. is a wholly foreign-owned enterprise and targets the development of ordinary residential properties in whichforeign investment is permitted. Zhengzhou Yasheng Construction Material Co., Ltd. is a wholly foreign-owned enterprise and targets the sale of construction materials, landscapedesign and decoration in which foreign investment is permitted. Zhengzhou Jiasheng Real Estate Co., Ltd. is a wholly foreign-owned enterprise and targets the development of commercial residential properties inwhich foreign investment is permitted. Zhengzhou Yusheng Landscape Design Co., Ltd. is a wholly-foreign owned enterprise and targets the landscaping engineering and management inwhich foreign investment is permitted. Circular No. 171 Considering the increasing foreign investment in the real estate industry in recent years, the MOHURD, the MOFCOM, the NDRC, the PBOC, theSAIC, and the SAFE jointly promulgated the Opinions on Regulating the Entry and Administration of Foreign Investment in the Real Estate Market, orCircular No. 171, on July 11, 2006, which may impact foreign investment in the real estate industry in the following areas: Circular No. 171 requires a FIREE, with total investments equating to or exceeding US$10 million to have a registered capital consisting of no lessthan 50% of its total amount of investment. FIREEs with total investments below US$10 million must have a registered capital in amounts pursuant to andconsistent with existing regulations. ·The ratio of registered capital and total investment of each of Xinyuan (China) Real Estate, Ltd. ,Zhengzhou Yasheng ConstructionMaterial Co., Ltd., Zhengzhou Jiasheng Real Estate, Ltd and Zhengzhou Yusheng Landscape Design Co., Ltd. meet such requirement. ·Upon payment of the land use rights grant premium, the FIREE can apply to the land administration authority for a land use rightscertificate. Upon obtaining the land use rights certificate, an FIREE may then obtain a recertification of its existing Foreign-InvestedEnterprises Approval Certificate, or FIEAC, and the Business License, with the same validity period as that of such land use rightscertificate; following which, the FIREE may apply to the tax administration for tax registration purposes. ·When a foreign investor merges with a domestic real estate enterprise, or acquires a FIREE’s equity or project, the investor is required tosubmit a guarantee which ensures the compliance with the provisions of the land use rights grant contract, construction site planning permitand construction work planning permit, and the land use rights certificate, and the modification certification issued by the constructionauthorities, and the tax payments certification issued by the relevant tax authorities. ·Foreign investors which merge with domestic real estate development enterprises by share transfers or other methods, or which acquire theequity of a PRC party in joint venture enterprises, must allocate their employees appropriately, deal with bank debts and settle the lumpsum payment of the transfer price through self-owned funds. However, a foreign investor with an unfavorable record may not be allowed toconduct any of the aforesaid activities. ·FIREEs which have not paid up their registered capital fully, or have failed to obtain a land use rights certificate, or which have under 35%of the total capital required for the project, will not be allowed to obtain a loan in or outside China, and foreign exchange administrationdepartments will not approve any settlement of foreign loans by such enterprises. 64  ·Any Chinese or foreign investors in an FIREE may not guarantee fixed profit returns or provide other arrangements to the same effect forany party in any form. Circular No. 50 On May 23, 2007, the MOFCOM and the SAFE issued the Notice on Further Strengthening and Standardizing the Approval and Administration ofForeign Direct Investments in Real Estate Enterprise, or Circular No. 50, and amended on October 28, 2015. Some of the key developments in this area are asfollows: ·the local governments/authorities that approve FIREE establishments are now required to file such approvals with the MOFCOM ·prior to establishing a FIREE, foreign investors are required to obtain land use rights or the ownership of a real estate project, or the investorshould have entered into an indicative land grant contract or indicative project purchase agreement with the land administrativedepartment, developer of the land or owner of the property; ·the practice of allowing foreign investors taking over local project companies by way of roundtrip investment is strictly controlled; and ·foreign-invested enterprise that intends to engage in real estate development, or an existing FIREE which intends to undertake a new realestate development project, must first apply to the relevant authorities for such business scope and scale expansion in accordance with lawsand regulations on foreign investments. Circular No. 23 Under the Circular on Properly Conducting Filing for the Record for Foreign Investment in the Real Property Sector, or Circular No. 23,promulgated by the MOFCOM on June 18, 2008 and effective as of July 1, 2008, the MOFCOM delegated to its provincial branches the review of filingrecords in relation to FIREE’s establishment, capital increase, equity transfer, merger and acquisition, etc. Under Circular No. 23, the local branches of theMOFCOM submit all the application documents that were previously required to be filed with the MOFCOM to the aforesaid provincial branches of theMOFCOM for review. Within five days of receipt of the MOFCOM’s request, the provincial branches of the MOFCOM that have reviewed such filings mustsubmit all of the aforementioned materials to the MOFCOM. Notwithstanding the above, Circular No. 23 does not de-regulate the Chinese real estate market. The previous material requirements for grantingapproval under Circular No. 171 and Circular No. 50 still apply. Under the Notice on Strengthening Administration of the Approval of Foreign Investment into Real Estate Industry , promulgated by the MOFCOMon November 22, 2010, among other things, if a real estate enterprise is established in China with overseas capital, the enterprise is prohibited frompurchasing and/or selling real estate properties completed or under construction for arbitrage purposes. The local counterparts of the MOFCOM are notpermitted to approve investment companies to engage in the real estate development and management. Circular No. 340 The Circular Concerning the Improvement of Record-filing Process for FIREEs, or Circular No. 340, jointly promulgated by the MOFCOM and theSAFE on June 24, 2014 and effective as of August 1, 2014, further simplifies the MOFCOM record-filing process for the incorporation of a FIREE byabolishing the requirement that MOFCOM perform a substantive final review of the written application materials which have been reviewed and accepted forrecord-filing by the relevant provincial commerce authority. The MOFCOM only needs to keep an electronic copy of the relevant application materials on itsonline system for record-filing purposes. However, as a supervisory measure the MOFCOM will, on both a weekly and a quarterly basis, perform randomchecks on FIREEs that have completed record-filings with the relevant provincial-level MOFCOM. 65  Circular No. 895 The Circular Concerning Further Improvement of Record-filing Process for FIREEs, or Circular No. 895, jointly promulgated by the MOFCOM andthe SAFE on November 6, 2015 further simplifies the MOFCOM record-filing process for the incorporation of a FIREE by abolishing the requirement to filerelevant application materials on MOFCOM’s online system. Instead, it only requires provincial commercial authorities to fill out relevant information ofapproved real estate projects on Foreign Investment Management System of MOFCOM. It also provides that MOFCOM must perform random checks on aquarterly basis instead of a weekly basis. Circular No 20 On May 4, 2015, the SAFE promulgated the Circular of the State Administration of Foreign Exchange on Repealing and Revising the RegulatoryDocuments concerning the Reform for Registered Capital Registration System, or the SAFE Circular 20, which allows foreign-invested real estate enterprises,approved by the local office of the MOFCOM and registered with the MOFCOM before June 1, 2007, whose registered capital is not paid up in full to processforeign debts. The Circular of the State Administration of Foreign Exchange on Further Promoting Trade and Investment Facilitation and ImprovingAuthenticity Review was promulgated by the SAFE on April 26, 2016, and provides that foreign debt borrowed by non-financial enterprises in China can besettled for use by referring to the foreign-invested enterprises’ foreign debt rules. Circular No. 122 On August 19, 2015, six PRC regulatory agencies, including the MOHURD and the SAFE, promulgated the Notice on Adjusting Policies on Entryand Administration of Foreign Investment in the Real Estate Market, or Circular 122, among other things, according to which, the requirement of fullypayment of its capital contributions of FIREE, no longer exists when the FIREE applies to domestic loans, overseas loans, and settlement of foreign exchangeloans, and the FIREE may directly apply to bank the registration of foreign exchange regarding foreign direct investment in accordance with the relevantrules on foreign exchange administration. Similarly, Circular 122 does not de-regulate the Chinese real estate market. The previous material requirements forgranting approval under Circular No. 171 and Circular No. 50 still apply. Regulations on Qualifications of Developer Under the Rules on the Administration of Qualifications of Real Estate Developers promulgated on March 29, 2000 by the MOHURD and effectiveon the same day (amended on May 4, 2015) a developer must apply for registration of its qualifications. An enterprise may not engage in the developmentand sale of real estate without a qualification classification certificate for real estate development. In accordance with the above rules, developers are classified into four classes: class I, class II, class III and class IV. A developer that passes thequalification examination will be issued a qualification certificate of the relevant class by the relevant construction authority. A developer of any qualification classification may only engage in the development and sale of real estate within its approved scope of business andmay not engage in business of another classification. A class I developer is not restricted as to the scale of the real estate projects to be developed and mayundertake real estate development projects anywhere in the country. A developer of class II or lower may only undertake projects with a gross area of lessthan 250,000 sq.m. and the specific scope of business must be as confirmed by the local construction authority. Under the Development Regulations, real estate administration authorities examine all applications for the registration of the qualifications of adeveloper when it reports its establishment, by considering its assets, professional personnel and business results. A developer may only undertake real estatedevelopment projects in compliance with the approved qualification registration. After a newly established developer reports its establishment to the real estate administration authority, the latter will issue a temporaryQualification Certificate to the eligible developer within 30 days of its receipt of the above report. The developer must apply for the qualificationclassification by the real estate administration authority within one month before expiry of the temporary Qualification Certificate. 66  Local Regulations on Qualifications of Developer The Regulations on Administration of Development of Urban Real Estate of Henan Province provide the following: ·a class I developer is not restricted as to the scale of the real estate development projects it may undertake and may undertake real estatedevelopment projects anywhere in the PRC; ·a class II developer may undertake projects with a gross area of no more than 250,000 sq.m.; ·a class III developer may undertake projects with a gross area of no more than 100,000 sq.m.; ·a class IV developer may undertake projects with a gross area of no more than 30,000 sq.m.; and ·a developer with temporary qualification may undertake relevant projects in accordance with its certificate. The Rules on the Administration of Qualifications of Real Estate Developers of Shandong Province promulgated on March 8, 2005 provide thefollowing: ·a class I developer is not restricted as to the scale of the real estate development projects it may undertake and may undertake real estatedevelopment projects anywhere in the PRC; ·a class II developer may undertake projects with a gross area of less than 250,000 sq.m. anywhere in the province; ·a class III developer may undertake projects with a gross area of less than 150,000 sq.m. anywhere in the province; ·a class IV developer may undertake projects with a gross area of less than 100,000 sq.m. in the city where it is located; and ·a developer with temporary qualification may undertake relevant projects complying with its actual conditions such as registered capitaland personnel in the city where it is located. The Measures on Administration of Development and Operation of Urban Real Estate of Anhui Province provide the following: ·a class I developer may undertake any real estate development projects; ·a class II developer may undertake projects with a gross area of less than 300,000 sq.m. and a building with no more than 29 floors; ·a class III developer may undertake projects with a gross area of less than 150,000 sq.m. and a building with no more than 15 floors; ·a class IV developer may undertake projects with a gross area of less than 50,000 sq.m. and a building with no more than 7 floors. Shandong Xinyuan Real Estate Co., Ltd. is classified as a class I developer. Each of Xinyuan (China) Real Estate, Ltd., Henan Xinyuan Real EstateCo., Ltd., Jiangsu Jiajing Real Estate Co., Ltd., and Suzhou Xinyuan Real Estate Development Co., Ltd.isclassified as a class II developer. Each of XinyuanReal Estate (Chengdu) Co., Ltd. and Zhengzhou Jiantou Xinyuan Real Estate Co., Ltd. is classified as a class III developer. Each of Henan Xinyuan WanzhuoReal Estate Co., Ltd., Henan Xinyuan Jiye Real Estate Co., Ltd., Zhengzhou Shengdao Real Estate Co., Ltd., Zhengzhou Jiasheng Real Estate Co., Ltd,Chengdu Xinyuan Wanzhuo Real Estate Co., Ltd., Beijing XinyuanWanzhong Real Estate Co., Ltd., Kunshan Xinyuan Real Estate Co., Ltd., XuzhouXinyuan Real Estate Co., Ltd.,Xingyang Xinyuan Real Estate Co., Ltd., Sanya Beida Science and Technology Park Industrial Development Co., Ltd.,Changsha Xinyuan Wanzhuo Real Estate Co., Ltd., Shanghai Junxin Real Estate Co., Ltd., Tianjin Xinyuan Real Estate Co., Ltd., Henan XinyuanGuangsheng Real Estate Co., Ltd., Shandong Xinyuan Renju Real Estate Co., Ltd., Henan Xinyuan Quansheng Real Estate Co., Ltd.,Henan XinyuanShunsheng Real Estate Co., Ltd., Zhengzhou Xinnan Real Estate Co., Ltd. and Hunan Erli Real Estate Co., Ltd. holds a valid temporary qualification. 67  Regulations on Development of a Real Estate Project Commencement of a Real Estate Project and the Idle Land According to the Circular on the Implementation of the Catalog for Restricted Land Use Projects (2012 Edition) and the Catalogue for ProhibitedLand Use Projects (2012 Edition) promulgated by the MLR and the NDRC in May 23, 2012, the area of a plot of land to be granted for residential use maynot exceed (i) 7 hectares for small cities and towns, (ii) 14 hectares for medium-sized cities or (iii) 20 hectares for large cities. The plot area ratio for residentialland should not be lower than 1.0. However, no land may be granted for “villa” real estate projects. Under the Urban Real Estate Law, those who have obtained the land use rights through grant must develop the land in accordance with the terms ofuse and within the period of commencement prescribed in the contract for the land use rights grant. According to the Measures on Disposing Idle Land promulgated by the MLR and effective as of April 28, 1999, as amended on May 22, 2012 andeffective July 1, 2012, with regards to the land for a real estate project which is obtained by grant and is within the scope of city planning, if the constructionwork has not been commenced within one year upon the commencement date as set forth in the land use rights grant contract, or the construction anddevelopment has been started but the area of land that is under construction and development is less than one third of the total area of land that should havebeen under construction and development, or the invested amount is less than 25% of the total investment, and the construction and development of whichhas been suspended for more than one year, a surcharge on idle land equivalent to 20% of the grant premium may be levied; if the construction work has notbeen commenced within two years, the land can be confiscated without any compensation, unless the delay is caused by force majeure, or the acts ofgovernment or acts of other relevant departments under the government, or by indispensable preliminary work. The Emergency Notice on Further Tightening the Administration on Real Estate Land Use and Reinforcing the Control Results of Real EstateMarket promulgated on July 19, 2012, requires that the Measures on Disposing Idle Land be strictly implemented, and the land authority dispose of, case bycase, idle land and publish related information on the website designated by the MLR. With regard to land users who have committed acts such as failing tomake payments for land grants, leaving land idle, hoarding land, land speculation, developing land in excess of its actual development capacity, or failing tofulfill the land use contract, they may be prohibited by the land authority from participating in land auctions for a certain period of time. Planning of a Real Estate Project The Law of the PRC on Urban and Rural Planning, promulgated by the National People’s Congress on October 28, 2007 and effective as of January1, 2008 (amended on April 24, 2015) replacing the previous City Planning Law of the PRC, provides that a developer who has obtained land use rights bygrant must, after obtaining approval for a construction project and signing a land use rights grant contract, apply to the city planning authority for the Permitfor Construction Site Planning It further provides that a developer who has a proposed construction project within the planning area of a city or town must, after obtaining a Permitfor Construction Site Planning, prepare the necessary planning and design work, and submit the detailed planning and design report, together with the landuse rights certificate, to the city planning authority or the town government designated by the provincial government, and apply for the Permit forConstruction Work Planning. 68  Relocation The Regulations of Administration on City Housing Demolition, which were promulgated by the PRC State Council on June 13, 2001 and effectiveas of November 1, 2001, have been revoked and replaced by the Regulations on the Expropriation of Buildings on State-owned Land and Compensation,which was promulgated on January 21, 2011 and went into immediate effect. Pursuant to the newly issued regulations, buildings and houses may beexpropriated for public interests but fair compensation must be provided. Further, the regulations stipulate that the expropriation of buildings and thecorresponding compensation shall be decided based on the principles of democratic decision-making, equitable procedures and transparent results. Thecompensation for the expropriated buildings must not be less than the market value of property of a similar nature as of the date when the expropriationnotice was issued and the fair market value must be determined by qualified real estate appraisal institutes based on the relevant regulations. Upon granting a demolition and removal permit, the real estate administration department must issue a demolition and removal notice to theinhabitants of the area. Construction of a Real Estate Project On June 25, 2014, the MOHURD promulgated the Measures for the Administration of Construction Permits for Construction Projects, supersedingits 1999 version. Under the new measures, after having obtained a Permit for Construction Work Planning, a developer needs to file an application for aConstruction Permit with the local construction authority above the county level. Completion of a Real Estate Project Construction projects shall be delivered for use only after passing the inspection and acceptance examinations under the Construction Law of thePRC which was promulgated on November 1, 1997 and amended on April 22, 2011. According to the Development Regulations, the Regulations on the Administration of Quality of Construction Works promulgated and implementedby the PRC State Council on January 30, 2000, and the Measures on the Administration of Reporting Details regarding Acceptance Examination UponCompletion of Construction Work and Municipal Infrastructure promulgated and implemented on April 4, 2000 by the MOHURD and amended on October19, 2009, a real estate project must comply with the relevant laws and regulations, requirements on construction quality, safety standards and technicalguidance on survey, design and construction work, as well as provisions of the relevant construction contract. After the completion of works for a project, thedeveloper must apply for an acceptance examination to the construction authority and must also report details of the acceptance examination to theconstruction authority. A real estate development project may only be delivered after passing the inspection and acceptance examinations. For a housingestate or building complex, an acceptance examination shall be conducted upon completion of the entire project. In the case of a cluster of real estatedevelopment projects, such as a residential area developed in phases, separate acceptance examinations may be carried out for each completed phase. Regulations on Sale of Commodity Properties Under the Measures for Administration of Sale of Commodity Properties promulgated by the MOHURD on April 4, 2001 and effective June 1, 2001,the sale of commodity properties can include both pre-completion and post-completion sales. Pre-completion Sales In accordance with the Measures for the Administration of Pre-completion Sale of Urban Commodity Properties, or Pre-completion Sale Measures,promulgated in November 15,1994 by the MOHURD and amended on July 20, 2004, a developer intending to sell a commodity building before itsconstruction work’s completion must attend to the necessary pre-completion sale registration with the real estate administration authority of the relevant cityor county to obtain a Permit for Pre-completion Sale of Commodity Properties. Commodity properties may only be sold before completion if: ·the grant land premium has been paid in full for the grant of the land use rights involved and a land use rights certificate has been obtained; 69  ·a permit for construction work planning and a construction permit have been obtained; ·the funds invested in the development of the commodity properties put up for pre-completion sale represent 25% or more of the totalinvestment in the project and the progress of works and the completion and delivery dates have been ascertained; and ·the pre-completion sale has been registered and a permit for pre-completion sale of commodity properties has been obtained. The Circular on Issues Relevant to Further Strengthening the Regulation of the Real Property Market and Improving the System for Pre-sale ofResidential Premises, promulgated by the MOHURD on April 13, 2010, provides that: ·for residential projects for which a pre-sale permit has not yet been obtained, real estate developers may not pre-sell such premises, collector collect in a disguised manner, deposits, reservation fees or other such fees from purchasers in the form of subscriptions, reservations lotdrawings or the issuance of VIP cards, or participate in any exhibition; ·where a real estate developer has obtained a pre-sale permit for its residential project, it must publicize all premises available for sale andthe prices of each unit at one time within 10 days, and must sell the premises to the public with clearly marked prices as filed. Real estatedevelopers may not sell the premises reserved for self-use to the public before the initial registration of the housing ownership, pre-sellpremises through a refund of the sales amount to the purchaser or the guarantee of a lease of the property after sales, or conduct shamtransactions; ·pre-sale permits can only be issued for an entire building but not for individual floors or units; and ·all proceeds from the pre-sale of commodity residential premises must be deposited into accounts monitored by the regulatory authorities toensure that such proceeds are used for construction of the commodity residential premises. Under the Provisions on Selling Real Estate at Expressly Marked Prices, promulgated by the NDRC on March 16, 2011 and took effect on May 1,2011, developers are required to make public the price of each unit of the commodity properties for sale or pre-sale and the number of units available for saleor pre-sale within a certain time period. Developers are also required to state factors that would affect prices and related charges for the sales of commodityproperties, such as commission fee and property management fee. No additional charge beyond what is stated in the price tag announced by the developers ispermitted. The Regulations on Administration of Development of Urban Real Estate of Henan Province also provide that commodity properties may only besold before completion if half or more of the project has been completed and the construction schedule and delivery date has been specified in addition tocompliance with the requirements under the Pre-completion Sale Measures. The Regulations on Administration of Transaction of Urban Real Estate of Jiangsu Province promulgated on February 7, 2002 and amended onAugust 20, 2004 also provide that commodity properties may only be sold before completion in accordance with the requirements under the Pre-completionSale Measures. The Regulations on Administration on Urban Real Estate Transaction of Anhui Province, promulgated on May 29, 2000 and effective as ofDecember 1, 2000, provide that the development enterprises which have obtained a permit for pre-completion sale of commodity properties must file with thereal estate administrative authority of the relevant city or county pre-sale contracts entered into with customers. Management of Proceeds from Pre-sales of Properties The Pre-completion Sale Measures also provide that the proceeds obtained by a real estate developer from the advance sale of commodity propertiesmust be used for the construction of the relevant projects. The specific measures for the supervision of proceeds from the pre-sale of commodity properties areformulated by the real estate administration authorities. 70  In accordance with the Implementing Opinions on Strengthening the Management of Pre-sale of Urban Commodity Properties, promulgated by thePeople’s Government of Sichuan Province on March 23, 2000, the proceeds from pre-sales of properties must be deposited in a special bank account openedby the developers, may only be used for the relevant construction work and may not be used for other purposes. The relevant banks monitor the use of theproceeds of pre-sales and ensure that the proceeds are used in the designated way. Pursuant to the Regulations on Supervision of Proceeds from the Pre-sales of Commodity Properties in Zhengzhou, promulgated by the ZhengzhouPeople’s Government on November 19, 2009 and effective as of December 20, 2009, the proceeds from the pre-sales of properties must be used for theconstruction of the same, which includes the purchase of construction materials and equipment, remittance of fees for construction and taxes payable. Under the Regulations on Supervision and Management of Proceeds from Pre-sales of Commodity Properties of Jinan City, promulgated by theJinan Committee of Construction on March 1, 2016, the proceeds from pre-sales of properties must be saved in the specified account opened by a supervisorycommercial bank and used in the construction of the commodity properties projects. Post-completion Sales In accordance with the Measures for Administration of Sale of Commodity Properties, commodity properties may be put up for post-completion saleonly when the following preconditions for such sale have been satisfied: ·the developer offering to sell the post-completion properties has a valid business license and a qualification classification certificate; ·the developer has obtained a land use rights certificate or other approval documents of land use; ·the developer has the relevant permit for construction project planning and the permit for construction; ·the commodity properties have been completed, inspected and accepted as qualified; ·the relocation of the original residents has been settled; ·the supplementary and essential facilities for supplying water, electricity, heating, gas, communication, etc. have been made ready for use,and other supplementary facilities and public facilities have been made ready for use, or the schedule of construction and delivery date ofsuch facilities have been specified; and ·the property management plan has been completed. Prior to a post-completion sale of a commodity property, a real estate developer is required to submit the Real Estate Development Project Manualand other documents showing that the preconditions for a post-completion sale have been fulfilled to the real estate development authority. Regulations on Property Ownership Certificates Under the Measures for Administration of Sale of Commodity Properties, developers must submit the documents relating to the application forproperty ownership certificates to the local real estate administration authorities within 60 days after the delivery of property to customers. The developersare required to assist customers in applying for amendments in the procedures for land use rights and registration procedures for property ownership. 71  In accordance with the Pre-completion Sale Measures, the purchasers must apply for property ownership certificates to the local real estateadministration authorities within 90 days after the delivery of pre-sale property to purchasers. The developers are required to assist and provide the purchaserswith necessary verifying documents. Where the purchasers fail to obtain the property ownership certificates within 90 days thereafter due to the developer’sfault, unless otherwise provided between the developers and the purchasers, the developers will be liable for the breach of contract. Regulations on Transfer, Mortgage and Lease Transfer According to the Urban Real Estate Law and the Provisions on Administration of Transfer of Urban Real Estate promulgated on August 7, 1995 bythe MOHURD and amended on August 15, 2001, a real estate owner may sell, bequeath or otherwise legally transfer real estate to another person or legalentity. When transferring a building, the ownership of the building and the land use rights to the site on which the building is situated are transferred as well. The parties to a transfer must enter into a real estate transfer contract in writing and register the transfer with the real estate administration authorityhaving jurisdiction over the location of the real estate within 90 days of the execution of the transfer contract. Where the land use rights were originally obtained by grant, the real property may only be transferred if: ·the grant premium has been paid in full for the grant of the land use rights as provided by the grant contract and a land use rights certificatehas been obtained; and ·the development has been carried out according to the grant contract: in the case of a project for which buildings are developed,development representing more than 25% of the total investment has been completed; in the case of a whole land lot development project,construction works have been carried out as planned, water supply, sewerage, electricity supply, heat supply, access roads,telecommunications and other infrastructure or utilities have been made available, and the site has been leveled and made ready forindustrial or other construction purposes. Mortgages of Real Estate Under the Urban Real Estate Law, the Property Law, and the Measures on the Administration of Mortgage of Buildings in Urban Areas promulgatedby the MOHURD in May 9, 1997 and amended on August 15, 2001, when a mortgage is created on the ownership of a building on state-owned land legallyobtained, a mortgage will be simultaneously created on the land use rights of the land on which the building is erected. Land use rights occupied by theproperties will also be mortgaged at the same time. The mortgager and the mortgagee sign a mortgage contract in writing. Within 30 days after a real estatemortgage contract has been signed, the parties to the mortgage must register the mortgage with the real estate administration authority in the city where thereal estate is situated. A real estate mortgage contract will become effective on the date of registration of the mortgage. If a mortgage is created on theproperty placed on pre-sale or which is still undergoing construction, the registration authority will, when registering the mortgage, record such details on themortgage contract. If the construction of the property is completed during the term of a mortgage, the parties involved will have to re-register the mortgageafter the issuance of the relevant certificates evidencing the rights and ownership to the real estate. Lease Under the Urban Real Estate Law and the Measures for Administration of Leases of Commodity Properties promulgated by the MOHURD onDecember 1, 2010 and effective as of February 1, 2011, the parties to a lease of a building are required to enter into a lease contract in writing. When a leasecontract is signed, amended or terminated, the parties must register the details with the real estate administration authority in which the building is situated. 72  On May 17, 2016, the PRC State Council promulgated the Opinions on Accelerating to Cultivate and Develop the Housing Leasing Market,according to which real estate developers are encouraged to engage in housing leasing business. Among others, the government intends to (i) support realestate developers to expand their business scopes, develop housing leasing business by taking advantage of their completed real properties; (ii) encouragereal estate developers to rent the commercial housing in stock and (iii) guide real estate developers to cooperate with the housing leasing enterprises fordeveloping housing leasing business. Regulations on Real Estate Financing The Opinions of the MOHURD and Other Departments on Adjusting the Housing Supply Structure and Stabilizing the Property Prices, issued onMay 24, 2006 by the General Office of the PRC State Council, provides that, to tighten the control of advancing loan facilities, commercial banks are notallowed to advance their loan facilities to developers who do not have the required 35% or more of the total capital for the construction projects. Thecommercial banks should be prudent in granting loan facilities and/or revolving credit facilities in any form to the developers who have a large number ofidle land parcels and unsold commodity properties. Banks may not accept mortgages of commodity properties remaining unsold for more than three years. Interms of minimum down payment, these Opinions provide that: ·the minimum down payment for any purchase of first self-use residential property with a unit GFA of less than 90 sq.m. is 20% of thepurchase price of the property; and ·the minimum down payment for any purchase of first self-use residential property with a unit GFA of 90 sq.m. or more is 30% of thepurchase price of the property. The Circular on Strengthening the Management of Commercial Real Estate Credit Facilities, issued on September 27, 2007 by the PBOC and theCBRC, as supplemented on December 5, 2007 reinstates the minimum down payment requirements specified in the Opinion of the MOHURD and OtherDepartments on Adjusting the Housing Supply Structure and Stabilizing the Property Prices, and further provides that if a family member (including thepurchaser and his / her spouse and their children under 18) has financed the purchase of a residential property with loans from banks, any member of thefamily that purchases another residential property will be regarded as a second-time property purchaser. The Circular of the State Council on Firmly Curbing Precipitous Rise of Some Urban Housing Prices promulgated on April 17, 2010 by the PRCState Council, provides for the implementation of a stricter differentiated housing loan policy, including: ·purchasers of a first residential property for a household with a gross floor area of greater than 90 sq.m.; ·purchasers of a second residential property for a household must make down payments of no less than 50% of the purchase price and theinterest rate of any mortgage for such property must equal at least the benchmark interest rate plus 10%; and ·the minimum down payment amount and applied interest rate must be increased significantly for purchasers of a third residential property. On May 26, 2010, the MOHURD, the PBOC and the CBRC jointly issued a circular clarifying the criteria for determining a “second residentialhousehold property”. Among other matters, the requirements on down payments and interest rates for mortgages on a second residential property will alsoapply to non-local resident purchasers (i.e., purchasers who cannot provide proof that they have been making individual income tax payments or socialsecurity payments in the relevant local area for more than one year) applying for housing-related mortgage financing, regardless of whether there is anyresidential property under the name of a member of their households at the time of application. 73  The Circular of the Ministry of Finance and the State Administration of Taxation on Adjusting the Business Tax Policy on Individual HouseTransfer, promulgated by the Ministry of Finance and the SAT on January 27, 2011, provides that: ·if a person sells housing purchased less than five years ago, business tax will be levied in the full amount of the purchase price of the house;if a person sells non-ordinary housing purchased not less than five years ago, business tax will be levied based on the balance of the salesprice and the purchase price of the house; and ·if a person sells ordinary housing purchased not less than five years ago, business tax will be exempted. However, On March 30, 2015, the Ministry of Finance and the SAT jointly issued the Notice on Adjustment of Business Tax Policies on IndividualTransfer of House, or Circular 39, which became effective on March 31, 2015. According to Circular No. 39, individual property owners are exempt frompaying business tax on the sale of an ordinary housing if he has owned and held it for at least two years. The Circular on Issues Relevant to Improving the Regulation and Control of the Real Property Market promulgated by the General Office of thePRC State Council on January 26, 2011, provides that all local governments and the ministries and commissions under the PRC State Council must complywith the following requirements: ·if an individual transfers a house within five years after purchasing it, all his or her income from such sale will be subject to business tax; ·a household purchasing a second residential household property by mortgage financing, the down payment must not be less than 60% ofthe purchase price, and the interest rate for a mortgage on such property must not be less than 1.1 times of the benchmark interest rate; ·local governments are required to strengthen the administration of housing land supply and the land supply for housing for low-incomepeople and shantytown renovation. Small and medium-sized common commodity property must not be less than 70% of the total housingland supply; ·a local resident household having one residential household property, or a non-local resident household that is able to provide theindividual income tax payment certificate or social insurance contribution certificate for a certain number of years, may only be allowed topurchase one more residential property; and ·a local resident household having two or more residential properties, or a non-local resident household having one or more residentialproperties or is unable to provide the individual income tax payment certificate or social insurance contribution certificate for a certainnumber of years, may not be allowed to purchase any residential property in the local area. In accordance with the Circular of the MOHURD and the SAFE on Further Regulating the Administration of Houses Purchase by Overseas Entitiesand Individuals promulgated on November 4, 2010, except as otherwise provided in the law, an overseas individual may only purchase one house unit forpersonal residence, and an overseas entity establishing domestic branches or representative offices may only purchase non-residential houses in the city ofregistration for business purposes. On February 20, 2013, the PRC State Council, in an executive meeting, stated that it is still a national policy to take action to curb investment andspeculation in the housing market. The PRC State Council required the local governments continue to stabilize the housing price and restrict the speculationin the housing market. The meeting also determined that the trial regions for real property tax will be enlarged. On February 26, 2013, the General Office of the PRC State Council announced the Circular on Continuing to Improve the Regulation and Controlof the Real Estate Market, which among others, provides the following requirements: ·all municipalities directly under the central government, municipalities with independent planning status, and provincial capital cities(excluding Lhasa) must promulgate their own plans and targets for price controls on newly constructed commodity properties (excludinglow-cost housing projects) in 2013 based on the principle of stabilizing the current market price. Such plans and targets must be publishedwithin the first quarter of 2013; 74  ·limitations on the purchase of commodity properties must be strictly implemented, and the scope of such limitations must cover all newlyconstructed commodity properties and second-hand properties located within the entire administrative area of the city in question; ·non-local resident families that already hold a property and non-local resident families that cannot prove their local payment of tax and/orsocial insurance for a required period of time shall be suspended from purchasing any property within the local administrative area; ·for those cities with excessive growth in housing prices, the local counterparts of the PBOC may further increase down payment ratios andinterest rates for loans to purchase second properties in accordance with the price control policies and targets of the corresponding localgovernments; and ·the gains generated from the sale of a self-owned property shall be subject to individual income tax at a rate of 20%, if the original value ofsuch property can be verified through historical information such as tax filings and property registration. In light of the weakening in the property market in China, on March 30, 2015, the PBOC, MHURD and CBRC jointly issued the Circular on Issuesconcerning Individual Residential Mortgage Policies in an effort to stimulate the market. The circular reduces the minimum down payment ratios from 30%to 20% for first home buyers who use the housing provident fund for their purchase and from 60% to 40% for second home buyers with outstandingmortgages who apply for another mortgage. In addition, the circular provides that home buyers who use the housing provident fund for their home purchaseare only required to pay a minimum down payment of 30% for their purchase of a second house if all loans are settled on their first home. On August 27, 2015, the MOHURD, the MOF and the PBOC jointly issued the Circular on Adjusting the Minimum Down Payment for the Purchaseof Houses by Individuals on the Housing Provident Fund Loans. The circular provides that home buyers who use the housing provident fund for their homepurchase are only required to pay a minimum down payment of 20% for their purchase of a second house if all loans are settled on their first home. On September 24, 2015, the PBOC and the CRBC jointly issued the Circular on Issues Concerning Further Improving Differentiated Housing LoanPolicies, which provided that in the cities without restrictive measures for house purchase, the minimum down payment ratio shall be 25% or higher for thefirst home buyers who use the commercial individual housing loans. On February 1, 2016, the PBOC and the CRBC jointly issued Circular of the People's Bank of China and the China Banking RegulatoryCommission on Issues Concerning Adjusting the Individual Housing Loan Policies. It provides that in the cities without restrictive measures for housepurchase, the minimum down payment ratio, in principal, shall be 25% for the first home buyers who use the commercial individual housing loans common,and the said percentage may be lowered by 5% in different regions; with respect to second home buyers with unsettled house purchase loans who purchasefor improving living conditions and use commercial individual housing loans , the minimum down payment ratio shall be at least 30%. On February 17, 2016, the MOF, the SAT and the MOHURD jointly issued Circular on Adjusting Deed Tax and Business Tax Policies for RealEstate Transactions. Regarding deed tax, it provides that for first home buyers purchasing the only residence for their families (family members include thebuyer, the buyer's spouse and under-age children, as applicable hereinafter) with an area of 90 square meters or less, the deed tax is reduced to 1%; for aresidence with an area of more than 90 square meters, the deed tax is reduced to 1.5%. For second home buyers purchasing a second residence with an area of90 square meters or less, the deed tax is reduced to 1%; for residences with an area of more than 90 square meters, the deed tax is reduced to 2%. Regardingbusiness tax, it provides that for any individual who sells his/her ordinary housing that is purchased and owned less than two years ago, full business tax islevied; for an individual who sells his/her ordinary housing purchased and owned not less than two years ago, the business tax is exempted. However, thecircular specifies that the polices regarding deed tax and business tax policies shall not apply to Beijing, Shanghai, Guangzhou and Shenzhen, where thebusiness tax for transfer of residences by individuals as stipulated in the Circular of the Ministry of Finance, and the State Administration of Taxation onAdjusting Business Tax Policies for Transfer of Residences by Individuals still apply. 75  Regulations on Housing Prices and Real Estate Tax On January 7, 2010, the general office of the PRC State Council issued a circular to all ministries and provincial-level local governments to controlthe rapid increase in housing prices and cool down the real estate market in China. The circular reiterated that the purchasers of a second residential propertyfor their households must make down payments of not less than 40% of the purchase price and the real estate developers must commence the sale within themandated period as set forth in the pre-sale approvals and at the publicly announced prices. Further, in order to implement the requirements set out in thePRC State Council’s circular, the MLR, issued a notice on March 8, 2010 in relation to increasing the supply of, and strengthening the supervision over, landfor real estate development purposes. The MLR’s notice stipulated that the floor price of a parcel of land must not be lower than 70% of the benchmark landprice set for the area in which the parcel is located, and that real estate developers participating in land auctions must pay a deposit equivalent to 20% of theland parcel’s floor price. On March 16, 2011, the NDRC, issued the Provisions on Selling Real Estate at Expressly Marked Prices, which was implemented on May 1, 2011 toregulate price manipulation and arbitrary price increases by, among other things, requiring developers to re-register with the appropriate governmentdepartment before increasing real estate prices. PRC government agencies have also promulgated several other regulations in a continuous bid to promote theconstruction of public housing, especially rental housing projects. The urban public rental housing policy is targeted at low to middle income families, newemployees without housing and migrants with stable employment in urban areas. Several policies, such as increasing financial aid from central financeagencies and local governments, improving project planning and establishing a sound regulatory mechanism, have been implemented to ensure thesuccessful promotion of affordable housing projects. In addition to the notice above, local government authorities of several municipalities and cities such as Beijing, Zhengzhou, Jinan, Chengdu andHefei have successively promulgated more detailed regulations to restrict residents who have not resided in the local area for a certain period of time (rangingfrom 1 year to 5 years, evidenced by their individual income tax payment track records) from purchasing residential property in that area. On February 15, 2012, the MLR issued the Circular on Issues Relevant to the Regulation and Control of the Real Property Market in 2012, whichprovides that governments must strictly maintain the current range of restrictions on the real estate market. On April 17, 2014, the General office of the PRC State Council issued a notice that, among other things, specifically emphasizes the importance ofadopting real estate tax. On November 24, 2014, the Provisional Regulations on Registration of Real Estate was promulgated by PRC State Council andbecame effective on March 1, 2015. It provides that PRC has established a nationwide property registration system to provide a uniform platform throughwhich ownership information of every registered property can be shared in real-time among different regions in China. If the PRC government promulgatesregulations of real estate tax in the future, it may adversely affect the real estate market in China. The MOF and the SAT jointly promulgated the Circular on Issues concerning the Taxation Basis for Deed Tax, House Property Tax, Land Value-added Tax and Individual Income Tax after the Pilot Collection of Value-Added Tax in Lieu of Business Tax on April 25, 2016 which deducts VAT from thetaxation basis of Deed Tax, House Property Tax, Land Value-added Tax and Individual Income Tax. Regulations on Housing Supply and Improving the Healthy Development of the Real Estate Market The Opinions of the MOHURD and Other Departments on Adjusting the Housing Supply Structure and Stabilizing Property Prices, promulgated onMarch 25, 2015, provide the following: ·commercial banks may not grant loans to any developer whose total investment capital contributed is less than 35% and may not acceptany premises that have been left vacant for more than three years as security; 76  ·land that has been left idle for two years or more will be repossessed by the government without any compensation payment to thedeveloper. Also, land will be treated as being left idle if construction has been halted for more than one year and the total area developed isless than one-third of the whole project area or the capital invested is less than a quarter of the total investment; ·there will be no supply of land for villas and other equivalent real estate development projects, while land allocation for low-density, largehousing developments will remain tight; and ·no planning permit, construction permit or premises pre-sale permit is to be issued for projects that do not comply with the abovementionedrequirements, in particular composite structure projects that exceed planning requirements. The Circular on Increasing the Supply of, and Strengthening the Supervision over, Land for Real Estate Development Purposes issued on March 8,2010 by the MLR, provides that: ·the floor price of a parcel of land must not be lower than 70% of the benchmark land price set for the area in which the parcel is located; ·real estate developers participating in land auctions must pay a deposit equivalent to 20% of the land parcel’s floor price; and ·real estate developers must report to the competent land authorities when they commence and complete the construction of each project,and the land authorities will conduct inspections according to the corresponding land grant contract. This circular also reiterates the policy that the initial installment payment made by real estate developers for a parcel of land must not be less than50% of the overall amount owed for the land use rights. Regulations on Environmental Protection in Construction Projects Under the Regulations on the Administration of Environmental Protection in Construction Project promulgated by the PRC State Council onNovember 29, 1998 and effective as of the same date, each construction project is subject to an environmental impact assessment by the relevant authorities. According to these regulations, a developer is required to submit an environmental impact report, or an environmental impact report form, or anenvironmental impact registration form (as the case may be) to the relevant environmental protection administration for approval during the project’sfeasibility analysis stage. In the meantime, if any ancillary environmental protection facilities are necessary in the construction project, such facilities arerequired to be designed, constructed and used in conjunction with the main project. After completion of the project, the developers are required to apply tothe relevant environmental protection administrations for final acceptance examination in respect of any ancillary environmental protection facilities.Construction projects are approved for use after passing the said acceptance examination. The Environmental Impact Assessment Law, promulgated by the National People’s Congress on October 28, 2002 and amended on July 2, 2016,provides that if the environmental impact assessment documents of a construction project have not been examined by the relevant environmental protectionadministrations or are not approved after examination, the construction work unit may not commence work. On July 6, 2006, the State Environmental Protection Administration issued its Circular on Strengthening the Environmental ProtectionExamination and Approval and Strictly Controlling New Construction Project, which provides for stringent examination and approval procedures forvarious real estate development projects. It also stipulates that no approvals may be issued for new residential projects or extensions in industry developmentzones, areas impacted by industrial enterprises or areas where such development poses potential harm to residents’ health. 77  Regulations on Property Management The Property Management Rules, issued by the PRC State Council on June 8, 2003 and amend on August 26, 2007 and February 6, 2016, providethat property owners have the right to appoint and dismiss property service enterprises (formerly known as property management enterprises). The rules alsoestablish a regulatory system for property service enterprises, which encompasses the following regulations: ·the Measures for the Administration of Qualifications of Property Service Enterprises (formerly known as the Measures for theAdministration of Qualifications of Property Management Enterprises) amended by the MOHURD and effective as of May 4, 2015,provide that property service enterprises must apply to the local branch of the MOHURD and undertake a qualification examination toobtain a Property Service Qualification Certificate. A property service enterprise must pass the Property Service Qualification (formerlyknown as the Property Management Qualification), or PSQ examination, in order to engage in property management. Property serviceenterprises are classified as class I, II or III. Different classes of service enterprises have different establishment requirements and maymanage different types of premises. ·the Measures on the Administration of Bid Solicitation and Bidding concerning Preliminary Property Management, promulgated on June26, 2003 by the MOHURD, provide that prior to the selection of the Property Owners’ Committee, or the POC, the developer will select aproperty management enterprise to provide property management services. ·the NDRC and the MOHURD jointly promulgated the Measures on the Administration of Property Management Service Fees on November13, 2003, which provide that property management fees will be determined by mutual consent between the POC and the propertymanagement enterprise, and set forth in writing in the property management service contract. Xinyuan Science and Technology Service Co., Ltd. is a class I property management company. Regulations on Urban Landscaping Services The Regulations regarding Urban Landscape promulgated on June 22, 1992, and amended on January 8, 2011 by the PRC State Council and theMeasures on the Administration of Qualifications of Urban Landscaping Enterprises promulgated on July 4, 1995, as amended on October 9, 2009, providethe following: ·any enterprise that wishes to provide landscaping services must apply to the MOHURD’s local branch for an urban landscapingqualification, or ULQ certificate; and ·if a landscaping enterprise wishes to provide landscaping service outside the province where it is registered, it must establish branches insuch locales and submit its original ULQ certificate for filing with the MOHURD’s respective local branch. Local Regulations on Urban Landscaping Services On August 7, 2006, the Construction Bureau of Henan promulgated the Implementation Measures on the Administration of Qualifications of UrbanLandscaping Enterprise in Henan. These measures require a newly-established landscaping enterprise to apply to the local construction administration for atemporary class III qualification. The requirements for a temporary class III qualification are the same as for a class III qualification (except no requirement forexperience). A temporary class III qualification is valid for two years, after which, the local construction administration authority will issue a class IIIqualification if the enterprise successfully passes an examination. Otherwise, the local construction administration authority will extend the temporaryqualification term or withdraw the temporary class III qualification. A ULQ certificate is subject to an annual inspection by the local constructionadministration authorities. United States Our operations in the U.S. will be subject to extensive regulations imposed and enforced by various federal, state, and local governing authorities.These regulations are complex and include building codes, land zoning and other entitlement restrictions, health and safety regulations, labor practices,marketing and sales practices, environmental regulations, and various other laws, rules, and regulations. Collectively, these regulations have a significantimpact on the site selection and development of our properties, our design and construction techniques, our relationships with customers, employees, andsuppliers / subcontractors, and many other aspects of our business. 78  C.Organizational Structure Xinyuan is a holding company established in the Cayman Islands that operates its business and operations through its subsidiaries. For itsoperations in each of the PRC and the U.S., the group has a local holding company which owns the operating entities. The group establishes a separate entityfor each development project. In addition, the group has various subsidiaries which have been created for use in various future ventures. Please refer toExhibit 8.1 to this Annual Report on Form 20-F for a listing of the Company's subsidiaries, including country of incorporation. Please refer to Note 1 of ouraudited consolidated financial statements for the ownership percentages of these subsidiaries. D.Property, plant and equipment Our headquarters are located in Beijing, China, where we lease approximately 3,791 square meters of office space. We also lease a total ofapproximately 9,066 square meters of office space in other cities where our subsidiaries are located, which includes approximately 518 square meters inBeijing, 1,383 square meters in Jinan, Shandong Province, 1,243 square meters in Suzhou, Jiangsu Province, 1,136 square meters in Kunshan, JiangsuProvince, 493 square meters in Xuzhou, Jiangsu Province, 1,814 square meters in Zhengzhou, Henan Province, 1,336 square meters in Xi’an, ShaanxiProvince, 776 square meters in Changsha, Hunan Province, and 367 square meters in New York. ITEM 4A.UNRESOLVED STAFF COMMENTS None. ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidatedfinancial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking statementsbased upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-lookingstatements as a result of various factors, including those set forth under “Item 3. Key Information-D. Risk Factors” or in other parts of this annual report onForm 20-F. A.Operating Results Overview Since our inception in 1997, we have completed 41 projects with total GFA of 5,756,611 square meters. As of December 31, 2016, we had 24projects in 11 cities in China and the United States with estimated total GFA of 4,138,924 square meters under construction and planning, of which 17projects with estimated total GFA of 3,566,254 square meters were under construction. As of December 31, 2015, we had sold all of the certain land parcels inReno, Nevada and condominium units in Irvine, California. In December 31, 2014, we also completed our acquisition of a Malaysian company, which ownsoffshore landfill reclamation rights for a total area of 170 acres (approximately 687,966 square meters). In January 2016, we acquired a parcel of land inmidtown Manhattan with gross floor area of approximately 9,755 square meters. In August 2016, we acquired another parcel of land in Flushing, Queens,New York with gross floor area of approximately 34,615 square meters. Our total revenue, derived primarily from sales of residential real estate, was US$919.7 million in 2014, US$1,164.3 million in 2015, andUS$1,561.6 million in 2016. Our net income was US$48.5 million, US$66.5 million and US$79.5 million, respectively, for the same periods. We acquire landin China primarily through auctions of government land, direct negotiation and acquisition of landowning entities. These acquisition methods allow us toobtain unoccupied land with unencumbered land use rights, which in turn enables us to save the time and expenses associated with protracted legal processesto obtain title, demolition and re-settlement and to commence construction quickly. 79  The most significant factors that directly or indirectly affect our financial performance and results of operations are: ·Economic growth and demand for residential property in China and, since 2012, in the U.S.; ·PRC government policies and regulations, including tax guidelines and lending policies for the real estate sector; ·Location, number and type of our property developments; ·Availability and cost of financing; ·Acquisition of quality land use rights or title to quality properties in our target markets; ·Changes in the price of raw materials and labor costs; and ·Our execution capability to support business expansion. Principal Factors Affecting Our Results of Operations Economic growth and demand for residential property in China and since 2012, in the U.S. Our business and results of operations are significantly affected by trends and developments in the PRC economy, including disposable incomelevels, urbanization rate, population growth, and availability of project and consumer financing, which affect demand for residential properties in China.During the past decade, China has experienced significant economic growth, which has created a favorable operating environment for us in the cities wherewe operate. As of December 31, 2016, 97.1% of the units in our completed projects have been sold. We have periodically experienced some volatilities indemand due to the strict mortgage policy and other measures taken by the PRC government to slow down the rapid increase in housing prices, such as theCircular on Continuing to Improve the Regulation and Control of the Real Estate Market announced by the General Office of the PRC State Council inFebruary 2013 which, among others, requires an individual income tax at a rate of 20% on gains generated from the sale of a self-owned property (See "ITEM4 INFORMATION ON THE COMPANY - B. Business Overview - Regulation - China - Regulations on Real Estate Financing"). However, we expectcontinuing economic growth in China, rising disposable income levels and population growth in our target cities to support demand for residential propertiesover the next several years. If we continue to expand our business operations in the U.S., trends and development in the U.S. economy, includingdevelopments in the U.S. housing markets, will become increasing important to our business and results of operations. PRC government policies and regulations Our business and results of operations are significantly affected by PRC government policies and regulations, particularly those that relate to landsales and development, project and consumer financing, property sales and transfers, property taxation and residential property prices. In connection with the rapid rise in housing prices as the PRC real estate market recovered from the impact of financial crisis, the general office ofPRC State Council issued a circular on January 7, 2010, which aimed to control the rapid increase in housing prices and cool down the real estate market.Among other matters, the circular reiterated that purchasers of a second residential property for their households must make down payments of no less than40% of the purchase price, and that real estate developers who have received approval to sell property must commence sales within the mandated period atthe price they have publicly announced. The circular also requested local governments to increase the effective supply of low income housing and ordinarycommodity housing and instructed the PBOC and the CBRC to tighten the supervision of bank lending to the real estate sector. 80  The General Office of the PRC State Council promulgated the Circular on Issues Relevant to Improving the Regulation and control of the RealProperty Market on January 26, 2011, which provided, among other things, that for a household purchasing a second residential household propertyutilizing mortgage financing, the down payment must be at least 60% of the purchase price, and the interest rate for the mortgage on the second residentialhousehold property must be at least 1.1 times the benchmark interest rate; in municipalities, the capital city of each province, and other cities where housingprices are too high, a local resident household having one residential household property, or a non-local resident household which is able to provide requiredcertificates as to payment of income tax and social insurance contributions for a certain number of years, may only purchase one additional residentialproperty; for a local resident household already having two or more residential property, or a non-local resident household that already has one or moreresidential properties or is unable to provide the requisite certificates, the purchase of any residential property in the local area is not permitted. Localitiesthat have already promulgated their own policies on limiting the purchase of residential properties must bring those policies in line with the abovementionedprinciple as soon as possible. Municipalities, capital cities of each province, and other cities where housing prices are too high must promulgate policies tolimit the purchase of residential properties. In accordance with the Notice of the MOHURD and the SAFE on Further Regulating the Administration of Houses Purchase by Overseas Entitiesand Individuals promulgated on November 4, 2010, except as otherwise provided in the law, an overseas individual may only purchase one house unit forpersonal residence, and an overseas entity establishing domestic branches or representative offices may only purchase non-residential houses in the city ofregistration for business purposes. On February 26, 2013, the General Office of the PRC State Council announced the Circular on Continuing to Improve the Regulation and Controlof the Real Estate Market , which, among others, provided the following requirements: (i) limitations on the purchase of commodity properties must bestrictly implemented, and the scope of such limitations must cover all newly constructed commodity properties and second-hand properties located withinthe entire administrative area of the city in question; (ii) for those cities with excessive growth in housing prices, the local counterparts of the PBOC mayfurther increase down payment ratios and interest rates for loans to purchase second properties in accordance with the price control policies and targets of thecorresponding local governments; and (iii) the gains generated from the sale of a self-owned property shall be subject to individual income tax at a rate of20%, if the original value of such property can be verified through historical information such as tax filings and property registration. On October 9, 2014, the MOHURD, the MOF, and the PBOC jointly issued the Notice of MOHURD, MOF and PBOC on Developing the Business ofIndividual Housing Loan through Housing Fund, which specifies that employees who make their payments of housing fund for consecutive 6 months willapply for individual housing loan through housing fund, and local authorities may raise the amount that one can apply for under certain conditions. On August 19, 2015, six PRC regulatory agencies, including the MOHURD and the SAFE, promulgated Circular 122 which, among other things,allows the branches and representative offices of foreign enterprises established in China (except enterprises that are approved to conduct real estate businessin China), and foreign individuals who work or study in China to purchase commodity houses for the purposes of self-use or self-living. On March 7, 2016, during the National People's Congress and the Chinese Political Consultative Conference, the All-China Federation of Industryand Commerce made a proposal concerning propelling relief of real estate inventory. The proposal includes suggestions such as introducing real estate trusts,using individual income tax to charge against interest of housing loans, etc. We believe that it is in the PRC government’s interest to stabilize the market and to encourage the urbanization process and that increases ofdisposable income will continue to support the long-term growth of China’s real estate market. Accordingly, we expect that the government will maintainpolicies that will foster long-term healthy growth and curb potential bubbles in the market. However, we cannot assure that the PRC government will notadopt further measures in the near future that may adversely affect our business and financial performance or that a real estate bubble will not develop despitegovernment efforts to discourage such development. 81  Moreover, a substantial portion of our customers depend on mortgage financing to purchase our properties. Although government policies havegenerally fostered the growth of private home ownership, regulations have been adopted in recent years to tighten and then loosen mortgage lending rules.For example, the minimum down payment required for residential properties of 90 square meters or more was increased from 20% to 30% of the purchaseprice in 2006. In September 2007, the minimum down payment for any second or subsequent purchases of residential property was increased to 40% of thepurchase price where the purchaser had obtained a bank loan to finance the purchase of his or her first property. Moreover, the interest rate for bank loans ofsuch purchase may not be less than 110% of the PBOC, benchmark rate of the same term and category. Effective as of December 20, 2008, however, residentswho have already purchased, with mortgages, an “ordinary property for self-use” that is smaller than the average size for their locality are entitled to thepreferential loan interest rate and down payment ratio available to first-time purchasers of residential property when they purchase a second property toimprove their living conditions. Since January 26, 2011, for a household purchasing a second residential household property with mortgage financing, thedown payment must be at least 60% of the purchase price and the interest rate for the mortgage on such property must be at least 1.1 times the benchmarkinterest rate. On September 29, 2014, the PBOC and CBRC issued the Circular of PBOC and CBRC on Further Improving Financial Services for Housing,among other incentive policies, which specifies that the minimum down payment percentage is 30% for purchasers of a first residential property for theirhouseholds, and the minimum loan interest rate is 70% of the benchmark rate, to be determined by banking financial institutions in light of risk conditions.For purchasers of a second residential property for their households who have paid up the loan that financed the acquisition their first house who apply againto for a loan to finance the purchase of an ordinary commodity house for the purpose of improving their living conditions, the loan policies for the first houseshall apply. In light of the weakening in the property market in China, however, the PBOC, the MOHURD and the CBRC jointly issued the Circular onIssues concerning Individual Residential Mortgage Policies on March 30, 2015, which came into effect on March 31, 2015, as a measure to shore up themarket. The circular reduces the minimum down payment ratios from 30% to 20% for first home buyers who use the housing provident fund for their purchaseand from 60% to 40% for second home buyers with outstanding mortgages who apply for another mortgage. In addition, the circular provides that homebuyers who use the housing provident fund for their home purchase are only required to pay a minimum down payment of 30% for their purchase of a secondhouse if all loans are settled on their first home. On August 27, 2015, the MOHURD, the MOF and the PBOC jointly issued the Circular on Adjusting the Minimum Down Payment for the Purchaseof Houses by Individuals on the Housing Provident Fund Loans. The circular provides that home buyers who use the housing provident fund for their homepurchase are only required to pay a minimum down payment of 20% for their purchase of a second house if all loans are settled on their first home. On September 24, 2015, PBOC and CRBC jointly issued the Circular on Issues Concerning Further Improving Differentiated Housing LoanPolicies, which provided that in the cities without restrictive measures for house purchase, the minimum down payment ratio shall be 25% or higher for thefirst home buyers who use the commercial individual housing loans. On February 1, 2016, the PBOC and the CRBC jointly issued Circular of the People's Bank of China and the China Banking RegulatoryCommission on Issues Concerning Adjusting the Individual Housing Loan Policies. It provides that in the cities without restrictive measures for housepurchase, the minimum down payment ratio, in principal, shall be 25% for the first home buyers who use the commercial individual housing loans common,and the said percentage may be lowered by 5% in different regions; with respect to second home buyers with unsettled house purchase loans who purchasefor improving living conditions and use commercial individual housing loans , the minimum down payment ratio shall be at least 30%. The down payment ratio, the loan interest rate and the size of mortgage financing are important factors that affect our results of operations, and wecannot guarantee that our operations will not be adversely affected by future government policies. The PRC government will also from time to time introduce sales tax incentives or disincentives to either stimulate or dampen demand. For example,the required holding period for avoidance of business tax on capital gains on sale of real estate was recently reduced from five years to two years with thepromulgation of Circular 39 on March 30, 2015 in an effort to stimulate the weakening property market in China. 82  On February 17, 2016, the MOF, the SAT and the MOHURD jointly issued Circular on Adjusting Deed Tax and Business Tax Policies for RealEstate Transactions. Regarding the deed tax, the Circular provides that for first home buyers purchasing the only residence for their families (family membersinclude the buyer, the buyer's spouse and under-age children, as applicable hereinafter) with an area of 90 square meters or less, the deed tax is reduced to 1%;for a residence with an area of more than 90 square meters, the deed tax is reduced to 1.5%. For second home buyers purchasing a second residence with anarea of 90 square meters or less, the deed tax is reduced to 1%; for residences with an area of more than 90 square meters, the deed tax is reduced to 2%.Regarding the business tax, the Circular provides that for any individual who sells his/her ordinary housing that is purchased and owned less than two years,full business tax is levied; for an individual who sells his/her ordinary housing purchased and owned not less than two years, the business tax is exempted.However, the Circular specifies that the polices regarding deed tax and business tax policies do not apply to Beijing, Shanghai, Guangzhou and Shenzhen,where the business tax for transfer of residences by individuals as stipulated in the Circular of the Ministry of Finance, and the State Administration ofTaxation on Adjusting Business Tax Policies for Transfer of Residences by Individuals still apply. Location, number and type of our property developments The amount of revenue we record in any given period is affected by a number of factors, including the number, type and location of properties wehave under construction and their stage of completion, whether the completed units have been sold and the realized selling prices for such units. The averageselling prices of our projects vary depending on the types and sizes of the units sold and on the location of the projects. As the overall development movescloser to completion, the sales prices tend to increase because a more established residential community is offered to purchasers. The type of propertydevelopment affects the estimated construction period of the project, which largely determines the revenue recognition method we apply. Revenuerecognized in any period under the full accrual method depends on the number, aggregate GFA and average selling prices of units completed and sold duringthe period. Revenue recognized in any period under the percentage of completion method depends on contracted sales of units in the relevant project and thecompletion progress of a project (measured by the ratio of cost incurred to total estimated cost). As the completion and sales of our projects are not spreadevenly over time, our results of operations may differ significantly from period to period. Availability and cost of financing Like other property developers, we require substantial capital investment for the acquisition of land use rights and the construction of our projects.Our ability to secure financing for such purposes affects the number of projects we are able to develop at any time. On January 18, 2010, the PBOC decided totighten the credit supply by increasing the reserve requirement ratio for commercial banks by 0.5%, which was the first increase since June 2008. As of March25, 2011, the PBOC raised the reserve requirement ratio for large commercial banks by 0.5% to 20%, and small and middle sized financial institutions by0.5% to 16.5% and on June 20, 2011, the reserve requirement ratio was raised to its peak of 21.5% for large commercial banks and 18% for small and middlesized financial institutions. As of May 18, 2012, the reserve requirement ratios have been reduced to 20.0% for large commercial banks and 16.5% for smalland middle sized financial institutions. As of February 4, 2015, the PBOC reduced the reserve requirement ratio by 0.5% to 19.5% for large commercial banksand to 16% for small and middle-sized financial institutions. On April 19, 2015, the PBOC further reduced the reserve requirement ratio for large commercialbanks by 1% to 18.5%, and small and middle sized financial institutions by 1% to 15% in order to free up more credit in China, effective from April 20, 2015.On February 29, 2016, the PBOC further reduced the reserve requirement ratio for large commercial banks by 0.5% to 16.5%, and small and middle sizedfinancial institutions by 0.5% to 13% in order to free up more credit in China, effective from March 1, 2016. Notwithstanding the recent reduction in thereserve requirement amount, any future increases in the reserve requirement ratio will reduce the amount of commercial bank credit available to businesses inChina and may affect our ability to obtain sufficient funding from banks to finance our business expansion. The cost of our financing also affects ouroperating results. We typically obtain bank borrowings for up to 65% of the cost of our land use rights to fund PRC project developments after we receive therequired permits. Interest rates on our commercial bank borrowings vary and are linked to benchmark lending rates published by the PBOC, which fluctuatefrom time to time. 83  In 2007, we issued US$75 million principal amount of floating rate notes, which bore interest at a variable rate based on LIBOR plus 6.8% perannum, and US$25 million principal amount of convertible notes, which bore interest at 2% per annum. These notes were paid in full in April 2010, at whichtime we issued US$40 million principal amount of a 3-year term guaranteed senior secured note (the “Guaranteed Senior Secured Note”) which bore interestat 15.6% per annum. The Guaranteed Senior Secured Note was paid in full prior to its maturity on April 15, 2013. In May 2013, we issued US$200 millionaggregate principal amount of our 13.25% Senior Secured Notes (the “May 2018 Senior Secured Notes”) which bear interest at a rate of 13.25%, which wassubsequently redeemed early in October 2016 for an aggregate payment of US$206,237,340 with loss on extinguishment of debt of US$12,123,750 (see"Loss on extinguishment of debt" below). We issued and sold the 5% Convertible Note in the aggregate principal amount of US$75,761,009, which wassubsequently redeemed early in November 2014 on negotiated terms for an aggregate payment of US$86,272,849 with loss on extinguishment of debt ofUS$9,848,931. We also issued US$200 million aggregate principal amount of our June 2019 Senior Secured Notes which bear interest at 13% per annum. In2016, we issued US$300 million aggregate principal amount of our August 2019 Secured Notes which bear interest at 8.125% per annum. In 2017, we issuedUS$300 million aggregate principal amount of our February 2021 Senior Secured Notes which bear interest at 7.75% per annum. Since 2013, we obtained borrowings from trust companies, with interest rates up to 12.50%. In 2014 and 2015, we also obtained borrowings fromnon-controlling shareholders of certain of our subsidiaries with interest rates up to 12% and 11%, respectively. On December 28, 2015, Xinyuan (China) RealEstate, Ltd. issued the first tranche of the onshore corporate bonds with an aggregate principal amount of US$154 million due on December 28, 2020 (the"First Tranche Bonds") at a coupon rate of 7.5% per annum payable annually. On January 27, 2016, Xinyuan (China) Real Estate, Ltd. issued the secondtranche of the onshore corporate bonds with an aggregate principal amount of US$107 million due on January 27, 2021 (the “Second Tranche Bonds”) at acoupon rate of 7.47% per annum payable annually. On March 14, 2016, Xinyuan (China) Real Estate, Ltd. issued the third tranche of the onshore corporatebonds with an aggregate principal amount of US$77 million due on March 14, 2021 (the “Third Tranche Bonds”) at a coupon rate of 7.09% per annumpayable annually. Upon the third anniversary of the issuance of each tranche of bonds, Xinyuan (China) Real Estate, Ltd may adjust the applicable couponrate and the holders have the right within a specified time period to require the company to repurchase the bonds following the company's announcement ofwhether it intends to increase the interest rate. On August 15, 2016, Xinyuan (China) Real Estate, Ltd. issued a new tranche of onshore corporate bonds withan aggregate principal amount of RMB1.5 billion (US$216 million) due on August 15, 2019 (the “New Tranche”) at a coupon rate of 7.5% per annumpayable annually. Interest is payable on August 15 of each year, commencing August 15, 2017. Upon the first anniversary of the issuance of the NewTranche, Xinyuan (China) Real Estate Ltd may adjust the applicable coupon rate and the holders have the right within a specified time period to require theCompany to repurchase the bonds following the Company’s announcement of whether it intends to adjust the interest rate. We expect our interest costs tofluctuate in future periods as a result of changes in interest rates and the amount of our outstanding borrowings. Acquisition of land use rights or title to properties in target markets Our business model depends to a large extent on our ability to acquire land use rights for development sites and proceed quickly with constructionto shorten our development cycle. As a consequence, we are frequently surveying the market for attractive development opportunities in our target cities.Under current regulations and market practice, land use rights for residential development purposes in China may be acquired from local governmentsthrough a competitive auction or other bidding process, in which the minimum reserve price is determined based on the appraised value. Land use rights mayalso be acquired in the secondary markets. We also utilize a negotiated land acquisition model, which involves deposits on certain lands that we are mostinterested in acquiring, which we believe will improve our chances of successfully acquiring desired land. For a description of this model, see " ITEM 4.INFORMATION ON THE COMPANY - B. Business Overview - Our Property Development Operations in China - Opportunity Identification." Land use rightsprices vary significantly from city to city. Government land auctions are a transparent and competitive process for bringing development land to market, allowing the developer to acquireclean title and the ability to proceed immediately with development. However, as competition for development sites increases, the auction mechanism tendsto lead to higher prices. In 2014, 2015 and 2016, land use rights costs, including auction price and taxes, constituted 39.2%, 40.2% and 35.6%, respectively,of our costs of revenue. During 2016, we incurred an aggregate of US$414.6 million for land acquisitions in China, including deposits for potentialacquisitions under the negotiated land acquisition model. In January 2016, we acquired a parcel of land in midtown Manhattan, New York with gross floorarea of approximately 9,755 square meters. In August 2016, we acquired another parcel of land in Flushing, Queens, New York with gross floor area ofapproximately 34,615 square meters. 84  Increases in the price of raw materials and labor costs We outsource the design and construction of our property developments to third-party service providers. Our third-party contractors are responsiblefor providing labor and procuring a majority of the raw materials used in our project developments. Our construction contracts typically provide for flexiblepayments, subject to changes in certain cases, such as design changes during construction, changes in government-suggested steel prices, cement prices, aswell as labor costs. Any increase in labor costs or other costs which may result in adjustments in payments under our construction contracts could result in anincrease in our construction costs. In addition, the increase in the price of raw materials, such as cement, concrete blocks and bricks, in the long run could bepassed on to us by our contractors, which could increase our construction costs. Any input cost increase could reduce our earnings to the extent we are unableto pass these increased costs to our customers. Our execution capability to support business expansion Since 2006, we have been expanding our residential property development operations from Zhengzhou in Henan Province into other high growthcities, including Beijing, Shanghai, Tianjin, Xingyang in Henan Province, Chengdu in Sichuan Province, Hefei in Anhui Province, Jinan in ShandongProvince, Sanya in Hainan Province, Changsha in Hunan Province, Xi’an in Shaanxi Province, and Suzhou, Kunshan and Xuzhou in Jiangsu Province. Weplan to expand into additional high growth cities as suitable opportunities arise. The development of real estate projects across additional high growth citieswill impose significant demand on our management and other operational resources. Moreover, we will face increased competition and will need to establishbrand recognition and market acceptance for our developments in these new markets. Each of our targeted high growth cities has its own market conditions,customer requirements and local regulations related to the real estate industry. In addition, while our primary focus continues to be residential real estatemarkets in the high growth cities in China, we have expanded into the U.S. market. Our expansion in the U.S. market, which is significantly different fromChina in terms of market conditions, regulatory compliance requirement and customers, imposes significant demands on our management and otheroperational resources. In 2014, we acquired 100% of the shares of a Malaysian company, which owns offshore land fill development rights for a total areas of170 acres (approximately 687,966 sq.m). We have no development experience in Malaysia, nor have we ever engaged in landfill reclamation projects. Suchexpansion also imposes significant demands on our capital and management resources to develop and generate future revenues from projects. The success ofour business expansion depends on our ability to develop, market and deliver quality development projects on time. In addition, the progress and costs of adevelopment project can be adversely affected by many factors, such as delays in obtaining necessary licenses, permits or approvals from relevantgovernment authorities, failure by local contractors to comply with our designs, specifications or standards, and disputes with our third-party contractors. Aswe are not permitted to commence pre-sales in China until we have reached certain milestones in the construction progress for a project, any significant delayin construction could restrict our ability to pre-sell our properties, which could extend the recovery period for our investments. This, in turn, could have anadverse effect on our cash flow, investment returns, results of operations and financial position. Operating Results Revenues We derive our revenues mainly from the development and sale of real estate. In addition, we generate a small percentage of revenue from leasingancillary facilities and residential units in certain of our residential developments, as well as from the provision of related services, including propertymanagement and real estate related services that we provide to residents and purchasers of our residential units. Year Ended December 31, 2014 2015 2016 US$ % US$ % US$ % (in thousands, except for percentages) Real estate sales 892,826 97.1 1,134,467 97.4 1,524,969 97.7 Real estate leasing 4,936 0.5 6,573 0.6 5,946 0.4 Real estate management services income 21,564 2.3 21,611 1.9 30,023 1.9 Other revenue 422 0.1 1,673 0.1 687 0.0 Total revenue 919,748 100.0 1,164,324 100.0 1,561,625 100.0 85  The impact of foreign exchange rate variances on reported revenues in U.S. dollars was an adverse 6.6% for the year ended December 31, 2016,compared to a favorable 1.4% for the year ended December 31, 2015. These variances were due to the fact that the appreciation of the RMB versus the U.S.dollar during 2016 was heightened as compared to 2015. Real Estate Sales Real estate sales represent revenues from the sales of residential properties we develop and acquire. Throughout this annual report, real estate salesare stated net of sales tax levied on the relevant contracted sales value. Sales tax is a one-time tariff which consists of a business tax at the rate of 5%, an urbanconstruction tax at the rate of 0.35% and an education surcharge at the rate of 0.15%. Total sales tax amounted to US$53.2 million, US$67.0 million andUS$30.1 million for 2014, 2015 and 2016, respectively. Beginning May 1, 2016, a value added tax instead of the business tax was levied on the relevantcontracted sales value at the rate of 5%. In the years ended December 31, 2014, 2015 and 2016, we recognized all our real estate sales revenues in China under the percentage of completionmethod. For the years ended December 31, 2014, 2015 and 2016, all the revenues from projects in the U.S. were recognized under the full accrual method. Our real estate sales revenue for 2016 increased significantly principally due to the delivery of projects in the U.S., which were recognized under thefull accrual method, and the impact of sales of units in new projects, especially Kunshan Xindo Park, and Zhengzhou Fancy City II (South), launched in2016, and higher percentage of completion from Xi'an Metropolitan project, which was consolidated on February 23, 2016. Real Estate Leasing Real estate leasing revenues represent the income from the rental of ancillary facilities, including a retail property, parking facilities, kindergartens,elementary schools, and clubhouses in a number of our developments. Real estate management services Real estate management services income is recognized ratably as services are provided over the term of the property management agreements. Other Revenue Other revenue consists primarily of fees received for our property management services, landscaping and computer network engineering and otherreal estate-related services that we provide to residents and purchasers of our residential units. Costs of Revenues The following table sets forth a breakdown of our costs of revenues for the period indicated. Year Ended December 31, 2014 2015 2016 US$ % US$ % US$ % (in thousands, except for percentages) Cost of real estate sales Land use rights costs 265,435 39.2 340,168 38.2 428,260 35.6 Construction costs 385,138 56.8 526,075 59.0 746,312 62.0 Total cost of real estate sales 650,573 96.0 866,243 97.2 1,174,572 97.6 Cost of real estate leasing 3,173 0.5 3,956 0.4 3,683 0.3 Cost of real estate management services 20,440 3.0 19,443 2.2 24,281 2.0 Other costs 3,396 0.5 1,692 0.2 1,100 0.1 Total costs of revenues 677,582 100.0 891,334 100.0 1,203,636 100.0 86  Cost of Real Estate Sales Cost of real estate sales consist primarily of land use rights costs and construction costs. Impairment charges, if any, are also recorded under cost ofreal estate sales. Cost of real estate sales are capitalized and allocated to development projects using the specific identification method. When the full accrualmethod of revenue recognition is applied, cost of sales is recognized by determining the ratio of the area of the relevant units completed and sold to theestimated total project area, and applying that ratio to the estimated total project costs. When the percentage of completion method of revenue recognition isapplied, capitalized costs are released to our statement of comprehensive income based on the completion progress of a project. Land use rights cost. Land use rights costs include the amount we pay to acquire land use rights for our property development sites in China, plustaxes, and the amount we pay to acquire land for our property development in the U.S., plus taxes. We acquire our development sites in the PRC mainly byauctions of government land, direct negotiation and acquisition of land-owning entities. We acquired our development sites or land held for sale in the U.S.generally through off-market transactions, including resale and distressed sales. Our land use rights costs for different projects vary according to the size andlocation of the site and the minimum reserve price for the site, all of which are influenced by government policies, as well as prevailing market conditions.Our land use rights costs have increased in the past few years due to several factors including geographic expansion into certain higher priced markets,generally rising prices in each of our served markets, and increased competition from a growing number of bidders at government land auctions. Construction costs. We outsource the construction of all of our projects to third party contractors, whom we select through a competitive tenderprocess. Our construction contracts provide for flexible payments which cover substantially most of all labor, materials, fittings and equipment costs, subjectto adjustments for certain prescribed contingencies, such as design changes during the construction process or changes in government-suggested steel pricesor cement prices. Our construction costs consist primarily of the payments to our third-party contractors, which are paid over the construction period based onspecified milestones. In addition, we directly purchase and supply a limited range of fittings and equipment, including elevators, window frames and doorframes. Our construction costs also include capitalized interest costs in the amount of US$28.8 million, US$56.8 million and US$103.4 million for 2014,2015 and 2016, respectively. Future losses and impairment charges. When the profitability of a current project deteriorates due to a slowdown in the sales pace, reduction of pricing or some other factor, this indicatesthat there may be a possible future loss on delivery and possible impairment in the recoverability of the assets. Accordingly, the assets of such project aresubsequently reviewed for future losses and impairment by comparing the estimated future undiscounted cash flows for the project to the carrying value ofsuch project. If the estimated future undiscounted cash flows are less than the asset’s carrying value, such deficit will be charged as a future loss and the assetwill then be written down to its estimated fair value. We determine estimated fair value primarily by discounting the estimated future cash flows relating to the asset. In estimating the cash flows for aproject, we use various factors including (a) the expected pace at which the planned number of units will be sold, based on competitive market conditions,historical trends in sales pace and actual average selling prices of similar product offerings and any other long or short-term economic conditions which mayimpact the market in which the project is located; (b) the estimated net sales prices expected to be attained based on the current market conditions andhistorical price trends, as well as any estimated increases in future sales prices based upon the projected rate of unit sales, the estimated time gap betweenpresale and expected delivery, the impact of government policies, the local and regional competitive environment, and certain external factors such as theopening of a subway line, school or factory; and (c) the expected costs to be incurred in the future by us, including, but not limited to, construction cost,construction overhead, sales and marketing, sales taxes and interest costs. 87  Our determination of fair value requires discounting the estimated cash flows at a rate commensurate with the inherent risk associated with the assetsand related estimated cash flows. The discount rate used in determining each project’s fair value depends on the stage of development, location and otherspecific factors that increase or decrease the risk associated with the estimated cash flows. In accordance with our accounting policies, we consider on aquarterly basis whether indicators of impairment of long-lived assets are present. See also “ITEM 5. OPERATING AND FINANCIAL REVIEW ANDPROSPECTS - A. Operating Results - Critical Accounting Policies - Real estate properties development completed and under development” for our policy onimpairment of long-lived assets. For the years ended December 31, 2014, 2015 and 2016 we did not recognize any impairment for our active projects, consisting of projects underconstruction or planning or held for sale or held for lease. Cost of Real Estate Leasing Our cost of real estate leasing consists primarily of depreciation expenses and maintenance expenses associated with the leased properties.Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives of our properties held for leaseare 20-60 years. Cost of real estate management services Our cost of real estate management services consists of employee salaries, maintenance water and electricity charges. Other Costs Other costs represent costs incurred in connection with the property management and real estate services that we provide to residents and purchasersof our residential units. Selling and Distribution Expenses Our selling and distribution expenses include: ·advertising and promotion expenses, such as print advertisement costs, billboard and other display advertising costs, and costs associatedwith our showrooms and illustrative units; ·sales and marketing staff costs, which consist primarily of salaries, welfares and sales commissions; ·agency commissions of approximately 1% of contracted sales on outsourced project sales; and ·other related expenses. As of December 31, 2016, we employed 92 full-time sales and marketing personnel. We expect our selling and marketing expenses to increase in thenear future as we increase our sales efforts, launch more projects and target new markets to expand our operations. General and Administrative Expenses General and administrative expenses principally include: ·staff salaries and benefits, quarterly and annual bonuses, and stock-based compensation; 88  ·traveling and office expenses; ·professional fees, such as audit and legal fees; and ·other expenses. Interest Income Interest income represents interest earned on mainly on our bank balances. Interest Expenses Interest expense includes (i) interest paid on our bank borrowings and other indebtedness, mainly including our US$200 million principal amount ofour May 2018 Senior Secured Notes issued in May 2013(which was redeemed early in October 2016 at the redemption price equal to 106.625% of theprincipal amount), the US$75.7 million principal amount of our Convertible Note issued in September 2013 (which was redeemed early in November 2014on negotiated terms), US$200 million principal amount of our June 2019 Senior Secured Notes issued in December 2013, US$300 million principal amountof our August 2019 Senior Secured Notes, US$338 million principal amount of our public onshore bonds, US$216 million principal amount of our non-public onshore bonds, and US$124.3 million principal amount from loans from non-controlling shareholders of certain of our subsidiaries, (ii) amortizationof debt issuance cost, and (iii) interest expense on capital leases. Except for US$ denominated borrowings from the following: US$99.3 million from The Bank of East Asia, US$48.5 million from Fortress Credit Co.LLC, US$60.0 million US$ from Kent EB-5. LLC, and US$26.6 million from The Bank of Ozarks, all of our borrowings are granted by PRC commercialbanks or financing institutions and denominated in RMB. Our senior secured notes (see below) are also denominated in US$. Interest rates on our long-termPRC bank borrowings are typically variable and linked to benchmark rates published by the PBOC. Our weighted average interest rate on short-term bankloans and other debt as of December 31, 2016 was 6.53%. As of December 31, 2016, the PBOC benchmark rate for a one-year loan was 4.35% per annum andthose for loans of more than one year ranged from 4.75% to 4.9% per annum. The above-mentioned The Bank of East Asia borrowings from oversea branchesof PRC banks are secured by RMB deposits in PRC banks’ local branches and bear interest rates ranging from LIBOR plus 1.1% to LIBOR plus 1.25%. The June 2019 Senior Secured Notes in the principal amount of US$200 million bear interest at the fixed rate of 13.0% per annum. The August 2019Senior Secured Notes in the principal amount of US$300 million bear interest at the fixed rate of 8.125% per annum. Until redeemed, the May 2018 SeniorSecured Notes in the principal amount of US$200 million bore interest at the fixed rate of 13.25% per annum, and the Convertible Note in the principalamount of US$75.7 million bore interest at the fixed rate of 5.0% per annum (see “Loss on extinguishment of debt, ” below). The loans from non-controllingshareholders of certain of our subsidiaries amount to US$124.3 million and bear interest at rates of up to 10.5% per annum. For the year ended December 31, 2016, of US$207.7 million total interest expenses incurred, US$29.9 million did not qualify for capitalizationunder U.S. GAAP and was charged to the current year Statement of Comprehensive Income. Share of loss of Equity Investee On October 22, 2013, our wholly owned subsidiary, Henan Xinyuan Real Estate Co., Ltd. (“Henan Xinyuan”), signed an agreement to acquire the51% equity interest in Shaanxi Zhongmao Economy Development Co., Ltd. as an equity investee company. The investment amounted to RMB37.0 million,equivalent to US$6.1 million as of the contract date. On February 23, 2016, upon the amendment of the articles of association, the Company obtained controlover Shaanxi Zhongmao Economy Development Co., Ltd., which was previously accounted under equity method investment. On March 19, 2014, we together with other four independent shareholders established a joint venture called Huayi Xincheng (Beijing) IntelligentCity Construction Co., Ltd., in which we hold a 40% equity interest. The purpose of the joint venture is to undertake residential property developmentprojects in Beijing. As at December 31, 2016, the joint venture has no active residential projects. 89  On May 27, 2015, the Group together with Nanjing Starry Sky Studios management Co., Ltd. established a joint venture called Beijing Starry SkyFilm Investment Co., Ltd., in which the Group holds a 51% equity interest. The purpose of the joint venture is to operate the movie theatres. The articles ofassociation do not allow for the Company to exercise control over relevant activities of the investee. On January 11, 2016, the Group together with two other independent shareholders established a joint venture called Shenzhen Zhong’an FinancialLease Co., Ltd., in which the Group holds a 25% equity interest. The purpose of the joint venture is to undertake financial lease businesses. On November 3, 2016, the Group together with two other entities established a joint venture called Zhengzhou Xinci Health Service Co., Ltd., inwhich the Group holds a 60% equity interest. The purpose of the joint venture is to provide health services in Zhengzhou. The articles of association do notallow for the Company to exercise control over relevant activities of the investee. On December 26, 2016, the Group together with one other independent shareholder established a joint venture called Wuhan Qiaoxin Real EstateCo., Ltd., in which the Group holds a 49% equity interest. The purpose of the joint venture is to undertake residential property development projects inWuhan. As at December 31, 2016, the joint venture has no active residential projects. Loss on extinguishment of debt On November 7, 2014, we signed a note redemption agreement with TPG to redeem the Convertible Note on November 21, 2014, prior to maturity.The cash redemption amount totaled US$86.3 million represents principal of US$75.7 million, accrued interest up to and including November 21, 2014 ofUS$0.8 million, recognized as interest expense, and loss on extinguishment of debt of US$9.8 million, which was recognized in our consolidated statementof comprehensive income. On October 18, 2016, the Company redeemed the May 2018 Senior Secured Notes for a total redemption amount of US$206,237,340 consisting ofthe entire outstanding principal balance, interest to the redemption date and debt extinguishment loss amounting to US$183,000,000, US$11,113,590 andUS$12,123,750 (equal to 6.625% of the outstanding principal amount) respectively. The Company funded the redemption using the proceeds from theissuance of its August 2019 Senior Secured Notes. Income Taxes The following table sets forth the components of income taxes for the periods indicated. Year Ended December 31, 2014 2015 2016 US$ % US$ % US$ % (in thousands, except for percentages) Corporate income tax 20,792 68.0 48,524 92.4 70,286 81.5 Land appreciation tax (3,771) (12.3) 23,223 44.2 33,254 38.5 Deferred tax expense (benefit) 13,537 44.3 (19,236) (36.6) (17,292) (20.0)Income taxes 30,558 100.0 52,511 100.0 86,248 100.0 For an explanation of deferred tax expense (benefit), see Notes 2(v) and 15 of the consolidated financial statements included elsewhere in thisannual report on Form 20-F. For a discussion of corporate income tax and land appreciation tax, see below. 90  Corporate Income Tax and Unrecognized Tax Benefit Cayman Islands We are incorporated in the Cayman Islands. Under the current law of the Cayman Islands, we are not subject to income or capital gains tax. Inaddition, dividend payments are not subject to withholding tax in the Cayman Islands. People’s Republic of China In general, enterprises in the PRC are subject to income tax at a statutory rate of 25%. For our subsidiaries located in various cities, income tax islevied at the statutory rate of 25% on income as reported in the statutory financial statements after appropriate tax adjustments except in 2009 and 2010when, in accordance with local provisional tax regulations in Henan province, the local tax authority in Zhengzhou determined that the taxable income ofour PRC subsidiaries in Henan province should be deemed from 12% to 20% of their total cash receipts from sales of residential units. Total cash receiptsinclude cash receipts proceeds from pre-sales of our properties that are recorded as customer deposits, which partly comprise mortgage loan proceeds receivedin our account from mortgage lending banks. In addition, the local tax authority of Zhengzhou city approved the application of the deemed profit method forthe CIT settlement of Zhengzhou Modern City project in 2013. We have made provision for the corporate income tax, or CIT, payable by our PRC subsidiaries based on the statutory income tax rate of 25%, afterappropriate adjustments to our taxable income used in the calculation. The difference between tax payable on our actual taxable income and tax levied onthe deemed taxable income basis had been treated as an unrecognized tax benefit under ASC 740-10 “ Income Tax”, or ASC 740-10, which has a balance ofUS$20.5 million as of December 31, 2016. The current year movement in ASC 740-10 liability of US$1.9 million, was recognized as a reduction ofunrecognized tax benefits due to expiration of a three year statute of limitations period in Henan Xinyuan Real Estate Co., Ltd., and the movement of US$0.9million was recognized as a reduction of unrecognized tax benefits due to the availability for taxation deduction in 2016. The addition of US$5.5 million in2016 mainly relates to the deemed interest income from subsidiaries of the Company. Land Appreciation Tax Under PRC laws and regulations, our PRC subsidiaries engaging in property development are subject to LAT, which is levied by the local taxauthorities upon the “appreciation value” as defined in the relevant tax laws. All taxable gains from the sale or transfer of land use rights, buildings andrelated facilities in China are subject to LAT at progressive rates that range from 30% to 60%. Certain exemptions are allowed for sales of ordinary residentialproperties if the appreciation value does not exceed a threshold specified in the relevant tax laws. Gains from sales of commercial properties are not eligiblefor this exemption. Whether a property qualifies for the ordinary residential property exemption is determined by the local government taking intoconsideration the property’s plot ratio, aggregate GFA and sales price. On May 30, 2014, the Modern City project developed by Henan Xinyuan Real Estate Co., Ltd., completed the LAT final settlement with the localtax bureau. We received a tax clearance certificate, which confirmed that our accrual under the deemed profit method was adequate and there was noadditional tax adjustments assessed by the local tax bureau as of May 30, 2014. Based on the above, management performed a reassessment and concludedthat the likelihood of the deemed profit method being overturned is only reasonably possible, and accordingly reversed the LAT liability accrued for theproject amounting to US$16.2 million as of December 31, 2014. Our estimate for the reasonably possible contingency for LAT related to the Modern Cityproject amounted to US$16.2 million, US$16.2 million and US$16.2 million, respectively,as of December 31, 2014, December 31, 2015 and December 31,2016. For the years ended December 31, 2014, 2015 and 2016, we have made provision for LAT with respect to properties sold up to December 31, 2016 inaccordance with the requirements set forth in the relevant PRC tax laws and regulations. 91  Share-based compensation expense We have four share-based compensation plans, our 2007 equity incentive plan, our 2007 long-term incentive plan, our 2014 Restricted Stock UnitPlan and our 2015 incentive plan. Under our 2007 equity incentive plan, we granted share option awards for an aggregate of 6,802,495 common shares at aweighted average exercise price of US$1.08 on August 11, 2007. Under our 2007 long-term incentive plan, we may grant options, restricted shares, restrictedstock units, stock appreciation rights and other stock-based awards for the purchase of up to 10,000,000 common shares. As of December 31, 2016, 1,401,944shares remained eligible for future grants under the plan. Under our 2014 Restricted Stock Unit Plan, we have granted 7,926,068 restricted common shares toemployees and directors that vest ratably over a three year service vesting period. Under our 2015 long-term incentive plan, we may grant options, restrictedshares, restricted stock units, stock appreciation rights and other stock-based awards for the purchase of up to 10,000,000 common shares. As of December 31,2016, 14,498,872 shares remained eligible for future grants under the plan. We charged compensation cost of US$3.2 million, US$4.9 million and US$7.8 million as of December 31, 2014, December 31, 2015 and December31, 2016 in the general and administrative expenses. For a description of the grants under each of the plans, see Note 16 of the consolidated financialstatements included elsewhere in this annual report. Results of Operations The following table presents a summary of our consolidated statements of comprehensive income by amount and as a percentage of our totalrevenue during the periods indicated. Our historical results presented below are not necessarily indicative of the results that may be expected for any otherfuture period. Year Ended December 31, 2014 2015 2016 US$ % US$ % US$ % (in thousands, except for percentages) Revenue 919,748 100.0 1,164,324 100.0 1,561,625 100.0 Costs of revenue (677,582) (73.7) (891,334) (76.6) (1,203,636) (77.1)Gross profit 242,166 26.3 272,990 23.4 357,989 22.9 Selling and distribution expenses (39,494) (4.3) (52,126) (4.5) (58,214) (3.7)General and administrative expenses (105,622) (11.5) (115,329) (9.9) (120,416) (7.7) Operating income 97,050 10.5 105,535 9.0 179,359 11.5 Interest income 14,577 1.6 24,504 2.1 20,917 1.3 Interest expense (28,201) (3.1) (20,281) (1.7) (29,857) (1.9)Exchange gains 706 0.1 403 - 459 - Other income 3,213 0.3 5,944 0.5 4,540 0.3 Share of loss in an equity investee (1,692) (0.2) 2,235 0.2 (325) - Loss on extinguishment of debt (9,849) (1.1) - - (12,124) (0.8)Net realized gain on short-term investments 3,128 0.3 603 0.1 2,506 0.2 Unrealized gain on short-term investments 122 - 49 - 235 - Income from operations before income taxes 79,054 8.4 118,992 10.2 165,710 10.6 Income taxes (30,558) (3.3) (52,511) (4.5) (86,248) (5.5)Net income 48,496 5.1 66,481 5.7 79,462 5.1 Net income attributable to non-controlling interest 19 - 1 - (6,485) (0.4)Net income attributable to Xinyuan Real Estate Co.,Ltd. shareholders 48,515 5.1 66,482 5.7 72,977 4.7 92  Year Ended December 31, 2016 Compared to Year Ended December 31, 2015 Revenue Revenue increased by US$397.3 million, or 34.1%, to US$1,561.6 million for the year ended December 31, 2016 from US$1,164.3 million for theyear ended December 31, 2015. Real estate sales Revenue from real estate sales increased by US$390.5 million, or 34.4%, to US$1,525.0 million for the year ended December 31, 2016 fromUS$1,134.5 million for the year ended December 31, 2015, principally due to the delivery of the New York Oosten project in the U.S. in 2016, the revenuefrom sales of units in new projects, especially Kunshan Xindo Park, and Zhengzhou Fancy City II (South), which launched in July 2016 and June 2016,respectively, and higher percentage of completion from the Xi'an Metropolitan project, which was consolidated by the Group on February 23, 2016. Revenues related to the projects in the U.S. are recognized under the full accrual method. For the year ended December 31, 2015, revenue wasrecognized in the amount of US$0.8 million for the resale of the remaining parcels of the Northern Nevada Land Portfolio and US$0.8 million for the sale ofthe remaining 1 of 15 finished condominium units located in Irvine, California. For the year ended December 31, 2016, revenue was recognized in theamount of US$152.0 million for the sale of 106 of 216 finished condominium units located in Brooklyn, New York. The following table sets forth the percentage of completion, the percentage sold and related revenues for our projects recognized under thepercentage of completion method in China and our project recognized under the full accrual method in the U.S. for each of the years ended December 31,2015 and 2016. For information regarding revenue recognition under the percentage of completion and the full accrual methods, see “Critical AccountingPolicies,” below. 93  Project Total GFA Percentage Complete as of December 31, (1) Percentage Sold (2) Accumulated as of December 31, Revenues Recognized For The Year Ended December 31, 2015 2016 2015 2016 2015 2016 m² % % % % US$ %(3) US$ %(4) Chengdu Segment Chengdu Xinyuan Splendid I 231,032 100.0 100.0 100.0 96.9 1,311,214 0.1 2,418,696 0.2 Chengdu Xinyuan Splendid II 217,010 100.0 100.0 99.9 99.9 - - - - Chengdu Thriving Family 211,381 82.4 92.5 15.8 35.0 35,061,084 3.1 74,071,054 4.9 Jiangsu Segment Suzhou International City Garden 204,872 100.0 100.0 99.5 99.5 344,516 - (182,921) - Suzhou Lake Splendid 198,113 100.0 100.0 99.9 100.0 (217,258) - 209,554 - Suzhou Colorful Garden 81,506 100.0 100.0 100.0 100.0 - - - - Kunshan International City Garden 497,938 100.0 100.0 99.6 99.8 354,879 - 636,469 - Xuzhou Colorful Garden 101,821 100.0 100.0 99.1 99.1 - - - - Suzhou Xin City 127,212 99.8 100.0 99.3 100.0 23,256,900 2.1 1,513,671 0.1 Kunshan Royal Palace 279,953 84.4 95.5 59.5 86.8 164,996,469 14.5 158,197,784 10.4 Xuzhou Colorful City 130,170 75.1 81.3 46.9 54.4 33,762,682 3.0 18,759,154 1.2 Suzhou Lake Royal Palace 169,631 91.9 99.3 48.3 77.8 148,971,755 13.1 117,515,700 7.7 KunshanXindo Park 361,645 - 63.3 - 32.2 - - 52,967,379 3.5 Shandong Segment Jinan International City Garden 263,749 100.0 100.0 99.4 99.6 - - 7,256 - Jinan Xinyuan Splendid 572,235 98.9 99.4 98.7 99.0 74,101,999 6.5 7,054,673 0.5 Shandong Royal Palace 449,650 55.9 71.5 21.1 38.6 56,552,926 5.0 99,227,124 6.5 Jinan Xin Central 194,659 57.3 72.6 26.4 47.0 55,567,629 4.9 63,316,167 4.1 Henan Segment Zhengzhou Xinyuan Colorful Garden 191,891 100.0 100.0 100.0 100.0 - - - - Zhengzhou Finance Square 67,225 100.0 100.0 100.0 100.0 - - - - Zhengzhou Modern City 231,733 100.0 100.0 100.0 100.0 2,183,419 0.2 (603,643) - Zhengzhou Royal Palace 135,877 98.4 99.9 100.0 100.0 3,959,633 0.3 3,063,521 0.2 Zhengzhou International City Garden 280,748 100.0 100.0 100.0 100.0 - - - - Zhengzhou YipinXiangshan Phase I 94,249 100.0 100.0 100.0 100.0 - - - - Zhengzhou YipinXiangshan Phase II 199,876 100.0 100.0 99.8 99.9 (57,451) - 133,008 - Zhengzhou Century East A 76,579 100.0 100.0 99.6 99.6 2,391,144 0.2 145,273 - Zhengzhou Century East B 166,288 100.0 100.0 99.7 99.6 6,478,014 0.6 (102,515) - Zhengzhou Xin City 211,076 93.9 97.9 89.0 90.7 79,758,186 7.0 16,645,474 1.1 Henan Thriving Family 131,508 78.7 92.7 82.3 82.3 37,436,004 3.3 18,348,545 1.2 Xingyang Splendid Phase I 117,264 72.6 77.1 66.6 74.6 23,317,771 2.1 8,357,507 0.5 Xingyang Splendid Phase II 137,209 40.6 57.8 5.6 34.0 1,854,936 0.2 23,581,474 1.5 Henan Xin Central 262,208 49.2 67.7 25.0 68.5 43,751,924 3.9 117,811,601 7.7 Zhengzhou Xindo Park 144,432 48.2 78.0 21.8 37.8 20,249,510 1.8 36,438,721 2.4 Zhengzhou Fancy City 166,760 43.6 62.3 30.1 72.6 30,358,098 2.7 71,189,705 4.7 Zhengzhou International New City I 91,204 - 31.9 - 12.0 - - 24,367,819 1.6 Zhengzhou Fancy City II (South) 84,065 - 56.8 - 54.6 - - 43,186,664 2.8 Henan Xin Central II 109,807 - 45.6 - 8.0 - - 6,303,623 0.4 Anhui Segment Hefei Wangjiang Garden 145,455 100.0 100.0 100.0 100.0 - - - - Beijing Segment Beijing Xindo Park 133,050 97.5 100.0 79.5 83.2 166,775,534 14.6 23,722,289 1.6 Changsha Segment Changsha Xinyuan Splendid 251,754 67.1 89.2 20.0 49.4 42,191,276 3.7 105,494,573 6.9 Sanya Segment SanyaYazhou Bay No.1 122,124 62.7 85.9 5.5 9.1 3,534,278 0.3 12,699,957 0.8 Shanghai Segment Shanghai Royal Palace 57,778 88.0 100.0 28.3 62.0 70,058,447 6.2 100,003,503 6.6 Tianjin Segment Tianjin Spring Royal Palace 278,570 25.3 36.5 5.2 25.6 4,631,258 0.4 39,912,406 2.6 Xi’an Segment Xi'an Metropolitan 290,663 - 94.1 - 47.0 - - 126,550,015 8.3 US Segment Northern Nevada Land Portfolio(5) N/A N/A N/A N/A N/A 750,000 0.1 - - Lennox Project(6) N/A N/A N/A N/A N/A 780,000 0.1 - - New York Oosten N/A N/A N/A N/A N/A - - 152,007,123 10.0 Total 8,471,970 1,134,466,776 100.0 1,524,968,403 100.0 (1)Percentage of completion is calculated by dividing total costs incurred by total estimated costs for the relevant project, estimated as of the time ofpreparation of our financial statements as of and for the year indicated.(2)Percentage sold is calculated by dividing contracted sales value from property sales by total estimated sales value of the relevant project, estimatedas of the time of preparation of our financial statements as of and for the year indicated.(3)Percentage of all real estate sales revenues for the financial year, including revenues recognized under the percentage of completion method.(4)Percentage of all real estate sales revenues for the financial year, including revenues recognized under the percentage of completion method andunder the full accrual method.(5)Northern Nevada Land Portfolio is a land portfolio, comprised of 325 finished lots and 185 acres of undeveloped land, at eight sites, in the northernNevada region near the Reno-Spark metropolitan area. We had an opportunity to promptly resell several parcels and recognized revenue of US$0.8million for the year 2015. All units were sold as of December 31, 2015.(6)The finished condominium project is located in Irvine, California, United States. We acquired 15 units with a total GFA of 2,865 square meters outof the total 72 units from a major U.S. developer in August 2012. For the year ended December 31, 2015, we resold 1 of 15 finished condominiumunits and recognized revenue in the amount of US$0.8 million. All units were sold as of December 31, 2015. 94  The following table sets forth the square meters sold and average selling price per square meter for each project, each reportable segment and on aconsolidated basis for each of the years ended December 31, 2015 and 2016. Year Ended December 31, 2015 2016 Project Contract Sales Square Meters Sold Average Selling Price Contract Sales Square Meters Sold Average Selling Price US$ m² US$/m² US$ m² US$/m² Chengdu region Chengdu Xinyuan Splendid I 1,391,318 - - 2,555,479 - - Chengdu Xinyuan Splendid II 42,395 - - 13,205 - - Chengdu Thriving Family 42,179,974 48,507 870 79,008,200 81,660 968 Total 43,613,687 48,507 899 81,576,884 81,660 999 Jiangsu region Suzhou International City Garden 143,663 102 1,408 17,774 25 711 Suzhou Lake Splendid - - - - - - Suzhou Xin City 6,470,062 3,418 1,893 1,158,953 405 2,862 Suzhou Lake Royal Palace 168,246,492 100,279 1,678 111,902,762 38,196 2,930 Kunshan International City Garden 150,139 118 1,272 257,128 330 779 Kunshan Royal Palace 168,097,031 114,066 1,474 143,059,329 64,105 2,232 KunshanXindo Park - - - 88,373,356 31,504 2,805 Xuzhou Colorful Garden (1,152,860) (900) 1,281 - - - Xuzhou Colorful City 29,341,359 20,242 1,450 18,310,169 11,000 1,665 Total 371,295,886 237,325 1,565 363,079,471 145,565 2,494 Shandong region Jinan International City Garden 39,183 15 2,612 248,185 - - Jinan Xinyuan Splendid 26,718,388 19,198 1,392 3,526,150 2,332 1,512 Shandong Royal Palace 102,215,975 101,352 1,009 115,564,954 102,608 1,126 Jinan Xin Central 102,800,660 67,252 1,529 72,593,212 47,307 1,535 Total 231,774,206 187,817 1,234 191,932,501 152,247 1,261 Henan region Zhengzhou Royal Palace 70,004 224 313 (89,463) - - Zhengzhou Modern City 2,406,590 248 9,704 601,795 714 843 Zhengzhou Yipin Xiangshan Phase II 291,068 90 3,234 64,157 266 241 Zhengzhou Century East A 856,426 - - 143,085 34 4,208 Zhengzhou Century East B 3,196,492 (125) (25,572) 91,678 79 1,160 Zhengzhou Xin City 39,865,645 15,878 2,511 (1,006,442) (599) 1,680 Zhengzhou Thriving Family 15,143,206 12,974 1,167 1,083,975 498 2,177 Xingyang Splendid Phase I 20,693,198 25,216 821 8,225,808 8,724 943 Xingyang Splendid Phase II 5,783,511 5,502 1,051 39,632,208 47,194 840 Henan Xin Central 94,181,923 77,420 1,217 161,574,449 127,088 1,271 Zhengzhou Xindo Park 44,511,220 31,929 1,394 38,471,271 39,303 979 Zhengzhou Fancy City 73,790,219 57,552 1,282 103,205,094 76,608 1,347 Zhengzhou Fancy City II (South) - - - 80,275,345 53,165 1,510 Zhengzhou International New City I - - - 80,672,150 49,945 1,615 Henan Xin Central II - - - 14,832,610 9,007 1,647 Total 300,789,502 226,908 1,326 527,777,720 412,026 1,281 Beijing region Beijing Xindo Park 145,862,389 52,432 2,782 14,908,688 2,881 5,175 Hunan region Changsha Xinyuan Splendid 64,625,618 72,831 887 108,423,470 105,602 1,027 Hainan region Sanya Yazhou Bay No.1 10,831,126 5,380 2,013 8,196,064 5,391 1,520 Shanghai region Shanghai Royal Palace 84,288,117 24,378 3,458 96,201,896 22,000 4,373 Tianjin region Tianjin Spring Royal Palace 19,394,472 14,064 1,379 110,203,567 96,006 1,148 Xi’an region Xi'an Metropolitan - - - 107,380,513 90,439 1,187 U.S. Oosten project - - - 152,007,123 12,180 12,480 Grand Total 1,272,475,003 869,642 1,463 1,761,687,897 1,125,997 1,565 95  Total square meters sold increased to 1,125,997 square meters for the year ended December 31, 2016 from 869,642 square meters for the year endedDecember 31, 2015. The increase was mainly due to the four new projects launched in 2016 and our major development projects Xi'an Metropolitan andTianjin Spring Royal Palace. The overall aggregate average selling price per square meter for the year ended December 31, 2016 increased to US$1,565 from US$1,463 for theyear ended December 31, 2015 primarily due to stronger pre-sales of higher margin saleable units that occurred in 2016. Total revenues increasedsignificantly by 34.1% to US$1,561.6 million from US$1,164.3 million in 2015, principally due to the delivery of the New York Oosten project in the U.S.,of which the revenue was recognized under the full accrual method, the revenue from sales of units in new projects, especially Kunshan Xindo Park,Zhengzhou Fancy City II (South), each of which launched in July 2016 and June 2016, respectively, and higher percentage of completion from Xi'anMetropolitan project, which was consolidated by the Group on February 23, 2016. Chengdu region. Total square meters in this region sold for the year ended December 31, 2016 increased to 81,660 square meters from 48,507 squaremeters for the year ended December 31, 2015, primarily due to increased sales of Chengdu Thriving Family which was launched in 2014. The average sellingprice per square meter for the year ended December 31, 2016 increased to US$999 from US$899 for the year ended December 31, 2015, which is attributableto the positive market momentum in high growth tier 1 and tier 2 cities. Jiangsu region. Total square meters sold for the year ended December 31, 2016 decreased to 145,565 square meters from 237,325 square meters forthe year ended December 31, 2015, mainly due to reductions of saleable units of Suzhou Lake Royal Palace and Kunshan Royal Palace, partially offset bynewly launched pre-sales of Kunshan Xindo park. The average selling price per square meter for the year ended December 31, 2015 increased to US$2,494from US$1,565 for the year ended December 31, 2015, which is attributable to the positive market momentum in high growth tier 1 and tier 2 cities. Shandong region. Total square meters sold for the year ended December 31, 2016 decreased to 152,247 square meters from 187,817 square metersfor the year ended December 31, 2015, mainly due to reductions of saleable units of Jinan Xinyuan Splendid and Jinan Xin Central. The average selling priceper square meter for the year ended December 31, 2016 increased slightly to US$1,261 from US$1,234 for the year ended December 31, 2015. 96  Henan region. Total square meters sold for the year ended December 31, 2016 increased to 412,026 square meters from 226,908 square meters forthe year ended December 31, 2015, mainly due to increased sales of Zhengzhou Fancy City, Henan Xin Central and newly launched pre-sales of ZhengzhouFancy City II (South), Zhengzhou International New City I and Henan Xin Central II, partially offset by the reductions of saleable units of Zhengzhou XinCity, Zhengzhou Thriving Family and Xingyang Splendid I. The average selling price per square meter for the year ended December 31, 2016 decreased toUS$1,281 from US$1,326 for the year ended December 31, 2015, resulting from the reduction in high margin units available for sale. Beijing region. Total square meters sold for the year ended December 31, 2016 decreased to 2,881 square meters from 52,432 square meters for theyear ended December 31, 2015, mainly due to reductions of saleable units of Beijing Xindo Park. The average selling price per square meter for the yearended December 31, 2016 increased to US$5,175 from US$2,782 for the year ended December 31, 2015, resulting from the rapidly rising commercialproperty prices in top-tier cities. Hunan region. Total square meters sold for the year ended December 31, 2016 increased to 105,602 square meters from 72,831 square meters for theyear ended December 31, 2015, mainly due to increased sales of Changsha Xinyuan Splendid which was launched in 2014. The average selling price persquare meter for the year ended December 31, 2016 increased to US$1,027 from US$887 for the year ended December 31, 2015, resulting from the positivemarket momentum in high growth tier 1 and tier 2 cities. Hainan region. Total square meters sold for the year ended December 31, 2016 increased slightly to 5,391 square meters from 5,380 square metersfor the year ended December 31, 2015. The average selling price per square meter for the year ended December 31, 2016 decreased to US$1,520 fromUS$2,013 for the year ended December 31, 2015, resulting from the reduction in high margin units available for sale. Shanghai region. Total square meters sold for the year ended December 31, 2016 decreased to 22,000 square meters from 24,378 square meters forthe year ended December 31, 2015, mainly due to reductions of saleable units of Shanghai Royal Palace. The average selling price per square meter for theyear ended December 31, 2016 increased to US$4,373 from US$3,458 for the year ended December 31, 2015, resulting from the rising residential propertyprices in top-tier cities. Tianjin region. Total square meters sold for the year ended December 31, 2016 increased to 96,006 square meters from 14,064 square meters for theyear ended December 31, 2015, mainly due to increased sales of Tianjin Spring Royal Palace. The average selling price per square meter for the year endedDecember 31, 2016 decreased to US$1,148 from US$1,379 for the year ended December 31, 2015, resulting from the reduction in high margin units availablefor sale. Xi'an region.In the first quarter of 2016, the Group obtained control over Shaanxi Zhongmao Economy Development Co., Ltd. by acquiring its65.98% voting interests. Total square meters sold for the year ended December 31, 2016 was 90,439 square meters and the average selling price per squaremeter for the year ended December 31, 2016 was US$1,187. U.S. region. In 2016, we commenced sales of our New York Oosten project in the U.S. region. Total square meters sold for the year ended December31, 2016 was 12,180 square meters and the average selling price per square meter for the year ended December 31, 2016 was US$12,480. Real estate leasing Real estate leasing income decreased by US$0.7 million, or 10.6% to US$5.9 million for the year ended December 31, 2016 from US$6.6 million forthe year ended December 31, 2015. Real estate management services income Real estate management services income increased by US$8.4 million, or 38.9%, to US$30.0 million for the year ended December 31, 2016 fromUS$21.6 million for the year ended December 31, 2015. The increase primarily resulted from expanded property management service operations. 97  Other revenue Other revenue decreased by US$1.0 million, or 58.8%, to US$0.7 million for the year ended December 31, 2016 from US$1.7 million for the yearended December 31, 2015. Costs of revenue Costs of revenue increased by US$312.3 million, or 35.0%, to US$1,203.6 million for the year ended December 31, 2016 from US$891.3 million forthe year ended December 31, 2015, generally in line with our revenue increases. Cost of real estate sales Cost of real estate sales increased by US$308.4 million, or 35.6%, to US$1,174.6 million for the year ended December 31, 2016 from US$866.2million for the year ended December 31, 2015. Total land use rights cost increased by US$88.1 million, or 25.9%, from US$340.2 million (38.2% of cost ofreal estate sales) for the year ended December 31, 2015 to US$428.3 million (35.6% of cost of real estate sales) for the year ended December 31, 2016,primarily due to increased sales of properties. Construction cost, including capitalized interest, increased by US$220.2 million, or 41.9%, to US$746.3million for the year ended December 31, 2016 from US$526.1 million for the year ended December 31, 2015, primarily due to increased project constructionactivity. Cost of real estate leasing Cost of real estate leasing decreased by US$0.3 million, or 7.5%, to US$3.7 million for the year ended December 31, 2016 from US$4.0 million forthe year ended December 31, 2015. Cost of real estate management services Cost of real estate management services increased by US$4.9 million, or 25.3%, to US$24.3 million for the year ended December 31, 2016 fromUS$19.4 million for year ended December 31, 2015 mainly due to expanded property management service operations. Other costs Other costs decreased by US$0.6 million, or 35.3%, to US$1.1 million for the year ended December 31, 2016 from US$1.7 million for year endedDecember 31, 2015. Gross profit Gross profit increased by US$85.0 million, or 31.1%, to US$358.0 million for the year ended December 31, 2016 from US$273.0 million for the yearended December 31, 2015. Gross profit margin was 22.9 % for the year ended December 31, 2016 compared to 23.4% for the year ended December 31, 2015. Selling and distribution expenses Selling and distribution expenses increased by US$6.1 million, or 11.7%, to US$58.2 million for the year ended December 31, 2016 from US$52.1million for the year ended December 31, 2015. The increase was primarily due to a US$4.4 million increase in advertising and promotion expenses for newprojects launched in 2016 as well as existing projects and a US$1.1 million increase in salary and welfare expenses as the average level of salary and bonusincreased and new employees were hired. As a percentage of revenue, selling and distribution expenses was 3.7% for the year ended December 31, 2016compared to 4.5% for the year ended December 31, 2015. As revenue grows in the future, we expect selling and distribution expenses as a percentage ofrevenue to be flat or slightly increase. General and administrative expense General and administrative expenses increased by US$5.1 million, or 4.4% to US$120.4 million for the year ended December 31, 2016 fromUS$115.3 million for the year ended December 31, 2015. The increase was primarily due to an increase in salary and welfare expenses of US$2.0 million asthe average level of salary and bonus increased and new employees were hired, and increased share-based compensation due to additional awards granted in2016. 98  As a percentage of revenue, general and administrative expenses were 7.7% for the year ended December 31, 2016, compared to 9.9% for the yearended December 31, 2015. Interest income Interest income was US$20.9 million for the year ended December 31, 2016, compared to US$24.5 million for the year ended December 31, 2015. Interest expenses For the year ended December 31, 2016, out of total interest costs incurred, US$29.9 million did not qualify for interest capitalization treatment underU.S. GAAP and was charged to the 2016 Statement of Comprehensive Income. Total gross interest costs incurred amounted to US$207.7 million for the yearof 2016, including US$196.2 million of interest on loans and notes, US$9.4 million of amortization of debt issuance costs and US$2.1 million ofamortization of aircraft finance lease related interest. For the year ended December 31, 2015, out of total interest costs incurred, US$20.3 million did not qualify for interest capitalization treatment underU.S. GAAP and was charged to the current year Statement of Comprehensive Income. Total gross interest costs incurred amounted to US$180.2 million for theyear of 2015, including US$171.0 million of interest on loans and notes, US$6.6 million of amortization of debt issuance costs and US$2.6 million ofamortization of aircraft finance lease related interest. Income taxes Income taxes increased by US$33.7 million, or 64.2%, to US$86.2 million for the year ended December 31, 2016 from US$52.5 million for the yearended December 31, 2015 mainly due to the increase in taxable income from PRC and the United States. Our effective tax rate increased to 52.0% for the year ended December 31, 2016, from 44.1% for the year ended December 31, 2015. The increase wasprimarily due to the increase in taxable income in the PRC and the United States . Net income attributable to our shareholders Net income increased by US$6.5 million to US$73.0 million for the year ended December 31, 2016, from US$66.5 million for the year endedDecember 31, 2015. Year Ended December 31, 2015 Compared to Year Ended December 31, 2014 Revenue Revenue increased by US$244.6 million, or 26.6%, to US$1,164.3 million for the year ended December 31, 2015 from US$919.7 million for the yearended December 31, 2014. Real estate sales Revenue from real estate sales increased by US$241.7 million, or 27.1%, to US$1,134.5 million for the year ended December 31, 2015 fromUS$892.8 million for the year ended December 31, 2014, principally due to the higher percentage of completion from two of our major development projectsSuzhou Lake Royal Palace and Kunshan Royal Palace, each of which launched in the fourth quarters of 2013 and third quarters of 2014, respectively. 99  Revenues related to the projects in the U.S. are recognized under the full accrual method. For the year ended December 31, 2013, revenue wasrecognized in the amount of US$1.2 million for the resale of several parcels of the Northern Nevada Land Portfolio and US$5.4 million for the sale of 7 of 15finished condominium units located in Irvine, California. For the year ended December 31, 2014, revenue was recognized in the amount of US$4.9 millionfor the sale of 7 of 15 finished condominium units located in Irvine, California. For the year ended December 31, 2015, revenue was recognized in the amountof US$0.8 million for the resale of the remaining parcels of the Northern Nevada Land Portfolio and US$0.8 million for the sale of the remaining 1 of 15finished condominium units located in Irvine, California. Revenue and profit from the sale of development properties is recognized utilizing the percentage of completion method. The following table setsforth the percentage of completion, the percentage sold and related revenues for our projects recognized under the percentage of completion method in Chinaand our project recognized under the full accrual method in the U.S. for each of the years ended December 31, 2014 and 2015. For information regardingrevenue recognition under the percentage of completion and the full accrual methods, see "Critical Accounting Policies,"below. Project TotalGFA Percentage Complete as of December 31, (1) Percentage Sold (2) Accumulated as of December 31, Revenues Recognized For The Year Ended December 31, 2014 2015 2014 2015 2014 2015 m² % % % % US$ %(3) US$ %(4) Chengdu Segment Chengdu Xinyuan Splendid I 231,032 100.0 100.0 100.0 100.0 1,288,027 0.1 1,311,214 0.1 Chengdu Xinyuan Splendid II 217,010 100.0 100.0 99.9 99.9 - - - - Chengdu Thriving Family 211,386 65.4 82.4 3.9 15.8 8,624,227 1.0 35,061,084 3.1 Jiangsu Segment Suzhou International City Garden 204,872 100.0 100.0 99.4 99.5 433,584 - 344,516 - Suzhou Lake Splendid 198,113 100.0 100.0 100.0 99.9 220,015 - (217,258) - Suzhou Colorful Garden 81,506 100.0 100.0 100.0 100.0 - - - - Kunshan International City Garden 497,938 100.0 100.0 99.6 99.6 8,288,955 0.9 354,879 - Xuzhou Colorful Garden 101,821 100.0 100.0 98.7 99.1 - - - - Suzhou Xin City 127,212 89.9 99.8 95.4 99.3 83,784,195 9.4 23,256,900 2.1 Kunshan Royal Palace 279,948 58.7 84.4 25.9 59.5 49,893,344 5.6 164,996,469 14.5 Xuzhou Colorful City 130,170 54.9 75.1 33.3 46.9 18,937,756 2.1 33,762,682 3.0 Suzhou Lake Royal Palace 169,635 76.1 91.9 5.5 48.3 14,402,509 1.6 148,971,755 13.1 Shandong Segment Jinan International City Garden 264,335 100.0 100.0 99.4 99.4 - - - - Jinan Xinyuan Splendid 572,235 92.0 98.9 95.2 98.7 170,834,230 19.1 74,101,999 6.5 Shandong Royal Palace 452,342 48.5 55.9 6.8 21.1 21,603,535 2.4 56,552,926 5.0 Jinan Xin Central 194,652 - 57.3 - 26.4 - - 55,567,629 4.9 Henan Segment Zhengzhou Xinyuan Colorful Garden 191,891 100.0 100.0 100.0 100.0 - - - - Zhengzhou Finance Square 67,225 100.0 100.0 100.0 100.0 - - - - Zhengzhou Modern City 231,019 100.0 100.0 99.9 100.0 16,314,477 1.8 2,183,419 0.2 Zhengzhou Royal Palace 135,877 96.7 98.4 99.9 100.0 31,719,440 3.6 3,959,633 0.3 Zhengzhou International City Garden 280,748 100.0 100.0 100.0 100.0 - - - - Zhengzhou Yipin Xiangshan Phase I 94,249 100.0 100.0 100.0 100.0 - - - - Zhengzhou Yipin Xiangshan Phase II 199,610 100.0 100.0 100.0 99.8 11,620,510 1.3 (57,451) - Zhengzhou Century East A 76,579 98.7 100.0 98.7 99.6 10,251,774 1.1 2,391,144 0.2 Zhengzhou Century East B 166,288 98.5 100.0 99.6 99.7 11,406,412 1.3 6,478,014 0.6 Zhengzhou Xin City 211,075 76.5 93.9 87.7 89.0 147,764,124 16.6 79,758,186 7.0 Henan Thriving Family 131,510 55.0 78.7 82.2 82.3 62,259,649 7.0 37,436,004 3.3 Xingyang Splendid Phase I 118,840 47.2 72.6 43.3 66.6 17,755,365 2.0 23,317,771 2.1 Xingyang Splendid Phase II 136,916 32.4 40.6 2.8 5.6 1,145,122 0.1 1,854,936 0.2 Henan Xin Central 262,820 - 49.2 - 25.0 - - 43,751,924 3.9 Zhengzhou Xindo Park 145,229 - 48.2 - 21.8 - - 20,249,510 1.8 Zhengzhou Fancy City 166,652 - 43.6 - 30.1 - - 30,358,098 2.7 Anhui Segment Hefei Wangjiang Garden 145,455 100.0 100.0 100.0 100.0 141,377 - - - Beijing Segment Beijing Xindo Park 132,869 82.1 97.5 51.8 79.5 188,579,891 21.2 166,775,534 14.6 Changsha Segment Changsha Xinyuan Splendid 252,652 49.0 67.1 2.4 20.0 4,109,978 0.5 42,191,276 3.7 Sanya Segment Sanya Yazhou Bay No.1 122,033 45.0 62.7 5.1 5.5 6,526,065 0.7 3,534,278 0.3 Shanghai Segment Shanghai Royal Palace 57,778 - 88.0 - 28.3 - - 70,058,447 6.2 Tianjin Segment Tianjin Spring Royal Palace 274,264 - 25.3 5.2 - - 4,631,258 0.4 US Segment Northern Nevada Land Portfolio(5) N/A N/A N/A N/A N/A - - 750,000 0.1 Lennox Project(6) N/A N/A N/A N/A N/A 4,921,331 0.6 780,000 0.1 New York Oosten N/A N/A N/A N/A N/A - - - - Total 7,535,786 892,825,892 100.0 1,134,466,776 100.0 (1)Percentage of completion is calculated by dividing total costs incurred by total estimated costs for the relevant project, estimated as of the time ofpreparation of our financial statements as of and for the year indicated.(2)Percentage sold is calculated by dividing contracted sales value from property sales by total estimated sales value of the relevant project, estimatedas of the time of preparation of our financial statements as of and for the year indicated.(3)Percentage of all real estate sales revenues for the financial year, including revenues recognized under the percentage of completion method.(4)Percentage of all real estate sales revenues for the financial year, including revenues recognized under the percentage of completion method andunder the full accrual method.(5)Northern Nevada Land Portfolio is a land portfolio, comprised of 325 finished lots and 185 acres of undeveloped land, at eight sites, in the northernNevada region near Reno-Spark metropolitan area. We had an opportunity to promptly resell several parcels and recognized revenue US$1.2million, US$nil million and US$0.8 million for the year 2013, 2014 and 2015, respectively.(6)The finished condominium project is located in Irvine, California, United States. We acquired 15 units with a total GFA of 2,865 square meters outof the total 72 units from a major U.S. developer in August 2012. For the year ended December 31, 2013, we resold 7 of 15 finished condominiumunits and recognized revenue in the amount of US$5.4 million. For the year ended December 31, 2014, we resold 7 of 15 finished condominiumunits and recognized revenue in the amount of US$4.9 million. For the year ended December 31, 2015, we resold 1 of 15 finished condominiumunits and recognized revenue in the amount of US$0.8 million. 100  The following table sets forth the square meters sold and average selling price per square meter for each project, each reportable segment and on aconsolidated basis for each of the years ended December 31, 2014 and 2015. Year Ended December 31, 2014 2015 Project Contract Sales Square Meters Sold Average Selling Price Contract Sales Square Meters Sold Average Selling Price US$ m² US$/m² US$ m² US$/m² Chengdu region Chengdu Xinyuan Splendid I 1,365,501 - - 1,391,318 - - Chengdu Xinyuan Splendid II - - - 42,395 - - Chengdu Thriving Family 14,050,989 15,814 889 42,179,974 48,507 870 Total 15,416,490 15,814 975 43,613,687 48,507 899 Jiangsu region Suzhou International City Garden 428,021 272 1,574 143,663 102 1,408 Suzhou Lake Splendid 233,061 204 1,142 - - - Suzhou Xin City 66,612,912 41,551 1,603 6,470,062 3,418 1,893 Suzhou Lake Royal Palace 20,044,488 14,156 1,416 168,246,492 100,279 1,678 Kunshan International City Garden 4,650,280 2,771 1,678 150,139 118 1,272 Kunshan Royal Palace 65,022,733 42,867 1,517 168,097,031 114,066 1,474 Xuzhou Colorful Garden - - - (1,152,860) (900) 1,281 Xuzhou Colorful City 24,111,221 16,022 1,505 29,341,359 20,242 1,450 Total 181,102,716 117,843 1,537 371,295,886 237,325 1,565 Shandong region Jinan International City Garden - - - 39,183 15 2,612 Jinan Xinyuan Splendid 139,449,860 90,167 1,547 26,718,388 19,198 1,392 Shandong Royal Palace 47,224,711 45,190 1,045 102,215,975 101,352 1,009 Jinan Xin Central - - - 102,800,660 67,252 1,529 Total 186,674,571 135,357 1,379 231,774,206 187,817 1,234 Henan region Zhengzhou Royal Palace 14,856,458 4,270 3,479 70,004 224 313 Zhengzhou Modern City 16,390,668 4,989 3,285 2,406,590 248 9,704 Zhengzhou Yipin Xiangshan Phase II 999,198 1,583 631 291,068 90 3,234 Zhengzhou Century East A 6,466,565 1,626 3,977 856,426 - - Zhengzhou Century East B 8,570,154 317 27,035 3,196,492 (125) (25,572)Zhengzhou Xin City 173,404,613 104,984 1,652 39,865,645 15,878 2,511 Zhengzhou Thriving Family 119,959,348 102,036 1,176 15,143,206 12,974 1,167 Xingyang Splendid Phase I 39,850,384 47,824 833 20,693,198 25,216 821 Xingyang Splendid Phase II 3,739,262 1,714 2,182 5,783,511 5,502 1,051 Henan Xin Central - - - 94,181,923 77,420 1,217 Zhengzhou Xindo Park - - - 44,511,220 31,929 1,394 Zhengzhou Fancy City - - - 73,790,219 57,552 1,282 Total 384,236,650 269,343 1,427 300,789,502 226,908 1,326 Anhui region Hefei Wangjiang Garden 149,860 - - - - - Beijing region Beijing Xindo Park 243,256,296 67,037 3,629 145,862,389 52,432 2,782 Hunan region Changsha Xinyuan Splendid 8,887,154 10,621 837 64,625,618 72,831 887 Hainan region Sanya Yazhou Bay No.1 15,496,749 6,453 2,401 10,831,126 5,380 2,013 Shanghai region Shanghai Royal Palace - - - 84,288,117 24,378 3,458 Tianjin region Tianjin Spring Royal Palace - - - 19,394,472 14,064 1,379 Grand Total 1,035,220,486 622,468 1,663 1,272,475,003 869,642 1,463 101  Total square meters sold increased to 869,642 square meters for the year ended December 31, 2015 from 622,468 square meters for the year endedDecember 31, 2014. The increase was mainly due to the six new projects launched in 2015 and our major development projects Suzhou Lake Royal Palaceand Kunshan Royal Palace. The overall aggregate average selling price per square meter for the year ended December 31, 2015 decreased to US$1,463 from US$1,663 for theyear ended December 31, 2014 primarily due to stronger pre-sales of lower margin saleable units that occurred in 2015. Total revenues increased significantlyby 26.6% to US$1,164.3 million from US$919.7 million in 2014, principally due to higher percentage of completion from two of our major developmentprojects Suzhou Lake Royal Palace and Kunshan Royal Palace, each of which launched in the fourth quarters of 2013 and third quarters of 2014,respectively. Chengdu region. Total square meters in this region sold for the year ended December 31, 2015 increased to 48,507 square meters from 15,814 squaremeters for the year ended December 31, 2014, primarily due to increased sales of Chengdu Thriving Family which was launched in 2014. The average sellingprice per square meter for the year ended December 31, 2015 decreased to US$899 from US$975 for the year ended December 31, 2014, which is attributableto the reduction of high margin saleable units. Jiangsu region. Total square meters sold for the year ended December 31, 2015 increased to 237,325 square meters from 117,843 square meters forthe year ended December 31, 2014, mainly due to increased sales of Suzhou Lake Royal Palace and Kunshan Royal Palace, partially offset by the reductionsof saleable units of Suzhou Xin City. The average selling price per square meter for the year ended December 31, 2015 increased slightly to US$1,565 fromUS$1,537 for the year ended December 31, 2014. Shandong region. Total square meters sold for the year ended December 31, 2015 increased to 187,817 square meters from 135,357 square metersfor the year ended December 31, 2014, mainly due to increased sales of Shandong Royal Palace and newly launched pre-sales of Jinan Xin Central, partiallyoffset by the reduction of saleable units of Jinan Xinyuan Splendid. The average selling price per square meter for the year ended December 31, 2015decreased to US$1,234 from US$1,379 for the year ended December 31, 2014, which is attributable to the reduction of high margin saleable units. Henan region. Total square meters sold for the year ended December 31, 2015 decreased to 226,908 square meters from 269,343 square meters forthe year ended December 31, 2014, mainly due to reductions of saleable units of Zhengzhou Xin City and Zhengzhou Thriving Family, partially offset bynewly launched pre-sales of Henan Xin Central, Zhengzhou Xindo Park and Zhengzhou Fancy City. The average selling price per square meter for the yearended December 31, 2015 decreased to US$1,326 from US$1,427 for the year ended December 31, 2014, resulting from the reduction in high margin unitsavailable for sale. Anhui region. The only formerly active project in Anhui region, Hefei Wangjiang Garden was completely sold out by the end of 2009. Revenue in2014 primarily represents the sale of parking facilities while no sales occurred in 2015. Beijing region. Total square meters sold for the year ended December 31, 2015 decreased to 52,432 square meters from 67,037 square meters for theyear ended December 31, 2014, mainly due to reductions of saleable units of Beijing Xindo Park. The average selling price per square meter for the yearended December 31, 2015 decreased to US$2,782 from US$3,629 for the year ended December 31, 2014, resulting from the reduction in high margin unitsavailable for sale. Hunan region. Total square meters sold for the year ended December 31, 2015 increased to 72,831 square meters from 10,621 square meters for theyear ended December 31, 2014, mainly due to increased sales of Changsha Xinyuan Splendid which was launched in 2014. The average selling price persquare meter for the year ended December 31, 2015 increased slightly to US$887 from US$837 for the year ended December 31, 2014. 102  Hainan region. Total square meters sold for the year ended December 31, 2015 decreased to 5,380 square meters from 6,453 square meters for theyear ended December 31, 2014, mainly due to reductions of saleable units of Sanya Yazhou Bay No.1. The average selling price per square meter for the yearended December 31, 2015 decreased to US$2,013 from US$2,401 for the year ended December 31, 2014, resulting from the reduction in high margin unitsavailable for sale. Shanghai region. In the first quarter of 2015, we commenced sales of our first project in the Shanghai region, Shanghai Royal Palace. Total squaremeters sold for the year ended December 31, 2015 was 24,378 square meters and the average selling price per square meter for the year ended December 31,2015 was US$3,458. Tianjin region. In the fourth quarter of 2015, we commenced sales of our first project in the Tianjin region, Tianjin Spring Royal Palace. Totalsquare meters sold for the year ended December 31, 2015 was 14,064 square meters and the average selling price per square meter for the year endedDecember 31, 2015 was US$1,379. Real estate leasing Real estate leasing income increased by US$1.7 million, or 33.2% to US$6.6 million for the year ended December 31, 2015 from US$4.9 million forthe year ended December 31, 2014. The increase mainly resulted from the leasing of more ancillary facilities, including parking facilities at most of our PRCproperties. Other revenue Other revenue increased by US$1.3 million, or 5.9%, to US$23.3 million for the year ended December 31, 2015 from US$22.0 million for the yearended December 31, 2014. The increase primarily resulted from expanded property management service operations. Costs of revenue Costs of revenue increased by US$213.7 million, or 31.5%, to US$891.3 million for the year ended December 31, 2015 from US$677.6 million forthe year ended December 31, 2014, generally in line with our revenue increases. Cost of real estate sales Cost of real estate sales increased by US$215.6 million, or 33.2%, to US$866.2 million for the year ended December 31, 2015 from US$650.6million for the year ended December 31, 2014. Total land use rights cost increased by US$74.8 million, or 28.2%, from US$265.4 million (39.2% of cost ofreal estate sales) for the year ended December 31, 2014 to US$340.2 million (38.2% of cost of real estate sales) for the year ended December 31, 2015,primarily due to increased sales of properties. Construction cost, including capitalized interest, increased by US$140.9 million, or 36.6%, to US$526.1million for the year ended December 31, 2015 from US$385.1 million for the year ended December 31, 2014, primarily due to increased project constructionactivity. Cost of real estate leasing Cost of real estate leasing increased by US$0.8 million, or 24.7%, to US$4.0 million for the year ended December 31, 2015 from US$3.2 million forthe year ended December 31, 2014 due to the increase in the leasing costs including depreciation expense related to the increase in the number of leasedproperties in 2015. Other costs Other costs decreased by US$2.7 million, or 11.3%, to US$21.1 million for the year ended December 31, 2015 from US$23.8 million for year endedDecember 31, 2014 mainly due to less compensation payments to our customers for late delivery of projects due to better delivery management in the currentyear. 103  Gross profit Gross profit increased by US$30.8 million, or 12.7%, to US$273.0 million for the year ended December 31, 2015 from US$242.2 million for the yearended December 31, 2014. Gross profit margin was 23.4 % for the year ended December 31, 2015 compared to 26.3% for the year ended December 31, 2014.The decrease of gross profit margin was primarily due to newly launched lower-margin projects such as Shanghai Royal Palace. Selling and distribution expenses Selling and distribution expenses increased by US$12.6 million, or 32.0%, to US$52.1 million for the year ended December 31, 2015 from US$39.5million for the year ended December 31, 2014. The increase was primarily due to a US$3.2 million increase in advertising and promotion expenses for newprojects launched in 2015 as well as existing projects and a US$8.4 million increase in salary and welfare expenses of US$8.4 million as the average level ofsalary and bonus increased and new employees were hired. As a percentage of revenue, selling and distribution expenses was 4.5% for the year endedDecember 31, 2015 compared to 4.3% for the year ended December 31, 2014. As revenue grows in the future, we expect selling and distribution expenses as apercentage of revenue to be flat or slightly increase. General and administrative expense General and administrative expenses increased by US$9.7 million, or 9.2% to US$115.3 million for the year ended December 31, 2015 fromUS$105.6 million for the year ended December 31, 2014. The increase was primarily due to an increase in salary and welfare expenses of US$5.0 million asthe average level of salary and bonus increased and new employees were hired, increased share-based compensation due to additional awards granted in2015, and bank charges associated with the notes payable issued in 2015. As a percentage of revenue, general and administrative expenses were 9.9% for the year ended December 31, 2015, compared to 11.5% for the yearended December 31, 2014. Interest income Interest income was US$24.5 million for the year ended December 31, 2015, compared to US$14.6 million for the year ended December 31, 2014.The increase in interest income mainly resulted from the increase in the average cash balance. Interest expenses For the year ended December 31, 2015, out of total interest costs incurred, US$20.3 million did not qualify for interest capitalization treatment underU.S. GAAP and was charged to the current year Statement of Comprehensive Income. Total gross interest costs incurred amounted to US$180.2 million for theyear of 2015, including US$171.0 million of interest on loans and notes, US$6.6 million of amortization of debt issuance costs and US$2.6 million ofamortization of aircraft finance lease related interest. For the year ended December 31, 2014, out of total interest costs incurred, US$28.2 million did not qualify for interest capitalization treatment underU.S. GAAP and was charged to the current year Statement of Comprehensive Income. Total gross interest costs incurred amounted to US$134.7 million for theyear of 2014, including US$128.1 million of interest on loans and notes, US$3.7 million of amortization of debt issuance costs and US$2.9 million ofamortization of aircraft finance lease related interest. Income taxes Income taxes increased by US$21.9 million, or 71.8%, to US$52.5 million for the year ended December 31, 2015 from US$30.6 million for the yearended December 31, 2014 mainly due to the increase of income before tax. Our effective tax rate increased to 44.1% for the year ended December 31, 2015, from 38.7% for the year ended December 31, 2014. The increase wasprimarily due to the US$24.6 million one-time reversal of previously accrued liabilities for LAT tax related to of Zhengzhou Modern City and ZhengzhouYipin Xiangshan Phase II in 2014. 104  Net income attributable to our shareholders Net income increased by US$18.0 million to US$66.5 million for the year ended December 31, 2015, from US$48.5 million for the year endedDecember 31, 2014. Discussion of Segment Operations We consider each of our individual property developments as a discrete operating segment. As a presentation of segment information for eachproperty development would not be meaningful, we have aggregated our segments on a provincial basis as property development projects undertaken withina province have similar expected economic characteristics, type of properties offered, customers and market and regulatory environment. Our reportingsegments are: (i) property developments in Zhengzhou, Henan Province, (ii) property developments in Jinan, Shandong Province, (iii) property developmentsin Suzhou, Xuzhou and Kunshan, Jiangsu Province, (iv) property developments in Chengdu, Sichuan Province (v) property developments in Beijing, (vi)property developments in Sanya, Hainan Province, (vii) property developments in Changsha, Hunan Province, (viii) property developments in Shanghai, (ix)property developments in Tianjin, (x) property developments in the U.S. and (xi) "other." Each geographic operating segment is principally engaged in theconstruction and development of residential real estate units. The “other” category relates to investment holdings, property management services, installationof intercom systems, landscaping, engineering and management, real estate sale, purchase and lease activities. The accounting policies of the varioussegments are the same as those described in Note 2, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statementsincluded in this report. For the Year Ended December 31, 2014 2015 2016 (US$ in thousands, except for percentages) Zhengzhou, Henan Total revenue 313,339 257,562 373,920 Total costs of revenue (215,169) (162,239) (255,819)Gross profit 98,170 95,323 118,101 Gross margin 31.3% 37.0% 31.6%Operating income 39,189 43,440 76,642 Jinan, Shandong Total revenue 192,766 186,456 169,880 Total costs of revenue (148,137) (150,530) (143,152)Gross profit 44,629 35,926 26,728 Gross margin 23.2% 19.3% 15.7%Operating income 35,738 22,398 18,046 Suzhou, Kunshan and Xuzhou, Jiangsu Total revenue 176,018 371,778 349,617 Total costs of revenue (139,806) (307,476) (275,136)Gross profit 36,212 64,302 74,481 Gross margin 20.6% 17.3% 21.3%Operating income 23,284 48,475 62,247 Chengdu, Sichuan Total revenue 9,942 36,452 76,490 Total costs of revenue (9,143) (32,318) (58,763)Gross profit 799 4,134 17,727 Gross margin 8.0% 11.3% 23.2%Operating (loss)/income (2,430) 462 14,397 Beijing Total revenue 188,592 167,094 24,002 Total costs of revenue (133,884) (119,704) (31,148)Gross profit 54,708 47,390 (7,146)Gross margin 29.0% 28.4% -29.8%Operating income/ (loss) 27,018 15,211 (45,987)Sanya, Hainan Total revenue 6,526 3,542 12,700 Total costs of revenue (4,137) (2,338) (8,545)Gross profit 2,389 1,204 4,155 Gross margin 36.6% 34.0% 32.7%Operating (loss)/income (1,467) (5,413) 127 Changsha, Hunan Total revenue 4,110 42,194 105,495 Total costs of revenue (3,665) (30,096) (75,515)Gross profit 445 12,098 29,980 Gross margin 10.8% 28.7% 28.4%Operating (loss)/income (2,789) 7,007 23,607 Shanghai Total revenue - 70,058 100,004 Total costs of revenue - (62,366) (89,068)Gross profit - 7,692 10,936 Gross margin - 11.0% 10.9%Operating (loss)/income (2,353) 3,346 7,815 Tianjin Total revenue - 4,633 39,913 Total costs of revenue - (3,543) (22,837)Gross profit - 1,090 17,076 Gross margin - 23.5% 42.8%Operating (loss)/income - (8,913) 543 Xi’an, Shaanxi Total revenue - - 126,834 Total costs of revenue - - (91,500)Gross profit - - 35,334 Gross margin - - 27.9%Operating income - - 25,095 US Total revenue 4,921 1,530 152,007 Total costs of revenue (4,643) (1,243) (128,803)Gross profit 278 287 23,204 Gross margin 5.6% 18.8% 15.3%Operating (loss)/income (5,506) (4,684) 12,202 Others Total revenue 23,534 23,024 30,763 Total costs of revenue (18,998) (19,481) (23,351)Gross profit 4,536 3,543 7,412 Gross margin 19.3% 15.4% 24.1%Operating (loss) (13,634) (15,794) (15,374) 105  Year Ended December 31, 2016 Compared to Year Ended December 31, 2015 Zhengzhou, Henan. Total revenue increased by US$116.3 million, or 45.1%, from US$257.6 million for the year ended December 31, 2015 toUS$373.9 million for the year ended December 31, 2016. The increase was primarily due to the increase of revenue from sales of units in old projects- HenanXin Central, Zhengzhou Xindo Park, Zhengzhou Fancy City,and the newly launched projects- Zhengzhou International New City I, Zhengzhou Fancy City II(South) , Henan Xin Central II , partially offset by the reduced revenue from sales of units in Henan Xin City , Zhengzhou Thriving Family and XingyangSplendid I. Gross profit for this region was US$118.1 million, or 31.6% of revenue, in the year ended December 31, 2016, as compared to US$95.3 million, or37.0% of revenue, in the year ended December 31, 2015. The decrease in gross margin was due to the reduction of high margin saleable units. The operatingincome was US$76.6 million for the year ended December 31, 2016, representing an increase of US$33.2 million, or 76.5%, from US$43.4 million for the yearended December 31, 2015. 106  Jinan, Shandong. Total revenue decreased by US$16.6 million, from US$186.5 million for the year ended December 31, 2015 to US$169.9 millionfor the year ended December 31, 2016. The slightly decrease was primarily due to a reduction of revenue from sales of units in Jinan Xinyuan Splendid andJinan Royal Palace, due to the reduced number of units available for sale in these projects, offset by revenue from sales of units in Jinan Xin Central. Thegross profit decreased to US$26.7 million, or 15.7% of revenue, for the year ended December 31, 2016 from US$35.9 million, or 19.3% of revenue, for theyear ended December 31, 2015. The decrease in gross margin was due to the reduction of high margin saleable units. The operating income was US$18.0million for the year ended December 31, 2016, representing a decrease of US$4.4 million from US$22.4 million for the year ended December 31, 2015. Suchdecrease was due to the decrease in gross profit as described above. Suzhou, Kunshan and Xuzhou, Jiangsu. Total revenue decreased by US$22.2 million, or 6.0%, from US$371.8 million for the year ended December31, 2015 to US$349.6 million for the year ended December 31, 2016. The decrease was primarily due to a reduction of revenue from sales of units in oldprojects- Suzhou Xin City, Suzhou Lake Royal Palace, Kunshan Royal Palace and Xuzhou Colorful City, partially offset by the revenue from sales of units inthe newly launched project Kunshan Xindo Park. Gross profit for the Jiangsu segment was US$74.5 million for the year ended December 31, 2016, increasingby US$10.2 million from US$64.3 million for the year ended December 31, 2015. The increase in gross profit was due to the increase of high margin saleableunits. Operating income was US$62.2 million for the year ended December 31, 2016, representing an increase of US$13.7 million, or 28.2%, from US$48.5million for the year ended December 31, 2015. Such increase was due to the increase in gross profit as described above. Chengdu, Sichuan. Total revenue increased by US$40.0 million from US$36.5 million for the year ended December 31, 2015 to US$76.5 million forthe year ended December 31, 2016. The increase was primarily due to an increase in revenue from sales of units in Chengdu Thriving Family. Gross profit forthe Sichuan segment was US$17.7 million for the year ended December 31, 2016, as compared to US$4.1 million for the year ended December 31, 2015.Operating income was US$14.4 million for the year ended December 31, 2016, representing an increase of US$13.9 million from US$0.5 million for the yearended December 31, 2015. Such increase was due to the increase in revenue as described above. Beijing. Total revenue decreased by US$143.1 million, or 85.6%, from US$167.1 million for the year ended December 31, 2015 to US$24.0 millionfor the year ended December 31, 2016. The decrease was primarily due to a reduction of revenue from sales of units in Beijing Xindo Park, due to the reducednumber of units available for sale in this project. Gross loss for the Beijing segment was US$7.1 million for the year ended December 31, 2016, decreasing byUS$54.5 million from gross profit of US$47.4 million for the year ended December 31, 2015. Operating loss was US$46.0 million for the year endedDecember 31, 2016, representing a decrease of US$61.2 million, or 402.6%, from operating income of US$15.2 million for the year ended December 31,2015. Such decrease was due to the decrease in revenue as described above. Sanya, Hainan. Total revenue increased by US$9.2 million, or 262.9%, from US$3.5 million for the year ended December 31, 2015 to US$12.7million for the year ended December 31, 2016. The increase was primarily due to the increase of revenue from sales of units in Sanya Yazhou Bay No. 1.Gross profit for the Hainan segment was US$4.2 million for the year ended December 31, 2016, increasing by US$3.0 million from US$1.2 million for theyear ended December 31, 2015. Operating income was US$0.1 million for the year ended December 31, 2016, representing an increase of US$5.5 million, or101.9%, from operating loss of US$5.4 million for the year ended December 31, 2015. Such increase was due to the increase in revenue as described above. Changsha, Hunan. Total revenue increased by US$63.3 million, or 150.0%, from US$42.2 million for the year ended December 31, 2015 toUS$105.5 million for the year ended December 31, 2016. The increase was primarily due to the increase of revenue from sales of units in Changsha XinyuanSplendid which was launched in 2014. Gross profit for the Hunan segment was US$30.0 million for the year ended December 31, 2016, increasing byUS$17.9 million from US$12.1 million for the year ended December 31, 2015. Operating income was US$23.6 million for the year ended December 31, 2016,representing an increase of US$16.6 million from US$7.0 million for the year ended December 31, 2015. Such increase was due to the increase in revenue asdescribed above. Shanghai. Total revenue increased by US$29.9 million, or 42.7%, from US$70.1 million for the year ended December 31, 2015 to US$100.0 millionfor the year ended December 31, 2016. The increase was primarily due to the increase of revenue from sales of units in Shanghai Royal Palace which waslaunched in 2015. Gross profit for the Shanghai segment was US$10.9 million for the year ended December 31, 2016, increasing by US$3.2 million fromUS$7.7 million for the year ended December 31, 2015. Operating income was US$7.8 million for the year ended December 31, 2016, representing an increaseof US$4.5 million from US$3.3 million for the year ended December 31, 2015. Such increase was due to the increase in revenue as described above. 107  Tianjin. Total revenue increased by US$35.3 million, or 767.4%, from US$4.6 million for the year ended December 31, 2015 to US$39.9 million forthe year ended December 31, 2016. The increase was primarily due to the increase of revenue from sales of units in Tianjin Spring Royal Palace which waslaunched in the fourth quarter of 2015. Gross profit for the Tianjin segment was US$17.1 million for the year ended December 31, 2016, increasing byUS$16.0 million from US$1.1 million for the year ended December 31, 2015. Operating income was US$0.5 million for the year ended December 31, 2016,representing an increase from an operating loss of US$8.9 million for the year ended December 31, 2015. Such increase was due to the increase in revenue asdescribed above. Xi’an, Shaanxi. In the first quarter of 2016, we obtained control over Shaanxi Zhongmao Economy Development Co., Ltd. which was previouslyaccounted under equity method investment. We commenced sales of our first project in the Xi’an region, Xi'an Metropolitan. Total revenue for the yearended December 31, 2016 was US$126.8 million, gross profit was US$35.3 million for the year ended December 31, 2016 and the operating income wasUS$25.1 million for the year ended December 31, 2016. The U.S. Total revenue increased by US$150.5 million from US$1.5 million for the year ended December 31, 2015 to US$152.0 million for the yearended December 31, 2016. The increase was due to the delivery of the New York Oosten project in 2016, of which the revenue was recognized under the fullaccrual method. This region had a gross profit of US$23.2 million and an operating income of US$12.2 million in the year ended December 31, 2016. Others. Other revenue of US$30.8 million for the year ended December 31, 2016 consisted of real estate-related services, including, among others,property management services, broadband network installation, landscaping services and consulting services. These services generated a gross profit ofUS$7.4 million in the year ended December 31, 2016, compared to a gross profit of US$3.5 million in the year ended December 31, 2015. Year Ended December 31, 2015 Compared to Year Ended December 31, 2014 Zhengzhou, Henan. Total revenue decreased by US$55.7 million, or 17.8%, from US$313.3 million for the year ended December 31, 2014 toUS$257.6 million for the year ended December 31, 2015. The decrease was primarily due to a reduction of revenue from sales of units in old projects-Zhengzhou Xin City, Zhengzhou Royal Palace, Zhengzhou Century East A and Zhengzhou Century East B, Zhengzhou Thriving Family, Zhengzhou YipinXiangshan Phase II and Zhengzhou Modern City, due to the reduced number of units available for sale in those projects, partially offset by the revenue fromsales of units in the newly launched project Henan Xin Central, Zhengzhou Xindo Park and Zhengzhou Fancy City. Gross profit for this region was US$95.3million, or 37.0% of revenue, in the year ended December 31, 2015, as compared to US$98.2 million, or 31.3% of revenue, in the year ended December 31,2014. The increase in gross margin was due to the reduction of low margin saleable units. The operating income was US$43.4 million for the year endedDecember 31, 2015, representing an increase of US$4.2 million, or 10.8%, from US$39.2 million for the year ended December 31, 2014. Jinan, Shandong. Total revenue decreased by US$6.3 million, from US$ 192.8 million for the year ended December 31, 2014 to US$186.5 millionfor the year ended December 31, 2015. The slightly decrease was primarily due to a reduction of revenue from sales of units in Jinan Xinyuan Splendid, dueto the reduced number of units available for sale in this project, offset by revenue from sales of units in Jinan Royal Palace and the newly launched projectJinan Xin Central. The gross profit decreased to US$35.9 million, or 19.3% of revenue, for the year ended December 31, 2015 from US$44.6 million, or23.2% of revenue, for the year ended December 31, 2014. The decrease in gross margin was due to the newly launched, lower-margin project Jinan RoyalPalace and Jinan Xin Central. The operating income was US$22.4 million for the year ended December 31, 2015, representing a decrease of US$13.3 millionfrom US$35.7 million for the year ended December 31, 2014. Such decrease was due to the decrease in gross profit as described above. 108  Suzhou, Kunshan and Xuzhou, Jiangsu. Total revenue increased by US$195.8 million, or 111.2%, from US$176.0 million for the year endedDecember 31, 2014 to US$371.8 million for the year ended December 31, 2015. The increase was primarily due to the increase of revenue from sales of unitsin Suzhou Lake Royal Palace, Kunshan Royal Palace and Xuzhou Colorful City, partially offset by a decrease of sales of Suzhou Xin City and KunshanInternational City Garden. Gross profit for the Jiangsu segment was US$64.3 million for the year ended December 31, 2015, increasing by US$28.1 millionfrom US$36.2 million for the year ended December 31, 2014. Operating income was US$48.5 million for the year ended December 31, 2015, representing anincrease of US$25.2 million, or 108.2%, from US$23.3 million for the year ended December 31, 2014. Such increase was due to the increase in revenue asdescribed above. Chengdu, Sichuan. Total revenue increased by US$26.6 million from US$9.9 million for the year ended December 31, 2014 to US$36.5 million forthe year ended December 31, 2015. The increase was primarily due to an increase in revenue from sales of units in Chengdu Thriving Family. Gross profit forthe Sichuan segment was US$4.1 million for the year ended December 31, 2015, as compared to US$0.8 million for the year ended December 31, 2014.Operating income was US$0.5 million for the year ended December 31, 2015, representing an increase of US$2.9 million from the operating loss US$2.4million for the year ended December 31, 2014. Such increase was due to the increase in revenue as described above. Beijing. Total revenue decreased by US$21.5 million, or 11.4%, from US$188.6 million for the year ended December 31, 2014 to US$167.1 millionfor the year ended December 31, 2015. The decrease was primarily due to a reduction of revenue from sales of units in Beijing Xindo Park, due to the reducednumber of units available for sale in this project. Gross profit for the Beijing segment was US$47.4 million for the year ended December 31, 2015, decreasingby US$7.3 million from US$54.7 million for the year ended December 31, 2014. Operating income was US$15.2 million for the year ended December 31,2015, representing a decrease of US$11.8 million, or 43.7%, from US$27.0 million for the year ended December 31, 2014. Such decrease was due to thedecrease in revenue as described above. Sanya, Hainan. Total revenue decreased by US$3.0 million, or 45.7%, from US$6.5 million for the year ended December 31, 2014 to US$3.5million for the year ended December 31, 2015. The decrease was primarily due to the decrease of revenue from sales of units in Sanya Yazhou Bay No.1.Gross profit for the Hainan segment was US$1.2 million for the year ended December 31, 2015, decreasing by US$1.2 million from US$2.4 million for theyear ended December 31, 2014. Operating loss was US$5.4 million for the year ended December 31, 2015, representing an increase of US$3.9 million, or269.0%, from US$1.5 million for the year ended December 31, 2014. Such increase was due to the decrease in revenue as described above. Changsha, Hunan. Total revenue increased by US$38.1 million, or 926.6%, from US$4.1 million for the year ended December 31, 2014 to US$42.2million for the year ended December 31, 2015. The increase was primarily due to the increase of revenue from sales of units in Changsha Xinyuan Splendidwhich was launched in 2014. Gross profit for the Hunan segment was US$12.1 million for the year ended December 31, 2015, increasing by US$11.7 millionfrom US$0.4 million for the year ended December 31, 2014. Operating income was US$7.0 million for the year ended December 31, 2015, representing anincrease of US$9.8 million from operating loss of US$2.8 million for the year ended December 31, 2014. Such increase was due to the increase in revenue asdescribed above. Shanghai. In the first quarter of 2015, we commenced sales of our first project in the Shanghai region, Shanghai Royal Palace. Total revenue for theyear ended December 31, 2015 was US$70.1 million, gross profit was US$7.7 million for the year ended December 31, 2015 and the operating income wasUS$3.3 million for the year ended December 31, 2015. Tianjin. In the fourth quarter of 2015, we commenced sales of our first project in the Tianjin region, Tianjin Spring Royal Palace. Total revenue forthe year ended December 31, 2015 was US$4.6 million, gross profit was US$1.1 million for the year ended December 31, 2015 and the operating loss wasUS$8.9 million for the year ended December 31, 2015. The U.S. Total revenue decreased by US$3.4 million, or 68.9%, to US$1.5 million for the year ended December 31, 2015 from US$4.9 million for theyear ended December 31, 2014. The decrease was primarily due to a reduction in units available for sale. This region had a gross profit of US$0.3 million andan operating loss of US$4.7 million in the year ended December 31, 2015. 109  Others. Other revenue of US$23.0 million for the year ended December 31, 2015 consisted of real estate-related services, including, among others,property management services, broadband network installation, landscaping services and consulting services. These services generated a gross profit ofUS$3.5 million in the year ended December 31, 2015, compared to a gross profit of US$4.5 million in the year ended December 31, 2014. Status of Projects as of December 31, 2016 The status of each of our projects under construction as of December 31, 2016, which were accounted for using the percentage of completion methodand full accrual method, is discussed below. Xuzhou Colorful City As of December 31, 2016, the carrying value of this project was US$29.6 million, net of profit recognized and progress billings. As of December 31,2016, the cumulative cost incurred on the project was US$107.2 million relative to total estimated cost of US$131.9 million. In the year ended December 31,2016, we had contract sales of US$18.3 million with area sold of 11,000 square meters at an average selling price of US$1,665 per square meter. Sales for thisproject began in November 2013 and cumulative contract sales through December 31, 2016 were US$110.3 million with total area sold of 78,570 squaremeters. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$194.8 million, or US$188.9 million net ofbusiness tax, relative to the total estimated cost of US$131.9 million, generating a gross margin of 30.2%. Kunshan Royal Palace As of December 31, 2016, the carrying value of this project was US$39.3 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$249.4 million relative to total estimated cost of US$261.3 million. In the year ended December 31,2016, we had contract sales of US$143.1 million with area sold of 64,105 square meters at an average selling price of US$2,232 per square meter. Sales forthis project began in November 2013 and cumulative contract sales through December 31, 2016 were US$420.2 million with total area sold of 263,553square meters. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$477.4 million, or US$457.9 million net ofbusiness tax, relative to the total estimated cost of US$261.3 million, generating a gross margin of 42.9%. Jinan Royal Palace As of December 31, 2016, the carrying value of this project was US$169.7 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$381.2 million relative to total estimated cost of US$532.9 million. In the year ended December 31,2016, we had contract sales of US$115.6 million with area sold of 102,608 square meters at an average selling price of US$1,126 per square meter. Sales forthis project began in June 2014 and cumulative contract sales through December 31, 2016 were US$255.1 million with total area sold of 249,150 squaremeters. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$635.8 million, or US$624.2 million net ofbusiness tax, relative to the total estimated cost of US$532.9 million, generating a gross margin of 14.6%. Xingyang Splendid Phase II As of December 31, 2016, the carrying value of this project was US$39.6 million, net of profit recognized and progress billings. As of December 31,2016, the cumulative cost incurred on the project was US$50.4 million relative to total estimated cost of US$87.2 million. In the year ended December 31,2016, we had contract sales of US$39.6 million with area sold of 47,194 square meters at an average selling price of US$840 per square meter. Sales for thisproject began in December 2014 and cumulative contract sales through December 31, 2016 were US$48.5 million with total area sold of 54,410 squaremeters. 110  We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$135.7 million, or US$134.5 million net ofbusiness tax, relative to the total estimated cost of US$87.2 million, generating a gross margin of 35.2%. Chengdu Thriving Family As of December 31, 2016, the carrying value of this project was US$202.6 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$288.8 million relative to total estimated cost of US$312.1 million. In the year ended December 31,2016, we had contract sales of US$79.0 million with area sold of 81,660 square meters at an average selling price of US$968 per square meter. Sales for thisproject began in November 2014 and cumulative contract sales through December 31, 2016 were US$131.7 million with total area sold of 146,081 squaremeters. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$361.0 million, or US$355.8 million net ofbusiness tax, relative to the total estimated cost of US$312.1 million, generating a gross margin of 12.3%. Changsha Xinyuan Splendid As of December 31, 2016, the carrying value of this project was US$135.6 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$216.6 million relative to total estimated cost of US$242.8 million. In the year ended December 31,2016, we had contract sales of US$108.4 million with area sold of 105,602 square meters at an average selling price of US$1,027 per square meter. Sales forthis project began in November 2014 and cumulative contract sales through December 31, 2016 were US$177.3 million with total area sold of 189,054square meters. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$344.1 million, or US$337.7 million net ofbusiness tax, relative to the total estimated cost of US$242.8 million, generating a gross margin of 28.1%. Sanya Yazhou Bay No.1 As of December 31, 2016, the carrying value of this project was US$137.3 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$157.2 million relative to total estimated cost of US$183.0 million. In the year ended December 31,2016, we had contract sales of US$8.2 million with area sold of 5,391 square meters at an average selling price of US$1,520 per square meter. Sales for thisproject began in November 2014 and cumulative contract sales through December 31, 2016 were US$32.7 million with total area sold of 17,162 squaremeters. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$285.0 million, or US$282.4 million net ofbusiness tax, relative to the total estimated cost of US$183.0 million, generating a gross margin of 35.2%. Jinan Xin Central As of December 31, 2016, the carrying value of this project was US$67.3 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$187.9 million relative to total estimated cost of US$258.8 million. In the year ended December 31,2016, we had contract sales of US$72.6 million with area sold of 47,307 square meters at an average selling price of US$ 1,535 per square meter. Sales for thisproject began in May 2015 and cumulative contract sales through December 31, 2016 were US$169.0 million with total area sold of 114,559 square meters. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$348.0 million, or US$340.3 million net ofbusiness tax, relative to the total estimated cost of US$258.8 million, generating a gross margin of 24.0%. 111  Henan Xin Central I As of December 31, 2016, the carrying value of this project was US$0.5 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$168.6 million relative to total estimated cost of US$249.1 million. In the year ended December 31,2016, we had contract sales of US$161.6 million with area sold of 127,088 square meters at an average selling price of US$1,271 per square meter. Sales forthis project began in July 2015and cumulative contract sales through December 31, 2016 were US$249.9 million with total area sold of 204,508 squaremeters. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$351.1 million, or US$343.7 million net ofbusiness tax, relative to the total estimated cost of US$249.1 million, generating a gross margin of 27.5%. Zhengzhou Xindo Park As of December 31, 2016, the carrying value of this project was US$75.4 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$100.5 million relative to total estimated cost of US$128.9 million. In the year ended December 31,2016, we had contract sales of US$38.5 million with area sold of 39,303 square meters at an average selling price of US$979 per square meter. Sales for thisproject began in April 2015 and cumulative contract sales through December 31, 2016 were US$80.2 million with total area sold of 71,232 square meters. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$191.0 million, or US$188.3 million net ofbusiness tax, relative to the total estimated cost of US$128.9 million, generating a gross margin of 31.5%. Zhengzhou Fancy City I As of December 31, 2016, the carrying value of this project was US$1.1 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$100.0 million relative to total estimated cost of US$160.5 million. In the year ended December 31,2016, we had contract sales of US$103.2 million with area sold of 76,608 square meters at an average selling price of US$1,347 per square meter. Sales forthis project began in October 2015 and cumulative contract sales through December 31, 2016 were US$172.4 million with total area sold of 134,160 squaremeters. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$230.5 million, or US$224.6 million net ofbusiness tax, relative to the total estimated cost of US$160.5 million, generating a gross margin of 28.6%. Tianjin Spring Royal Palace As of December 31, 2016, the carrying value of this project was US$13.2 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$102.1 million relative to total estimated cost of US$279.9 million. In the year ended December 31,2016, we had contract sales of US$110.2 million with area sold of 96,006 square meters at an average selling price of US$1,148 per square meter. Sales forthis project began in October 2015 and cumulative contract sales through December 31, 2016 were US$128.4 million with total area sold of 110,070 squaremeters. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$478.8 million, or US$475.1 million net ofbusiness tax, relative to the total estimated cost of US$279.9 million, generating a gross margin of 41.0%. Xi’an Metropolitan As of December 31, 2016, the carrying value of this project was US$166.3 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$304.7 million relative to total estimated cost of US$323.8 million. In the year ended December 31,2016, we had contract sales of US$107.4 million with area sold of 90,439 square meters at an average selling price of US$1,187 per square meter. Sales forthis project began in December 2014 and cumulative contract sales through December 31, 2016 were US$224.0 million with total area sold of 212,763 squaremeters. 112  On October 21, 2013, the Group acquired a 51% equity interest in a joint venture, Shaanxi Zhongmao Economy Development Co., Ltd. ("ShaanxiZhongmao"), On February 23, 2016, the Group acquired an additional 14.98% equity interest of Shaanxi Zhongmao. Upon completion of this acquisitionand amendment of the articles association, the Group obtained control over Shaanxi Zhongmao through its 65.98% voting interests of Shaanxi Zhongmao. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$459.1 million, or US$449.8 million net ofbusiness tax, relative to the total estimated cost of US$323.8 million, generating a gross margin of 28.0%. Zhengzhou Fancy City II (South) As of December 31, 2016, the carrying value of this project was US$0.2 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$54.9 million relative to total estimated cost of US$96.7 million. Sales for this project began in June2016. In the year ended December 31, 2016, we had contract sales of US$80.3 million with area sold of 53,165 square meters at an average selling price ofUS$1,510 per square meter. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$140.1 million, or US$139.3 million net ofbusiness tax, relative to the total estimated cost of US$96.7 million, generating a gross margin of 30.6%. Kunshan Xindo Park As of December 31, 2016, the carrying value of this project was US$36.1 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$97.2 million relative to total estimated cost of US$153.6 million. Sales for this project began inJuly 2016.In the year ended December 31, 2016, we had contract sales of US$88.4 million with area sold of 31,504 square meters at an average selling priceof US$2,805 per square meter. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$261.7 million, or US$260.4 million net ofbusiness tax, relative to the total estimated cost of US$153.6 million, generating a gross margin of 41.0%. Zhengzhou International New City I (Zhengzhou Shilipu project) As of December 31, 2016, the carrying value of this project was US$87.4 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$143.2 million relative to total estimated cost of US$448.8 million. Sales for this project began inSeptember 2016. In the year ended December 31, 2016, we had contract sales of US$80.7 million with area sold of 49,945 square meters at an average sellingprice of US$1,615 per square meter. We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$639.1 million, or US$635.2 million net ofbusiness tax, relative to the total estimated cost of US$448.8 million, generating a gross margin of 29.4%. Henan Xin Central II As of December 31, 2016, the carrying value of this project was US$44.1 million, net of profit recognized and progress billings. As of December 31,2016 the cumulative cost incurred on the project was US$53.7 million relative to total estimated cost of US$117.8 million. Sales for this project began inOctober 2016. In the year ended December 31, 2016, we had contract sales of US$14.8 million with area sold of 9,007 square meters at an average sellingprice of US$1,647 per square meter. 113  We estimate that over the full life of the project we will achieve aggregate gross sales revenue of US$175.9 million, or US$174.8 million net ofbusiness tax, relative to the total estimated cost of US$117.8 million, generating a gross margin of 32.6%. Critical Accounting Policies We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptionsthat affect (i) the reported amounts of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the end of each reporting periodand (iii) the reported amounts of revenues and expenses during each reporting period. We continually evaluate these estimates based on our own experience,knowledge and assessment of current business and other conditions, and our expectations regarding the future based on available information and reasonableassumptions, which together form our basis for making judgments about matters that are inherently uncertain. Since the use of estimates is an integralcomponent of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree ofjudgment than others in their application. When reading our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgment and other uncertaintiesaffecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions. We believe the followingaccounting policies involve the most significant judgments and estimates used in the preparation of our financial statements. Revenue recognition We apply either of two different methods for revenue recognition, full accrual method and percentage-of-completion method, depending on theexpected construction period and timing of collection of sales prices. Full accrual method Revenue from sales of development properties in the United States where the construction period, the period from the construction permit award dateto the unit delivery date is expected to be 12 months or less, or the construction period is expected to be longer than 12 months and sales prices are notcertain to be collected is recognized by the full accrual method when the sale is consummated and the unit has been delivered. Revenue from and the sale ofproperties held for sale is recognized by the full accrual method at the time of the closing of an individual unit sale. This occurs when title to the property istransferred to the buyer. A sale is not considered consummated until (a) the parties are bound by the terms of a contract, (b) all consideration has beenexchanged, (c) any permanent financing of which the seller is responsible has been arranged, (d) all conditions precedent to closing have been performed, (e)the seller does not have substantial continuing involvement with the property, and (f) the usual risks and rewards of ownership have been transferred to thebuyer. In addition, the buyer’s initial and continuing investment must be adequate to demonstrate a commitment to pay for the property, and the buyer’sreceivable, if any, must not be subject to future subordination. Sales transactions not meeting all the conditions of the full accrual method are accounted forusing the deposit method in which all costs are capitalized as incurred, and payments received from the buyer are recorded as a deposit liability. Cost of salesis recognized by determining the ratio of the area of the relevant units completed and sold to the estimated total project area, and applying that ratio to theestimated total project costs. For the year ended December 31, 2014, revenue was recognized in the amount of US$4.9 million for the sales of 7 of 15 finished condominium unitslocated in Irvine, California. For the year ended December 31, 2015, revenue was recognized in the amount of US$0.8 million for the resale of the remainingparcels of the Northern Nevada Land Portfolio and US$0.8 million for the sales of the remaining 1 finished condominium unit located in Irvine, California.For the year ended December 31, 2016, revenue was recognized in the amount of US$152.0 million for the sales of 106 units of the New York Oosten project. 114  Percentage-of-completion method Revenue and profit from the sale of development properties in the PRC is recognized by the percentage-of-completion method on the sale ofindividual units when the following conditions are met: ·Construction is beyond a preliminary stage. ·The buyer is committed to the extent of being unable to require a refund except for non-delivery of the unit. ·Sufficient units have already been sold to assure that the entire property will not revert to rental property. ·Sales prices are collectible. ·Aggregate sales proceeds and costs can be reasonably estimated. If any of the above criteria is not met, proceeds are accounted for as customer deposits until the criteria are met. The Group offered certain homebuyers seller-financing arrangements. All the homebuyers entered into such arrangement were subject to creditverification procedures. In addition, accounts receivable balances are unsecured, but monitored on an ongoing basis via the Group’s management reportingprocedures. The Group provides longer payment terms to particular home buyers after applying strict credit requirements based on the Group’s credit policy.Under the seller-financed contract arrangements, the buyer pays the purchase price for the residential unit in installment payments over one year. Thesecontracts require a minimum down payment upon the contract execution date, followed by subsequent installment payments and a final payment upondelivery of the unit. Since 2013, PRC banks have tightened the distributions of mortgage loans to homebuyers. Therefore, mortgage loans for homebuyers have beensubject to longer processing periods or even denied by the banks. The Group took the position that the processing periods of the contracts with underlyingmortgage loans exceeding one year cannot be recognized as revenue under the percentage of completion method. As a result, the Group reversed contractedsales amounts of US$10.6 million in aggregate related to sales contracts of 79 apartments when determining revenue to be recognized under the percentage ofcompletion method in 2016. Under the percentage of completion method, revenues from units sold and related costs are recognized over the course of the construction period,based on the completion progress of a project. In relation to any project, revenue is determined by calculating the ratio of incurred costs, including land userights costs and construction costs, to total estimated costs and applying that ratio to the contracted sales amounts. Cost of sales is recognized by determiningthe ratio of contracted sales during the period to total estimated sales value, and applying that ratio to the incurred costs. Current period amounts arecalculated based on the difference between the life-to-date project totals and the previously recognized amounts. The effect of changes to total estimated contract cost or revenues, if any, are recognized in the period in which they are determined. Revenuerecognized to date in excess of amounts received from customers is classified as current assets under accounts receivable . Amounts received from customersin excess of revenue recognized to date are classified as current liabilities under customer deposits. As of December 31, 2015 and December 31, 2016, thegross amounts received from customers in excess of revenues recognized were US$280.2 million and US$605.6 million, respectively. Any losses occurred or forecast to occur on real estate transactions are recognized in the period in which the loss is first anticipated. Real estate management services income is ratably recognized as services are provided over the term of the property management agreements.Employee salaries, water and electricity charges are recorded as the cost of real estate management services income. Real estate lease income is generally recognized on a straight-line basis over the terms of the tenancy agreements. Depreciation cost andmaintenance cost of the property are recorded as the cost of real estate lease income. 115  Other revenue includes services ancillary to the Group’s real estate projects, including landscaping and computer network engineering. Landscapingand computer network engineering income is recognized when services are provided. Income taxes We account for income tax using the balance sheet method. Deferred taxes are provided for the net tax effects of temporary differences between thecarrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as unutilized net operatinglosses. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before we are able to realize theirbenefits, or that future utilization is uncertain. We assess the need for valuation allowances by tax reporting unit by jurisdiction. Generally, each of ourreportable operating segments is organized in a separate tax reporting unit in a single tax jurisdiction. Interest and penalties arising from underpayment of income taxes is recognized according to the relevant tax law. The amount of interest expense tobe recognized is computed by applying the applicable statutory rate of interest to the difference between the tax position recognized and the amountpreviously taken or expected to be taken in a tax return. Interest recognized in accordance with ASC 740-10, “Income Tax” (“ASC 740-10”) is classified inthe consolidated financial statements as interest expense, while penalties recognized in accordance with this Interpretation are classified in the consolidatedfinancial statements as other expenses. In accordance with the provisions of ASC 740-10, we recognize in our consolidated financial statements the impact of a tax position if a tax return’sposition or future tax position is “more likely than not” to prevail (defined as a likelihood of more than fifty percent of being sustained upon audit, based onthe technical merits of the tax position). Tax positions that meet the “more likely than not” threshold are measured (using a probability weighted approach) atthe largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. Our estimated liability for unrecognizedtax benefits is periodically assessed for adequacy and may be affected by changing interpretations of laws, rulings by tax authorities, certain changes and/ordevelopments with respect to audits, and expiration of the statute of limitations. The outcome for a particular audit cannot be determined with certainty priorto the conclusion of the audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized may differ from our estimates. As eachaudit is concluded, adjustments, if any, are appropriately recorded in our consolidated financial statements. Additionally, in future periods, changes in facts,circumstances, and new information may require us to adjust the recognition and measurement estimates with regards to individual tax positions. Changes inrecognition and measurement estimates are recognized in the period in which the changes occur. Please see the more detailed discussion in Note 15 to our consolidated financial statements included elsewhere in this annual report. Land Appreciation Tax (“LAT”) In accordance with the relevant taxation laws for real estate companies of the provinces in which the subsidiaries operate in the PRC, the local taxauthorities levy LAT based on progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties lessdeductible expenditures, including borrowing costs and all property development expenditures. LAT is prepaid based on a fixed percentage (varying bylocal tax jurisdiction) of customer deposits and is expensed when the related revenue is recognized. Please see the more detailed discussion in Note 15 to ourconsolidated financial statements included elsewhere in this annual report. Share-based compensation Under ASC 718, “Compensation-Stock Compensation”, we are required to recognize share-based compensation as compensation expense based onthe fair value of stock options and other equity awards on the date of the grant. We have elected to recognize compensation expense using the straight-linemethod for all restricted shares and stock options granted with service conditions that have a graded vesting schedule. We have a policy of using authorizedshares in the existing pool to satisfy any future exercise of share options and shares repurchased held by a third party trustee to satisfy the restricted sharesgranted under our 2014 Restricted Stock Unit plan(“2014 RSU Plan”). 116  For options granted with performance conditions, share-based compensation expense is recognized based on the probable outcome of theperformance condition. A performance condition is not taken into consideration in determining fair value of the non-vested shares granted. Real estate properties development completed and under development Real estate properties consist of finished residential unit sites, commercial offices and residential unit sites under development. We lease the land forthe residential unit sites under land use right leases with various terms from the PRC. Real estate properties development completed, under development andheld for sale are stated at the lower of carrying amounts or fair value less selling costs. Expenditures for land development, including cost of land use rights, deed tax, pre-development costs and engineering costs, are capitalized andallocated to development projects by the specific identification method. Costs are allocated to specific units within a project based on the ratio of the salesvalue of units to the estimated total sales value times the total project costs. Costs of amenities transferred to buyers are allocated as common costs of the project that are allocated to specific units as a component of totalconstruction costs. For amenities retained by us, costs in excess of the related fair value of the amenities are also treated as common costs. Results ofoperations of amenities retained by us are included in current operating results. In accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”), real estate property development completed, under development andheld for sale are subject to valuation adjustments when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amountof the assets is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expectedto be generated by the assets. When the profitability of a current project deteriorates due to a slowdown in the sales pace, reduction of pricing or some other factor, this indicatesthat there may be a possible future loss on delivery and possible impairment in the recoverability of the assets. Accordingly, the assets of such project aresubsequently reviewed for future losses and impairment by comparing the estimated future undiscounted cash flows for the project to the carrying value ofsuch project. If the estimated future undiscounted cash flows are less than the asset’s carrying value, such deficit will be charged as a future loss and the assetwill then be written down to its estimated fair value. We determine estimated fair value primarily by discounting the estimated future cash flows relating to the asset. In estimating the cash flows for aproject, we use various factors including (a) the expected pace at which the planned number of units will be sold, based on competitive market conditions,historical trends in sales pace and actual average selling prices of similar product offerings and any other long or short-term economic conditions which mayimpact the market in which the project is located; (b) the estimated net sales prices expected to be attained based on the current market conditions andhistorical price trends, as well as any estimated increases in future sales prices based upon the projected rate of unit sales, the estimated time gap betweenpresale and expected delivery, the impact of government policies, the local and regional competitive environment, and certain external factors such as theopening of a subway line, school or factory; and (c) the expected costs to be incurred in the future by us, including, but not limited to, construction cost,construction overhead, sales and marketing, sales taxes and interest costs. Our determination of fair value requires discounting the estimated cash flows at a rate commensurate with the inherent risk associated with the assetsand related estimated cash flows. The discount rate used in determining each project’s fair value depends on the stage of development, location and otherspecific factors that increase or decrease the risk associated with the estimated cash flows. For the years ended December 31, 2014, 2015 and 2016, we did not recognize any impairment for real estate properties completed and underdevelopment. 117  Real estate properties held for lease, net Real estate properties held for lease are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method overthe estimated useful lives of the assets. Estimated useful lives of the real estate properties held for lease are 20-60 years. Maintenance, repairs and minor renewals are charged directly to expenses as incurred. Major additions and improvements to the real estate propertiesheld for lease are capitalized. In accordance with ASC 360, Property, Plant and Equipment (“ASC 360”), real estate properties held for lease is subject to valuation adjustmentswhen the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fairvalue. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets. For the years ended December 31, 2014, 2015 and 2016, we did not recognize any impairment for real estate properties held for lease. Effect of change in estimate Revisions in estimated gross profit margins related to percentage of completion revenues are made in the period in which circumstances requiringthe revisions become known. During the year ended December 31, 2016 real estate development projects (Chengdu Thriving Family, Chengdu XinyuanSplendid I, Zhengzhou Xin City, Henan Thriving Family, Suzhou Xin City, Suzhou Lake Royal Palace, Jinan Royal Palace, Kunshan Royal Palace, Xi'anMetropolitan, Shanghai Royal Palace, Zhengzhou Xindo Park, Jinan Xin Central, Henan Xin Central I, Zhengzhou Fancy City I, and Tianjin Spring RoyalPalace ), which recognized gross profits in 2015, had changes in their estimated gross profit margins. As of December 31, 2016, each of these projects has apercentage of completion at 36.5% or more. As the unit sales and selling prices were on an upward trend during the year ended December 31, 2016, the Grouprevised upwards its prior estimates related to selling prices and total estimated sales values in conjunction with the change in total estimated costs, which ledto a decrease of the percentage sold and thus a decrease in the recognized costs. As a result of the changes in estimate above, gross profit, net income andbasic and diluted earnings per share increased by US$61.2 million (2014: US$10.8 million, 2015: US$52.1 million), US$45.9 million (2014: US$8.1 million,2015: US$39.1 million), US$0.34 per share (2014: US$0.05 per share, 2015: US$0.27 per share), US$0.33 per share (2014: US$0.05 per share, 2015: US$0.27per share), respectively, for the year ended December 31, 2016. Recently Issued Accounting Pronouncements Please see the more detailed discussion in Note 2 to our consolidated financial statements included elsewhere in this annual report. B.Liquidity and Capital Resources A principal factor affecting our results of operations and our growth is the acquisition of land and land use rights in target markets. Under currentregulations and market practice, land use rights for residential development purposes in the PRC may be acquired from local governments through acompetitive auction or other bidding process. These competitive auctions and bidding processes are typically announced 20 days before they are about totake place. To participate in these auctions, we are required to make a minimum deposit of 20-50% of the opening auction price in cash. If we are successfulon our bids, we are also generally required to remit the remaining purchase price within one to six months of the auction. Further, under current regulationswe are not permitted to borrow money from local banks to fund land purchases. As a result we have to fund land purchases either from cash flows from projectsales or from financing transactions in foreign markets which have been and continue to be relatively expensive and not easily accessible. (See “ITEM 3.KEY INFORMATION D. Risk Factors - Our business requires access to substantial financing. Our failure to obtain adequate financing in a timely mannercould severely adversely (1) restrict our ability to complete existing projects, expand our business, or repay our debts and (2) affect our financial performanceand condition.”) As a result of entering into the U.S. market, we will also require adequate U.S. dollar financing for our U.S. operations, one of the sources ofwhich is back-to-back loan arrangements with our subsidiaries, which is subject to foreign exchange rate fluctuation and regulatory risk. See “ITEM 3. KEYINFORMATION “D. Risk Factors - We face risks related to our back-to back loans.” 118  In addition to our land acquisitions, we expect to incur material project development costs on the acquired land. Our cash needs can only bepartially satisfied by construction loans and future cash flows from real estate projects under development in the upcoming fiscal year. To ensure that we havesufficient funds to secure attractive land parcels and cover material project development costs, which are vital to our growth strategy, we have chosen tomaintain a certain level of cash reserves on hand. In addition, we are required to maintain restricted cash deposits by banks that provide loans to us and ourcustomers. The amount of the restricted cash deposits will vary based on the amount of the related loans. As of December 31, 2016, approximately US$328.5million, or 36.2% of our total cash balance reserve, were restricted cash. Since our 2007 IPO, we have mainly been acquiring land parcels through public auctions in the PRC. During 2013, we acquired one parcels of landin Suzhou for the total amount of US$159.1 million. In 2014, we purchased parcels in Jinan City, Chengdu City and Changsha City for aggregate land userights costs of approximately US$460.4 million. Starting from second half of 2012, apart from public auctions, we adopted a negotiated land acquisitionmodel as an additional approach to secure land in China. In 2013, we entered into two framework cooperation agreements with local governments and paidadvances in the aggregate amount of US$333.1 million. These advances have been or will be deducted from land cost if we succeed in auction bids for therelevant properties. In 2013, we chose not to participate in the bidding for one parcel of land in Jiangsu Province through this new acquisition model; theadvance payment and interest of US$28.6 million were refunded to us. An aggregate of total US$92.3 million of advance payments related to the remainingland parcels that we successfully acquired were transferred to land cost, including payments for three parcels of land in Xingyang for an aggregate price ofUS$39.7 million and two parcels of land in Zhengzhou for US$52.6 million. In 2014, we entered into one framework cooperation agreement with a localgovernment and paid advances in the aggregate amount of US$209.2 million. These advances have been or will be deducted from land cost if we succeed inauction bids. A total US$131.5 million of advance payments related to land parcels we successfully acquired were transferred to land cost, includingpayments for three parcels of land in Xingyang for the amount of US$27.1 million and two parcels of land in Xi’an for the amount of US$104.4 million.During 2015, we acquired six parcels in Zhengzhou City and Tianjin City for aggregate land costs of approximately US$232.9 million. In 2013, we started toacquire parcels of land by acquisitions of the equity interests of companies holding land. In 2013, we purchased one parcel of land in Kunshan throughacquisition of a local real estate company for an aggregate consideration of approximately US$93.1 million. In 2014, we purchased two parcels of land inSanya City and Shanghai City through acquisition of local real estate companies for an aggregate consideration of approximately US$58.3 million US$149.4million, respectively. During 2015, we acquired one parcel in Jinan City through the acquisition of one company for consideration of US$16.2 million.During 2016, we acquired six parcels in Zhengzhou City for aggregate land costs of approximately US$210.0 million, and we acquired three parcels inBeijing, Kunshan and Changsha through the acquisition of three companies for total consideration of US$159.5 million. We have and will continue to closely monitor our cash flow position to support our operations. We believe we manage land acquisition activities ina rational manner to control land expenditure and achieve reasonable profit of each project investment. We also closely monitor collection of accountsreceivable, and obtain funds through a variety of both domestic and overseas financing activities to provide a solid cash flow position for sustainabledevelopment. Cash Flows Year Ended December 31, 2014 2015 2016 (US$ in thousands) Net cash used in operating activities (884,314) (4,535) (159,881) Net cash (used in) provided by investing activities (15,892) (35,003) 4,468 Net cash provided by financing activities 455,066 306,282 375,230 Net (decrease) increase in cash and cash equivalents (445,140) 266,744 219,817 Effect of exchange rate changes on cash and cash equivalents (1,484) (19,711) (29,101) Cash and cash equivalents at beginning of year 587,119 140,495 387,528 Cash and cash equivalents at end of year 140,495 387,528 578,244 119  Operating Activities Net cash used in operating activities was US$159.9 million for the year ended December 31, 2016, primarily attributable to an increase in real estateproperty development completed of US$429.4 million, an increase in real estate properties held for lease of US$100.4 million, an increase in other depositsand prepayments of US$258.4 million, an increase in amounts paid for deposits for land use rights of US$129.5 million, partially offset by US$79.5 millionin net income, a decrease in customer deposits of US$101.9 million,a decrease in real estate property under development of US$346.7 million, a decrease inother receivables of US$114.2 million, and a decrease in other payables and accrued liabilities of US$101.4 million. Net cash used in operating activities was US$4.5 million for the year ended December 31, 2015, primarily attributable to an increase in real estateproperty under development of US$23.2 million, an increase in other deposits and prepayments of US$114.8 million, an increase in amounts paid fordeposits for land use rights of US$95.0 million, and a decrease in income tax payable of US$49.2 million, offset by US$66.5 million in net income, anincrease in accounts payable of US$144.3 million and a decrease in amounts due from related party of US$62.5 million. Net cash used in operating activities was US$884.3 million for the year ended December 31, 2014, primarily attributable to an increase in real estateproperty under development of US$762.2 million, an increase in amounts due from related party of US$124.1 million, an increase in other receivables ofUS$124.8 million and a decrease in income tax payable of US$58.5 million, partially offset by US$48.5 million in net income and an increase in accountspayable of US$157.3 million. Proceeds from pre-sales of our properties under development are an important source of cash flow for our operations. PRC law allows us to pre-sellproperties before their completion upon satisfaction of certain requirements and requires us to use the pre-sales proceeds to develop the particular project pre-sold. The amount and timing of cash flows from pre-sales are affected by a number of factors, including restrictions on pre-sales imposed by PRC law, marketdemand for our properties subject to pre-sales, prices at which we can pre-sell and the number of properties we have available for pre-sale. Any pre-salespayments we receive before we recognize revenue are recorded as current liabilities under customer deposits. At December 31, 2014, 2015 and 2016, werecorded current liabilities consisting of customer deposits of US$107.2 million, US$64.5 million and US$150.5 million, respectively. We actively marketpre-sales of our properties in accordance with regulations to accelerate cash in flow to the extent possible. Investing Activities Net cash provided by investing activities was US$4.5 million in the year ended December 31, 2016, mainly attributable to the acquisition ofsubsidiaries (net of cash acquired), partially offset by the acquisition of other equity method investments and purchase of property and equipment. Net cash used in investing activities was US$35.0 million in the year ended December 31, 2015, and was mainly attributable to the acquisition of along-term investment and purchase of property and equipment. Net cash used in investing activities was US$15.9 million in the year ended December 31, 2014, and was mainly attributable to the acquisition of asubsidiary and purchase of property and equipment. 120  Financing Activities Net cash provided by financing activities was US$375.2 million in the year ended December 31, 2016, and was primarily attributable to theproceeds from short-term, long-term bank loans and other debt in the aggregate of US$1,836.9 million, a decrease of restricted cash of US$31.4 million,partially offset by repayments of short-term, long-term bank loans and other debt in the aggregate of US$1,497.2 million, repurchases of ADSs of US$33.7million and dividend distributions of US$20.5 million. Net cash provided by financing activities was US$306.3 million in the year ended December 31, 2015, and was primarily attributable to theproceeds from short-term, long-term bank loans and other debt in the aggregate of US$1,086.1 million, a decrease of restricted cash of US$53.9 million,partially offset by repayments of short-term, long-term bank loans and other debt in the aggregate of US$802.2 million, repurchases of ADSs of US$6.6million and dividend distributions of US$14.8 million. Net cash provided by financing activities was US$455.1 million in the year ended December 31, 2014, and was primarily attributable to theproceeds from short-term, long-term bank loans and other debt in the aggregate of US$873.9 million, partially offset by repayment of short-term and long-term bank loans and other short-term and other debt in the aggregate of US$186.6 million, an increase in restricted cash and deposit of US$177.0 million,repurchases of ADSs of US$24.7 million and dividend distributions of US$15.3 million. Bank Borrowings and other debt Bank borrowings and other debt are an important source of funding for our property developments. Our borrowings as of December 31, 2014, 2015and 2016, respectively, were as follows. As of December 31, 2014 2015 2016 (US$) (US$) (US$) Short-term bank loans and other debt 293,449,741 222,226,246 178,576,151 Long-term bank loans 52,296,127 13,859,800 235,885,009 Other debt 576,204,491 910,007,958 974,791,324 Current portion of long-term bank loans and other debt 586,841,245 594,834,196 704,695,082 Total 1,508,791,604 1,740,928,200 2,093,947,566 As of December 31, 2014, 2015 and 2016 the weighted average interest rate on our short-term bank loans was 7.62%, 1.71% and 6.53%,respectively. As of December 31, 2014, US$163.4 million of the short-term bank loans were denominated in Renminbi and are secured by associated land userights and real estate under development. The remaining US$130.0 million was denominated in U.S. dollars and was secured by the equivalent amount ofRMB bank deposit. As of December 31, 2015, all of the short-term bank loans were denominated in U.S. dollars and are secured by the equivalent amount ofRMB bank deposit. As of December 31, 2016, US$144.2 million of the short-term bank loans were denominated in Renminbi and are secured by associatedland use rights and real estate under development. The remaining US$34.4 million was denominated in U.S. dollars and was secured by the equivalentamount of RMB bank deposit. As of December 31, 2014, 2015 and 2016, the weighted average interest rate on our long-term bank loans, including their current portion, was7.43%, 7.23% and 5.07%, respectively. As of December 31, 2014, all of the long-term bank loans were denominated in Renminbi and were secured byassociated land use rights, real estate under development and the 100% equity interest of Henan Xinyuan Wanzhuo Real Estate Co., Ltd. and ZhengzhouJiantou Xinyuan Real Estate Co., Ltd. As of December 31, 2015, all of the long-term bank loans were denominated in Renminbi and were secured byassociated land use rights and real estate under development. As of December 31, 2016, US$253.3 million of the long-term bank loans were denominated inRenminbi and are secured by associated land use rights. The remaining US$64.8 million was denominated in U.S. dollars and was secured by the equivalentamount of RMB bank deposit. 121  Since June 2003, commercial banks have been prohibited under the PBOC guidelines from advancing loans to fund the payment of land use rights.In addition, the PRC government also encourages property developers to use internal funds to develop their property projects. Under guidelines jointlyissued by the MOHURD and other PRC government authorities in August 2004, commercial banks in China are not permitted to lend funds to propertydevelopers with an internal capital ratio, calculated by dividing the internal funds available by the total capital required for the project, of less than 35%.These internal capital ratio requirements have limited the amount of bank financing that property developers, including us, are able to obtain. Debt Securities Issued in 2013, 2016 and 2017 During 2013, we issued approximately US$475.76 million aggregate principal amount of debt securities in three separate transactions. On May 3,2013, we issued US$200 million aggregate principal amount of May 2018 Senior Secured Notes. On September 19, 2013 we issued the Convertible Note inthe aggregate principal amount of approximately US$75.76 million together with 12,000,000 common shares to a single institutional investor. On December6, 2013, we issued US$200 million aggregate principal amount of June 2019 Senior Secured Notes. On August 30, 2016, we issued US$300 millionaggregate principal amount of 8.125% senior notes due 2019.On February 28, 2017, we issued US $300 million aggregate principal amount of 7.75% seniornotes due 2021. The terms of each debt security are discussed in more detail below. We redeemed the Convertible Note in 2014. See "Convertible Note,"below. We redeemed the May 2018 Senior Secured Notes in 2016. See "May 2018 Senior Secured Notes," below. The May 2018 Senior Secured Notes, the June 2019 Senior Secured Notes, the August 2019 Senior Secured Notes and the February 2021 SeniorSecured Notes were issued without registration under the Securities Act in offerings conducted outside the United States pursuant to Regulation S under theSecurities Act. The Convertible Note and shares were issued without registration under the Securities Act pursuant to an exemption for issuance and subs notinvolving any public offering. Senior Secured Notes Our obligations under the June 2019 Senior Secured Notes, the August 2019 Senior Secured Notes, the February 2021 Senior Secured Notes, theindenture governing the June 2019 Senior Secured Notes (the “June 2019 Indenture”), the indenture governing the August 2019 Senior Secured Notes (the“August 2019 Indenture”), and the indenture governing the February 2021 Senior Secured Notes (the “February 2021 Indenture”) have been guaranteedinitially by certain of our wholly-owned subsidiaries, Xinyuan Real Estate, Ltd., Xinyuan International Property Investment Co., Ltd., Victory GoodDevelopment Limited, South Glory International Limited, Elite Quest Holdings Limited and Xinyuan International (HK) Property Investment Co., Limited(the "Subsidiary Guarantors") and will be guaranteed by such other of our future subsidiaries in accordance with the terms of the applicable Indenture. Ourobligations under the June 2019 Senior Secured Notes, the August 2019 Senior Secured Notes, the February 2021 Senior Secured Notes, the June 2019Indenture, the August 2019 Indenture and the February 2021 Indenture are secured by a pledge of the capital stock of our wholly-owned subsidiaries,Xinyuan Real Estate, Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Ltd., South Glory International Ltd. and EliteQuest Holdings Ltd. During the period the May 2018 Senior Secured Notes were outstanding, we had similar obligations under the May 2018 Senior SecuredNotes and the indenture governing the May 2018 Senior Secured Notes (the “ May 2018 Indenture”). 122  In February 2015, pursuant to a consent solicitation to the holders of the May 2018 Senior Secured Notes and the June 2019 Senior Secured Notes,we amended the May 2018 Indenture and the June 2019 Indenture to give us additional flexibility in pursuing new business opportunities and new sourcesof capital. The amendments to the Indentures include amendments that allow us to: (i) incur additional Indebtedness (as defined in the Indentures) infurtherance of our business plans; (ii) make certain Restricted Payments (as defined in the Indentures) and Permitted Investments (as defined in theIndentures); and (iii) make certain deemed Investments (as defined in the Indentures) without having to satisfy the Fixed Charge Coverage Ratio (as definedin the Indentures) requirement. The amendments also amend (i) the “Limitation on Issuances of Guarantees by Restricted Subsidiaries” covenant in theIndentures to the extent that we believe necessary as a result of the amendments to other covenants and (ii) the “Limitation on Asset Sales” covenant in theIndentures to remove the Fixed Charge Coverage Ratio requirement for Asset Dispositions (as defined in the Indentures). The amendments also amendedcertain related definitions in the Indentures. In February 2016, through a consent solicitation to the holders of the May 2018 Senior Secured Notes and the June 2019 Senior Secured Notes, weamended the May 2018 Indenture and the June 2019 Indenture to give us additional flexibility in pursuing new business opportunities and new sources ofcapital. The amendments to the Indentures include: (i) amend the provisions relating to future Subsidiary Guarantors, JV Subsidiary Guarantors and pledgedsubsidiary Capital Stock (each, as defined in the Indentures); (ii) amend the “Limitation on Indebtedness and Preferred Stock” covenant; (iii) amend the“Limitation on Transactions with Shareholders and Affiliates” covenant and the provisions relating to “Designation of Restricted Subsidiaries andUnrestricted Subsidiaries”; (iv) amend the definition of “Permitted Investment” and the “Limitation on Restricted Payments” covenant; and (v) remove the“Limitation on the Company’s Business Activities” covenant and amend the related definitions and provisions. The amendments also clarify certain otherprovisions in the Indentures. The June 2019 Indenture, the August 2019 Indenture and the February 2021 Indenture continue to contain certain covenants that, among others,restrict our ability and the ability of our restricted subsidiaries (as defined in the applicable Indenture) to incur additional debt or to issue preferred stock, tomake certain payments or investments, to pay dividends or purchase or redeem capital stock, to sell assets (including limitations on the use of proceeds ofasset sales), to grant liens on the collateral securing the June 2019 Senior Secured Notes, the August 2019 Senior Secured Notes or the February 2021 SeniorSecured Notes, as applicable, or other assets, to make certain other payments and to engage in transactions with affiliates and holders of more than 10% of ourcommon shares, subject to certain qualifications and exceptions and the satisfaction, in certain circumstances of specified conditions, such as a Fixed ChargeCoverage Ratio (as defined in the applicable Indenture) of 2.75 to 1.0(reduced from 2.75 to 1.0 effective August 2016), 2.50 to 1.0, and 2.0 to 1.0,respectively. Certain of these limitations, including restrictions on the incurrence of certain indebtedness or issuances of preferred stock, the making ofcertain payment or investments, payments of dividends, and sales of assets will be suspended if the June 2019 Senior Secured Notes, the August 2019 SeniorSecured Notes or the February 2021 Senior Secured Notes, as applicable, obtain and retain an investment grade rating. Additional information regarding the May 2018 Senior Secured Notes, the June 2019 Senior Secured Notes, the August 2019 Senior Secured Notesand the February 2021 Senior Secured Notes is set forth below. May 2018 Senior Secured Notes The May 2018 Senior Secured Notes bore interest at 13.25% per annum payable semi-annually. Interest was payable on May 3 and November 3 ofeach year, commencing November 3, 2013. The final maturity date of the May 2018 Senior Secured Notes was May 3, 2018. The Company had the option to redeem the May 2018 Senior Secured Notes, in whole or in part, at a redemption price equal to 106.6250% ofprincipal amount, plus accrued and unpaid interest, if any, to (but excluding) the redemption date, during the 12 month period commencing on May 3, 2016or at a redemption price equal to 103.3125% of the principal amount, plus accrued and unpaid interest, if any to (but excluding) the redemption date, duringthe 12 month period commencing on May 3, 2017. At any time prior to May 3, 2016, the Company could at its option redeem the May 2018 Senior Secured Notes, in whole but not in part, at aredemption price equal to 100.0% of the principal amount of the May 2018 Senior Secured Notes plus the Applicable Premium as of, and accrued and unpaidinterest, if any, to (but not including) the redemption date. "Applicable Premium" meant with respect to any Senior Note due 2018 at any redemption date, thegreater of (i) 1.00% of the principal amount of such Note and (ii) the excess of (A) the present value at such redemption date of the redemption price of suchNote on May 3, 2016, plus all required remaining scheduled interest payments due on such Note through May 3, 2016 (but excluding accrued and unpaidinterest to the redemption date), computed using a discount rate equal to the Adjusted Treasury Rate (as defined in the May 2018 Indenture) plus 100 basispoints, over (B) the principal amount of such Note on such redemption date. 123  At any time prior to May 3, 2016, the Company could redeem up to 35% of the aggregate principal amount of the May 2018 Senior Secured Noteswith the net cash proceeds of one or more sales of the Company's common shares in certain equity offerings, within a specified period after the equityoffering, at a redemption price of 113.25% the principal amount of the Senior Notes, plus accrued and unpaid interest, if any, to (but not including) theredemption date, provided that at least 65% of the aggregate principal amount of the Senior Notes issued on May 3, 2013 remained outstanding after eachsuch redemption. Following any Change of Control Triggering Event, the Company was obligated to make an offer to purchase all outstanding May 2018 SeniorSecured Notes at a purchase price equal to 101.0% of the principal amount thereof plus accrued and unpaid interest, if any to (but not including) the offer topurchase payment date. A "Change of Control Triggering Event" meant the occurrence of both a Change of Control (as defined in the May 2018 Indenture)and specified decline in the ratings of the Senior Notes within six months after the date of public notice of the occurrence of a Change of Control or theintention by the Company or any other person to effect a Change of Control. On October 18, 2016, we redeemed an aggregate principal amount of US$183,000,000 of all outstanding May 2018 Senior Secured Notes onOctober 18, 2016 at the redemption price equal to 106.625% of the principal amount thereof, being US$195,123,750, plus accrued and unpaid interest ofUS$11,113,590 to October 18, 2016. The total redemption price paid by the Company on October 18, 2016 was US$206,237,340. The Company funded theredemption using the proceeds from the offering of its August 2019 Senior Secured Notes. June 2019 Senior Secured Notes On December 6, 2013, we issued an aggregate principal amount of US$200,000,000 of the June 2019 Senior Secured Notes. The June 2019 SeniorSecured Notes bear interest at 13% per annum payable semi-annually. Interest will be payable on June 6 and December 6 of each year, commencing June 6,2014. The June 2019 Senior Secured Notes have a five and a half year term maturing on June 6, 2019. We may redeem the June 2019 Senior Secured Notes, in whole or in part, at a redemption price equal to 106.5% of principal amount, plus accruedand unpaid interest, if any, to (but excluding) the redemption date, during the 12 month period commencing on June 6, 2017 or at a redemption price equalto 103.25% of the principal amount, plus accrued and unpaid interest, if any to (but excluding) the redemption date, during the 12 month periodcommencing on June 6, 2018. At any time prior to June 6, 2017, we may at our option redeem the June 2019 Senior Secured Notes, in whole but not in part, at a redemption priceequal to 100.0% of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, to (but not including) theredemption date. “Applicable Premium” means with respect to any Note at any redemption date, the greater of (i) 1.00% of the principal amount of such Noteand (ii) the excess of (A) the present value at such redemption date of the redemption price of such Note on June 6, 2017, plus all required remainingscheduled interest payments due on such Note through June 6, 2017 (but excluding accrued and unpaid interest to the redemption date), computed using adiscount rate equal to the Adjusted Treasury Rate (as defined in the June 2019 Indenture) plus 100 basis points, over (B) the principal amount of such Noteon such redemption date. At any time prior to June 6, 2017, we may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of one ormore sales of our common shares in certain equity offerings, within a specified period after the equity offering, at a redemption price of 113% the principalamount of the Notes, plus accrued and unpaid interest, if any, to (but not including) the redemption date, provided that at least 65% of the aggregateprincipal amount of the Notes issued on December 6, 2013 remain outstanding after each such redemption. Following any Change of Control Triggering Event, we must make an offer to purchase all outstanding June 2019 Senior Notes at a purchase priceequal to 101.0% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the offer to purchase payment date. A“Change of Control Triggering Event” means the occurrence of both a Change of Control (as defined in the June 2019 Indenture) and specified decline in theratings of the Notes within six month after the date of public notice of the occurrence of a Change of Control or the intention by us or any other person toeffect a Change of Control. 124  August 2019 Senior Secured Notes On August 30, 2016, we issued an aggregate principal amount of US$300,000,000 of the August 2019 Senior Secured Notes. The August 2019Senior Secured Notes bear interest at 8.125% per annum payable semi-annually. Interest will be payable on February 28 and August 30 of each year,commencing February 28, 2017. The August 2019 Senior Secured Notes have a three year term maturing on August 30, 2019. At any time prior to August 30, 2019, we may at our option redeem the August 2019 Senior Secured Notes, in whole but not in part, at a redemptionprice equal to 100.0% of the principal amount of the August 2019 Senior Secured Notes plus the Applicable Premium as of, and accrued and unpaid interest,if any, to (but not including) the redemption date. “Applicable Premium” means with respect to any August 2019 Senior Secured Note at any redemptiondate, the greater of (i) 1.00% of the principal amount of such August 2019 Senior Secured Note and (ii) the excess of (A) the present value at such redemptiondate of the principal amount of such August 2019 Senior Secured Note, plus all required remaining scheduled interest payments due on such August 2019Senior Secured Note through the maturity date of the August 2019 Senior Secured Notes (but excluding accrued and unpaid interest to the redemption date),computed using a discount rate equal to the Adjusted Treasury Rate (as defined in the August 2019 Indenture) plus 100 basis points, over (B) the principalamount of such August 2019 Senior Secured Note on such redemption date. At any time prior to August 30, 2019, we may redeem up to 35% of the aggregate principal amount of the August 2019 Senior Secured Notes withthe net cash proceeds of one or more sales of our common shares in certain equity offerings, within a specified period after the equity offering, at a redemptionprice of 108.125% of the principal amount of the August 2019 Senior Secured Notes, plus accrued and unpaid interest, if any, to (but not including) theredemption date, provided that at least 65% of the aggregate principal amount of the August 2019 Senior Secured Notes issued on August 30, 2016 remainoutstanding after each such redemption. Following any Change of Control Triggering Event, we must make an offer to purchase all outstanding August 2019 Senior Secured Notes at apurchase price equal to 101.0% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the offer to purchase paymentdate. A “Change of Control Triggering Event” means the occurrence of both a Change of Control (as defined in the August 2019 Indenture) and specifieddecline in the ratings of the August 2019 Senior Secured Notes within six months after the date of public notice of the occurrence of a Change of Control orthe intention by us or any other person to effect a Change of Control. February 2021 Senior Secured Notes On February 28, 2017, we issued an aggregate principal amount of US$300,000,000 of the February 2021 Senior Secured Notes. The February 2021Senior Secured Notes bear interest at 7.75% per annum payable semi-annually. Interest will be payable on February 28 and August 28 of each year,commencing August 28, 2017. The February 2021 Senior Secured Notes have a four year term maturing on February 28, 2021. At any time prior to February 28, 2021, we may at our option redeem the February 2021 Senior Secured Notes, in whole but not in part, at aredemption price equal to 100.0% of the principal amount of the February 2021 Senior Secured Notes plus the Applicable Premium as of, and accrued andunpaid interest, if any, to (but not including) the redemption date. “Applicable Premium” means with respect to any February 2021 Senior Secured Note atany redemption date, the greater of (i) 1.00% of the principal amount of such February 2021 Senior Secured Note and (ii) the excess of (A) the present value atsuch redemption date of the principal amount of such February 2021 Senior Secured Note, plus all required remaining scheduled interest payments due onsuch February 2021 Senior Secured Note through the maturity date of the February 2021 Senior Secured Notes (but excluding accrued and unpaid interest tothe redemption date), computed using a discount rate equal to the Adjusted Treasury Rate (as defined in the February 2021 Indenture) plus 100 basis points,over (B) the principal amount of such February 2021 Senior Secured Note on such redemption date. At any time prior to February 28, 2021, we may redeem up to 35% of the aggregate principal amount of the February 2021 Senior Secured Noteswith the net cash proceeds of one or more sales of our common shares in certain equity offerings, within a specified period after the equity offering, at aredemption price of 107.75% of the principal amount of the February 2021 Senior Secured Notes, plus accrued and unpaid interest, if any, to (but notincluding) the redemption date, provided that at least 65% of the aggregate principal amount of the February 2021 Senior Secured Notes issued on February28, 2017 remain outstanding after each such redemption. 125  Following any Change of Control Triggering Event, we must make an offer to purchase all outstanding February 2021 Senior Secured Notes at apurchase price equal to 101.0% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the offer to purchase paymentdate. A “Change of Control Triggering Event” means the occurrence of both a Change of Control (as defined in the February 2021 Indenture) and specifieddecline in the ratings of the February 2021 Senior Secured Notes within six months after the date of public notice of the occurrence of a Change of Control orthe intention by us or any other person to effect a Change of Control. Convertible Note Pursuant to a Securities Purchase Agreement entered into on August 26, 2013, on September 19, 2013, we issued and sold the Convertible Note inthe aggregate principal amount of US$75,761,009 and 12,000,000 common shares to TPG Asia. We received gross proceeds of approximatelyUS$108,600,000 from the issuance of the Convertible Note and the shares. The Convertible Note bore interest at 5.00% per annum payable semi-annually inarrears, commencing March 19, 2014, and was convertible at the option of the holder at any time at an initial conversion price of $3.00 per common share,equivalent to $6.00 per ADS, subject to adjustments for share splits, reverse splits, share dividends and distributions, and certain issuances (or deemedissuances) of common shares or ADSs for consideration less than the conversion price then in effect, and certain Extraordinary Cash Dividends (as defined inthe Convertible Note). The maturity date of the Convertible Note was September 19, 2018. Following a "Change of Control" or a "Fundamental Transaction"(as defined in the Convertible Note), we were required to make an offer to purchase all outstanding Convertible Note at a purchase price equal to 150% of theoutstanding principal amount thereof plus accrued and unpaid interest to the payment date. The Convertible Note contained certain financial covenants, including a covenant requiring that we maintain a Fixed Charge Coverage Ratio (asdefined in the Convertible Note) of no less than 3.0 to 1.0, as determined on the last day of each fiscal quarter of each fiscal year for the four preceding fiscalquarters for which our consolidated financial statements available, and a limitation on the incurrence by us or our Restricted Subsidiaries (as defined in theConvertible Note) of any indebtedness except under certain limited circumstances. We and the holder of the Convertible Note agreed to waivers of thosecovenants beginning as of June 30, 2014 and, most recently, in connection with the redemption of the Convertible Note, through December 1, 2014. TheInitial Subsidiary Guarantors were also guarantors of the Convertible Note and the shares of the subsidiaries pledged to secure our obligations under theSenior Secured Notes and the obligations of Xinyuan Real Estate Ltd. as guarantor of the Senior Secured Notes were also pledged to secure the ConvertibleNote. On November 21, 2014, pursuant to a note redemption agreement entered into with TPG Asia, we redeemed the Convertible Note in full for a totalredemption amount of $86,272,849 consisting of the entire outstanding principal balance, interest to the redemption date and debt extinguishment loss equalto the 13% of the outstanding principal amount. In connection with the redemption, we agreed with TPG Asia to waivers of the covenants requiring us tomaintain a Fixed Charge Coverage Ratio (as defined in the Convertible Note) of not less than 3.0 to 1.0 and limiting our ability, and the ability of ourRestricted Subsidiaries (as defined in the Convertible Note) to incur indebtedness, except under limited circumstances. Onshore Corporate Bonds On December 28, 2015, Xinyuan (China) Real Estate, Ltd. issued the first tranche of the onshore corporate bonds with an aggregate principal amountof US$154 million due on December 28, 2020 (the "First Tranche Bonds") at a coupon rate of 7.5% per annum payable annually. Interest is payable onDecember 28 of each year, commencing December 28, 2015. Given that First Tranche Bonds is debt in its legal form and is not a derivative in its entirety, ithas been classified as other long-term debt. The Company has evaluated and determined that there was no embedded derivative requiring bifurcation fromthe First Tranche Bonds under the requirements of ASC 815 "Derivatives and Hedging ". The First Tranche Bonds were issued at par.On January 27, 2016,Xinyuan (China) Real Estate, Ltd. issued the second tranche of the onshore corporate bonds with an aggregate principal amount of US$107 million due onJanuary 27, 2021 (the “Second Tranche Bonds”) at a coupon rate of 7.47% per annum payable annually. On March 14, 2016, Xinyuan (China) Real Estate,Ltd. issued the third tranche of the onshore corporate bonds with an aggregate principal amount of US$77 million due on March 14, 2021 (the “ThirdTranche Bonds”) at a coupon rate of 7.09% per annum payable annually. 126  Upon the third anniversary of the issuance of each tranche of bonds, Xinyuan (China) Real Estate, Ltd may adjust the applicable coupon rate and theholders have the right within a specified time period to require the company to repurchase the bonds following the company's announcement of whether itintends to adjust the interest rate. The bonds contain restrictions on certain business activities of Xinyuan (China) Real Estate Ltd. when in default on payment of interest or principal,including, among others, limitations on distributions of net income, limitations on certain expenditures, or business combination transactions. On August 15, 2016, Xinyuan (China) Real Estate, Ltd. issued a new tranche of onshore corporate bonds with an aggregate principal amount ofRMB1.5 billion (US$216 million) due on August 15, 2019 (the “New Tranche”) at a coupon rate of 7.5% per annum payable annually. Interest is payable onAugust 15 of each year, commencing August 15, 2017. Given that the New Tranche is debt in its legal form and is not a derivative in its entirety, it has beenclassified as other long-term debt. The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from the NewTranche under the requirements of ASC 815, Derivatives and Hedging. The New Tranche was issued at par. Upon the first anniversary of the issuance of theNew Tranche, Xinyuan (China) Real Estate Ltd may adjust the applicable coupon rate and the holders have the right within a specified time period to requirethe Company to repurchase the bonds following the Company’s announcement of whether it intends to adjust the interest rate. Therefore, the entire amountof the New Tranche has been classified as current liabilities as of December 31, 2016. Capital Expenditures Our capital expenditures were US$18.7 million, US$39.1 million and US$6.5 million in 2014, 2015 and 2016, respectively. Our capitalexpenditures in 2014, 2015 and 2016 were mainly used for building improvements, and purchase of aircraft, vehicles, fixtures and furniture and computernetwork equipment. The source of our capital expenditures is primarily the cash flow generated from operating activities. As of December 31, 2016, we had outstanding commitments with respect to non-cancelable construction contracts for real estate development in theamount of US$347.1 million. C.Research and Development, Patent and Licenses, etc. Not applicable. D.Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the periodfrom January 1, 2016 to December 31, 2016 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity orcapital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. E.Off-Balance Sheet Arrangements As is customary in the property industry in China, we provide guarantees to commercial banks in respect of the mortgage loans they extend to ourcustomers prior to the issuance of their property ownership certificates. These guarantees remain outstanding until the completion of the registration of themortgage with the relevant mortgage registration authorities. In most cases, guarantees for mortgages on residential properties are discharged when we submitthe individual property ownership certificates and certificates of other interests in the property to the mortgagee bank. In our experience, the application forand issuance of the individual property ownership certificates typically takes six to twelve months, so the guarantee periods typically last for up to six totwelve months after we deliver the related property. 127  As of December 31, 2015 and 2016, we guaranteed mortgage loans in the aggregate outstanding amount of US$1,513.7 million and US$1,672.9,respectively. We generally pre-sell properties prior to the completion of their construction. Sales contracts are executed during the pre-sales period and mortgagesare generally executed within 30 days after the buyer signs the sales contract. The pre-sales period begins upon receipt of a government permit which is issued soon after groundbreaking on a given phase of the project. Theperiod from groundbreaking to delivery consists of building construction, landscaping, municipal government inspections and issuance of a certificate ofoccupancy. This “delivery period” will generally range from one to two years. The buyers only request the government to record buyer ownership in theirofficial records after the delivery period is completed. Typically, the government will provide certificates of ownership six to twelve months after beingrequested to record. Therefore, the total elapsed time between our receipt of mortgage proceeds and the buyer’s receipt of an ownership certificate can rangefrom one and a half years to three years. Due to the time lag above, our mortgage guarantees will exceed the real estate balances at any given point in time. We paid US$1.5 million, US$0.6 million and US$1.8 million to satisfy guarantee obligations related to customer defaults for the years endedDecember 2013, 2014 and 2016, respectively. The fair value of the guarantees is not significant and we consider that in case of default in payments, the netrealizable value of the related properties can cover the repayment of the outstanding mortgage principal together with the accrued interest and penalty andtherefore, no provision has been made for the guarantees in our consolidated financial statements. Except for the contingent liabilities set forth above, we have not entered into any financial guarantees or other commitments to guarantee thepayment obligations of any third parties. We have not entered into any transactions with unconsolidated entities, derivative contracts that are indexed to ourshares and classified as shareholders’ equity, or that are not reflected in our consolidated financial statements. Other than as described above, there are no off-balance sheet arrangements that have or are reasonably likely to have effect on our financial position. We have no obligation arising out of a variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risksupport to us, or that engages in leasing, hedging, or research and development arrangements with us. F.Tabular Disclosure of Contractual Obligations As of December 31, 2016, our contractual obligations amounted to US$2,812.6 million, primarily arising from contracted construction costs or othercapital commitments for future property developments and debt obligations. The following table sets forth our contractual obligations for the periodsindicated. 128  Payments due by period Total less than 1 year 1-3 years 3-5 years morethan 5 years (US$ in thousands) Long-term debt obligations: long-term bank loans 235,885 - 168,617 67,268 - interest on long-term bank loans (1) 33,212 11,691 17,016 4,505 - other long-term debt 974,791 546,066 412,508 16,217 interest on other long-term debt (2) 263,181 84,836 143,572 32,882 1,891 current portion of long-term bank loan and otherdebt 704,695 704,695 interest on current portion of long-term bank loanand other debt (1) 49,712 49,712 Short-term debt obligations short-term bank loans 178,576 178,576 interest on short-term debt obligations (3) 7,338 7,338 Operating lease obligations 9,241 4,884 4,357 Non-cancellable construction contract obligations 347,145 317,775 25,782 3,588 - Capital lease obligations (4) 24,166 5,837 11,148 7,181 Total 2,827,942 1,365,344 916,558 527,932 18,108 (1)Our long-term bank loans, including current portion, bear variable interest at rates adjustable based on the PBOC benchmark rate. Interest on long-term loans, including current portion, is calculated based on the current interest rate of each loan, ranging from 4.75% to 6.175% per annum, usingthe PBOC benchmark rate of 4.75% as of December 31, 2016. Interest on the current portion of other debts calculated at rates ranging from 4.99%to11.0% per annum.(2)Interest on other long-term debt is calculated based on the interest rates for relevant loans, ranging from 5.95% to 13.0% per annum.(3)Interest on short-term loans is calculated based on the interest rates for relevant loans, ranging from 2.02% to 8.30% per annum.(4)In 2012, one of our subsidiaries entered into a capital lease agreement to lease an aircraft, and in 2016, another one of our subsidiaries entered into asale and leaseback agreement for shopping mall equipment, as described further below. We have projected cash flows for each of our existing projects, considering a number of factors, including the relative stage of each of our projectsunder construction and our projects under planning and the demand for and the average selling prices of our projects. For any given project, we use cash earlyin the project life and generate cash later in the project life. Costs for land acquisition, site preparation, foundation, and early above-ground framing are allincurred before we obtain licenses from local governing authorities to enter into pre-sales activity. The construction of many of our projects is carried-out inphases, the timing of which is primarily determined by us based on the pace of the market demand for units in the project. Accordingly, after receiving thepre-sale permits relating to a project, we are in a better position to manage some of our construction activities to coincide with the timing of expected pre-sales.. Starting in 2013, we adopted a negotiated land acquisition model. We entered into two framework cooperation agreements with local governmentsin 2013, one such agreement in 2014,no such agreements in 2015 and 2016, all with local governments, relating to prospective land parcel planning andpreparation, pursuant to which we paid advances in the aggregate amount of US$333.1 million, US$209.2 million, US$83.4 million and US$255.1 million,respectively. These advances have been or will be transfer to land cost through our success in auction bids. In 2013, we chose not to participate in thebidding for one parcel of land in Jiangsu Province through this negotiated land acquisition model; the advance payment and related interest of US$28.6million were refunded to us, and total US$92.3 million of the advance payments related to the other land parcels successfully acquired were transferred toland cost, including three parcels of land in Xingyang for the amount of US$39.7 million and two parcels of land in Zhengzhou of US$52.6 million. In 2014,a total of US$131.5 million of advance payments related to the land parcels successfully acquired were transferred to land cost, including payments related tothree parcels of land in Xingyang for the amount of US$27.1 million and two parcels of land in Xi’an for the amount of US$104.4 million. In 2015, a total ofUS$232.9 million of advance payments related to the remaining land parcels successfully acquired were transferred to land cost, including four parcels ofland in Zhengzhou for the amount of US$180.7 million and two parcels of land in Tianjin for US$52.2 million. In 2016, a total of US$210.0 million ofadvance payments related to the remaining land parcels successfully acquired were transferred to land cost, which were six parcels of land in Zhengzhou forthe amount of US$210.0 million. 129  In 2013, we started to acquire parcels of land by acquisitions of equity interests in companies holding land. In 2014, we purchased two parcels ofland in Sanya City and Shanghai City through acquisition of local real estate companies for an aggregate consideration of approximately US$58.3 millionUS$149.4 million, respectively. In 2015, we purchased one parcel of land in Jinan City through acquisition of local real estate companies for an aggregateconsideration of approximately US$16.2 million. In 2016, we acquired three parcels of land in Beijing, Kunshan and Changsha in the amounts of US$63.1million, US$66.9 million and US$29.5 million, respectively. On October 23, 2012, Henan Xinyuan Real Estate Co., Ltd. (“Henan Xinyuan”), one of our subsidiaries, entered into a capital lease agreement withMinshengHongtai (Tianjin) Aviation Leasing Co., Ltd. (“Minsheng”) to lease an aircraft. Pursuant to the agreement, Minsheng purchased a Gulf 450 fromGulfstream Aerospace Corporation and leased the aircraft to Henan Xinyuan for a term of 96 months starting from September 12, 2013. We measured a capitallease asset and capital lease obligation at an amount equal to the present value of the minimum lease payments during the lease term, excluding the portionof the payments representing executory costs (such as insurance, maintenance, and taxes to be paid by the lessor) as well as any profit thereon. As ofDecember 31, 2016, we are contractually committed to pay the amount of US$24.2 million. See Note 22 to the consolidated financial statements containedelsewhere in this annual report on Form 20-F. During 2013, we issued approximately US$475.76 million aggregate principal amount of debt securities in three separate transactions. On May 3,2013, we issued US$200 million aggregate principal amount of May 2018 Senior Secured Notes that bore interest at a rate of 13.25% per annum . OnSeptember 19, 2013 we issued the Convertible Note in the aggregate principal amount of approximately US$75.76 million together with 12,000,000common shares for aggregate proceeds to us of approximately US$106 million. The Convertible Note bore interest at a rate of 5% per annum. On December 6,2013, we issued US$200 million aggregate principal amount of June 2019 Senior Secured Notes that bear interest at a rate of 13% per annum. On November21, 2014, we redeemed the Convertible Note in full. The total cash redemption amount (including the principal, accrued interest up to and includingNovember 21, 2014 and loss on extinguishment of debt amounted to US$86.27 million. On December 28, 2015, our subsidiary, Xinyuan (China) Real Estate,Ltd. issued US$154 million aggregate principal amount of First Tranche Bonds that bear interest at a rate of 7.5% per annum. On January 27, 2016, Xinyuan(China) Real Estate, Ltd. issued US$107 million aggregate principal amount of Second Tranche Bonds that bear interest at a rate of 7.47% per annum. OnMarch 14, 2016, Xinyuan (China) Real Estate, Ltd. issued US$77 million aggregate principal amount of Third Tranche Bonds that bear interest at a rate of7.09% per annum. Upon the third anniversary of the issuance of each tranche of bonds, Xinyuan (China) Real Estate, Ltd may adjust the applicable couponrate and the holders have the right within a specified time period to require the company to repurchase the bonds following the company's announcement ofwhether it intends to increase the interest rate. On August 15, 2016, Xinyuan (China) Real Estate, Ltd. issued US$216 million (RMB1.5 billion) aggregateprincipal amount of the New Tranche of Onshore Corporate Bond that bear 7.5% per annum. Upon the first anniversary of the issuance of the New Tranche,Xinyuan (China) Real Estate Ltd may adjust the applicable coupon rate and the holders have the right within a specified time period to require the Companyto repurchase the bonds following the Company’s announcement of whether it intends to adjust the interest rate. On August 30, 2016, we issued US$300million aggregate principal amount of August 2019 Senior Secured Notes that bear interest at a rate of 8.125% per annum. On October 18, 2016, we redeemedan aggregate principal amount of US$183,000,000 of all outstanding May 2018 Senior Secured Notes at the redemption price equal to 106.625% of theprincipal amount thereof, being US$195,123,750, plus accrued and unpaid interest of US$11,113,590 to October 18, 2016. The total redemption price paidby the Company on October 18, 2016 was US$206,237,340. The Company funded the redemption using the proceeds from the offering of its August 2019Senior Secured Notes. On February 28, 2017, we issued US$300 million aggregate principal amount of February 2021 Senior Secured Notes that bear interestat a rate of 7.75% per annum. We believe our cash on hand, projected cash flow from operations, available construction loan borrowing capability, and potential access to capitalmarkets, should be sufficient to meet our expected cash requirements, including our non-cancellable construction contract obligations and capital leaseobligations that are due on various dates through March 31, 2018, US$200 million principal amount of our June 2019 Senior Secured Notes due in June2019, US$300 million principal amount of our August 2019 Senior Secured Notes due in August 2019, US$300 million principal amount of our February2021 Senior Secured Notes due in February 2021 and for Xinyuan (China) Real Estate, Ltd. to satisfy its obligations under the First, Second, Third and theNew Tranche Bonds. Our ability to secure sufficient financing for land use rights acquisition and property development depends on internal cash flows in addition to anumber of other factors that are not completely under our control, including lenders’ perceptions of our creditworthiness, market conditions in the capitalmarkets, investors’ perception of our securities, the PRC economy and the PRC government regulations that affect the availability and cost of financing forreal estate companies or property purchasers and the U.S. economy and recovery of the U.S. real estate markets. 130  There can be no assurance that our internally generated cash flow and external financing will be sufficient for us to meet our contractual andfinancing obligations in a timely manner. We may require additional cash due to changing business conditions or other future developments, including anydecline in cash flow from operations or any investments or acquisitions we may decide to pursue. In the event that proceeds from the sale of units for a projectare insufficient to meet our contractual and financing obligations, we would need to raise the required funds through new borrowings, refinancing of existingborrowings, public or private sales of equity securities, or a combination of one or more of the above. We cannot assure you that we will be able to obtainadequate funding in a timely manner and on reasonable terms, or at all. G.Safe Harbor See “FORWARD-LOOKING STATEMENTS” at the beginning of this annual report. ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A.Directors and Senior Management The following table sets forth information regarding our executive officers and directors as of the date of this annual report. Name Age PositionYong Zhang 54 Director, Chairman of the BoardLizhou Zhang 46 Executive Director and Chief Executive OfficerYong Cui 43 Director and PresidentYuan (Helen) Zhang 48 Chief Financial OfficerHuai Chen 65 Independent DirectorThomas Gurnee 66 Independent Director and Chairman of the Audit CommitteeYifan (Frank) Li 49 Independent DirectorYumin Liang 54 DirectorSteve Sun 47 Investor DirectorWells Tian 46 Executive DirectorYuyan Yang 54 Director Unless otherwise indicated, the business address of each director and executive officer is 27/F, China Central Place, Tower II, 79 Jianguo Road,Chaoyang District, Beijing, 100025, the People’s Republic of China. A description of the business experience and present position of each director and executive officer is provided below: Yong Zhang founded our company in 1997 and has been the Chairman of the board of directors since 2007 and, through September 2013, was ourChief Executive Officer. Mr. Zhang has more than 20 years of working experience in the real estate industry. Prior to founding our company, he worked atseveral construction and property development companies, including Zhengzhou City Construction and Development Inc. and China Antai Real EstateDevelopment Inc. Mr. Zhang is also vice chairman of Henan Real Estate Association, a member of China Democratic National Construction Association anda deputy to the 12th People’s Congress of Henan Province in China. He serves as a director of Beijing Ruizhuo Xihe Technology Development Ltd., BeijingRuizhuo Xitou Technology Development Ltd., Beijing Ruizhuo Xichuang Technology Development Ltd, Beijing XinyuanXin Technology DevelopmentLtd., Beijing Ruizhuo Xirong Technology Development Ltd., Beijing Ruizhuo Xihui Technology Development Ltd., Beijing Ruizhuo Xijia TechnologyDevelopment Ltd., Beijing Ruizhou Xiyuan Technology Development Ltd., Xin Media Conference (Beijing) Ltd., Xinyuan Holding Ltd., Xinyuan Xinwisdom technology development center (limited partnership) and Xinyuan Xin Fintech development center (limited partnership). Mr. Zhang also serves as adirector or officer of a number of subsidiaries of Xinyuan. Mr. Zhang received a Ph.D. in finance from Renmin University of China in 2014, an executivemaster’s degree in business administration from Tsinghua University in 2005 and a bachelor’s degree in civil engineering from Henan Zhongzhou Universityin 1985. 131  Lizhou Zhang was appointed our Chief Executive Officer effective July 26, 2016 and a director of our company effective July 26, 2016. Mr. Zhangjoins Xinyuan in June 2016 after working at Wanda Group, one of China’s largest property enterprises, in various positions for nearly seven years. SinceJanuary 2014, Mr. Zhang served as General Manager at Wanda One UK Co., Ltd. From 2011 to 2013, Mr.Zhang worked as Assistant to the President ofWanda Group and General Manager of the Northern Project Management Center and Operation Center of Wanda Commercial Management Company. Priorto this role, Mr. Zhang served as General Manager at two different regional subsidiaries of Wanda Group. He serves as a director of Beijing Starry Sky CinemaCo., Ltd. and Wuhan Qiaoxin Real Estate Co., Ltd. Mr. Zhang also serves as a director or officer of a number of subsidiaries of Xinyuan. Mr. Zhang holds abachelor’s degree in construction management from Chongqing University and a master’s degree in monetary banking from Dongbei University of Financeand Economics. Yong Cui has been a director of our company since August 2006 and was appointed our President effective September 2013. With a doctorate degreein finance from Renmin University of China, Mr. Cui has extensive experience in corporate finance. As discussed below in “ITEM 7. MAJORSHAREHOLDERS AND RELATED PARTY TRANSACTIONS - B. Related Party Transactions, ” prior to his being appointed President, Mr. Cui providedconsulting services to us with respect to, among other matters, the development of commercial real estates in China and residential real estate in the U.S. Forthe past five years, he has worked at Beijing Runzheng Consulting Company as President, and he has served as an executive director of Winsway EnterprisesHoldings Limited (formerly known as Winsway Coking Coal Holdings Limited). He resigned his position at Winsway Enterprises Holdings Limited onDecember 30, 2013. Mr. Cui also serves as a director or officer of a number of subsidiaries of Xinyuan. Yuan (Helen) Zhang was appointed as our Chief Financial Officer effective September 26, 2016. Prior to that, Ms.Zhang had been working for theCompany for nearly eight years in a number of other senior-level roles, including Financial Controller, Interim Chief Financial Officer and AssistantPresident. She has more than a decade of experience in accounting, finance and investor relations having worked for companies with public listings inmainland China, Hong Kong and the United States. Her career encompasses working at China National Metals & Minerals Import & Export Corp.; ChinaNetcomGroup Company Ltd.; TechFaith Wireless Technology Ltd.; Baidu, Inc. and Sohu.com Inc. Ms. Zhang obtained her bachelor’s degree in economicsfrom the University of International Business and Economics in Beijing, China and her master’s degree in business administration from Fordham Universityin 2001. Huai Chen was appointed as director of our company in December 2007. From 2004-2011, Mr. Chen was director of development of urban and ruralconstruction, Graduate School, Chinese Academy of Social Science. He was former director of the Policy Research Center of the MOHURD and was thedeputy director of the Institute of Market Research under the PRC State Council’s Development and Research Center.” Mr. Chen was a visiting professor ofStanford University and Tokai University, and has a bachelor's degree from Beijing Institute of Economics and a doctorate from Renmin University of China. Thomas Gurnee was appointed to the board of directors of our company in December 2007 and from February 2009 through October 2013 served asour Chief Financial Officer. In 2015, Mr. Gurnee was appointed Audit Committee chair. Mr. Gurnee is owner and manager of Chalet Development LLC, aU.S.-based real estate company. From 2006-2008, Mr. Gurnee was the Chief Financial Officer of GEM Services Inc., a semiconductor contract manufacturerbased in China. Prior to that, Mr. Gurnee served as the president of Globitech Inc., a Texas-based epitaxial semiconductor wafer manufacturer, the ChiefFinancial Officer of Artest Inc., a California-based semiconductor test subcontractor, and the Chief Financial Officer of Sohu.com (NASDAQ: SOHU), aBeijing-based internet portal. Mr. Gurnee is a director of Planar Semiconductor AG. Mr. Gurnee obtained his bachelors degree from Stanford University andmaster’s degree in business administration from the University of Santa Clara. His business address is 5920 Sky Terrace Court, Reno, NV 89511. 132  Yifan "Frank" Li was appointed as a director of our company in February 2017. Mr. Li has been a director and Vice President of Geely HoldingGroup since September 2014. Prior to joining Geely, he was Vice President and international Chief Financial Officer of Sanpower Group from April in 2014.Prior to joining Sanpower Group, he served as Chief Financial Officer of China Zenix Auto International (NYSE:ZX) from December 2010 - 2014. Prior tojoining China Zenix Auto International, Mr. Li was the Chief Financial Officer of Standard Water and Time Share Media from December 2007. Mr. Li is alsoa director of Shanghai International Port (Group) Co. Ltd. (600018-CN) and ,Heilongjiang Interchina Water Treatment Co., Ltd. (600187-CN) and ZhonganOnline Insurance Co., Ltd. Mr. Li received his MBA from the University of Chicago Booth School of Business in 2000, MSc in Accounting from Universityof Texas at Dallas in 1994, and Bachelor of Economics in World Economy from Fudan University in 1989. He is a Certified Public Accountant in the U.S.and a Chartered Global Management Accountant. His business address is Room 815, 1760 Jiangling Road, Binjiang District, Hangzhou, Zhejiang, PRC,310051. Yumin Liang was appointed as a director in January 2014. Mr. Liang was appointed chairman of Henan Xinyuan Real Estate Co., Ltd., one of oursubsidiaries, in July 2013. Prior to joining Xinyuan, Mr. Liang was the chairman of Zhengzhou Public Housing Investment Co. Ltd. Prior to that, Mr. Liangheld progressive positions at the Zhengzhou Housing Management Bureau for approximately eighteen years. Mr. Liang holds a bachelor's degree in civilengineering from Zhongzhou University. He serves as a director of Beijing Starry Sky Cinema Co., Ltd. Mr. Liang also serves as a director or officer of anumber of subsidiaries of Xinyuan. Steve Sun was appointed a director of our company in September 2013. Mr. Sun is a Partner and Managing Director at TPG and is based in the firm'sHong Kong office. Prior to joining TPG, Mr. Sun was a Managing Director in the Principal Investment Area (PIA) of Goldman Sachs and focused on privateequity investment in the Greater China region from 2006 to early 2011. Before joining Goldman Sachs, Mr. Sun was a Vice President at Morgan Stanley inHong Kong from 2004 to 2006. Prior to that, he worked for General Electric in Connecticut and Citigroup in New York. Mr. Sun earned a bachelor's degree ininternational finance from Renmin University of China and an MBA with high distinction from University of Michigan. He is also a director of PhoenixSatellite Television Company Limited and of China National Building Materials Group Corporation. His business address is 57/F, Two International FinanceCentre, 8 Finance Street, Central, Hong Kong. Mr. Sun was appointed as the TPG Investor director pursuant to the TPG Securities Purchase Agreement. Wells Tian was appointed as an independent director in October 2015 and became an executive director in September 2016. Mr. Tian was appointedPresident of Xinyuan (China) Real Estate Co., Ltd in September 2016. Prior to joining Xinyuan, Mr. Tian was a Senior Partner at Korn/Ferry Internationalwhere he led its talent and leadership consulting business for Chinese companies. Prior to joining Korn/Ferry, Mr. Tian was at Aon Hewitt and held the rolesof Vice President of its China division, General Manager of its North China division, and Director of its leadership and senior executive compensationconsulting practice in China. Mr. Tian received his bachelor’s degree in Accounting from Qingdao University and holds an MBA in AdministrativeEngineering from Tsinghua University. Mr. Tian is a member of the Association of Charted Certified Accountants(ACCA) and is certified as a ProjectManagement Professional(PMP). Yuyan Yang co-founded our company in 1997 with Mr. Yong Zhang. She has been a director since 2007 and previously was a Vice President of ourcompany. Ms. Yang has more than 10 years’ working experience in the real estate industry. Ms. Yang received a bachelor’s degree in education managementfrom Henan University in 1985. Ms. Yang received her executive master’s degree in business administration at the National University of Singapore in May2008. Ms. Yang also serves as a director of a number of subsidiaries of Xinyuan. As of the date of this annual report on Form 20-F, there are no familial relationships between any directors and members of senior management. B.Compensation For the fiscal year ended December 31, 2016, the aggregate compensation to our executive officers, including all directors was US$11.0 million(which includes amounts paid to persons who are no longer serving as executive officers), and the aggregate compensation to our non-executive directors wasUS$0.8 million (which includes amounts paid to persons who are no longer serving as directors. As discussed below under “- D. Employees” we madecontributions of US$11.0 million to employee benefit plans for the fiscal year ended December 31, 2016. 133  2007 Equity Incentive Plan In August 2006, our shareholders agreed to allocate 6,802,495 common shares for our employee bonus scheme. In August 2007, we adopted our2007 equity incentive plan to attract, retain and motivate key employees, directors and consultants of our company, our subsidiaries and our equity investee.Our plan provides for the grant of options to purchase our common shares. The maximum aggregate number of common shares which may be issued pursuantto all awards, including options, is 6,802,495 common shares, subject to adjustment to account for changes in the capitalization of our company. Our boardof directors believes that our company’s expansion plans and its long-term success is dependent upon our ability to attract and retain superior individualswho, by virtue of their ability, experience and qualifications, make important contributions to our business. Termination. The terms of a participant’s award are set forth in the participant’s award agreement. Our board of directors, or any committeedesignated under it, will determine the terms and conditions of an award in the relevant award agreement. The duration of any award may not exceed tenyears from the date of grant. If a participant’s service with our company terminates for any reason, unless otherwise provided in the award agreement ordetermined by our board of directors, or any board committee designated by it, any outstanding unvested or vested but unexercised option granted to theparticipant will expire and be forfeited for no consideration on the date of the participant’s termination of service. In the event any award under the planexpires, terminates, or is forfeited, the common shares underlying the award will revert to our company to be available for the purposes of the plan. Administration. Our 2007 equity incentive plan is administered by our board of directors, or any board committee designated by it. Our board ofdirectors, or any designated committee, is authorized to interpret, establish or amend the plan at any time for any reason. They will determine the terms andconditions of any award, including, but not limited to, the exercise price for any option, restrictions and vesting conditions, including time-based vestingconditions and performance-based vesting conditions, forfeiture provisions and other applicable terms. In addition, they will also specify in the awardagreement whether the option constitutes an incentive share option, or ISO, or a non-qualifying stock option. Awards under our 2007 equity incentive planmay also be awarded under certain performance-based criteria based on conditions our board of directors, or any designated committee, deems appropriate. Option Exercise and Conditions. The consideration paid for our common shares upon exercise of an option or purchase of common sharesunderlying an award or option may be paid in cash or cash equivalents. Our board of directors may accept any form of legal consideration that satisfiesCayman Islands corporate law requirements regarding adequate consideration for options. Participation in our 2007 equity incentive plan may also besubject to certain terms and conditions, including, but not limited to, withholding tax arrangements and certain restrictions on transfer. Amendment and Termination. Our board of directors, or any designated committee, is authorized to interpret the plan and to establish, amend,suspend or terminate the plan at any time for any reason. However, any amendment to increase the number of common shares available for issuance under theplan or materially change the class of persons who are eligible for grants under the plan is subject to approval by our shareholders. Our board of directors atany time may amend the terms of any award provided that the amendment does not impair the rights of a participant under an award, in which case, our boardof directors would need the participant’s consent. On August 11, 2007, we granted share options awards to 346 directors, management, employees and consultants and employees of the equityinvestee for an aggregate of 6,802,495 common shares at a weighted average exercise price of US$1.08. These options had various vesting periods rangingfrom four to 60 months. As of December 31, 2016, 554,706 options remain issued and outstanding under the 2007 equity incentive plan. The following table summarizes theoptions granted to our current directors, executive officers, and other individuals as a group under our 2007 equity incentive plan that remain outstanding asof December 31, 2016. 134  Name Common Shares Underlying Options Granted ExercisePrice of Options Granted (US$ per share) Grant Date Date of ExpirationYong Zhang 146,890 2.5 August 11, 2007 August 10, 2017 Other employees and consultants as a group(1) 407,816 2.5 August 11, 2007 August 10, 2017 (1)None of these employees and consultants is a director or executive officer of our company. 2007 Long Term Incentive Plan In November 2007, we adopted our 2007 long term incentive plan (the “2007 Plan”) which provides for the grant of options, restricted shares,restricted stock units, stock appreciation rights and other stock-based awards to purchase our common shares. The maximum aggregate number of commonshares which may be issued pursuant to all awards, including options, is 10 million common shares, subject to adjustment to account for changes in thecapitalization of our company. Termination. The terms of a participant’s award are set forth in the participant’s award agreement. Our board of directors, or any board committeedesignated by it, will determine the terms and conditions of an award in the relevant award agreement. The duration of any award may not exceed ten yearsfrom the date of grant. If a participant’s service with our company terminates for any reason, unless otherwise provided in the award agreement or determinedby our board of directors, or any designated committee, the unvested portion of any outstanding awards to the participant will be immediately forfeitedwithout consideration, the vested portion of any outstanding restricted stock units or other stock-based awards will be settled upon termination and theparticipant will have a period of three months to exercise the vested portion of any outstanding options or stock appreciation rights. Administration. Our 2007 long term incentive plan is administered by our board of directors, or any board committee designated by it. Our board ofdirectors, or any designated committee, is authorized to interpret, establish or amend the plan at any time for any reason. They will determine the terms andconditions of any award, including, but not limited to, the exercise price for any option, restrictions and vesting conditions, including time-based vestingconditions and performance-based vesting conditions, forfeiture provisions and other applicable terms. In addition, they will also specify in the awardagreement whether the option constitutes an ISO, or a non-qualifying stock option. Awards under our 2007 long term incentive plan may also be awardedunder certain performance-based criteria based on conditions our board of directors, or any designated committee, deems appropriate. Award Exercise and Conditions. The consideration paid for our common shares upon exercise of an option may be paid in cash or cash equivalentsor, subject to prior approval by our board of directors in its discretion, shares, promissory note, irrevocable direction to sell or pledge shares and to deliverproceeds as payment, or any combination of the foregoing methods. The consideration paid for our common shares upon exercise of stock appreciationrights, restricted stock units and other stock-based awards may be paid in cash, shares or any combination thereof. The restricted shares will be awarded for noadditional consideration or such additional consideration as our board may determine satisfies Cayman Islands corporate law requirements. Each award ofrestricted shares will entitle the participant to all voting, dividends and other ownership rights in such shares, subject to any limitation on dividends rightsspecified in the award agreement. The participant will possess no incidents of ownership with respect to the shares underlying the restricted stock unitsgranted. Participation in our 2007 long term incentive plan may also be subject to certain terms and conditions, including, but not limited to, withholdingtax arrangements and certain restrictions on transfer. Amendment and Termination. Our board of directors, or any designated committee, is authorized to interpret the plan and to establish, amend,suspend or terminate the plan at any time for any reason. However, any amendment to increase the number of common shares available for issuance under theplan, or materially change the class of persons who are eligible for grants under the plan is subject to approval by our shareholders. Our board of directors atany time may amend the terms of any award provided that the amendment does not impair the rights of a participant under an award, in which case, our boardof directors would need the participant’s consent. On June 25, 2014, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 600,000 common shares toone employee, at an exercise price of US$2.045 per share. These options have a weighted average grant date fair value of US$0.52 per option and a totalexpected compensation cost, net of expected forfeitures, of US$311,098. These options have vesting periods based on length of service of 36 months and willexpire no later than June 25, 2024. 135  On June 30, 2014, under the 2007 Plan, the Company granted share options to purchase up to 907,000 common shares to six employees, at anexercise price of US$1.21 per share. These options have a weighted average grant date fair value of US$0.81 per option and a total expected compensationcost, net of expected forfeitures, of US$734,181. These options became vested and exercisable immediately upon grant. On February 26, 2015, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 200,000 common sharesto one employee, at an exercise price of US$1.255 per share. These options have a weighted average grant date fair value of US$0.36 per option and a totalexpected compensation cost, net of expected forfeitures, of US$71,853. These options have vesting periods based on length of service of 36 months and willexpire no later than February 26, 2025. On April 10, 2015, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 600,000 common shares toone employee, at an exercise price of US$1.605 per share. These options have a weighted average grant date fair value of US$0.52 per option and a totalexpected compensation cost, net of expected forfeitures, of US$312,671. These options have vesting periods based on length of service of 36 months and willexpire no later than April 10, 2025. On July 1, 2015, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 1,200,000 common shares totwo employees, at an exercise price of US$1.71 per share. These options have a weighted average grant date fair value of US$0.48 per option and a totalexpected compensation cost, net of expected forfeitures, of US$577,836. These options have vesting periods based on length of service of 36 months and willexpire no later than July 1, 2025. On September 30, 2015, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 200,000 common sharesto one employee, at an exercise price of US$1.39 per share. These options have a weighted average grant date fair value of US$0.50 per option and a totalexpected compensation cost, net of expected forfeitures, of US$100,243. These options have vesting periods based on length of service of 36 months and willexpire no later than September 30, 2025. On November 6, 2015, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 200,000 common sharesto one employee, at an exercise price of US$1.81 per share. These options have a weighted average grant date fair value of US$0.61 per option and a totalexpected compensation cost, net of expected forfeitures, of US$122,109. These options have vesting periods based on length of service of 36 months and willexpire no later than November 6, 2025. In 2016, the Company did not grant any share options. As of December 31, 2016, 3,661,580 options were issued and outstanding under the 2007 plan and 1,401,944 shares remained eligible for futuregrants under the plan. 136  The following table summarizes the options granted to our current directors, executive officers, and other individuals as a group under our 2007 Planoutstanding as of March 1, 2017. Name Common Shares Underlying Options Granted ExercisePrice of OptionsGranted (US$ per share) Grant Date Date ofExpiration Yong Zhang 473,493 7.00 November 5, 2007 December 4, 2017 39,400 1.21 June 30, 2014 June 29, 2024 Yuyan Yang 134,956 7.00 November 5, 2007 December 4, 2017 400,000 1.21 December 13, 2010 December 12, 2020 100,000 1.21 June 30, 2014 June 29, 2024 Thomas Gurnee - 1.87 March 31, 2009 March 31, 2019 - 1.255 February 26, 2015 February 25, 2025 Yong Cui 120,000 1.21 December 13, 2010 December 12, 2020 170,000 1.21 June 30, 2014 June 29, 2024 Huai Chen 100,000 1.64 November 12, 2012 November 11, 2022 100,000 1.21 December 13, 2010 December 12, 2020 Yumin Liang 559,124 2.105 July 1, 2013 June 30, 2023 Wells Tian 134,000 1.81 November 6, 2015 November 5, 2015 Other employees as a group(1) 183,607 7.00 November 5, 2007 December 4, 2017 180,000 2.975 July 1, 2008 June 30, 2018 134,000 1.21 December 13, 2010 December 12, 2020 100,000 1.085 May 24, 2011 May 25, 2021 100,000 1.64 November 12, 2012 November 11, 2022 600,000 2.86 September 3, 2013 September 2, 2023 33,000 1.21 June 30, 2014 June 29, 2024 (1)None of these employees is a director or executive officer of our company. 2014 Restricted Stock Unit Plan Our board of directors adopted the Xinyuan Real Estate Co., Ltd. 2014 Restricted Stock Unit Plan, or the RSU Plan, effective May 23, 2014. TheRSU Plan provides for discretionary grants of restricted stock units, or RSUs, to or for the benefit of participating employees. The purpose of the RSU Plan isto provide to us and our shareholders the benefits of the additional incentive inherent in the ownership of our common shares by selected employees,including selected employees of our subsidiaries who are important to the success and growth of our business, and to help us and our subsidiaries secure theservices of those persons. The maximum number of shares that may be delivered to RSU Plan participants in connection with RSUs granted under the RSUPlan is 10,000,000, subject to adjustment if our outstanding common shares are increased, decreased, changed into or exchanged for a different number orkind of shares or securities of our company through a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or othersimilar transaction. All of our and our subsidiaries' employees and officers who are capable of contributing significantly to our successful performance, in thedetermination of the Compensation Committee of our board of directors, are eligible to be participants in the RSU Plan. Each eligible employee selected toparticipate may be granted an award of RSUs at such times and subject to such conditions as determined by the Compensation Committee. 137  Incentive Pool; Funding. Under the RSU Plan, we will establish a long-term incentive pool for participants for each fiscal year, a "Grant Year," basedon our net income (or other performance goals) for the most recently completed prior fiscal year, a "Base Year." For Grant Year 2014, 2015, and 2016, thetarget long-term incentive pool is 6.75% of net income for 2013, 2014, and 2015 respectively. The long-term incentive pool will be funded for any GrantYear and RSUs will be granted only if 70% or more of the target net income for applicable Base Year has been achieved in the Grant Year or if 70% or more ofthe total target net income for the three fiscal years ending with the Base Year has been achieved. If neither of such targets is achieved for a Grant Year, noamount will be credited to the long-term incentive pool for that Grant Year and no RSUs will be awarded for the Grant Year. The pre-condition for Grant Year2014, 2015, and 2016 were met and the RSUs have been granted accordingly. For Grant Year 2017, the target long-term incentive pool is 6.75% of netincome for 2016. We have established a trust and we will deposit or cause to be deposited in the trust amounts of cash not exceeding the amount of the long-term incentive pool for a Grant Year. The trustee will use the funds to acquire in the open market or in private transactions that number of ADSs representingcommon shares as we direct over a period of time as we and the trustee determine. Administration. The RSU Plan provides that it will be administered by one or more committees of our board of directors, which has designated theCompensation Committee to administer the RSU Plan. Subject to the provisions of the RSU Plan, the Compensation Committee has the discretionaryauthority and power to determine and designate those individuals selected to receive awards; determine the terms of awards, including the time at which eachaward will be granted and the number of common shares subject to each award; establish the terms and conditions upon which awards may be exercised,unlocked or paid (including any requirements that we or the participant satisfy performance criteria or performance objectives); prescribe, amend, or rescindany rules and regulations necessary or appropriate for the administration of the RSU Plan; correct any defect, supply any deficiency, and reconcile anyinconsistency in the RSU Plan or in any related award or agreement; and make other determinations and take such other action in connection with theadministration of the RSU Plan as it deems necessary or advisable. Grant, Allocation and Unlocking of RSUs. During the Grant Year, the Compensation Committee will allocate to each participant a percentage of thelong-term incentive pool, if any, for that Grant Year based on such factors as the Compensation Committee may determine from time to time in its discretion.A participant will be allocated RSUs based on the aggregate of common shares represented by ADSs purchased by the trustee for a Grant Year multiplied bythe percentage of the long-term incentive pool allocated by the Compensation Committee to that participant for the Grant Year. Each RSU represents a rightto receive one common share to be delivered or made available at the time or times specified in the award agreement, subject to a risk of cancellation and tothe other terms and conditions set forth in the RSU Plan, the award agreement and any additional terms and conditions set by the Compensation Committee.At our election, RSUs may be settled by delivery of common shares or ADSs representing the number of common shares subject to the RSU. Common shares (either in the form of common shares or ADSs) in respect of RSUs allocated to a participant will not be eligible to be withdrawn by aparticipant from the trust established pursuant to the RSU Plan for the period of time (the "lock-up period") set forth in the RSU Plan. Common shares or ADSsbecome "unlocked" and may be withdrawn or transferred from the trust at the election of a participant as follows: one-third after the first anniversary of thegrant date, one-third after the second anniversary of the grant date, and one-third after the third anniversary of the Grant Date. In the event of (i) death, (ii)disability as the result of a work injury, (iii) retirement on or after age 60, in each case prior to termination of service, or (iv) subject to exceptions specified inthe RSU Plan, the termination of employment or resignation by a participant, the locked portion of a participant's RSUs will continue to become unlocked oneach subsequent anniversary of the Grant Date after such event. In the event of death, a participant's awards will be paid to his personal representative orestate as provided by applicable law. The locked portion of a participant's RSU award may be cancelled for no value for certain events specified in the RSUPlan. The Compensation Committee, in its sole discretion, may (but will not be required to) reallocate all or a portion of RSUs forfeited by a participant to adifferent participant or participants continuing in employment on such unlocking schedule as the Compensation Committee may determine. If we are party toa "Change of Control," as defined in the RSU Plan, the board of directors may determine to cancel each outstanding award after payment to participants of thefair market value of the common shares subject to the award at the time of the transaction constituting the Change of Control, provide for assumption of theawards or substitution of comparable awards by the surviving or acquiring company in the transaction, or accelerate the unlocking, in whole or in part, of theawards, subject to effectiveness of the transaction. 138  Amendments. Our board of directors may amend, suspend or terminate the RSU Plan or the Compensation Committee's authority to grant awardsunder the RSU Plan without the consent of participants; provided, however, that, without the consent of an affected participant, no such board action maymaterially and adversely affect the rights of the participant under any outstanding award. The Compensation Committee may amend any outstanding awardwithout the consent of the affected participant; provided, however, that, without such consent, no such action may materially and adversely affect the rightsof the participant under any outstanding award. Unless earlier terminated by action of the board of directors, the RSU Plan will remain in effect until suchtime as no common shares remain available for delivery under the RSU Plan and we have no further rights or obligations with respect to outstanding awardsunder the RSU Plan. On May 23, 2014, the Company established a trust that is governed by a third party trustee and deposited US$7,042,725 into the trust. The trusteeused the funds to acquire 4,234,884 common shares in the open market. The awards vest ratably over a three year service vesting period. The aggregate fairvalue of the restricted shares granted at the grant date shall be recognized as compensation expense using the straight-line method. The shares held by thethird party trustee are legally outstanding as of December 31, 2016. On April 10, 2015, under the 2014 RSU Plan, the Company deposited $3,259,998 into the trust. The trustee used the funds to acquire 2,076,964common shares in the open market. 2015 RSU awards vest ratably over a three year service vesting period. The aggregate fair value of the restricted sharesgranted at the grant date shall be recognized as compensation expense using the straight-line method. The shares held by the third party trustee are legallyoutstanding as of December 31, 2016. On April 18, 2016, under the 2014 RSU Plan, the Company deposited $4,003,999 into the trust. The trustee used the funds to acquire 1,614,220common shares in the open market. 2016 RSU awards vest ratably over a three year service vesting period. The aggregate fair value of the restricted sharesgranted at the grant date shall be recognized as compensation expense using the straight-line method. The shares held by the third party trustee are legallyoutstanding as of December 31, 2016. 2015 Stock Option Plan Our board of directors adopted the Xinyuan Real Estate Co., Ltd. 2015 Stock Option Plan, or the Option Plan, effective June 24, 2015. The OptionPlan provides for discretionary grants of stock options, or Options, to purchase shares of Company stock to participating employees and directors. Thepurpose of the Option Plan is to promote the interests of the Company by enabling it to attract, retain and motivate key employees and directors responsiblefor the success and growth of the Company and its subsidiaries by providing them with appropriate incentives and rewards and enabling them to participatein the growth of the Company. All employees and directors of the Company or any subsidiary who are capable of contributing significantly to the successfulperformance of the Company, in the determination of the board of directors, are eligible to be participants in the Option Plan. Each eligible employeeselected to participate may be granted an award of Options at such times and subject to such conditions as determined by the board of directors. Stock Subject to Plan. The aggregate number of shares that may be issued under the Option Plan or covered by awards must not exceed 20,000,000common shares. Shares offered under the Option Plan may be authorized but unissued shares or treasury shares. The number of shares that are subject toawards outstanding at any time under the Option Plan should not exceed the number of shares that then remain available for issuance under the Option Plan.In the event that any outstanding award for any reason expires, is terminated unexercised, or is forfeited or settled or in a manner that results in fewer sharesoutstanding than were initially awarded, the shares subject to the award, to the extent of such expiration, termination, or forfeiture, again will be available forpurposes of the Option Plan. If shares issued under the Option Plan are reacquired by the Company, those shares again will be available for purposes of theOption Plan. If the outstanding shares of the Company are increased, decreased, changed into or exchanged for a different number or kind of shares orsecurities of the Company through a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similartransaction, the board of directors will make appropriate and proportionate adjustments as it deems necessary or appropriate in one or more of (i) the numberand class of shares subject to the Option Plan, and (ii) the number of shares or class of shares covered by each outstanding award and (iii) the exercise price orgrant price under each outstanding Option. 139  Administration. The Option Plan provides that it will be administered by the Compensation Committee. Subject to the provisions of the OptionPlan, the board of directors has the discretionary authority and power to determine and designate those individuals selected to receive awards; determine theterms of awards, including the time at which each award will be granted and the number of shares subject to each award; establish the terms and conditionsupon which awards may be exercised, vested or paid (including any requirements that we or the participant satisfy performance criteria or performanceobjectives); prescribe, amend, or rescind any rules and regulations necessary or appropriate for the administration of the Option Plan; grant awards insubstitution for options or other equity interests held by individuals who become employees of the Company or one of its subsidiaries as a result of theCompany's acquiring or merging with the individual's employer (if necessary to conform the awards to the interests for which they are substitutes, the boardof directors may grant substitute awards under terms and conditions that vary from those the Option Plan otherwise requires); correct any defect, supply anydeficiency, and reconcile any inconsistency in the Option Plan or in any related award or agreement; and make other determinations and take such otheraction in connection with the administration of the Option Plan as it deems necessary or advisable. Grant, Exercise and Payment of Options. Each grant of an Option will be evidenced by an award agreement between the participant and theCompany. Each award agreement will specify (i) the formula for determining the number of shares that are subject to the Option, (ii) the exercise price, (iii)the term of the Option, and (iv) when all or any installment of the Option becomes exercisable. Options will be exercised by delivering a signed writtennotice of exercise to the Company which must be received as of a date set by the Company prior to the effective date of the proposed exercise. The exerciseprice upon exercise of any Option will be payable in the following manner: ·in cash or cash equivalents when the shares are purchased; ·subject to prior approval by the board of directors, by surrendering or attesting to the ownership of shares that are already owned by theparticipant. These shares will be surrendered to the Company in good form for transfer and will be valued at their Fair Market Value (asdefined in the Stock Option Plan) on the date when the Option is exercised; ·subject to prior approval by the board of directors, with a full recourse promissory note. These shares will be pledged as a security forpayment of the principal amount of the promissory note and interest on it. The interest rate payable under the terms of the promissory notewill not be less than the minimum rate (if any) required to avoid the imputation of additional interest under the Code (as defined below).The board of directors will specify the term, interest rate, amortization requirements (if any) and other provisions of the note; ·subject to prior approval by the board of directors, if the Company's stock is publicly traded, by the delivery of an irrevocable direction to asecurities broker approved by the Company to sell the shares and to deliver all or part of the sales proceeds to the Company in payment ofall or part of the exercise price and any withholding taxes; ·subject to prior approval by the board of directors, if the Company's stock is publicly traded, by the delivery of an irrevocable direction topledge the shares to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loanproceeds to the Company in payment of all or part of the exercise price and any withholding taxes; or ·any combination of the above methods of payment. 140  Termination of Options. Upon termination of a participant’s service for any reason other than for death or disability, all unvested portions of anyoutstanding awards will be immediately forfeited without consideration, and the participant will have a period of three months (twelve months in the case oftermination of service due to death or disability (as defined in the Option Plan), commencing with the date the participant’s service has terminated, toexercise the vested portion of any outstanding Options, subject to the term of the Option. The participant may exercise all or part of his or her Options at anytime before their expiration due to termination of the participant's service, but only to the extent that the Options had become exercisable before the date theparticipant’s service terminated. Those Options that are not exercisable immediately before the date of termination of Service (as defined in the Option Plan)will expire on the date of termination of Service. Notwithstanding the forgoing, if the participant’s Service is terminated due to any Cause (as defined in theOption Plan), then such participant’s Options shall be terminated, whether or not such Options are vested or unvested, and/or whether or not such Options areexercised or unexercised. If we are party to a Change in Control (as defined in the Option Plan), the board of directors may determine to cancel eachoutstanding award after payment to participants of the Fair Market Value of the shares subject to the award at the time of the transaction constituting theChange in Control minus, in the case of an Option, the exercise price and grant price of the shares subject to the Option; provide for assumption of the awardsor substitution of comparable awards by the surviving or acquiring company in the transaction; accelerate the exercisability or vesting, in whole or in part, ofthe awards subject to effectiveness of the transaction; or terminate awards if not exercised by the effective time of the Change in Control, and lapse anyreacquisition or repurchase rights held by the Company with respect to such awards subject to effectiveness of the transaction. Performance Awards. The board of directors will have the authority to establish and administer performance-based grant and/or vesting conditionsand performance objectives with respect to such awards as it considers appropriate, which performance objectives must be satisfied before the participantreceives or retains an award or before the award becomes nonforfeitable. Performance objectives will be based on one or more of the following performance-based measures determined based on the Company and itssubsidiaries on a group-wide basis or on the basis of subsidiary, business platform, or operating unit results: (i) earnings per share (on a fully diluted or otherbasis), (ii) pretax or after tax net income, (iii) operating income, (iv) gross revenue, (v) profit margin, (vi) stock price targets or stock price maintenance, (vi)working capital, (vii) free cash flow, (viii) cash flow, (ix) return on equity, (x) return on capital or return on invested capital, (xi) earnings before interest,taxes, depreciation, and amortization (EBITDA), (xii) strategic business criteria, consisting of one or more objectives based on meeting specified revenue,market penetration, geographic business expansion goals, cost targets, or objective goals relating to acquisitions or divestitures, or (xiv) any combination ofthese measures. Amendments. Our board of directors may amend the terms of any award; provided, however, that the rights under any award not be impaired withoutthe consent of the participant. The Option Plan will terminate automatically on June 24, 2025. No shares will be issued or sold under the Option Plan after itstermination, except on exercise of an Option granted prior to the termination. No amendment, suspension, or termination of the Option Plan will, without theconsent of the participant, alter or impair any rights or obligations under any award previously granted under the Option Plan. On July 1, 2015, under the 2015 Plan, the Company granted share options with service conditions to purchase up to 6,574,600 common shares totwenty-two employees, at an exercise price of US$1.71 per share. These options have a weighted average grant date fair value of US$0.48 per option and atotal expected compensation cost, net of expected forfeitures, of US$3,165,867. These options have vesting periods based on length of service of 34 monthsand will expire no later than July 1, 2025. On July 29, 2015, under the 2015 Plan, the Company granted share options with service conditions to purchase up to 81,600 common shares to oneemployee, at an exercise price of US$1.71 per share. These options have a weighted average grant date fair value of US$0.42 per option and a total expectedcompensation cost, net of expected forfeitures, of US$34,294. These options have vesting periods based on length of service of 33 months and will expire nolater than July 29, 2025. In 2016, the Company did not grant any share options. As of December 31, 2016, 4,872,800 options were issued and outstanding under the 2015 plan and 14,498,872 shares remained eligible for futuregrants under the plan. The following table summarizes the options granted to our current directors, executive officers, and other individuals as a group underour 2015 Plan outstanding as of March 1, 2017. 141  Name Common Shares Underlying Options Granted ExercisePrice of Options Granted (US$ per share) Grant Date Date ofExpirationYong Zhang 2,497,600 1.71 July 1, 2015 June 30, 2025 Yong Cui 999,000 1.71 July 1, 2015 June 30, 2025 Yumin Liang 163,000 1.71 July 1, 2015 June 30, 2025 Yuan (Helen) Zhang 112,200 1.71 July 1, 2015 June 30, 2025 Other employees as a group(1) 108,668 1.71 July 1, 2015 June 30, 2025 54,400 1.71 July 1, 2015 June 30, 2025 81,600 1.71 July 1, 2015 June 30, 2025 81,600 1.71 July 1, 2015 June 30, 2025 122,200 1.71 July 1, 2015 June 30, 2025 122,200 1.71 July 1, 2015 June 30, 2025 81,600 1.71 July 1, 2015 June 30, 2025 81,600 1.71 July 1, 2015 June 30, 2025 81,600 1.71 July 1, 2015 June 30, 2025 54,400 1.71 July 1, 2015 June 30, 2025 81,600 1.71 July 1, 2015 June 30, 2025 81,600 1.71 July 29, 2015 July 28, 2025 (1)None of these employees is a director or executive officer of our company. C.Board Practices Our board of directors currently has ten directors. Committees of the Board of Directors We have established four standing committees under the board of directors: the audit committee, the compensation committee, the corporategovernance and nominating committee and the investment committee. Each committee’s members and functions are described below. Audit Committee. Our audit committee consists of Mr. Thomas Gurnee (Chairman), Mr. Huai Chen, Mr. Yifan "Frank" Li and Mr. Steve Sun . Mr. Sunis not a voting member of the committee. Under Section 303A of the NYSE Listed Company Manual, as a foreign private issuer, we are required to have anaudit committee composed solely of independent directors. However, unlike U.S. listed companies, we are not required to have a minimum number ofcommittee members and our audit committee members may be “independent” only as required by SEC Rule 10A-3 but need not meet the other independencetest of NYSE Rule 303A. Our audit committee charter provides that the committee will consist of at least three directors, each of whom must meet applicableindependence and financial literacy requirements of the NYSE and Rule 10A-3 under the Exchange Act. Our board of directors has determined that Mr.Gurnee qualifies as an “audit committee financial expert” under applicable SEC rules. The audit committee oversees our accounting and financial reportingprocesses and the audits of the financial statements of our company. The audit committee is responsible for, among other things: ·selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to beperformed by the independent registered public accounting firm; 142  ·reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ·reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Exchange Act,regardless of the dollar amount involved in such transactions; ·discussing the annual audited financial statements with management and the independent registered public accounting firm; ·reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material controldeficiencies; and ·meeting separately and periodically with management and the independent registered public accounting firm. Compensation Committee. Our compensation committee consists of Mr. Yong Zhang (Chairman), Mr. Huai Chen, Mr. Steve Sun, and Mr. WellsTian. Our compensation committee charter provides that the committee will be composed of at least three directors, at least half of whom will be independentas defined by the NYSE and any other applicable laws and regulations. All decisions are subject to simple majority approval. However, the committee maydelete all or any portion of its duties and responsibilities to a subcommittee consisting of one or more members. The compensation committee assists the board in reviewing and approving the design of and administering executive compensation programs. Thecompensation committee is responsible for, among other things: ·reviewing our overall compensation philosophy at least annually; ·reviewing and approving the corporate goals and objectives relative to our chief executive officer’s compensation on an annual basis anddetermine the level of the chief executive officer’s compensation; ·determine, or recommend for the board’s determination, the annual base and incentive compensation for our chief financial officer, chiefoperating officer, chief administrative officer and any other person who performs similar functions for our company; ·make recommendations to the board with respect to equity-based compensation plans; ·determine compensation policies and practices and approval compensation to non-employee directors; and ·review, approve or make recommendations on executive employments agreements or any severance or similar termination paymentsproposed to be made to any current or former executive officer of the company. No member of senior management may be present when his or her compensation is being discussed. Corporate Governance and Nominating Committee. Our corporate governance and nominating committee consists of Mr. Yong Zhang (Chairman),Mr. Huai Chen, Mr. Steve Sun, and Mr. Wells Tian. The corporate governance and nominating committee assists the board of directors in selecting individuals qualified to become our directors and indetermining the composition of the board and its committees. The corporate governance and nominating committee is responsible for, among other things: ·identifying and recommending qualified candidates to the board for selection of directors, nominees for board of directors, or forappointment to fill any vacancy; 143  ·reviewing annually with the board of directors the current composition of the board of directors with regards to characteristics such asindependence, age, skills, experience and availability of service to us; ·advising the board of directors periodically with regards to significant developments in the law and practice of corporate governance aswell as our compliance with applicable laws and regulations, and making recommendations to the board of directors on all matters ofcorporate governance and on any remedial action to be taken; and ·monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of ourprocedures to ensure proper compliance. Investment Committee. The investment committee consists of Mr. Yong Zhang (Chairman), Mr. Yong Cui, Mr. Steve Sun and Mr. Lizhou Zhang.Theprimary purpose of the committee is to oversee the company’s real property acquisition and developments and other strategic assets, including the review andapproval of individual real property acquisitions. The committee has the power to approve, without further board action, land acquisitions where theconsideration is cash, seller financing and/or conventional bank debt. The committee may also approve land acquisitions involving use of the company’sshares, options or warrants. In addition, the committee has the authority to approve acquisitions of assets, other than land, including shares in a third party ornon-bank financial assets. Duties of Directors Under Cayman Islands law, our directors have a fiduciary duty to act honestly in good faith with a view to our best interests. Our directors also havea duty to exercise the skill they actually possess with the care and diligence that a reasonably prudent person would exercise in comparable circumstances. Infulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, as amended and restated from timeto time. Our company has the right to seek damages if a duty owed by our directors is breached. The functions and powers of our board of directors include, among others: ·convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; ·declaring dividends and distributions; ·appointing officers and determining the term of office of officers; ·exercising the borrowing powers of our company and mortgaging the property of our company; and ·approving the transfer of shares of our company, including the registering of such shares in our register of members. Terms of Directors and Officers Under our memorandum and articles of association, a director holds office until he resigns or otherwise vacates his office or is removed by ourshareholders or directors. Accordingly, annual elections of directors by our shareholders are not required and we do not put to shareholder vote on an annualor periodic basis election of directors to our company. A director may be removed by special resolution passed by our shareholders before the expiration ofsuch director’s term. Officers are elected by and serve at the discretion of the board of directors. 144  D.Employees As of December 31, 2016 we had 1,085 full time employees. The following table sets forth the number of our full time employees categorized byfunction as of the period indicated: As of December 31, 2014 2015 2016 Management 25 23 17 Finance 123 112 133 Planning and development 243 243 252 Project construction management 168 173 222 Sales and marketing 117 99 92 Property management 126 143 176 Administrative and human resources 183 172 173 Legal and audit 22 24 20 Total 1,007 989 1,085 During the year ended December 31, 2016, our subsidiary, Xinyuan Science and Technology Service Co., Ltd, also hired approximately 2,499contract employees and temporary employees, most of whom provided security and housekeeping services relating to property management. As required by PRC regulations, we participate in various employee benefit plans that are organized by municipal and provincial governments,including housing funds, pension, medical and unemployment benefit plans. We are required under PRC law to make contributions to the employee benefitplans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the respective localgovernment authorities where we operate our businesses from time to time. Members of the retirement plan are entitled to a pension equal to a fixedproportion of the salary prevailing at the member’s retirement date. The total amount of contributions we made to employee benefit plans for the years endedDecember 31, 2014, 2015 and 2016 was US$7,328,091, US$10,664,576and US$11,023,291, respectively. We have entered into confidentiality agreements with all of our employees. We offer training programs for our employees, third-party contractors and outsourced employees. We sponsor senior managers for executive MBAprograms and other senior employees for part-time non-degree MBA courses at top universities in China. We also invite industry experts to give lectures toour employees and provide training to our third-party contractors. We have not been subjected to any strikes or other labor disturbances that have interfered with our operations, and we believe that we have a goodrelationship with our employees. Our employees are not covered by any collective bargaining agreement. E.Share Ownership The following table sets forth information with respect to the beneficial ownership of our common shares as of March 1, 2017, by: ·each of our directors and executive officers; ·each person known to us to own beneficially more than 5% of our common shares; and ·all of our directors and executive officers as a group. 145  Shares BeneficiallyOwned(1) Number % Directors, Executive Officers and Principal Shareholders: Huai Chen (2) 200,000 - Yong Cui (3) 1,380,940 - Thomas Gurnee - - Yifan Li - - Yumin Liang (4) 774,021 - Steve Sun (5) - - Wells Tian - Yuyan Yang (6) 29,034,956 19.9%Yuan (Helen) Zhang(7) 156,283 - Lizhou Zhang - - Yong Zhang (8) 31,265,788 21.4%All directors and executive officers as a group (9) 62,811,989 43.0% TPG Group Holdings (SBS) Advisors, Inc. (10) 12,000,000 8.2% * Beneficially owns less than 1% of our outstanding common shares. (1)Beneficial ownership includes voting or investment power with respect to the securities and, (except as indicated below, each person named has solevoting and investment power with respect to the shares shown opposite his or her name. Beneficial ownership is determined in accordance with Rule13d-3 of the General Rules and Regulations under the Exchange Act, pursuant to which a person or group of persons is deemed to have “beneficialownership” of any shares of common stock that such person has the right to acquire within 60 days of March 1, 2017. The percentage of beneficialownership is based on 141,294,632 common shares outstanding as of March 1, 2017. In addition, for purposes of computing the percentage ofoutstanding shares of common stock held by each person or group of persons named above, any shares which such person or persons had the right toacquire on or within 60 days of March 1, 2017 are deemed to be outstanding but are not deemed to be outstanding for the purpose of computing thepercentage ownership of any other person. (2)Represents 200,000 common shares issuable upon the exercise of options exercisable within 60 days. (3)Represents 956,000 common shares issuable upon the exercise of options exercisable within 60 days and 424,940 shares subject under RSUsscheduled to vest within 60 days held by Tongyv Ltd, a British Virgin Islands ("BVI") company wholly-owned and controlled by Mr. Cui. (4)Represents 667,789 common shares issuable upon the exercise of options exercisable within 60 days and 106,232 shares subject to RSUs scheduledto vest within 60 days held by Ruixin Real Estate Development Co., Ltd., a BVI company wholly-owned and controlled by Mr. Liang. (5)Mr. Sun was nominated to our board of directors by TPG Asia VI SF Pte. Ltd. in connection with TPG Asia VI SF Pte. Ltd.’s investment in ourcompany in September 2013. The TPG group’s beneficial ownership of our common shares is described below in footnote 10. (6)Includes 634,956 common shares issuable upon the exercise of options exercisable within 60 days that are held by Spectacular Stage Limited, a BVIcompany indirectly wholly-owned by Ms. Yang. (7)Includes 71,465 common shares issuable upon the exercise of options exercisable within 60 days and 77,324 shares subject to RSUs scheduled tovest within 60 days. (8)Includes 2,177,958 common shares issuable upon exercise of options exercisable within 60 days and 424,940 shares subject to RSUs scheduled tovest within 60 days. Also includes options to purchase 146,890 common shares held by Shining Gold Trading Limited, a British Virgin Islandscompany, of which Mr. Zhang is the sole owner, and 116,000 common shares held by Universal World Development Co. Ltd., a British VirginIslands Company, of which Mr. Zhang is the sole owner. (9)Includes 4,855,059 common shares issuable upon exercise of options exercisable within 60 days and 1,033,436 shares subject to RSUs scheduled tovest within 60 days. 146  (10)Based on information in a Schedule 13D filed with the SEC on September 30, 2013 and amended on November 10, 2014 and November 24, 2014 byTPG Group Holdings (SBS) Advisors, Inc. (“Group Advisors”), David Bonderman and James G. Coulter (each, a “Reporting Person” and collectively,the “Reporting Persons”). The business address of each Reporting Person is c/o TPG Global, LLC, 301 Commerce Street, Suite 3300, Fort Worth, TX76102. Group Advisors is the general partner of TPG Group Holdings (SBS), L.P., a Delaware limited partnership, which is the sole member of TPGHoldings I-A, LLC, a Delaware limited liability company, which is the general partner of TPG Holdings I, L.P., a Delaware limited partnership, whichis the sole shareholder of TPG Asia GenPar VI Advisors, Inc., a Cayman Islands exempted company, which is the general partner of TPG Asia GenParVI, L.P., a Cayman Islands limited partnership, which is the general partner of TPG Asia VI SF AIV, L.P., a Prince Edward Island limited partnership,which is the sole shareholder of TPG Asia VI SF Pte., Ltd., a company formed under the laws of Singapore (“TPG Asia” or the “TPG Investor”), whichdirectly holds 12,000,000 common shares (the "TPG Shares"). Because of Group Advisors’ relationship to TPG Asia, Group Advisors may be deemedto be the beneficial owner of the TPG Shares. Messrs. Bonderman and Coulter are officers and sole stockholders of Group Advisors. Because of therelationship of Messrs. Bonderman and Coulter to Group Advisors, each of Messrs. Bonderman and Coulter may be deemed to beneficially own theTPG Shares. Messrs. Bonderman and Coulter disclaim beneficial ownership of the TPG Shares except to the extent of their pecuniary interest therein. ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A.Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees-E.Share Ownership” for our major shareholders. In connection with the 2013 investment by the TPG group, one of our major shareholders, Mr. Yong Zhang, our Chairman, entered into a letteragreement dated as of September 19, 2013 with TPG Asia (the "Chairman's Letter"), pursuant to which Mr. Zhang agreed to certain contractual limitations onthe transfer by him of our common shares which would constitute a Change of Control as defined in the Convertible Note and agreed to provide TPG Asiawith tag-along rights in sales of common shares by the Chairman in certain limited circumstances. These provisions terminated when we redeemed theConvertible Note. Mr. Zhang also agreed, so long as the TPG Asia and its affiliates own at least 5% of our common shares on an as-converted basis, to use hisreasonable best efforts to cause the TPG Investor Director to be elected to and not be removed from the board and to ensure the TPG Investor Director will bea member of our Investment Committee. These additional provisions remain in effect following redemption of the Convertible Note. Our major shareholders do not have voting rights that are different from other shareholders. There are three record holders in the U.S., including the depositary for our ADSs, holding, collectively, 59.8% our outstanding common shares, as ofMarch 1, 2017. B.Related Party Transactions Shareholders Agreement We entered into a shareholders agreement, dated as of April 9, 2007, with Blue Ridge China Partners, L.P., (“Blue Ridge China”), EI Fund II China,LLC (“Equity International”), Mr. Yong Zhang, Ms. Yuyan Yang, Xinyuan Real Estate , Ltd., Burnham Securities and Mr. Joel Gardner. The agreement wasamended and restated on October 31, 2007. Although the agreement remains in effect, many of its provisions have ceased to be effective as a result of ourinitial public offering, the passage of time, or the sale by Blue Ridge China and Equity International of all of their shares subject to the agreement. The rightsand obligations under the terms of the agreement which are currently or were, during 2016, in effect are summarized below. If any shareholder party to the agreement, other than Mr. Yong Zhang or Ms. Yuyan Yang, desires to transfer all or any portion of its securities, theselling shareholder must first deliver to us a notice identifying the transferee and containing an offer to sell the shares to us at the same price, upon the termsas set forth in the proposed transfer. This right of first refusal does not apply to sales to the public. Blue Ridge China and Equity International were entitled to certain registration rights, including demand registration, piggyback registration andForm F-3 registration. Burnham Securities and Mr. Gardner, to the extent that they continue to hold common shares acquired upon the exercise of warrantswhich were subject to the agreement, continue to have piggyback registration rights. 147  The rights and obligations of any shareholder under the agreement terminate with respect to any securities transferred in compliance with theagreement upon consummation of such transfer. Accordingly, Blue Ridge China and Equity International's rights and obligations under the agreementterminated prior to the end of 2013. The shareholders agreement will terminate upon the expiration of any period of four consecutive weeks during which theweekly trading volume in each such week of the common shares on the NYSE, Nasdaq or any applicable major international securities exchange exceedsone-half the number of common shares (on a fully diluted basis) held by Blue Ridge China and Equity International immediately after our initial publicoffering. Cash Advances As of December 31, 2016, we recorded balances due from employees in the amount of US$0.62 million as compared to US$0.35 million for 2015,which mainly represented cash advances paid to employees for their traveling expenses. TPG Investment As described elsewhere in this annual report on Form 20-F, on September 19, 2013, we issued an aggregate of 12,000,000 of our common shares andthe Convertible Note with an aggregate principal amount of $75,761,009, to TPG ASIA upon completion of a private placement pursuant to a securitiespurchase agreement dated August 26, 2013 among us, TPG Asia and the guarantors named therein (the "TPG Securities Purchase Agreement"). We redeemedthe Convertible Note on November 21, 2014. For a description of the terms of the Convertible Note, the other agreements and agreements entered into as partof the transaction, and the terms on which the Convertible Note was redeemed, see “ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS -B. Liquidity and Capital Resources - Debt Securities Issued in 2013 , 2016 and 2017 - Convertible Note” and “Item 10. Additional Information - C. MaterialContracts- Investment by TPG” included elsewhere in this annual report on Form 20-F. Other Transactions During the year ended December 31, 2016, the Group received full reimbursement of US$3.12 million relating to software technical services fromBeijing Aijieli Technology Development Co., Ltd. (“Aijieli”), a company owned by senior management members of the Company. During the year endedDecember 31, 2016, the Group also made advances to Aijieli for its start-up needs amounting to US$4.35 million, which was repaid in full by Aijieli as ofDecember 31, 2016. See Note 18 to the consolidated financial statements contained elsewhere in this annual report. On June 28, 2016, the Group sold 6% of its equity interest in Xinyuan Service to key management personnel for US$506,696, which was based on anappraised value by an independent valuer. See Note 18 to the consolidated financial statements contained elsewhere in this annual report. On November 10, 2016, the Group sold 21.05% of its equity interest in Shanghai Hexinli, a dormant company with no operations to keymanagement personnel for US$337,344 , calculated by multiplying the percentage sold with Shanghai Hexinli’s paid-in capital. See Note 18 to theconsolidated financial statements contained elsewhere in this annual report. On August 1, 2016, the Group entered into a sale and leaseback agreement of shopping mall equipment with Shenzhen Zhong An, which is a jointventure of the Group, to sale and leaseback equipment. See Note 18 to the consolidated financial statements contained elsewhere in this annual report. On November 10, 2016, the Group acquired 70% of Xinyan Investment Management Co., Limited (“Xinrock”), a dormant company with nooperations from a senior management member at nil consideration. The remaining 30% equity interest in Xinrock is held by key management personnel. SeeNote 18 to the consolidated financial statements contained elsewhere in this annual report. 148  Shenzhen Pingjia Investment Management Co., Ltd. (“Shenzhen Pingjia”) is the non-controlling interest shareholder of Zhengzhou Xinnan RealEstate Co., Ltd. ("Zhengzhou Xinnan"), one of the Company’s subsidiaries. As of December 31, 2016, Shenzhen Pingjia advanced US$63,572,149 of workingcapital funds which is expected to be repaid in one year by Zhengzhou Xinnan. Of the amount advanced, US$24,086,781 was in the form of an unsecuredinterest bearing loan at an annual rate of 12%, the loan has no fixed payment terms, and bears accrued interest amounting US$2,657,575 as December 31,2016. The remaining advances were unsecured and bear no interest. See Note 18 to the consolidated financial statements contained elsewhere in this annualreport. Review and Approval of Related Party Transactions Pursuant to our audit committee charter, all transactions or arrangements with related parties, as such term is defined under Item 404 of Regulation S-K, including directors, executive officers, beneficial owners of 5% or more of our voting securities and their respective affiliates, associates and relatedparties, will require the prior review and approval of our audit committee, regardless of the dollar amount involved in such transactions or arrangements. C.Interests of Experts and Counsel Not applicable. ITEM 8.FINANCIAL INFORMATION A.Consolidated Statements and Other Financial Information We have appended consolidated financial statements filed as part of this annual report. Dividend Policy Payment of dividends is subject to our board of directors’ discretion and the form, frequency and amount of any dividend will depend upon ourfuture operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board ofdirectors may deem relevant. If we pay any dividends, we will pay our ADS holders to the same extent as holders of our common shares, subject to the terms of the depositagreement, including the fees and expenses payable thereunder. Cash dividends on our common shares, if any, will be paid in U.S. dollars. For 2014, our board of directors declared quarterly dividends of US$0.025 per common share payable to holders of record on May 30, 2014,September 2, 2014, December 2, 2014 and March 20, 2015. For 2015, we declared quarterly dividends of US$0.025 per common share payable to holders ofrecord on June 25, 2015, August 24, 2015, November 25, 2015 and March 15, 2016. For 2016, we declared quarterly dividends of US$0.025 per commonshare payable to holders of record on June 8, 2016,we declared quarterly dividends of US$0.05 per common share payable to holders of record on September8, 2016, December 15, 2016 and March 14, 2017.Any future payment of dividends will be subject to our board of directors’ discretion and the form,frequency and amount of any dividend will depend upon our future operations and earnings, capital requirements and surplus, general financial condition,contractual restrictions and other factors that the board of directors may deem relevant. Legal Proceedings From time to time, we may be subject to various claims and legal actions arising in the ordinary course of business. In December 2016, 421 KentDevelopment LLC ("421 Kent"), the property company for the Group's Oosten project, terminated its contract with its general contractor. The contractor hasconstruction liens against the Oosten project in an aggregate amount of approximately US$20 million. The contractor has filed a lawsuit against 421 Kentclaiming the amount of the construction liens and punitive damages. As of March 21, 2017, 421 Kent had not been served in the litigation. 421 Kent believesthe contractor’s liens and claims are without merit and intends to contest vigorously such claims. Based on the above, 421 Kent cannot predict the outcomeof this lawsuit or a judgment against 421 Kent, whether in whole or in part, may result in a loss, if any. And an estimate for the reasonably possible loss or arange of reasonably possible losses cannot be made at this time. B.Significant Changes Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidatedfinancial statements included in this annual report. 149  ITEM 9.THE OFFER AND LISTING A.Offer and Listing Details Not applicable. B.Plan of Distribution Not applicable. C.Markets Our ADSs, each representing two of our common shares, have been listed on the NYSE since December 12, 2007. Our ADSs trade under the symbol“XIN.” The following table provides the high and low trading prices for our ADSs on the NYSE for the periods indicated. Year High Low 2012 3.95 1.74 2013 7.44 3.60 2014 5.46 2.20 2015 3.74 2.00 2016 7.06 2.85 Quarter First Quarter 2015 3.41 2.00 Second Quarter 2015 3.57 2.79 Third Quarter 2015 3.24 2.20 Fourth Quarter 2015 3.74 2.79 First Quarter 2016 4.51 2.85 Second Quarter 2016 5.55 4.34 Third Quarter 2016 7.06 4.72 Fourth Quarter 2016 6.81 4.83 First Quarter 2017 (through March 21, 2017) 5.59 4.49 Month September 2016 7.06 5.91 October 2016 6.81 5.20 November 2016 5.78 4.83 December 2016 5.57 4.89 January 2017 5.59 4.93 February 2017 5.59 4.91 March 2017 (through March 21, 2017) 5.07 4.49 D.Selling Shareholders Not applicable. E.Dilution Not applicable. F.Expenses of the Issue Not applicable. 150  ITEM 10.ADDITIONAL INFORMATION A.Share Capital Not applicable. B.Memorandum and Articles of Association The Companies Law differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significantdifferences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in the United States and theirshareholders. Mergers and Similar Arrangements. The Companies Law (2016 Revision) permits mergers and consolidations between Cayman Islands companiesand between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) "merger" means the merging of two or more constituentcompanies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (b) "consolidation" meansthe combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of suchcompanies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a writtenplan of merger or consolidation, which must then be authorized by (a) a special resolution of each constituent company and (b) such other authorization, ifany, as may be specified in such constituent company's articles of association. The written plan of merger or consolidation must be filed with the Registrar ofCompanies together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituentcompany and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent companyand that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid thefair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures,subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures. In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement isapproved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition representthree-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting,or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of theCayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can beexpected to approve the arrangement if it determines that: ·the company is not proposing to act illegally or beyond the scope of its authority and the statutory provisions as to majority vote have beencomplied with; ·the shareholders have been fairly represented at the meeting in question; ·the arrangement is such that a businessman would reasonably approve; and ·the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law or that wouldamount to a “fraud on the minority.” If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which wouldotherwise ordinarily be available to dissenting shareholders of United States corporations, providing rights to receive payment in cash for the judiciallydetermined value of the shares. When a take-over offer is made and accepted by holders of 90% of the shares within four months, the offeror may, within a two month period, requirethe holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands butthis is unlikely to succeed unless there is evidence of fraud, bad faith or collusion. 151  Shareholders’ Suits. We are not aware of any reported class action or derivative action having been brought in a Cayman Islands court. In principle,we will normally be the proper plaintiff and a derivative action may not be brought by a minority shareholder. However, based on English authorities, whichwould in all likelihood be of persuasive authority in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which: ·a company is acting or proposing to act illegally or ultra vires; ·the act complained of, although not ultra vires, could be effected duly if authorized by more than a simple majority vote which has not beenobtained; and ·those who control the company are perpetrating a “fraud on the minority.” Anti-takeover Provisions. Some provisions of our amended and restated memorandum and articles of association may discourage, delay or prevent achange in control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors toredesignate authorized and unissued common shares as other shares or series of shares, to issue preference shares in one or more series and to designate theprice, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders. However, under CaymanIslands law, our directors may only exercise the rights and powers granted to them under our amended and restated memorandum and articles of association,as amended and restated from time to time, for what they believe in good faith to be in the best interests of our company. Directors’ Fiduciary Duties and Powers. As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciarywith respect to the company, and therefore it is considered that he or she owes the following duties to the company-a duty to act bona fide in the best interestsof the company, a duty not to make a profit out of his or her position as director (unless the company permits him or her to do so) and a duty not to puthimself or herself in a position where the interests of the company conflict with his or her personal interests or his or her duty to a third party. A director of aCayman Island company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in theperformance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However,there are indications that the courts are moving towards an objective standard with regard to the required skill and care. Under our memorandum and articles of association, directors who are in any way, whether directly or indirectly, interested in a contract or proposedcontract with our company shall declare the nature of their interest at a meeting of the board of directors. Following such declaration, a director may vote inrespect of any contract or proposed contract notwithstanding his interest. Directors are not required to hold shares; however, a minimum share requirement fordirectors may be established at a general meeting. Directors may exercise all powers of our company to borrow money, under our memorandum and articles ofassociation, in a variety of ways, including issuing bonds and other securities either outright or as security for any debt liability or obligation of our companyor of any third party. Shareholder Action by Written Resolution. Under Cayman Islands law, a corporation may eliminate the ability of shareholders to approve corporatematters by way of written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matters at a general meetingwithout a meeting being held. Our memorandum and articles of association allow shareholders to act by written resolutions. Removal of Directors. Under our memorandum and articles of association, directors may be removed by a special resolution. Dissolution; Winding Up. Under our memorandum and articles of association, if our company is wound up, the liquidator of our company maydistribute the assets only by the vote of holders of a two-thirds majority of our outstanding shares being entitled to vote in person or by proxy at ashareholder meeting or by unanimous written resolution. 152  Amendment of Governing Documents. Under Cayman Islands law and our memorandum and articles of association, our governing documents mayonly be amended with the vote of holders of two-thirds of our shares entitled to vote in person or by proxy at a shareholder meeting or, as permitted by ourarticles of association, by unanimous written consent. Rights of Non-Resident or Foreign Shareholders.There are no limitations imposed by foreign law or by our memorandum and articles of associationon the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our memorandumand articles of association governing the ownership threshold above which shareholder ownership must be disclosed. C.Material Contracts During the two fiscal years immediately preceding this annual report, we have entered into the following material contracts, excluding contractsentered into in the ordinary course of business. Commercial Arrangements On October 23, 2012, the Group entered into a capital lease agreement with MinshengHongtai (Tianjin) Aircraft Leasing Co., Ltd. to lease acorporate aircraft with a lease term of 8 years and a quarterly lease payment of US$1.4 million. According to the contract, the company will pay US$6.7million to repurchase the jet and get the ownership after 8 years lease term ended. The corporate aircraft was delivered on September 12, 2013, and the capitallease commenced on September 15, 2013 (the “Commencement Date”).The Group measured a capital lease asset and capital lease obligation at an amountequal to the present value of the minimum lease payments during the lease term, excluding the portion of the payments representing executory costs (such asinsurance, maintenance, and taxes to be paid by the lessor) as well as any profit thereon. The effective interest rate for the capital lease obligation is 10.47%.As of December 31, 2014, the capital lease obligation was US$16.4 million. The group's continued expansion of operations both within and outside of the PRC has placed and will continue to place increasing demands on ourproject management, property acquisition and management personnel, including increasing travel demands. The aircraft will facilitate our land acquisitionefforts, including the implementation of our negotiated purchase process, which will require additional travel and time spent at potential acquisition targetsand enhance our efficiency in locating or managing development sites in multiple cities and jurisdictions. Investment by TPG On September 19, 2013, we issued an aggregate of 12,000,000 of our common shares and Convertible Note with an aggregate principal amount of$75,761,009, to TPG Asia, upon completion of a private placement pursuant to the TPG Securities Purchase Agreement. The Convertible Note and shareswere issued without registration under the Securities Act pursuant to an exemption for transactions not involving any public offering. We receivedapproximately US$108,600,000 of gross proceeds from the private placement. We redeemed the Convertible Note on November 21, 2014 for a totalredemption amount of $86,272,849. For a description of the terms of the Convertible Note and the terms on which we redeemed the Convertible Note, see“ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS - B. Liquidity and Capital Resources - Debt Securities Issued in 2013, 2016 and 2017- Convertible Note” included elsewhere in this annual report on Form 20-F. Pursuant to the TPG Securities Purchase Agreement, subject to certain exceptions, we have agreed that so long as TPG Asia (including any transfereewho has become a party to the Registration Rights Agreement discussed below) owns 10% or more of our common shares on an as converted basis, we willnot issue any securities to any person unless we have offered TPG Asia the right to purchase up to its pro rata shares of such issuance at for the same per unitconsideration and otherwise on the same terms and conditions. This pre-emptive right terminated when we redeemed the Convertible Note. Also pursuant to the TPG Securities Purchase Agreement, we have agreed that TPG Asia, so as long as it holds at least five percent of our commonshares on an as-converted basis, is entitled to appoint one member to our board of directors (the "TPG Investor Director") and to have the TPG InvestorDirector appointed to each of the board's committees, including our investment committee to the extent permitted by applicable law or regulatory authorities.We also agreed to enter into an indemnification agreement in a form mutually agreed to us and TPG Asia for the benefit of TPG Investor Director concurrentlywith his or her appointment and entered into such an indemnification agreement with Steve Sun in connection with his appointment to the board. 153  The TPG Securities Purchase Agreement contains customary representations and warranties and indemnification provisions. The agreement alsocontains a standstill agreement of TPG Asia. We and TPG Asia also entered into a registration rights agreement dated as of September 19, 2013 (the "Registration Rights Agreement"). Pursuantto the terms and conditions of the Registration Rights Agreement, we filed with the SEC a registration statement on Form F-3 covering the resale of thecommon shares issued to TPG Asia at closing and issuable upon conversion of the Convertible Note. The Registration Rights Agreement also provides theholders of the commons shares certain demand and piggy back rights and contains other customary provisions. In connection with the transaction, Mr. Yong Zhang, our Chairman, entered into the Chairman's Letter, pursuant to which Mr. Zhang agreed tocertain contractual limitations on the transfer by him of our common shares which would constitute a Change of Control as defined in the Convertible Noteand agreed to provide TPG Asia with tag-along rights in sales of common shares by the Chairman in certain limited circumstances. The Chairman's letterprovides that se provisions terminate upon the first date following the closing on which TPG Asia and its affiliates no longer own at least 10% of our commonshares on an as-converted basis and, therefore, the provisions terminated when we redeemed the Convertible Note. The Chairman's Letter also provides that,until the earlier of the repayment or conversion in full of the Convertible Note, without the prior written consent of TPG Asia, Mr. Zhang will not enter intoany business that is engaged in the purchase, development construction or improvement of real estate in China, subject to certain limited exceptions. Theseprovisions also terminated when we redeemed the Convertible Note. Mr. Zhang also agreed, so long as TPG Asia and its affiliates own at least 5% of ourcommon shares on an as-converted basis, to use his reasonable best efforts to cause the TPG Investor Director to be elected to and not be removed from theboard and to ensure the TPG Investor Director will be a member of our Investment Committee. Bond Offerings For a description of the June 2019 Senior Secured Notes and the August 2019 Senior Secured Notes Indenture, as amended, the August 2019 SeniorSecured Notes and the August 2019 Senior Secured Notes Indenture, and the February 2021 Senior Secured Notes and the February 2021 Senior SecuredNotes Indenture, see “ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS - B. Liquidity and Capital Resources - Debt Securities Issued in2013, 2016 and 2017 - July 2019 Senior Secured Notes”, “ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS - B. Liquidity and CapitalResources - Debt Securities Issued in 2013, 2016 and 2017 - August 2019 Senior Secured Notes”, and “ITEM 5. OPERATING AND FINANCIAL REVIEWAND PROSPECTS - B. Liquidity and Capital Resources - Debt Securities Issued in 2013, 2016 and 2017 - February 2021 Senior Secured Notes”,respectively, included elsewhere in this annual report on Form 20-F. For a description of the onshore corporate bonds, see “ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS - B. Liquidity andCapital Resources - Onshore Corporate Bonds” included elsewhere in this annual report on Form 20-F. D.Exchange Controls Under current PRC foreign exchange rules, after complying with certain procedural requirements and producing commercial documents evidencingrelevant transactions, RMB is convertible into other currencies without prior approval from the SAFE only for current account items, such as trade relatedpayments, interest and dividends, etc. The conversion of RMB into other currencies and remittance of the converted foreign currency outside the PRC undercapital account items, such as direct equity investments, loans and repatriation of investment, requires prior approval from the SAFE or its local office.Foreign-invested enterprises may retain foreign exchange in accounts with designated foreign exchange banks subject to a cap set by the SAFE or its localoffice. Under the SAFE regulations, PRC companies and individuals may repatriate foreign currency revenues received from abroad back to China or theymay retain the foreign currency revenues abroad. The term and conditions for both alternatives are subject to provisions further provided by the SAFE inaccordance with international receipts and payments and the needs of foreign exchange administration. These restrictions could affect our ability to obtainforeign currency through debt or equity financing, or for capital expenditures. 154  E.Taxation Cayman Islands Taxation The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is notaxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islandsexcept for stamp duties which may be applicable on instruments executed in, or brought within the jurisdiction of the Cayman Islands. The Cayman Islands isnot party to any double tax treaties which are applicable to payments made to and by our company. There are no exchange control regulations or currencyrestrictions in the Cayman Islands. People’s Republic of China Taxation The PRC Corporate Income Tax Law, or the CIT Law, and the Implementation for the CIT Law issued by the PRC State Council, became effective asof January 1, 2008. The CIT Law provides that enterprises established outside of China whose “de facto management bodies” are located in China areconsidered “resident enterprises” and are generally subject to the uniform 25% corporate income tax rate as to their worldwide income (including dividendincome received from subsidiaries). Under the Implementation for the CIT Law, a “de facto management body” is defined as a body that has material andoverall management and control of the manufacturing and business operations, personnel and human resources, finances and treasury, and acquisition anddisposition of properties and other assets of an enterprise. On April 22, 2009, the SAT issued the Circular 82, which was retroactively effective as of January1, 2008. Under this notice, an overseas incorporated domestically controlled enterprise will be recognized as a PRC resident enterprise if it satisfies all of thefollowing conditions: (i) the senior management responsible for daily production/ business operations are primarily located in the PRC, and the location(s)where such senior management execute their responsibilities are primarily in the PRC; (ii) strategic financial and personnel decisions are made or approvedby organizations or personnel located in the PRC; (iii) major properties, accounting ledgers, company seals and minutes of board meetings and shareholdermeetings, etc., are maintained in the PRC; and (iv) 50% or more of the board members with voting rights or senior management habitually reside in the PRC.Further, the SAT issued Bulletin 45, which became effective on September 1, 2011, to provide further guidance on the implementation of Circular 82.Bulletin 45 clarified certain issues relating to the determination of PRC tax resident enterprise status, post-determination administration and the authoritiesresponsible for determining offshore-incorporated PRC tax resident enterprise status. Bulletin 45 specifies that when provided with a copy of a Chinese taxresident determination certificate issued by the in-charge tax authorities from an offshore-incorporated PRC tax resident enterprise, the payer should notwithhold 10% income tax when paying Chinese-sourced dividends, interest and royalties to the offshore incorporated PRC tax resident enterprise. However,as Circular 82 and Bulletin 45 only apply to enterprises incorporated under laws of foreign jurisdictions that are controlled by PRC enterprises or groups ofPRC enterprises, it remains unclear how the tax authorities will determine the location of “de facto management bodies” for overseas incorporated enterprisesthat are controlled by individual PRC residents or non-PRC enterprises such as our company. It is not clear whether PRC tax authorities would require (orpermit) us to be treated as a PRC resident enterprise. Under the CIT Law and the Implementation for the CIT Law, PRC income tax at the rate of 10% is applicable to dividends payable to investors thatare “non-resident enterprises,” which do not have an establishment or place of business in the PRC, or which have such establishment or place of business butthe relevant income is not effectively connected with the establishment or place of business, to the extent such dividends have their sources within the PRC.Similarly, any gain realized on the transfer of our ADSs by such investors is also subject to 10% PRC income tax if such gain is regarded as income derivedfrom sources within the PRC. For non-PRC individual investors, under PRC Individual Income Law, there could be a PRC income tax at a rate of 20% forsuch dividends or gains. If we are considered a PRC “resident enterprise,” it is unclear whether dividends we pay with respect to our ADSs, or the gain youmay realize from the transfer of our ADSs, would be treated as income derived from sources within the PRC and be subject to PRC tax as stated above. If weare not considered a PRC “resident enterprise”, the holders of our ADSs that are non-PRC “resident enterprises” could be subject to PRC income tax for gainsfrom transferring or otherwise disposing their ADSs, since such activities might be recognized as “transferring the equity interests of a PRC resident enterpriseindirectly by disposing of the equity interests of an overseas holding company” under Circular 698 or Circular 7 or GATA. However, since Circular 7specifies that it does not apply if a non-PRC resident enterprise purchases and sells equity of the same listed foreign enterprise in the open market and obtainsthe proceeds from indirect transfer of Chinese taxable property, for most our investors, who either are not enterprises, or are non-resident enterprises but onlytrade equity in the open market and gain proceeds, they will not be required to pay tax under Circular 7. It is also unclear whether, if we are considered a PRC“resident enterprise”, holders of our ADSs might be able to claim the benefit of income tax treaties entered into between China and other countries. 155  U.S. Federal Income Taxation Introduction The following is a general discussion of certain U.S. federal income tax consequences of the ownership and disposition of the common shares orADSs (evidenced by ADRs) by U.S. Holders (as defined below). This discussion applies only to U.S. Holders that hold the common shares or ADSs as capitalassets. This discussion is based on the Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations promulgated thereunder, andadministrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, orto different interpretation. This discussion does not address all of the tax considerations that may be relevant to specific U.S. Holders in light of their particular circumstancesor to U.S. Holders subject to special treatment under U.S. federal income tax law (such as banks, other financial institutions, insurance companies, tax-exemptentities, retirement plans, regulated investment companies, real estate investment trusts, grantor trusts, partnerships, dealers or traders in securities, brokers,U.S. expatriates and certain former long-term U.S. residents, persons subject to the alternative minimum tax, persons who have acquired the shares or ADSs aspart of a straddle, hedge, conversion transaction or other integrated investment, persons who generally mark their securities to market for U.S. federal incometax purposes, persons that have a “functional currency” other than the U.S. dollar, persons who are residents in the PRC for PRC tax purposes or persons thatown directly, indirectly, or constructively 10% or more of the voting power of our stock). If a partnership holds common shares or ADSs, the consequences toa partner will generally depend upon the status of the partner and upon the activities of the partnership. A partner of a partnership holding common shares orADSs should consult its own tax adviser regarding the U.S. tax consequences of its investment in the common shares or ADSs through the partnership. Thisdiscussion does not address any U.S. state or local or non-U.S. tax considerations, any U.S. federal estate, gift or alternative minimum tax considerations orthe U.S. federal unearned Medicare contribution tax. As used in this discussion, the term “U.S. Holder” means a beneficial owner of the common shares or ADSs that is, for U.S. federal income taxpurposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation, created or organized in or under the laws of the United States orof any state or political subdivision thereof or therein, including the District of Columbia, (iii) an estate, the income of which is subject to U.S. federal incometax regardless of the source thereof, or (iv) a trust with respect to which a court within the United States is able to exercise primary supervision over itsadministration and one or more U.S. persons have the authority to control all of its substantial decisions, or certain electing trusts that were in existence onAugust 19, 1996 and were treated as domestic trusts on that date. In general, for U.S. federal income tax purposes, a U.S. Holder of an ADS will be treated as the owner of the common shares represented by the ADSsand exchanges of common shares for ADSs, and ADSs for common shares, will not be subject to U.S. federal income tax. Investors should consult their tax advisors as to the particular tax considerations applicable to them relating to the ownership and disposition of thecommon shares or ADSs, including the applicability of U.S. federal, state and local tax laws or non-U.S. tax laws, any changes in applicable tax laws and anypending or proposed legislation or regulations. 156  Dividends Subject to the discussion below under “-Passive Foreign Investment Company,” the gross amount of any distribution (without reduction for anyPRC tax withheld) made by us on the common shares or ADSs generally will be treated as a dividend includible in the gross income of a U.S. Holder asordinary income to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, when received bythe U.S. Holder, in the case of common shares, or when received by the Depositary, in the case of ADSs. To the extent the amount of such distribution exceedsour current and accumulated earnings and profits as so computed, it will be treated first as a non-taxable return of capital to the extent of such U.S. Holder’sadjusted tax basis in such common shares or ADSs and, to the extent the amount of such distribution exceeds such adjusted tax basis, will be treated as gainfrom the sale of such common shares or ADSs. We, however, may not calculate earnings and profits in accordance with U.S. tax principles. In this case, alldistributions by us to U.S. Holders will generally be treated as dividends. The dividends will not be eligible for the dividends-received deduction allowed tocorporations in respect of dividends received from other U.S. corporations. Certain dividends received by non-corporate U.S. Holders in taxable years beginning after December 31, 2012, generally will be subject to amaximum income tax rate of 20%. These reduced income tax rates are applicable to dividends paid by “qualified foreign corporations” and only with respectto common shares or ADSs held for a minimum holding period of at least 61 days during a specified 121-day period, and if certain other conditions are met.We are considered a qualified foreign corporation with respect to the ADSs because our ADSs are listed on the NYSE. Accordingly, subject to the discussionbelow under “-Passive Foreign Investment Company,” dividends paid by us with respect to the ADSs generally should be eligible for the reduced income taxrates. The U.S. Treasury Department has announced its intention to promulgate rules pursuant to which U.S. Holders of the common shares or ADSs andintermediaries through whom such common shares or ADSs are held will be permitted to rely on certifications from issuers to establish that dividends aretreated as qualified dividends eligible for the reduced rates, described above. Because such rules have not yet been issued, it is not clear whether we will be ina position to comply with them. Investors should consult their tax advisors regarding the availability of the lower rates for dividends paid with respect to ourADSs or common shares. Dividends paid by us will constitute income from sources outside the United States for U.S. foreign tax credit limitation purposes and will becategorized as “passive category income” or, in the case of certain U.S. Holders, as “general category income” for U.S. foreign tax credit purposes. In the event that we are deemed to be a PRC resident enterprise under the CIT Law (see discussion under “ITEM 10. ADDITIONAL INFORMATION -E. Taxation - People’s Republic of China Taxation”), you may be subject to PRC withholding taxes on dividends paid to you with respect to the commonshares or ADSs. Subject to generally applicable limitations, PRC withholding taxes on dividends, if any, may be treated as foreign taxes eligible for creditagainst your U.S. federal income tax liability. However, such foreign tax credit may be disallowed, if the U.S. Holder has held such shares for less than aspecified minimum period during which the U.S. Holder is not protected from risk of loss, or is obligated to make payments related to the dividends. The rulesrelating to the U.S. foreign tax credit are complex and U.S. Holders may be subject to various limitations on the amount of foreign tax credits that areavailable. In addition, if the dividends are taxed as qualified dividends (as discussed above), the amount of the dividend taken into account for purposes ofcalculating a U.S. Holder's foreign tax credit limitation will generally be limited to the gross amount of the taxable dividend, multiplied by the reduced taxrate applicable to qualified dividend income and divided by the highest tax rate normally applicable to dividends. U.S. Holders should consult their own taxadvisors regarding the effect of these rules in their particular circumstances. A distribution of additional common shares or ADSs to U.S. Holders with respect to their common shares or ADSs that is made as part of a pro ratadistribution to all shareholders generally may not be subject to U.S. federal income tax. Sale or Other Disposition of Ordinary common shares or ADSs Subject to the discussion below under “-Passive Foreign Investment Company,” a U.S. Holder generally will recognize gain or loss for U.S. federalincome tax purposes upon a sale or other disposition of the common shares or ADSs in an amount equal to the difference between the amount realized fromsuch sale or disposition and the U.S. Holder’s adjusted tax basis in such common shares or ADSs. Such gain or loss generally will be a capital gain or loss andwill be long-term capital gain (taxable at a reduced rate for non-corporate U.S. Holders) or loss if, on the date of sale or disposition, such common shares orADSs were held by such U.S. Holder for more than one year. The deductibility of capital losses is subject to significant limitations. Any gain or loss on thesale or disposition will generally be treated as U.S. source income or loss for U.S. foreign tax credit limitation purposes. 157  In the event that we are deemed to be a PRC “resident enterprise” under the PRC tax law, you may be eligible for the benefits of the income taxtreaty between the United States and the PRC. Under that treaty, if any PRC tax was to be imposed on any gain from the disposition of common shares orADSs, the gain may be treated as PRC-source income. U.S. Holders are urged to consult their tax advisors regarding the tax consequences if a foreign tax isimposed on a disposition of the common shares or ADSs, including the availability of the foreign tax credit under their particular circumstances. Passive Foreign Investment Company Based on the composition of our assets and income, although not free from doubt, we do not believe we were a PFIC in 2016 and do not expect to bea PFIC for U.S. federal income tax purposes with respect to our current taxable year or the foreseeable future. The determination of PFIC status is dependentupon the composition of all income and assets and such determination must be made at the close of each taxable year. Changes in the nature of our income,assets or activities, or a decrease in the share price of the common shares or ADSs, may cause us to be considered a PFIC in the current or any subsequent year.Accordingly, we cannot assure you that we were not a PFIC for the year ended December 31, 2016 or will not be a PFIC for the current taxable year endingDecember 31, 2017 or any future taxable years. In general, a non-U.S. corporation will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (i) at least 75% ofits gross income is “passive income” or (ii) on average at least 50% of the value of its assets is attributable to assets that produce passive income or are heldfor the production of passive income. Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents and gainsfrom commodities and securities transactions. Passive income does not include certain rents and royalties derived from the active conduct of a trade orbusiness. If we own at least 25% (by value) of the stock of another corporation, we will be treated for purposes of the PFIC tests, as owning our proportionateshare of the other corporation’s assets and receiving our proportionate share of the other corporation’s income. If we are a PFIC in any year during which a U.S. Holder owns the common shares or ADSs, such U.S. Holder may experience certain adverse taxconsequences. Such U.S. Holder could be liable for additional taxes and interest charges upon (i) distributions received by the U.S. Holder on our commonshares or ADSs during the year, but only to the extent that the aggregate of the distributions for the taxable year exceeds 125% of the average amount ofdistributions received by the U.S. Holder in the preceding three years, or (ii) upon a sale or other disposition of the common shares or ADSs at a gain (each an“excess distribution”). The tax will be determined by allocating the excess distribution ratably to each day of the U.S. Holder’s holding period. The amountallocated to the current taxable year and any taxable year with respect to which we were not a PFIC will be taxed as ordinary income (rather than capital gain)earned in the current taxable year. The amount allocated to other taxable years will be taxed at the highest marginal rates applicable to ordinary income forsuch taxable years and, in addition, an interest charge will be imposed on the amount of such taxes. If we are a PFIC for any year during which a U.S. Holder holds the common shares or ADSs, the U.S. Holder generally will be subject to the rulesdescribed in the above paragraph for that year and for all succeeding years during which the U.S. Holder holds such shares or ADSs. These adverse taxconsequences may be mitigated if the U.S. Holder is eligible to and does elect to annually mark-to-market the common shares or ADSs. If a U.S. Holder makesa mark-to-market election, such holder will generally include as ordinary income the excess, if any, of the fair market value of the ADSs or common shares atthe end of each taxable year over their adjusted basis, and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of the ADSsor common shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as aresult of the mark-to-market election). Any gain recognized on the sale or other disposition of the ADSs or common shares will be treated as ordinary income.The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded in other than de minimis quantities on at least 15days during each calendar quarter on a qualified exchange or other market, as defined in the applicable Treasury regulations. The ADSs are listed on theNYSE, and we expect, although no assurance can be given, that they will be regularly traded on the NYSE. The stock of any of our subsidiaries that are PFICs,however would not be eligible for the mark-to-market election. 158  A U.S. Holder’s adjusted tax basis in the common shares or ADSs will be increased by the amount of any income inclusion and decreased by theamount of any deductions under the mark-to-market rules. If a U.S. Holder makes a mark-to-market election, it will be effective for the taxable year for whichthe election is made and all subsequent taxable years unless the common shares or ADSs are no longer regularly traded on a qualified exchange or theInternal Revenue Service consents to the revocation of the election. U.S. Holders are urged to consult their tax advisors about the availability of the mark-to-market election, and whether making the election would be advisable in their particular circumstances. In general, if a non-U.S. corporation is a PFIC, a holder of shares in that corporation may avoid taxation under the rules described by making a“qualified electing fund” election to include its share of the corporation’s income on a current basis (or, in certain cases by making a “deemed sale” electiononce the corporation no longer qualifies as a PFIC). However, a U.S. Holder may make a qualified electing fund election with respect to the common shares orADSs only if we agree to furnish the U.S. Holder annually with certain tax information, and we do not intend to prepare or provide such information. The reduced tax rate for dividend income, as discussed above under “-Dividends,” is not applicable to any dividends paid by a PFIC or amountsincluded in income under the mark-to-market election. If we are regarded as a PFIC, a U.S. Holder of common shares or ADSs must make an annual return onIRS Form 8621, reporting distributions received and gains realized with respect to these interests. In addition, each U.S. Holder who is a shareholder of a PFICis required to file an annual report containing such information as the IRS may require. This requirement is in addition to other reporting requirementsapplicable to ownership in a PFIC. Investors should consult their own tax advisors regarding the U.S. federal income tax consequences of an investment in a PFIC. Backup Withholding Tax and Information Reporting and Disclosure Requirements Dividend payments made to U.S. Holders and proceeds paid from the sale or other disposition of their common shares or ADSs may be subject toinformation reporting to the Internal Revenue Service and possible U.S. federal backup withholding at a current rate of 28%. Certain exempt recipients (suchas corporations) are not subject to these information reporting requirements. Backup withholding will not apply to a U.S. Holder who furnishes a correcttaxpayer identification number and makes any other required certification, or who is otherwise exempt from backup withholding. U.S. Holders who arerequired to establish their exempt status generally must provide IRS Form W-9 (Request for Taxpayer Identification Number and Certification). Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s U.S. federal incometax liability. A U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refundwith the Internal Revenue Service in a timely manner and furnishing any required information. Investors should consult their own tax advisors as to their qualification for an exemption from backup withholding and the procedure for obtainingthis exemption. Certain U.S. Holders may be required to report information with respect to such holder’s interest in “specified foreign financial assets” (as defined inSection 6038D of the Code), including stock of a non-U.S. corporation that is not held in an account maintained by a U.S. “financial institution,” if theaggregate value of all such assets exceeds certain thresholds. Persons who are required to report specified foreign financial assets and fail to do so may besubject to substantial penalties. U.S. Holders are urged to consult their own tax advisors regarding the foreign financial asset reporting obligations and theirpossible application to the holding of the common shares or ADSs F.Dividends and Paying Agents Not applicable. G.Statement by Experts Not applicable. 159  H.Documents on Display We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to filereports and other information with the SEC. Specifically, we are required to file annually a Form 20-F no later than four months after the close of each fiscalyear, which is December 31. Copies of reports and other information, when so filed, may be inspected without charge and may be obtained at prescribed ratesat the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain informationregarding the Washington, D.C. Public Reference Room by calling the Commission at 1-800-SEC-0330. The SEC also maintains a web site at www.sec.govthat contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using itsEDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reportsand proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained inSection 16 of the Exchange Act. In accordance with Section 203.01 of the NYSE Listed Company Manual, we will post this annual report on our website atwww.xyre.com. I.Subsidiary Information Not applicable. ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss related to adverse changes in market prices, including interest rate and foreign exchange rates of financial instruments.We are exposed to various types of market risks in the normal course of business. We have not in the past used derivatives to manage our exposure to marketinterest rate risk or foreign exchange risk. The following discussion and analysis, which involves “forward-looking statements” that involve risk anduncertainties, summarizes our exposure to different market risks. Foreign Exchange Risk We and our subsidiaries are principally engaged in real estate development and the provision of property management services in the PRC. Westarted U.S. business operations, which is mainly residential real estate development, as well as resale, in 2012. The functional currency of our PRCsubsidiaries is the Renminbi, while that of our subsidiaries in the U.S. is U.S. dollars. Our reporting currency is the U.S. dollar. We translate the PRC operatingresults using the average exchange rate for the year and we translate the PRC financial position at the year-end exchange rate. The PRC subsidiaries’significant net asset position as of December 31, 2015 coupled with the fact that the RMB strengthened against the US$ during the year ended December 31,2015, resulted in foreign exchange translation losses. The foreign currency translation losses recognized in our other comprehensive income amounted to$65.6 million for the year ended December 31, 2016. A significant portion of our revenues is denominated in RMB. However, we have substantial U.S. dollar denominated obligations, including theobligation to pay interest and principal on our secured debt and capital commitments to support our U.S. business operations. Accordingly, any significantfluctuation between the RMB and the U.S. dollar could expose us to foreign exchange risk. We do not currently hedge our exchange rate exposure. Weevaluate such risk from time to time and may consider engaging in hedging activities in the future to the extent we deem appropriate. Such hedgingarrangements may require us to pledge or transfer cash and other collateral to secure our obligations under the agreements, and the amount of collateralrequired may increase as a result of mark-to-market adjustments. 160  The RMB is not a freely convertible currency. The PRC government may take actions that could cause future exchange rates to vary significantlyfrom current or historical exchange rates. The conversion of RMB into foreign currencies, including U.S. dollars, has been based on rates set by the PBOC. OnJuly 1, 2005, the PRC government changed its previous policy of pegging the value of the RMB to the U.S. dollar. Under the current policy, the RMB ispermitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Since July 21, 2005, this change in policy hasresulted in an approximately 16.2% appreciation of the RMB against the U.S. dollar through December 31, 2016. There remains significant internationalpressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of theRMB against the U.S. dollar. Any appreciation of the RMB against the U.S. dollar or any other foreign currencies would make any new RMB-denominatedinvestments or expenditures more costly to us, to the extent that we need to convert foreign currencies into RMB for such purposes. On August 11, 2015, thePBOC allowed the RMB to depreciate by approximately 2% against the U.S. dollar. It is difficult to predict how long such depreciation of RMB against theU.S. dollar may last. However, any significant depreciation in the exchange rates of the RMB against the U.S. dollar could adversely affect the value of anydividends paid by us to our shareholders, which would be funded by RMB but paid in U.S. dollars. There can be no assurance that any future movements inthe exchange rate of the RMB against the U.S. dollar or other foreign currencies will not adversely affect our results of operations and financial condition(including our ability to pay dividends). A significant depreciation in the RMB against major foreign currencies may have a material adverse impact on ourresults of operations, financial condition and share price because our reporting currency is the U.S. dollar and our ADSs are expected to be quoted in U.S.dollars, whereas our revenues, costs and expenses are largely denominated in RMB. Interest Rate Risk The cost of financing is sensitive to fluctuations in interest rates. Our bank borrowings bear interest at variable rates, and an increase in interest rateswould increase our costs there under. Our net income is affected by changes in interest rates as a result of the impact such changes have on interest incomefrom, and interest expense on, short-term deposits and other interest-bearing financial assets and liabilities. In addition, our sales are also sensitive tofluctuations in interest rates. An increase in interest rates would adversely affect our prospective purchasers’ ability to obtain financing and depress theoverall housing demand. Higher interest rates, therefore, may adversely affect our revenues, gross profits and net income, and our ability to raise and servicedebt and to finance our developments. Our indebtedness consists primarily of short-term and long-term bank borrowings, secured debt and onshore corporate bonds. As of December 31,2016, we had US$178.6 million of short-term borrowings, with US$34.4 million denominated in USD and US$144.2 million denominated in RMB, whichbear interest rates ranging from 2.02% per annum to 8.30% per annum, with a weighted average interest rate at such date of 6.53%. US$252.2 million of long-term bank loans, including current portions of long-term bank loans, bear floating interest rates, which are based on 110% to 130% of PBOC benchmark ratesin the following years. US$75.1 million of long-term debt, including current portions of long-term debt bear floating interest rates, which are based on Liborbenchmark rates in the following years. The PBOC regulates the interest rates of our Renminbi-denominated borrowings. The PBOC-published benchmarkone-year lending rate in China, which directly affects the property mortgage rates offered by commercial banks in China, as at December 31, 2014, 2015 and2016 was 5.60% , 4.35% and 4.35%, respectively. As of December 31, 2016, the principal amount of our aggregate outstanding variable rate debt, includinglong-term bank loans, was US$405.0 million. A hypothetical 1% increase in annual interest rates would increase our interest cost by approximately US$4.1million per year based on our debt level at December 31, 2016. The senior secured notes and other debt, except the above-mentioned US$75.1 million offloating rate debt, bear fixed interest rates and therefore, interest rate risk is low. Credit Risk We provide guarantees to mortgage lending banks in respect of the mortgage loans provided to the purchasers of our properties in the PRC up untilcompletion of the registration of the mortgage with the relevant authorities, which generally occurs within six to 12 months after the purchaser takespossession of the relevant properties. If a purchaser defaults under the loan while our guarantee is in effect and we repay all debt owed by the purchaser to themortgagee bank under the loan, the mortgagee bank must assign its rights under the loan and the mortgage to us and, after the registration of the mortgage,we will have full recourse to the property. In line with what we believe is industry practice, we do not conduct independent credit checks on our customersbut rely on the credit checks conducted by the mortgagee banks. As of December 31, 2016, we had outstanding guarantees of mortgages in the principal amount of US$1,672.9 million. If a purchaser defaults on thepayment of its mortgage during the term of the guarantee, the mortgage lending bank may require us to repay the outstanding amount under the loan plus anyaccrued interest. In this event, although we are able to retain the customer’s deposit and sell the property to recover any amounts paid by us to the bank, therecan be no assurance that we would be able to sell the property at a price equal to or greater than the amount we paid on the defaulting purchaser’s outstandingloan amount and any accrued interest thereon. We paid US$1.8 million to satisfy guarantee obligations related to customer defaults for the year endedDecember 31, 2016. 161  During parts of 2011 and 2012 we offered certain homebuyers seller-financing arrangements. All the homebuyers entered into such arrangementwere subject to credit verification procedures. In addition, accounts receivable balances are unsecured, but monitored on an ongoing basis via ourmanagement reporting procedures. We provided longer payment terms, ranging between six months to two years to particular home buyers after applyingstrict credit requirements based on our credit policy. In the second half of 2012, execution of seller-financed contracts dropped significantly. From the fourthquarter of 2012, we stopped offering seller-financed contracts to second home buyers. Commencing in the second quarter of 2014, the Group again offerseller-financed contracts. As of December 31, 2015 and 2016, there is no concentration of credit risk with respect to receivables and we do not have asignificant exposure to any individual debtor. Since 2013, PRC banks have tightened the distributions of mortgage loans to homebuyers. Therefore,mortgage loans for homebuyers have been subject to longer processing periods or even denied by the banks. We took the position that the processing periodsof the contracts with underlying mortgage loans exceeding one year cannot be recognized as revenue under the percentage of completion method. As of December 31, 2016 our cash and cash equivalents totaled US$578.2 million and restricted cash totaled US$328.5 million, predominatelydeposited in accounts maintained with state-owned bank within the PRC. We have not experienced any losses in such accounts and management believes itis not exposed to any risks on its cash in bank accounts. Inflation Inflation has not had a significant effect on our business during the past three years. According to the National Bureau of Statistics of China, China’soverall national inflation rate, as represented by the general consumer price index, was approximately 2.0%, 1.4% and 2.0% in 2014, 2015 and 2016,respectively. Deflation could negatively affect our business as it would be a disincentive for prospective property buyers to make a purchase. As of the date ofthis annual report, we have not been materially affected by any inflation or deflation. ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Our common shares, in the form of ADSs, each representing two common shares, are listed on the NYSE. JPMorgan Chase Bank, N.A. serves as thedepositary for the ADSs. JPMorgan Chase Bank, N.A.’s principal executive office is located at Four New York Plaza, New York, New York 10004. The depositary may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of shares, issuances inrespect of share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to amerger, exchange of securities or any other transaction or event affecting the ADSs or deposited securities, and each person surrendering ADSs for withdrawalof deposited securities in any manner permitted by the deposit agreement, US$5.00 for each 100 ADSs (or any portion thereof) issued, delivered, reduced,cancelled or surrendered, as the case may be. ADSs are represented and evidenced by American depositary receipts, or ADRs. The depositary may charge the following the additional amounts to ADR holders: ·a fee of US$0.02 or less per ADS (or portion thereof) for any cash distribution made pursuant to the deposit agreement; ·a fee of US$0.05 per ADS (or portion thereof) per calendar year for services performed by the depositary in administering our ADR program; ·any other charge payable by any of the depositary, any of the depositary’s agents, including, without limitation, the custodian, or theagents of the depositary’s agents in connection with the servicing of our shares or other deposited securities; 162  ·a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to thefee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all suchsecurities as if they were shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositaryto those holders entitled thereto; ·stock transfer or other taxes and other governmental charges; ·cable, telex and facsimile transmission and delivery charges incurred upon request of an ADR holder; ·transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit orwithdrawal of deposited securities; ·expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars; and ·such fees and expenses as are incurred by the depositary (including without limitation expenses incurred in connection with compliancewith foreign exchange control regulations or any law or regulation relating to foreign investment) in delivery of deposited securities orotherwise in connection with the depositary’s or its custodian’s compliance with applicable laws, rules or regulations. The fees described above may be amended from time to time. The depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing shares or surrendering ADSs for the purposeof withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from theamounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services bydeduction from cash distributions, or by directly billing investors, or by charging the book-entry system accounts of participants acting for them. Thedepositary may generally refuse to provide services to any holder until the fees and expenses owing by such holder for those services or otherwise are paid. ADR holders must pay any tax or other governmental charge payable by the custodian or the depositary on any ADS or ADR, deposited security ordistribution. If an ADR holder owes any tax or other governmental charge, the depositary may (i) deduct the amount thereof from any cash distributions, or(ii) sell deposited securities and deduct the amount owing from the net proceeds of such sale. In either case the ADR holder remains liable for any shortfall.Additionally, if any tax or governmental charge is unpaid, the depositary may also refuse to effect any registration, registration of transfer, split-up orcombination of deposited securities or withdrawal of deposited securities (except under limited circumstances mandated by securities regulations). If any taxor governmental charge is required to be withheld on any non-cash distribution, the depositary may sell the distributed property or securities to pay suchtaxes and distribute any remaining net proceeds to the ADR holders entitled thereto. The depositary may remit to us all or a portion of the depositary fees charged for the reimbursement of certain of the expenses we incur in respect ofthe ADS program established pursuant to the deposit agreement upon such terms and conditions as we may agree from time to time. In the year endedDecember 31, 2016, the depositary reimbursed us nil with respect to certain fees and expenses. The table below sets forth the types of expenses that the depositary has agreed to reimburse and the amounts reimbursed in 2016. 163  Category of Expenses AmountReimbursedin the Year EndedDecember 31,2016 (US$) Investor relations marketing - Legal - Total - PART II ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES None. ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS None. ITEM 15.CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness ofour disclosure controls and procedures within the meaning of Rule 13a-15(e) of the Exchange Act as of the end of the period covered by this report. Based onsuch evaluation, our management has concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures wereeffective to ensure that information required to be disclosed by our company in reports that we file or submit under the Exchange Act is (i) recorded,processed, summarized and reported within the time period specified in the SEC rules and forms, and (ii) accumulated and communicated to our management,including our chief executive officer and interim chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Report of Management on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Rule 13(a)-15(f) and 15(d)-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Ourinternal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made onlyin accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate. Management, under the supervision and with the participation of our chief executive officerand chief financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in InternalControl-Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on ourevaluation under the framework in Internal Control-Integrated Framework (2013 Framework), our management concluded that, as of December 31, 2016, ourinternal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with U.S. GAAP. 164  The effectiveness of our internal control over financial reporting as of December 31, 2016 has been audited by Ernst & Young Hua Ming LLP, anindependent registered public accounting firm, as stated in their attestation report thereon which appears herein. Changes in Internal Control over Financial Reporting During the year ended December 31, 2016, there were no changes in our internal control over financial reporting that occurred during the periodcovered by the report for the year ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal controlover financial reporting. 165  Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Xinyuan Real Estate Co., Ltd. We have audited Xinyuan Real Estate Co., Ltd. and subsidiaries' internal control over financial reporting as of December 31, 2016, based on criteriaestablished in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013framework) (the “COSO criteria”). Xinyuan Real Estate Co., Ltd. and subsidiaries' management is responsible for maintaining effective internal control overfinancial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report ofManagement on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financialreporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained inall material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate. In our opinion, Xinyuan Real Estate Co, Ltd. and subsidiaries maintained, in all material respects, effective internal control over financial reportingas of December 31, 2016, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedbalance sheets of Xinyuan Real Estate Co., Ltd and subsidiaries as of December 31, 2016 and 2015 and the related consolidated statements of comprehensiveincome, cash flows and changes in shareholders’ equity for each of the three years in the period ended December 31, 2016 of Xinyuan Real Estate Co., Ltd.and subsidiaries and our report dated March 27, 2017 expressed an unqualified opinion thereon. /s/ Ernst & Young Hua Ming LLP Beijing, People’s Republic of ChinaMarch 27, 2017 166  PART III ITEM 16.[RESERVED] ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT Our board of directors has determined that Mr. Thomas Gurnee, the chairman of our audit committee, qualifies as an audit committee financial expertunder applicable SEC rules. ITEM 16B.CODE OF ETHICS Our board of directors has adopted a code of business conduct and ethics that pertains to our directors, officers and employees with certainprovisions that specifically apply to our chief executive officer, chief financial officer, vice presidents and any other persons who perform similar functionsfor us. Our code of business conduct and ethics is available at our website at ir.xyre.com. ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Ernst &Young Hua Ming LLP, our independent registered public accounting firm, for the periods indicated. For the Year Ended December 31, 2014 2015 2016 US$ US$ US$ Audit fees (1) 1,284,512 1,332,859 1,295,156 Audit-related fees (2) 170,617 172,308 293,669 Tax fees (3) - - - All other fees (4) - - - (1)“Audit fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our independent registered publicaccounting firm for the audit of our annual financial statements and the quarterly procedures performed for our comparative interim financialstatements.(2)“Audit related fees” represents aggregate fees billed for professional services rendered by our independent registered public accounting firm forassurance and related services. In 2014, such services consisted principally of a SAS 100 review of the Company’s June 30, 2014 financialstatements incorporated by reference into the F-3 registration statement and the issuance of their consent in the Form S-8 filing in September 2014.In 2015, such services consisted principally of a SAS 100 review of the Company’s June 30, 2015 financial statements incorporated by referenceinto the F-3 registration statement and the issuance of their consent in the Form S-8 filing in June 2015. In 2016, such services consisted principallyof a SAS 100 review of the Company’s June 30, 2016 financial statements incorporated by reference into the F-3 registration statement and theissuances of our August 2019 Senior Secured Notes in August 2016.(3)There were no tax fees billed in 2014, 2015 and 2016.(4)There were no other fees billed in 2014, 2015 and 2016. All audit and non-audit services provided by our independent auditors must be pre-approved by our audit committee. Our audit committee hasadopted a project-by-project approach in pre-approving proposed services. All requests or applications for services to be provided by our independentauditors require a detailed description of the services to be rendered and will be presented to our audit committee for pre-approval. ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES None. 167  ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS Effective July 12, 2013, our board of directors approved a US$60 million share repurchase program (the “2013 authorization”). The 2013authorization permitted us to purchase shares from time to time in the open market through July 2015. Effective December 28, 2015, our board of directors approved a new US$40 million share repurchase program through December 2017 (the "2015Authorization"). This program will be funded from available working capital. Repurchases under the 2015 program will be made from time to time through acombination of open market and privately negotiated transactions. The per share price cap will be determined from time to time in the discretion ofmanagement. Effective March 21, 2017, our board of directors approved a new US$40 million share repurchase program through December 2019 (the "2017Authorization") to be effective upon the earlier of completion or expiration of the 2015 Authorization. This program will be funded from available workingcapital. Repurchases under the 2017 program will be made from time to time through a combination of open market and privately negotiated transactions.The per share price cap will be determined from time to time in the discretion of management. The following table sets forth a summary of our repurchase of our ADSs made from January 1, 2016 to December 31, 2016. Period Total Numberof ADSsPurchased(1)(2) AveragePricePaid PerADS(US$) TotalNumber ofADSsPurchasedasPart ofPubliclyAnnouncedPlansorPrograms(1) ApproximateU.S. DollarValueof ADSs thatMayYet BePurchasedUnderthe Programs January 1 through January 31 751,559 3.52 842,511 37,024,123 February 1 through February 29 1,044,208 3.61 1,886,719 33,253,908 March 1 through March 31 1,838,473 4.22 3,725,192 25,497,177 April 1 through April 30 1,387,008 5.08 5,112,200 18,451,155 November 1 through November 30 496,666 5.28 5,608,866 15,827,322 December 1 through December 31 1,081,205 5.41 6,690,071 9,979,322 Total 6,599,119 4.50 6,690,071 9,979,322 (1)In 2016, we repurchased 6,599,119 ADSs under the 2015 Authorization.(2)Our ADS to common share ratio is one ADS for two common shares. ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT None. ITEM 16G.CORPORATE GOVERNANCE Our ADSs are listed on the NYSE and we are therefore subject to corporate governance requirements of the NYSE. We are incorporated in theCayman Islands and thus our corporate governance practices are also governed by applicable Cayman Islands law. Under Section 303A of the NYSE ListedCompany Manual, NYSE-listed non-U.S. companies may, in general, follow their home country corporate governance practices in lieu of some of the NYSEcorporate governance requirements. 168  The NYSE Listed Company Manual requires that the board of directors of a listed company consist of a majority of independent directors, as definedby the NYSE from time to time. The corporate governance practice in our home country, the Cayman Islands, does not require a majority of directors of acorporation to be independent. As of the date of this annual report, the majority of our directors are not independent directors as defined by the NYSE. Ourboard is currently composed of ten directors, four of whom are current officers of the Company or one of its subsidiaries, five of whom are current directors ofone of the Company's subsidiaries and two of whom are former executive officers of our company. Under NYSE rules, all non-management directors arerequired to meet periodically in executive session, without any members of management present. The corporate governance practice in our home countrydoes not require such meetings and, accordingly, our non-management directors do not meet in executive session. The NYSE Listed Company Manual requires each issuer to have a nominating and corporate governance committee and a compensation committeecomposed entirely of independent directors. In addition, each of those committees must have a written charter setting out, at a minimum, certain prescribedduties. The corporate governance practice in our home country, the Cayman Islands, does not require the implementation of a compensation committee, nor anominating and corporate governance committee, nor does it require any such committees to be comprised solely of independent directors. We haveestablished a separate compensation committee and a nominating and corporate governance committee. However, neither of the committees consists solely ofindependent directors. Each committee has a written charter which is available on our corporate website. However, the committees have not adopted andimplemented all of the duties prescribed for such committee by the NYSE. The NYSE Listed Company Manual requires listed companies to have an audit committee that satisfies the requirements of Section 10A of theExchange Act. As a foreign private issuer, we are not required to comply with certain other NYSE rules related to audit committees, including therequirements to have a minimum of three members and that the members satisfy the additional "independence" standards of Section 303A.02 of the New YorkStock Exchange Listed Company Manual. Our audit committee has, as of the date of this annual report, three members (including one with observer rightsbut no voting rights), each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act, and one such member qualifies as an“audit committee financial expert” under applicable SEC rules. In addition to the board governance rules described above, the NYSE Listed Company Manual requires shareholder action in connection withcertain share issuances by a listed company. Specifically, shareholder approval is required in connection with an issuance of an amount of equity securitiesequal to or greater than 20% of the outstanding voting power or equity interest of the company, subject to limited exceptions. Shareholder approval is alsorequired for the adoption of or material revision to an equity compensation plan, which is defined as a plan or other arrangement that provide for the deliveryof equity securities of the company to any employee, director or other service provider as compensation for services. Our home country corporate governancedoes not require shareholder action in either situation and, accordingly, such actions may be and are taken on behalf of our company with just board or boardcommittee action. ITEM 16H.MINE SAFETY Not applicable. ITEM 17.FINANCIAL STATEMENTS We have elected to provide financial statements pursuant to Item 18. ITEM 18.FINANCIAL STATEMENTS The consolidated financial statements of Xinyuan Real Estate Co., Ltd. are included at the end of this annual report. 169  ITEM 19.EXHIBITS ExhibitNumber Description of Document1.1 Amended and Restated Memorandum and Articles of Association of Xinyuan Real Estate Co., Ltd. (incorporated by reference to Exhibit 3.1to the registrant’s F-1 registration statement (File No. 333-147477), as amended, initially filed with the SEC on November 16, 2007)1.2 Amendment to Amended and Restated Articles of Association of Xinyuan Real Estate Co., Ltd. (incorporated by reference to Exhibit 99.5 tothe registrant’s Form 6-K (File No. 001-33863 ) filed with the SEC on December 10, 2009)2.1 Deposit Agreement, dated as of December 11, 2007, among Xinyuan Real Estate Co., Ltd., JPMorgan Chase Bank, N.A., as depositary, andholders of American Depositary Shares (incorporated by reference to Exhibit 2.5 to Amendment No. 1. to the registrant’s annual report (FileNo. 001-33863), as amended, initially filed with the SEC on September 29, 2009)2.2 Indenture, dated as of December 6, 2013, between Xinyuan Real Estate Co., Ltd., the entities listed on Schedule 1 thereto as SubsidiaryGuarantors, and Citicorp International Limited, as Trustee and Shared Security Agreement (incorporated by reference to Exhibit 99.1 to theregistrant’s Form 6-K (File No. 001-33863) filed with the SEC on December 9, 2013)2.3 Indenture Supplement No. 1dated as of February 13, 2015, among Citicorp International Limited as Trustee, Citicorp International Limitedas Shared Security Agent, Xinyuan Real Estate Co., Ltd. and the entities listed in Schedules I thereto as the Subsidiary Guarantors to theIndenture, dated as of May 3, 2013 with respect to the registrant’s 13% June 2019 Senior Secured Notes (incorporated by reference toExhibit 99.2 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on February 13, 2015)2.4 Indenture Supplement No. 2, dated as of February 3, 2016, among Citicorp International Limited as Trustee, Citicorp International Limitedas Shared Security Agent, Xinyuan Real Estate Co., Ltd. and the entities listed in Schedule I as the Subsidiary Guarantors, to the Indenture,dated as of December 6, 2013, with respect to the registrant's 13% June 2019 Senior Secured Notes (incorporated by reference to Exhibit99.3 to the registrant's Form 6-K (File No. 001-33863) filed with the SEC on February 3, 2016)2.5 Global note representing the 13% June 2019 Senior Secured Notes (US$200,000,000 aggregate principal amount) (incorporated byreference to Exhibit 99.2 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on December 9, 2013)2.6 Indenture, dated as of August 30, 2016, between Xinyuan Real Estate Co., Ltd., the entities listed on Schedule I thereto as SubsidiaryGuarantors, and Citicorp International Limited, as Trustee and Shared Security Agent (incorporated by reference to Exhibit 99.1 to theregistrant’s Form 6-K (File No. 001-33863) filed with the SEC on August 30, 2016)2.7 Global note representing the 8.125% August 2019 Senior Secured Notes (US$300,000,000 aggregate principal amount) (incorporated byreference to Exhibit 99.2 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on August 30, 2016)2.8 Indenture, dated as of February 28, 2017, between Xinyuan Real Estate Co., Ltd., the entities listed on Schedule I thereto as SubsidiaryGuarantors, and Citicorp International Limited, as Trustee and Shared Security Agent (incorporated by reference to Exhibit 99.1 to theregistrant’s Form 6-K (File No. 001-33863) filed with the SEC on February 28, 2017)2.9 Global note representing the 7.75% February 2021 Senior Secured Notes (US$300,000,000 aggregate principal amount) (incorporated byreference to Exhibit 99.2 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on February 28, 2017)4.1 2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the registrant’s F-1 registration statement (File No. 333-147477),as amended, initially filed with the SEC on November 16, 2007)4.2 2007 Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the registrant’s F-1 registration statement (File No. 333-147477), as amended, initially filed with the SEC on November 16, 2007)4.3 2014 Restricted Stock Unit Plan (incorporated by reference to Exhibit 4.3 to the registrant's Annual Report on Form 20-F (File No. 001-33863), filed with the SEC on April 27, 2015)4.4 2015 Stock Option Plan (incorporated by reference to Exhibit 10.1 to the registrant's Form S-8 (File No. 333-205371) filed with the SEC onJune 30, 2015) 170  4.5 Amended and Restated shareholders agreement, dated as of October 31, 2007, among Blue Ridge China Partners, L.P., EI Fund II China,LLC, Yong Zhang, Yuyan Yang, Xinyuan Real Estate, Ltd., Xinyuan Real Estate Co., Ltd. and, to the extent set forth herein, BurnhamSecurities Inc. and Joel B. Gardner (incorporated by reference to Exhibit 10.10 to the registrant’s F-1 registration statement (File No. 333-147477), as amended, initially filed with the SEC on November 16, 2007)4.6 English Summary of the Capital Lease Agreement dated as of October 23, 2012, by and among MinshengHongtai (Tianjin) AviationLeasing Co., Ltd., and Henan Xinyuan Real Estate Co., Ltd. (Original Language: Chinese) (incorporated by reference to Exhibit 4.7 to theregistrant’s Annual Report on Form 20-F (File No. 001-33863), filed with the SEC on April 15, 2013)4.7 English Summary of the Guarantee Agreement dated as of October 23, 2012, by and among MinshengHongtai (Tianjin) Aviation LeasingCo., Ltd., Xinyuan (China) Real Estate , Ltd. and Henan Xinyuan Real Estate Co., Ltd. (Original Language: Chinese) (incorporated byreference to Exhibit 4.8 to the registrant’s Annual Report on Form 20-F for the year ended December 31, 2012 (File No. 001-33863), filedwith the SEC on April 15, 2013)4.8 Securities Purchase Agreement, dated as of August 26, 2013, among Xinyuan Real Estate Co., Ltd , the guarantors named therein and TPGASIA VI SF PTE. LTD. (incorporated by reference to Exhibit 99.2 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC onSeptember 19, 2013)4.9 Registration Rights Agreement, dated as of September 19, 2013, between Xinyuan Real Estate Co., Ltd. and TPG ASIA VI SF PTE. LTD.(incorporated by reference to Exhibit 99.5 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on September 19, 2013)4.10 Letter Agreement, dated September 19, 2013, between Yong Zhang and TPG ASIA VI SF PTE. LTD. (incorporated by reference to Exhibit99.6 to the registrant’s Form 6-K (File No. 001-33863) filed with the SEC on September 19, 2013)8.1* Subsidiaries of Xinyuan Real Estate Co., Ltd.11.1 Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 to the registrant’s F-1 registrationstatement (File No. 333-147477), as amended, initially filed with the SEC on November 16, 2007)12.1* CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2* CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1* CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2* CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200223.1* Consent of Ernst & Young Hua Ming LLP101* The following materials from Xinyuan Real Estate Co., Ltd.’s Annual Report on Form 20-F for the year ended December 31, 2016 formattedin XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statement of Operations, (ii) the CondensedConsolidated Balance Sheet, (iii) the Condensed Consolidated Statement of Stockholders’ Equity, (iv) the Condensed ConsolidatedStatement of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements. * Filed with this Annual Report on Form 20-F 171  SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersignedto sign this Annual Report on its behalf. Xinyuan Real Estate Co., Ltd. By:/s/ Lizhou Zhang Name:Lizhou Zhang Title:Chief Executive Officer Date: March 27, 2017 172  Xinyuan Real Estate Co., Ltd. and Subsidiaries As of December 31, 2015 and 2016 For the years ended December 31, 2014, 2015 and 2016 CONTENTS Pages Report of Independent Registered Public Accounting FirmF-2 Consolidated Balance Sheets as of December 31, 2015 and 2016F-3 Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2015 and 2016F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2015 and 2016F-8 Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2014, 2015 and 2016F-11 Notes to Consolidated Financial StatementsF-12 F-1  Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Xinyuan Real Estate Co., Ltd. We have audited the accompanying consolidated balance sheets of Xinyuan Real Estate Co., Ltd. and subsidiaries (the “Company”) as of December31, 2016 and 2015, and the related consolidated statements of comprehensive income, cash flows and changes in shareholders’ equity for each of the threeyears in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Xinyuan RealEstate Co., Ltd. and subsidiaries at December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the threeyears in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. As discussed in Note 2. Summary of Significant Accounting Policies to the consolidated financial statements, the Company changed its presentationof debt issuance costs as a result of the adoption of FASB Accounting Standard Update No. 2015-03, effective January 1, 2016. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Xinyuan Real EstateCo., Ltd. and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 27, 2017expressed an unqualified opinion thereon. /s/ Ernst & Young Hua Ming LLP Beijing, People’s Republic of China March 27, 2017 F-2  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETSAs of December 31, 2015 and 2016(All amounts stated in US$, except for number of shares data) Notes December 31, 2015 December 31, 2016 US$ US$ ASSETS Current assets Cash and cash equivalents 387,528,092 578,244,378 Restricted cash 363,137,210 328,499,059 Short-term investments 3 1,244,646 39,310,595 Accounts receivable 42,040,320 32,703,517 Other receivables 147,651,234 31,822,187 Deposits for land use rights 46,199,335 153,252,126 Other deposits and prepayments 254,048,288 525,263,384 Advances to suppliers 50,534,250 27,457,335 Real estate properties development completed 4 24,076,559 477,179,252 Real estate properties under development (including real estate properties under development ofthe consolidated variable interest entities (“Consolidated VIEs”) to be used only to settleobligations of the Consolidated VIEs of US$321,477,961 and US$105,056,385 as of December31, 2015 and December 31, 2016, respectively) 4 1,887,321,801 1,719,135,164 Amounts due from related parties 18 58,630,172 17,731,875 Amounts due from employees 18 350,919 620,462 Other current assets 200,891 225,785 Total current assets 3,262,963,717 3,931,445,119 Real estate properties held for lease, net 5 71,132,582 159,873,934 Deposits for land use rights 107,798,448 28,830,907 Property and equipment, net 6 39,323,322 34,090,096 Other long-term investment 7 31,107,552 241,648 Investment in joint ventures 8 6,124,827 7,555,911 Deferred tax assets 15 15,488,557 49,689,528 Other assets 14,944,179 24,718,147 TOTAL ASSETS 3,548,883,184 4,236,445,290 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable and notes payable (including accounts payable and notes payable of theConsolidated VIEs without recourse to the primary beneficiary of US$51,564,352 andUS$2,321,966 as of December 31, 2015 and December 31, 2016, respectively) 471,175,849 524,663,366 F-3  Notes December 31, 2015 December 31,2016 US$ US$ Short-term bank loans and other debt 10 222,226,246 178,576,151 Customer deposits (including customer deposits of the Consolidated VIEs without recourse tothe primary beneficiary of US$11,510,875 and nil as of December 31, 2015 and December 31,2016, respectively) 14 64,451,511 150,545,253 Income tax payable (including income tax payable of the Consolidated VIEs without recourse tothe primary beneficiary of US$9,011,064 and nil as of December 31, 2015 and December 31,2016, respectively) 106,034,490 120,573,148 Deferred tax liabilities 15 57,692,275 79,606,467 Other payables and accrued liabilities (including other payables and accrued liabilities of theConsolidated VIEs without recourse to the primary beneficiary of US$9,884,086 andUS$1,583,399 as of December 31, 2015 and December 31, 2016, respectively) 17 106,126,369 199,661,165 Payroll and welfare payable (including payroll and welfare payable of the Consolidated VIEswithout recourse to the primary beneficiary of US$2,017,480 and nil as of December 31, 2015and December 31, 2016, respectively) 22,966,053 19,521,772 Current portion of long-term bank loans and other debt (including current portion of long-termbank loans and other debt of the Consolidated VIEs without recourse to the primary beneficiaryof US$122,890,230 and nil as of December 31, 2015 and December 31, 2016, respectively) 11, 12 594,834,196 704,695,082 Current maturities of capital lease obligations 13 3,065,612 3,923,394 Mandatorily redeemable non-controlling interests 2(a) 2,309,967 12,613,522 Amounts due to related parties 18 - 66,229,724 Total current liabilities 1,650,882,568 2,060,609,044 Long-term bank loans 11 13,859,800 235,885,009 Deferred tax liabilities 15 13,500,239 13,500,239 Unrecognized tax benefits 15 17,842,283 20,491,988 Other long-term debt (including other long-term debt of the Consolidated VIEs without recourseto the primary beneficiary of US$65,603,055 and nil as of December 31, 2015 and December 31,2016, respectively) 12 897,503,703 974,791,324 Capital lease obligations, net of current maturities 13 18,111,007 15,015,508 Mandatorily redeemable non-controlling interests (including mandatorily redeemable non-controlling interests of the Consolidated VIEs without recourse to the primary beneficiary ofUS$615,991 and nil as of December 31, 2015 and December 31, 2016, respectively) 2(a) 1,231,982 - Total liabilities 2,612,931,582 3,320,293,112 F-4  Notes December 31, 2015 December 31,2016 US$ US$ Commitments and contingencies 22 - - Shareholders’ equity Common shares, US$0.0001 par value: Authorized-500,000,000 shares; shares issued and outstanding-131,426,741 shares as ofDecember 31, 2016 (December 31, 2015: 142,802,936 shares) 19 15,835 16,051 Treasury shares 19 (24,045,440) (53,734,088)Additional paid-in capital 531,233,336 538,414,246 Statutory reserves 80,049,764 95,973,296 Retained earnings 317,765,089 354,273,848 Accumulated other comprehensive income 24 30,951,837 (34,682,888) Total Xinyuan Real Estate Co., Ltd. shareholders’ equity 935,970,421 900,260,465 Non-controlling interest 25 (18,819) 15,891,713 Total equity 935,951,602 916,152,178 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 3,548,883,184 4,236,445,290 The accompanying notes are an integral part of these consolidated financial statements. F-5  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFor the years ended December 31, 2014, 2015 and 2016(All amounts stated in US$, except for number of shares data) Year ended December 31 Notes 2014 2015 2016 US$ US$ US$ Revenue: Real estate sales, net of sales taxes of US$53,185,957 in 2014,US$67,023,202 in 2015 and US$30,105,069 in 2016 892,825,892 1,134,466,776 1,524,968,403 Real estate management services income 21,563,570 21,611,201 30,022,747 Real estate lease income 4,936,186 6,573,263 5,946,051 Other revenue 422,025 1,672,758 687,492 Total revenue 919,747,673 1,164,323,998 1,561,624,693 Costs of revenue: Cost of real estate sales (650,573,170) (866,242,863) (1,174,571,926)Cost of real estate management services (20,439,545) (19,442,859) (24,281,442)Cost of real estate lease income (3,173,215) (3,956,322) (3,682,645)Other costs (3,396,187) (1,691,848) (1,100,367) Total costs of revenue (677,582,117) (891,333,892) (1,203,636,380) Gross profit 242,165,556 272,990,106 357,988,313 Selling and distribution expenses (39,493,575) (52,126,074) (58,213,716)General and administrative expenses (105,622,486) (115,329,011) (120,415,631) Operating income 97,049,495 105,535,021 179,358,966 Interest income 14,577,322 24,503,736 20,916,567 Interest expense (28,200,767) (20,281,416) (29,856,832)Loss on extinguishment of debt 12 (9,848,931) - (12,123,750)Net realized gain on short-term investments 3 3,128,014 603,078 2,505,696 Unrealized gain on short-term investments 3 122,033 49,443 235,334 Exchange gains 706,108 403,286 458,959 Other income 3,212,606 5,945,120 4,540,227 Share of (loss)/gain of equity investees 8 (1,691,897) 2,234,635 (324,612) Income from operations before income taxes 79,053,983 118,992,903 165,710,555 Income taxes 15 (30,557,618) (52,511,318) (86,247,875) Net income 48,496,365 66,481,585 79,462,680 Net loss/(income) attributable to non-controlling interest 25 19,365 522 (6,485,132) Net income attributable to Xinyuan Real Estate Co., Ltd. shareholders 48,515,730 66,482,107 72,977,548 F-6  Year ended December 31 Notes 2014 2015 2016 US$ US$ US$ Earnings per share: Basic 20 0.32 0.47 0.55 Diluted 20 0.29 0.45 0.53 Shares used in computation: Basic 20 151,935,765 142,625,427 133,261,510 Diluted 20 177,118,235 146,487,949 137,653,029 Other comprehensive loss, net of tax of nil Foreign currency translation adjustments (3,354,027) (73,604,028) (66,273,588) Comprehensive income/(loss) 45,142,338 (7,122,443) 13,189,092 Comprehensive loss/(income) attributable to non-controlling interest 19,440 (621) (5,846,269) Comprehensive income/(loss) attributable to Xinyuan Real Estate Co., Ltd.shareholders 45,161,778 (7,123,064) 7,342,823 The accompanying notes are an integral part of these consolidated financial statements. F-7  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2014, 2015 and 2016(All amounts stated in US$, except for number of shares data) Year ended December 31 2014 2015 2016 US$ US$ US$ CASH FLOWS FROM OPERATING ACTIVITIES: Net income 48,496,365 66,481,585 79,462,680 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,998,122 8,751,664 8,688,384 Stock-based compensation expenses 2,736,313 3,774,826 7,828,255 Deferred tax expense/(benefit) 9,437,344 (25,580,665) (17,244,658)Amortization of deferred charges 1,620,695 2,378,767 7,732,038 Share of loss/(income) of equity investees 1,691,897 (2,234,635) 324,612 Exchange gains (706,108) (403,286) (458,959)Changes in unrecognized tax benefit (2,228,532) 4,150,919 2,718,631 Loss on extinguishment of debt (Note 12) 9,848,931 - 12,123,750 Net realized gain on short-term investments (3,128,014) (603,078) (2,505,696)Unrealized gain on short-term investments (122,033) (49,443) (235,334)Proceeds from disposal of trading securities 76,528,665 26,524,907 61,064,916 Purchase of trading securities (79,264,198) (21,363,193) (97,389,871)Bargain purchase gain (Note 9) - - (2,004,507)Effect of remeasurement of equity interest in joint venture (Note 9) - - (2,100,563)Others 166,750 (38,195) (289,020) Changes in operating assets and liabilities: Accounts receivable (6,932,612) (28,650,522) 6,948,740 Real estate properties held for sale 4,338,824 1,185,217 - Real estate properties development completed 8,932,570 (9,357,412) (429,429,125)Real estate properties under development (762,186,342) (23,151,082) 346,724,458 Real estate properties held for lease (11,052,625) (9,197,390) (100,388,128)Advances to suppliers (14,484,990) (24,573,309) 24,935,560 Other receivables (124,825,380) (21,400,932) 114,240,396 Deposits for land use rights (3,411,626) (94,952,534) (129,517,140)Other deposits and prepayments (48,556,579) (114,766,016) (258,358,536)Other current assets (138,513) 656,158 326,254 Amounts due from related parties (124,099,452) 62,518,780 (45,409,421)Amounts due from employees 8,921 (316,946) (292,592)Other assets (4,427,986) (4,328,591) (10,525,572)Accounts payable 157,267,231 144,250,668 39,976,328 Customer deposits 32,027,383 (38,092,541) 101,932,472 Income tax payable (58,549,759) 49,189,884 21,938,554 Other payables and accrued liabilities 842,663 38,869,980 101,375,219 Payroll and welfare payable (1,142,361) 5,791,340 (2,073,425) Net cash used in operating activities (884,314,436) (4,535,075) (159,881,300) F-8  Year ended December 31 2014 2015 2016 US$ US$ US$ CASH FLOWS FROM INVESTING ACTIVITIES: Disposal of properties held for lease and property and equipment 39,011 8,992 559,030 Purchase of property and equipment (5,932,847) (2,477,039) (2,739,578)Proceeds from disposal of available-for-sale securities - 6,284,380 - Purchase of available-for-sale securities - (6,137,451) - Acquisition of subsidiaries, net of cash acquired (Note 9) (9,997,800) - 15,055,431 Acquisition of other long-term investment - (32,681,875) - Acquisition of other equity method investments - - (8,407,244) Net cash (used in)/provided by investing activities (15,891,636) (35,002,993) 4,467,639 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of stock options 1,080,530 48,400 1,454,020 Purchase of shares under Restricted Stock Unit (“RSU”) plan (7,042,725) (3,259,998) (4,003,999)Purchase of treasury shares (Note 19) (17,610,787) (3,349,172) (29,688,648)Dividends to shareholders (15,288,919) (14,751,703) (20,545,257)Capital injection from non-controlling interests - - 4,505,328 (Increase)/decrease in restricted cash (177,026,061) 53,913,283 31,406,042 Amounts due to related parties - - 66,414,412 Repayments of short-term bank loans and current portion of long-term bank loans (63,657,978) (576,757,761) (444,479,915)Proceeds from short-term bank loans and current portion of long-term bank loans 483,446,420 584,233,410 203,622,120 Repayment of long-term bank loans - (38,540,493) (13,553,962)Proceeds from long-term bank loans 52,096,830 8,029,269 201,936,395 Repayment of other short-term debt - (169,096,413) (669,849,132)Proceeds from other short-term debt 162,802,592 8,511,026 819,039,966 Repayment of other long-term debt (122,973,761) (17,854,351) (369,338,675)Proceeds from other long-term debt 175,592,700 485,351,457 612,307,593 Deferred charges (10,649,965) (3,104,812) (10,725,482)Capital lease payments (2,765,286) (3,966,658) (3,721,954)Proceeds from sale and leaseback (Note 13,18) - - 2,861,392 Repayment of mandatorily redeemable non-controlling interests - (4,408,069) (3,463,790)Proceeds from mandatorily redeemable non-controlling interests 6,910,970 1,284,683 13,177,463 Loss on extinguishment of debt (Note 12) (9,848,931) - (12,123,750) Net cash provided by financing activities 455,065,629 306,282,098 375,230,167 NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (445,140,443) 266,744,030 219,816,506 Effect of exchange rate changes on cash and cash equivalents (1,483,929) (19,710,692) (29,100,220)Cash and cash equivalents, at beginning of year 587,119,126 140,494,754 387,528,092 F-9  Year ended December 31 2014 2015 2016 US$ US$ US$ CASH AND CASH EQUIVALENTS, AT END OF YEAR 140,494,754 387,528,092 578,244,378 SUPPLEMENTARY INFORMATION ON CASH FLOWS Incomes taxes paid 94,316,553 55,564,648 122,347,190 Interest paid 141,052,901 187,209,963 181,857,136 NON-CASH ACTIVITIES Non-controlling interest arising from business combination (Note 9, Note 25) - - 5,724,339 The accompanying notes are an integral part of these consolidated financial statements. F-10  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYFor the years ended December 31, 2014, 2015 and 2016(All amounts stated in US$, except for number of shares data) Number of Shares Common Shares Treasury Shares Additional Paid-in Capital Statutory Reserves Retained Earnings Accumulated Other Comprehensive Income / (Loss) (Note 24) Total Xinyuan Real Estate Co., Ltd. shareholders’equity Non-controlling Interest Total US$ US$ US$ US$ US$ US$ US$ US$ US$ BALANCE ATDECEMBER 31,2013 156,012,492 15,828 (3,085,481) 534,936,597 68,547,200 244,310,439 107,910,960 952,635,543 - 952,635,543 Exercise ofshare options 33,000 3 - 39,927 - - - 39,930 - 39,930 Treasury sharerepurchases(Note 19) (9,025,690) - (17,610,787) - - - - (17,610,787) - (17,610,787) Sharesrepurchasedunder RSUplan - - - (7,042,725) - - - (7,042,725) - (7,042,725) Othercomprehensiveloss - - - - - - (3,353,952) (3,353,952) (75) (3,354,027)Stock-basedcompensationexpenses - - - 2,736,313 - - - 2,736,313 - 2,736,313 Net income - - - - - 48,515,730 - 48,515,730 (19,365) 48,496,365 Appropriationto statutoryreserves - - - - 4,282,287 (4,282,287) - - - - Dividends toshareholders - - - - - (15,288,919) - (15,288,919) - (15,288,919) BALANCE ATDECEMBER 31,2014 147,019,802 15,831 (20,696,268) 530,670,112 72,829,487 273,254,963 104,557,008 960,631,133 (19,440) 960,611,693 Exercise ofshare options 40,000 4 - 48,396 - - - 48,400 - 48,400 Treasury sharerepurchases(Note 19) (2,179,902) - (3,349,172) - - - - (3,349,172) - (3,349,172) Sharesrepurchasedunder RSUplan (2,076,964) - - (3,259,998) - - - (3,259,998) - (3,259,998) Othercomprehensiveloss - - - - - - (73,605,171) (73,605,171) 1,143 (73,604,028)Stock-basedcompensationexpenses - - - 3,774,826 - - - 3,774,826 - 3,774,826 Net income - - - - - 66,482,107 - 66,482,107 (522) 66,481,585 Appropriationto statutoryreserves - - - - 7,220,277 (7,220,277) - - - - Dividends toshareholders - - - - - (14,751,704) - (14,751,704) - (14,751,704) BALANCE ATDECEMBER31, 2015 142,802,936 15,835 (24,045,440) 531,233,336 80,049,764 317,765,089 30,951,837 935,970,421 (18,819) 935,951,602 Capitalinjection fromnon-controllinginterests - - - - - - - 10,064,263 10,064,263 Exercise ofshare options 2,160,884 216 - 3,356,654 - - 3,356,870 - 3,356,870 Treasury sharerepurchases(Note 19) (13,198,238) - (29,688,648) - - - (29,688,648) - (29,688,648) Sharesrepurchasedunder RSUplan (1,614,220) - - (4,003,999) - - (4,003,999) - (4,003,999) Othercomprehensiveloss - - - - - (65,634,725) (65,634,725) (638,863) (66,273,588)Stock-basedcompensationexpenses 1,275,379 - - 7,828,255 - - 7,828,255 - 7,828,255 Net income - - - - - 72,977,548 - 72,977,548 6,485,132 79,462,680 Appropriationto statutoryreserves - - - - 15,923,532 (15,923,532) - - - - Dividends toshareholders - - - - - (20,545,257) - (20,545,257) - (20,545,257)BALANCE ATDECEMBER31, 2016 131,426,741 16,051 (53,734,088) 538,414,246 95,973,296 354,273,848 (34,682,888) 900,260,465 15,891,713 916,152,178 The accompanying notes are an integral part of these consolidated financial statements. F-11  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) 1.Background information of business and organization Xinyuan Real Estate Co., Ltd. (the “Company”) and its subsidiaries (collectively the “Group”) are principally engaged in residential real estatedevelopment and the provision of property management services. The Group’s operations are conducted mainly in the People’s Republic of China (“PRC”).In 2012, the Group expanded its business into the U.S. residential real estate market. As of December 31, 2016, subsidiaries of the Company and its consolidated variable interest entities included the following entities: Company Name Registered Place and Date of Incorporation Registered Capital Percentage of Equity Directly Attributable to the Group Principal ActivitiesSubsidiary companies: Xinyuan International PropertyInvestment Co., Ltd. Cayman Islands October 6, 2011 US$ 500,000 100% Investment holding company Xinyuan International (HK) PropertyInvestment Co., Limited Hong Kong October 26, 2011 HK$ 3,000,000 100% Investment holding company XIN Development Group InternationalInc. United States November 10, 2011 US$ 0 100% Investment holding company Xinyuan Real Estate, Ltd. Cayman Islands January 27, 2006 US$ 50,000,000 100% Investment holding company South Glory International Ltd. Hong Kong January 17, 2001 HK$ 10,000 100% Investment holding company Victory Good Development Ltd. Hong Kong January 17, 2001 HK$ 10,000 100% Investment holding company Elite Quest Holdings Ltd. Hong Kong November 19, 2001 HK$ 10,000 100% Investment holding company XIN Irvine, LLC United States July 12, 2012 US$ 50,000 100% Real estate development Vista Sierra, LLC United States May 1, 2012 US$ 0 100% Real estate development XIN Development Management East,LLC United States August 28, 2012 US$ 1,000 100% Property management services XIN NY Holding, LLC United States August 29, 2012 US$ 1,000 100% Investment holding company 421 Kent Development, LLC United States August 29, 2012 US$ 1,000 100% Real estate development Xinyuan Sailing Co., Ltd. Hong Kong June 21, 2013 HK$ 3,000,000 100% Investment holding company AWAN Plasma Sdn Bhd Malaysia April 16, 2007 MYR 33,577,000 100% Real estate development F-12  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Company Name Registered Place and Date of Incorporation Registered Capital Percentage of Equity Directly Attributable to the Group Principal ActivitiesSubsidiary companies: XIN Eco Marine Group Properties SdnBhd Malaysia July 9, 2014 MYR 33,217,000 100% Investment holding company Xinyuan Internet Finance Co., Ltd. Cayman Islands July 7, 2015 US$ 50,000 100% Investment holding company New Dawn International Ltd. Cayman Islands July 7, 2015 US$ 50,000 100% Investment holding company New Legend International Ltd. Cayman Islands July 7, 2015 US$ 50,000 100% Investment holding company New Point International Ltd. Cayman Islands July 7, 2015 US$ 50,000 100% Investment holding company New Grace International Ltd. Cayman Islands July 7, 2015 US$ 50,000 100% Investment holding company China Online Finance ResearchInstitute Limited Hong Kong July 17, 2015 US$ 1,000,000 100% Dormant Genesis Ocean Investments Ltd. Hong Kong August 19, 2015 HK$ 100 100% Investment holding company Honest View Development Ltd. Hong Kong August 19, 2015 HK$ 100 100% Investment holding company Honour Triumph Enterprises Ltd. Hong Kong August 19, 2015 HK$ 100 100% Investment holding company Well Poly Holdings Ltd. Hong Kong August 19, 2015 HK$ 100 100% Investment holding company Zhengzhou Yasheng ConstructionMaterial Co., Ltd. PRC October 22, 2013 US$ 50,000,000 100% Sales of construction materials Zhengzhou Jiasheng Real Estate Co.,Ltd. PRC December 2, 2013 US$ 60,000,000 100% Real estate development Zhengzhou Yusheng LandscapeDesign Co., Ltd. PRC December 25, 2013 US$ 70,000,000 100% Landscaping engineering andmanagement Xinyuan (China) Real Estate, Ltd. PRC April 10, 2006 US$ 307,000,000 100% Investment holding company Henan Xinyuan Real Estate Co., Ltd.(“Henan Xinyuan”) PRC May 19, 1997 RMB 200,000,000 100% Real estate development Qingdao Xinyuan Xiangrui RealEstate Co., Ltd. PRC February 9, 2006 RMB 10,000,000 100% Real estate development F-13  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Company Name Registered Place and Date of Incorporation Registered Capital Percentage of Equity Directly Attributable to the Group Principal ActivitiesSubsidiary companies: Shandong Xinyuan Real Estate Co.,Ltd. PRC June 2, 2006 RMB 300,000,000 100% Real estate development Xinyuan Technology Service Co.,Ltd. (“Xinyuan Service”) PRC December 28, 1998 RMB 50,000,000 94% Property management services Zhengzhou Mingyuan LandscapeEngineering Co., Ltd. PRC February 17, 2004 RMB 2,000,000 100% Landscaping engineering andmanagement Zhengzhou Xinyuan ComputerNetwork Engineering Co., Ltd* PRC May 26, 2004 RMB 2,000,000 100% Installation of intercomsystems Henan Xinyuan Wanzhuo Real EstateCo., Ltd. PRC December 29, 2011 RMB 20,000,000 100% Real estate development Suzhou Xinyuan Real EstateDevelopment Co., Ltd. (“SuzhouXinyuan”) PRC November 24, 2006 RMB 200,000,000 100% Real estate development Anhui Xinyuan Real Estate Co., Ltd. PRC December 7, 2006 RMB 50,000,000 100% Real estate development Kunshan Xinyuan Real Estate Co.,Ltd. PRC January 31, 2008 RMB 200,000,000 100% Real estate development Xinyuan Real Estate (Chengdu) Co.,Ltd. PRC June 12, 2007 RMB 220,000,000 100% Real estate development Xuzhou Xinyuan Real Estate Co., Ltd. PRC November 9, 2009 RMB 200,000,000 100% Real estate development Henan Xinyuan Jiye Real Estate Co.,Ltd. PRC November 15, 2009 RMB 50,000,000 100% Real estate development Beijing Xinyuan Wanzhong RealEstate Co., Ltd. (“BeijingWanzhong”) PRC March 4, 2008 RMB 900,000,000 100% Real estate development Beijing Heju Management ConsultingService Co., Ltd. PRC January 16, 2009 RMB 30,000,000 100% Real estate development Xinyuan Renju (Beijing) AssetManagement Co., Ltd. PRC January 16, 2009 RMB 30,000,000 100% Real estate development Zhengzhou Jiantou Xinyuan RealEstate Co., Ltd. (“Jiantou Xinyuan”) PRC June 13, 2005 RMB 10,000,000 100% Real estate development F-14  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Company Name Registered Place and Date of Incorporation Registered Capital Percentage of Equity Directly Attributable to the Group Principal ActivitiesSubsidiary companies: Beijing Xinyuan Priority Real EstateConsulting Co., Ltd. PRC March 8, 2012 RMB 30,000,000 100% Real estate consulting services Henan Xinyuan Priority CommercialManagement Co., Ltd. PRC August 10, 2012 RMB 2,000,000 100% Leasing management services Suzhou Xinyuan Wanzhuo RealEstate Co., Ltd. PRC September 20, 2012 RMB 200,000,000 100% Real estate development Jiangsu Jiajing Real Estate Co., Ltd. PRC March 28, 2005 RMB 150,000,000 100% Real estate development Beijing XIN Media Co., Ltd. PRC July 10, 2013 RMB 10,000,000 100% Culture and media services Xingyang Xinyuan Real Estate Co.,Ltd. PRC July 25, 2013 RMB 200,000,000 100% Real estate development APEC Construction Investment(Beijing) Co., Ltd. PRC August 1, 2013 RMB 100,000,000 100% Dormant Beijing Xinxiang HuichengDecoration Co., Ltd. PRC October 18, 2013 RMB 10,000,000 100% Property decoration services Jinan Xinyuan Wanzhuo Real EstateCo., Ltd. (“Jinan Wanzhuo”) PRC December 4, 2013 RMB 300,000,000 100% Real estate development Xinrongji (Beijing) Investment Co.,Ltd. PRC December 25, 2013 RMB 100,000,000 100% Dormant Sanya Beida Science and TechnologyPark Industrial Development Co., Ltd. PRC January 10, 2014 RMB 200,000,000 100% Real estate development Chengdu Xinyuan Wanzhuo RealEstate Co., Ltd. PRC February 21, 2014 RMB 50,000,000 100% Real estate development Zhengzhou Hengsheng Real EstateCo., Ltd. PRC June 19, 2014 RMB 20,000,000 100% Real estate development Beijing Xinyuan Xindo Park E-commerce Co., Ltd. PRC August 12, 2014 RMB 202,000,000 100% Electronic commerce Beijing Economy CooperationRuifeng Investment Co., Ltd. PRC September 15, 2014 RMB 20,000,000 90% Real estate development F-15  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Company Name Registered Place and Date of Incorporation Registered Capital Percentage of Equity Directly Attributable to the Group Principal ActivitiesSubsidiary companies: Tianjin Xinyuan Real Estate Co., Ltd. PRC September 17, 2014 RMB 100,000,000 100% Real estate development Xi’an Xinyuan Metropolitan BusinessManagement Co., Ltd. PRC November 25, 2014 RMB 3,000,000 100% Property management services Beijing Xinleju TechnologyDevelopment Co., Ltd. PRC December 24, 2014 RMB 10,000,000 100% Technical service Changsha Xinyuan Wanzhuo RealEstate Co., Ltd. PRC April 3, 2014 RMB 100,000,000 100% Real estate development Shanghai Junxin Real Estate Co., Ltd. PRC January 16, 2014 RMB 5,000,000 100% Real estate development Beijing Yue-Mart Commerce andTrade Co., Ltd. PRC January 5, 2015 RMB 30,000,000 100% Retail store Beijing Xinhe InvestmentDevelopment Co., Ltd. PRC May 5, 2015 RMB 5,000,000 100% Investment holding company Jinan Yue-Mart Commerce and TradeCo., Ltd. PRC December 4, 2015 RMB 3,000,000 100% Retail store Henan Yue-Mart Commerce and TradeCo., Ltd. PRC March 23, 2015 RMB 10,000,000 100% Retail store Henan Xinyuan Guangsheng RealEstate Co., Ltd. PRC July 27, 2015 RMB 40,000,000 100% Real estate development Shanghai Hexinli PropertyManagement Center (Limitedpartnership) (“Shanghai Hexinli”) PRC July 28, 2015 RMB 100,000 78.95% Property management services Shenzhen Xilefu Internet FinancialService Co., Ltd. PRC June 12, 2015 RMB 5,000,000 100% Dormant Shenzhen Xileju TechnologyDevelopment Co., Ltd. PRC June 4, 2015 RMB 5,000,000 100% Intelligent information systemdevelopment Henan Xinyuan Real Estate MarketingCo., Ltd. PRC July 30, 2015 RMB 1,000,000 100% Real estate marketing F-16  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Company Name Registered Place and Date of Incorporation Registered Capital Percentage of Equity Directly Attributable to the Group Principal ActivitiesSubsidiary companies: Shandong Xinyuan Renju Real EstateCo., Ltd. PRC November 19, 2011 RMB 50,000,000 100% Real estate development Shaanxi Zhongmao EconomyDevelopment Co., Ltd. (“ShaanxiZhongmao”) (Note 9) PRC June 22, 1998 RMB 22,500,000 65.98% Real estate development 421 Kent Holding Co, Ltd. United States May 2, 2014 US$ 1,000 100% Investment holding company Hudson 888 Owner LLC United States October 22, 2015 US$ 1,000 100% Real estate development XIN Manhattan Holding LLC United States December 9, 2015 US$ 1,000 100% Investment holding company Hudson 888 Holding LLC United States December 9, 2015 US$ 1,000 100% Investment holding company Shenzhen Xinchuang InvestmentConsulting Co., Ltd. PRC January 20, 2016 RMB 500,000 100% Dormant Shenzhen Keye Investment Co., Ltd. PRC February 26, 2016 RMB 5,000,000 100% Dormant Henan Yueshenghang PropertyService Co., Ltd. PRC April 15, 2016 RMB 5,000,000 100% Property management services Henan Xinyuan Quansheng RealEstate Co., Ltd. (“Henan Quansheng”) PRC January 14, 2015 RMB 40,000,000 100% Real estate development Zhengzhou Shengdao Real Estate Co.,Ltd. (“Zhengzhou Shengdao”) PRC October 14, 2013 RMB 20,000,000 100% Real estate development Henan Xinyuan Shunsheng RealEstate Co., Ltd. (“Henan Shunsheng”) PRC January 13, 2016 RMB 30,000,000 100% Real estate development Hunan Erli Real Estate Co., Ltd.(“Hunan Erli”)** PRC January 4, 2008 RMB 50,000,000 100% Real estate development Ningbo Meishan Bonded PortXinshoulei Investment ManagementCo., Limited PRC July 13, 2016 RMB 5,000,000 100% Dormant F-17  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Company Name Registered Place and Date of Incorporation Registered Capital Percentage of Equity Directly Attributable to the Group Principal ActivitiesSubsidiary companies: XinYuan (China) TechnologyResearch Institute Limited Hong Kong July 8, 2016 HK$ 10,000 100% Dormant XIN Queens Holding LLC United States July 6, 2016 US$ 1,000 100% Investment holding company Queens Theatre Holdco LLC United States July 6, 2016 US$ 1,000 100% Investment holding company Queens Theatre Owner LLC United States July 6, 2016 US$ 1,000 100% Real estate development Xinyuan Future Science &Technology Research (Beijing) Co.,Limited PRC July 8, 2016 RMB 1,000,000 100% Dormant Zhengzhou Xinnan Real Estate Co.,Ltd. (“Zhengzhou Xinnan”) PRC January 21, 2016 RMB 50,000,000 51% Real estate development Xinyan Investment Management Co.,Limited(“Xinrock”) PRC April 8, 2016 RMB 100,000,000 70% Investment Hangzhou Investment Consulting Co.,Limited PRC May 25, 2016 RMB 10,000,000 70% Dormant Hunan Yue-Mart Commerce andTrade Co., Ltd. PRC October 11, 2016 RMB 10,000,000 100% Retail store Xinyuan Tianjin TechnologyDevelopment Co., Limited PRC December 8, 2016 RMB 20,000,000 100% Dormant Henan Xinyuan Industrial Co.,Limited The PRC December 22, 2016 RMB 20,000,000 100% Dormant Chengdu Xinyuan CommercialManagement Co., Limited The PRC December 12, 2016 RMB 10,000,000 100% Dormant VIE: Beijing Ruihao Rongtong Real EstateCo., Ltd. (“Ruihao Rongtong”) (Note7) PRC June 15, 2006 RMB 250,000,000 65% Real estate development *Liquidated on December 20, 2016. **Acquired on August 1, 2016. F-18  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Equity holdings remained unchanged throughout the year ended December 31, 2016 except for Zhengzhou Shengdao, Henan Quansheng, HenanShunsheng, Jinan Wanzhuo, Shaanxi Zhongmao, Xinyuan Service, Hunan Erli, Shanghai Hexinli and Ruihao Rongtong. 2.Summary of significant accounting policies. (a)The Company and basis of presentation and consolidation The Group is principally engaged in residential real estate development and the provision of property management services. The Group’s operationsare conducted mainly in the PRC. In 2012, the Group expanded its business into the U.S. residential real estate market. The accompanying consolidatedfinancial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The consolidated financialstatements include the financial statements of the Company and its subsidiaries. All inter-company transactions and balances between the Company and itssubsidiaries have been eliminated upon consolidation. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which controlis transferred out of the Group. Where there is a loss of control of a subsidiary, the consolidated financial statements include the results for the part of thereporting year during which the Group has control. Jinan Wanzhuo, with registered capital of US$48.8 million (RMB300.0 million), was established by the Company on December 4, 2013, for thepurpose of undertaking a residential property development project in Jinan, Shandong province. On June 24, 2014 (“transaction date”), an unrelated assetmanagement company purchased 5% of the equity interest in Jinan Wanzhuo and lent US$111.7 million (RMB685.0 million) to Jinan Wanzhuo. The loanwas for a two-year term and bore interest at an annual rate of 11.24% until its maturity date of and repayment on June 21, 2016. As of December 31, 2015,Jinan Wanzhuo had one project under construction. Pursuant to the share purchase agreement, the 5% of non-controlling equity interest of Jinan Wanzhuowas to be repurchased by the Company in cash at the earlier of the second anniversary of the transaction date, or the date the Company elected to repurchasethe 5% equity interest of Jinan Wanzhuo. The Company could exercise its right of redemption starting from the first anniversary of the transaction date.Therefore, the non-controlling interest is mandatorily redeemable and has been accounted for as liability in accordance with ASC 480, DistinguishingLiabilities from Equity. On June 21, 2016, the Company repurchased the 5% equity interest of Jinan Wanzhuo from the unrelated asset management companyand Jinan Wanzhuo ceased to be variable interest entity (“VIE”). Zhengzhou Shengdao, with registered capital of US$3.3 million (RMB20.0 million), was established by the Company on October 14, 2013, for thepurpose of undertaking a residential property development project in Zhengzhou, Henan province. On March 5, 2015 (“transaction date”), an unrelated assetmanagement company purchased 20% of the equity interest in Zhengzhou Shengdao and lent US$86.0million (RMB526.0 million) to Zhengzhou Shengdao.The loan is for a two-year term and bears interest at an annual rate of 10.984%. As of December 31, 2016, Zhengzhou Shengdao had two projects underconstruction. Pursuant to the share purchase agreement, the 20% of non-controlling equity interest of Zhengzhou Shengdao was to be repurchased by theCompany in cash at the earlier of the second anniversary of the transaction date, or the date the Company elected to repurchase the 20% equity interest ofZhengzhou Shengdao. The Company could exercise its right of redemption starting from the first anniversary of the transaction date. Therefore, the non-controlling interest is mandatorily redeemable and has been accounted for as liability in accordance with ASC 480, Distinguishing Liabilities from Equity.On September 13, 2016, the Company repurchased the 20% equity interest of Zhengzhou Shengdao from the unrelated asset management company andZhengzhou Shengdao ceased to be VIE. F-19  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Henan Quansheng, with registered capital of US$6.5 million (RMB40.0 million), was established by the Company on January 14, 2015, for thepurpose of undertaking a residential property development project in Zhengzhou, Henan province. On March 23, 2015 (“transaction date”), an unrelatedasset management company purchased 10% of the equity interest in Henan Quansheng and lent US$38.1 million (RMB233.0 million) to Henan Quansheng.The loan is for a two-year term and bears interest at an annual rate of 11%. As of December 31, 2016, Henan Quansheng had one project under construction.Pursuant to the share purchase agreement, the 10% of non-controlling equity interest of Henan Quansheng was to be repurchased by the Company in cash atthe earlier of the second anniversary of the transaction date, or the date the Company elected to repurchase the 10% equity interest of Henan Quansheng. TheCompany could exercise its right of redemption starting from the first anniversary of the transaction date. Therefore, the non-controlling interest ismandatorily redeemable and has been accounted for as liability in accordance with ASC 480, Distinguishing Liabilities from Equity. On August 8, 2016, theCompany repurchased the 10% equity interest of Henan Quansheng from the unrelated asset management company and Henan Quansheng ceased to be VIE. Henan Shunsheng, with registered capital of US$4.5 million (RMB30.0 million), was established by the Company on January 13, 2016, for thepurpose of undertaking a residential property development project in Zhengzhou, Henan province. On March 31, 2016 (“transaction date”), an unrelatedtrustee company purchased 10% of the equity interest in Henan Shunsheng and lent US$43.3 million (RMB287.0 million) to Henan Shunsheng. The loan isfor a two-year term and bears interest at an annual rate of 9%. As of December 31, 2016, Henan Shunsheng had one project under construction. Pursuant to theshare purchase agreement, the 10% of non-controlling equity interest of Henan Shunsheng was to be repurchased by the Company in cash at the earlier of thesecond anniversary date, or the date the Company elected to repurchase the 10% equity interest of Henan Shunsheng. Therefore, the non-controlling interestis mandatorily redeemable and has been accounted for as liability in accordance with ASC 480, Distinguishing Liabilities from Equity. On August 26, 2016,the Company repurchased the 10% equity interest of Henan Shunsheng from the unrelated asset management company and Henan Shunsheng ceased to beVIE. Ruihao Rongtong, with registered capital of US$37.6 million (RMB250.0 million), was invested in by the Company on May 6, 2015 (see Note 7),for the purpose of undertaking a residential property development project in Beijing. On March 1, 2016 (“transaction date”), June 28, 2016 and September18, 2016, an unrelated trustee company, Ping’an trust Co., Ltd. (“Ping’an trust”) purchased 20%, 5% and 10% of the Company’s equity interest in RuihaoRongtong, respectively, and loaned US$124.3 million (RMB862.5 million) in aggregate to the Group (see Note 11). As of December 31, 2016, RuihaoRongtong had one project under construction. Pursuant to the share purchase agreement, the 35% of non-controlling equity interest of Ruihao Rongtong willbe repurchased by the Company in cash at the earlier of the second anniversary date, or the date the Company elects to repurchase the 35% equity interest ofRuihao Rongtong. Therefore, the non-controlling interest is mandatorily redeemable and is accounted for as liability in accordance with ASC 480,Distinguishing Liabilities from Equity. In addition, since the Company planned to repurchase the 35% equity interest of Ruihao Rongtong within the next12 months, the liability is classified as current liability as of December 31, 2016. In accordance with ASC 810, Consolidation, Ruihao Rongtong as of December 31, 2016, and Jinan Wanzhuo, Henan Quansheng and ZhengzhouShengdao as of December 31, 2015 are variable interest entities as they were not established with sufficient equity at risk to finance their activities withoutadditional subordinated financial support. As of December 31, 2015, the Company was considered the primary beneficiary of Jinan Wanzhuo, HenanQuansheng and Zhengzhou Shengdao, as it has the power to direct the activities of Jinan Wanzhuo, Henan Quansheng and Zhengzhou Shengdao that mostsignificantly impact their economic performance and has the obligation to absorb the losses and the right to receive benefits from Jinan Wanzhuo, HenanQuansheng and Zhengzhou Shengdao through its voting interest underlying the 95%, the 90% and the 80% equity interests, respectively, in accordance withPRC Law and the articles of association of Jinan Wanzhuo, Henan Quansheng and Zhengzhou Shengdao, respectively. Based on the above, Jinan Wanzhuo,Henan Quansheng and Zhengzhou Shengdao are consolidated by the Company. As of December 31, 2016, the Company is considered as the primarybeneficiary of Ruihao Rongtong, as it has the power to direct the activities of Ruihao Rongtong that most significantly impact their economic performanceand has the obligation to absorb the losses and the right to receive benefits from Ruihao Rongtong through its voting interest underlying its 65% equityinterest in accordance with PRC Law and the articles of association of Ruihao Rongtong. Based on the above, Ruihao Rongtong is consolidated by theCompany. F-20  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) The carrying amounts and classifications of the assets and liabilities of the VIEs are as follows: December 31, 2015 December 31, 2016 US$ US$ Current assets 412,763,119 143,994,102 Non-current assets 7,469,208 10,184 Total assets 420,232,327 144,004,286 Current liabilities 262,759,976 109,607,206 Non-current liabilities 66,219,046 - Total liabilities 328,979,022 109,607,206 The financial performance and cash flows of the VIEs are as follows: Year ended December 31, 2015 Year ended December 31, 2016 US$ US$ Revenue 168,108,983 - Cost of revenue (125,707,809) - Net profit/(loss) 9,944,795 (1,256,925)Net cash used in operating activities (4,601,835) (111,519,380)Net cash used in investing activities (6,098,628) (8,552)Net cash provided by financing activities 35,532,406 136,924,739 As of December 31, 2016, the current liabilities of the VIEs included amounts due to subsidiaries of the Group amounting to US$105,701,841(2015: US$55,881,889), which was eliminated upon consolidation by the Company. As of December 31, 2016, the land use rights included in real estate properties under development of the VIEs of US$76,002,595 (2015:US$289,057,933) were pledged as collateral for bank loans and other debt. Creditors of the VIEs have no recourse to the general credit of the primarybeneficiary. The VIEs contributed nil (2015: 14.4%) of the Company’s consolidated revenues for the year ended December 31, 2016. (b)Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect theamounts reported in the consolidated financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the consolidatedfinancial statements. Estimates are used for, but not limited to, the selection of the useful lives of property and equipment and capital lease, allowance fordoubtful debt associated with accounts receivable, other receivables, deposit for land use rights, other deposits and prepayments and advances to suppliers,fair values of the purchase price allocation with respect to business combinations, revenue recognition for percentage of completion method, accounting forthe share-based compensation, classification of financial instruments, accounting for mandatorily redeemable non-controlling interests, accounting fordeferred income taxes, impairment of real estate properties under development, real estate properties held for lease and long-term investments, and provisionnecessary for contingent liabilities. Management analyzed the forecasted cash flows for the twelve months from March 27, 2017, which indicates that theGroup will have sufficient liquidity from cash flows generated by operations and existing credit facilities and therefore, there will be sufficient financialresources to settle borrowings and payables that will be due through March 31, 2018. Management believes that the estimates utilized in preparing itsconsolidated financial statements are reasonable and prudent. Actual results could differ from these estimates. F-21  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (c)Fair value of financial instruments Financial instruments include cash and cash equivalents, restricted cash, short-term investments, accounts receivable, other deposits andprepayments, due from employees, due from related party, other receivables, investment in joint ventures and other long-term investment, accounts payable,customer deposits, other payables and accrued liabilities, and borrowings. The carrying amounts of cash and cash equivalents, restricted cash, short-terminvestments, accounts receivable, other deposits and prepayments, due from employees, due from related parties, other receivables, accounts payable,customer deposits, other payables and accrued liabilities, and short-term bank borrowings approximate their fair value due to the short term maturities ofthese instruments. The Group is exposed to credit risk for financial assets and its maximum amount of loss in the event of non-performance by thecounterparty is the recorded amount. The Group’s financial asset and liability arrangements generally do not require collateral, except as disclosed in Note10, Note 11 and Note 12. Trading securities were initially recognized at cost and subsequently remeasured at the end of each reporting period with theadjustment in its fair value recognized in profit and loss. Available-for-sale securities were initially recognized at cost and subsequently remeasured at theend of each reporting period with the adjustment in its fair value recognized in accumulated comprehensive income. Investment in joint ventures and other long-term investments have no quoted market prices and it is not practicable to estimate their fair valuewithout incurring excessive costs. The Group reviews the investments for impairment whenever events or changes in circumstances indicate that the carryingamount may no longer be recoverable. The carrying amounts of the long-term borrowings approximate their fair values because the stated interest rates approximate rates currently offeredby financial institutions for similar debt instruments of comparable credit risk and maturities. Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required orpermitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considersassumptions that market participants would use when pricing the asset or liability. Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use ofunobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of inputthat is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value: Level 1-Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets Level 2-Includes other inputs that are directly or indirectly observable in the market place Level 3-Unobservable inputs which are supported by little or no market activity The carrying values of the Company’s financial instruments approximate their fair values except for the short-term investments. F-22  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) ASC 820 describes three main approaches for measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) costapproach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets orliabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on thevalue indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required toreplace an asset. In accordance with ASC 820, the investment in debt and equity securities, real estate investment trusts (“REITs”) and money market instrumentclassified as trading security is within Level 1 as the Company measures the fair value using quoted trading prices that are published on a regular basis. (d)Foreign currency translation The Group’s financial information is presented in U.S. dollars. The functional currency of the Company is U.S. dollars. The functional currency ofthe Company’s subsidiaries in the PRC is Renminbi (“RMB”), the currency of the PRC. The functional currency of the Company’s subsidiaries in Malaysia isMalaysian Ringgit (“MYR”), the currency of Malaysia. The functional currency of the Company’s subsidiaries other than those in the PRC and Malaysia isU.S. dollars. Transactions by the Company’s subsidiaries in the PRC which are denominated in currencies other than RMB are remeasured into RMB at theexchange rate quoted by the People’s Bank of China (“PBOC”) prevailing at the dates of the transactions. Exchange gains and losses resulting fromtransactions denominated in a currency other than RMB are included in the consolidated statements of comprehensive income as exchange gains. Theconsolidated financial statements of the Company’s subsidiaries have been translated into U.S. dollars in accordance with ASC 830, Foreign CurrencyMatters. The PRC subsidiaries’ financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates as to assetsand liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capitaltransactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in shareholders’equity. December 31, 2014 December 31, 2015 December 31, 2016 Year end RMB: US$ exchange rate 6.1190 6.4936 6.9370 Period average RMB: US$ exchange rate 6.1424 6.2272 6.6401 The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. Norepresentation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation. (e)Cash and cash equivalents The Group considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. TheGroup maintains bank accounts mainly in the PRC, Hong Kong and United States. The vast majority of the PRC bank balances are denominated in RMB.Hong Kong and United States bank balances are denominated in U.S. dollars. Cash includes cash on hand and demand deposits in accounts maintained with various state-owned and private banks within the PRC, Hong Kongand United States. Total cash in banks at December 31, 2016 amounted to US$578,244,378 (December 31, 2015: US$387,528,092), of which the vastmajority of deposits are not covered by insurance. The Group has not experienced any losses in such accounts and management believes it is not exposed toany risks on its cash in bank accounts. F-23  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (f)Restricted cash The Group is required to maintain certain deposits with banks that provide mortgage loans to the Group’s customers in order to purchase residentialunits from the Group. These balances are subject to withdrawal restrictions and totaled US$48,081,446 as of December 31, 2016 (December 31, 2015:US$47,351,169). As of December 31, 2016, the Group held US$153,548,292 (December 31, 2015: US$53,515,247) in its restricted cash accounts,representing funds received from sales proceeds that are subject to withdrawal restrictions. The Group is also required to maintain certain deposits with banksand financial institutions that provide loans to the Group. As of December 31, 2016, the Group also held US$36,471,097 (December 31, 2015:US$232,351,854) in its restricted cash accounts as security for its short-term loans (see Note 10), held US$65,787,805 (December 31, 2015: nil) in itsrestricted cash accounts as security for its long-term loans and current portion of long-term loans (see Note 11), and held US$24,610,419 (December 31, 2015:US$29,918,940) in its restricted cash accounts as security for its other debts (see Note 12). These restricted cash deposits are not covered by insurance. TheGroup has not experienced any losses in such accounts and management believes it is not exposed to any risks on its cash in bank accounts. (g)Real estate properties development completed and under development Real estate properties consist of finished residential unit sites, commercial offices and residential unit sites under development. The Group leases theland for the residential unit sites under land use right leases with various terms from the PRC. Real estate properties development completed, underdevelopment and held for sale are stated at the lower of carrying amounts or fair value less selling costs. Expenditures for land development, including cost of land use rights, deed tax, pre-development costs and engineering costs, are capitalized andallocated to development projects by the specific identification method. Costs are allocated to specific units within a project based on the ratio of the salesvalue of units to the estimated total sales value times the total project costs. Costs of amenities transferred to buyers are allocated as common costs of the project that are allocated to specific units as a component of totalconstruction costs. For amenities retained by the Group, costs in excess of the related fair value of the amenities are also treated as common costs. Results ofoperations of amenities retained by the Group are included in the current operating results. In accordance with ASC 360, Property, Plant and Equipment (“ASC 360”), real estate property development completed, under development andheld for sale are subject to valuation adjustments when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amountof the assets is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expectedto be generated by the assets. When the profitability of a current project deteriorates due to a slowdown in the sales pace, reduction of pricing or some other factor, this indicatesthat there may be a possible future loss on delivery and possible impairment in the recoverability of the assets. Accordingly, the assets of such project aresubsequently reviewed for future losses and impairment by comparing the estimated future undiscounted cash flows for the project to the carrying value ofsuch project. If the estimated future undiscounted cash flows are less than the asset’s carrying value, such deficit will be charged as a future loss and the assetwill then be written down to its estimated fair value. The Group determines estimated fair value primarily by discounting the estimated future cash flows relating to the asset. In estimating the cash flowsfor a project, the Group uses various factors including (a) the expected pace at which the planned number of units will be sold, based on competitive marketconditions, historical trends in sales pace and actual average selling prices of similar product offerings and any other long or short-term economic conditionswhich may impact the market in which the project is located; (b) the estimated net sales prices expected to be attained based on the current market conditionsand historical price trends, as well as any estimated increases in future sales prices based upon the projected rate of unit sales, the estimated time gap betweenpresale and expected delivery, the impact of government policies, the local and regional competitive environment, and certain external factors such as theopening of a subway line, school or factory; and (c) the expected costs to be incurred in the future by the Group, including, but not limited to, constructioncost, construction overhead, sales and marketing, sales taxes and interest costs. F-24  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) The Group’s determination of fair value requires discounting the estimated cash flows at a rate commensurate with the inherent risk associated withthe assets and related estimated cash flows. The discount rate used in determining each project’s fair value depends on the stage of development, location andother specific factors that increase or decrease the risk associated with the estimated cash flows. For the years ended December 31, 2014, 2015 and 2016, the Group did not recognize any impairment for real estate properties completed and underdevelopment. (h)Revenue recognition Real estate sales are reported in accordance with the provisions of ASC 360, Property, Plant and Equipment and ASC 976, Real Estate-Retail Land. Percentage-of-completion method Revenue and profit from the sale of development properties in the PRC is recognized by the percentage-of-completion method on the sale ofindividual units when the following conditions are met: ·Construction is beyond a preliminary stage. ·The buyer is committed to the extent of being unable to require a refund except for non-delivery of the unit. ·Sufficient units have already been sold to assure that the entire property will not revert to rental property. ·Sales prices are collectible. ·Aggregate sales proceeds and costs can be reasonably estimated. If any of the above criteria is not met, proceeds are accounted for as customer deposits until the criteria are met. The Group has, in the past, offered certain homebuyers seller-financing arrangements. All the homebuyers that entered into such arrangements weresubject to credit verification procedures. In addition, accounts receivable balances are unsecured, but monitored on an ongoing basis via the Group’smanagement reporting procedures. The Group provides longer payment terms to particular home buyers after applying strict credit requirements based on theGroup’s credit policy. Under the seller-financed contract arrangements, the buyer pays the purchase price for the residential unit in installment payments overone year. These contracts require a minimum down payment upon the contract execution date, followed by subsequent installment payments and a finalpayment upon delivery of the unit. Since 2013, PRC banks have tightened the distributions of mortgage loans to homebuyers. Therefore, mortgage loans for homebuyers have beensubject to longer processing periods or even denied by the banks. The Group took the position that the processing periods of the contracts with underlyingmortgage loans exceeding one year cannot be recognized as revenue under the percentage of completion method. As a result, the Group reversed contractedsales amounts of US$10.6 million in aggregate related to sales contracts of 79 apartments when determining revenue to be recognized under the percentage ofcompletion method in 2016. F-25  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Under the percentage of completion method, revenues from units sold and related costs are recognized over the course of the construction period,based on the completion progress of a project. In relation to any project, revenue is determined by calculating the ratio of incurred costs, including land userights costs and construction costs, to total estimated costs and applying that ratio to the contracted sales amounts. Cost of sales is recognized by determiningthe ratio of contracted sales during the period to total estimated sales value, and applying that ratio to the incurred costs. Current period amounts arecalculated based on the difference between the life-to-date project totals and the previously recognized amounts. The effect of changes to total estimated contract cost or revenues, if any, are recognized in the period in which they are determined. Revenuerecognized to date in excess of amounts received from customers is classified as current assets under accounts receivable. Amounts received from customersin excess of revenue recognized to date are classified as current liabilities under customer deposits. As of December 31, 2015 and December 31, 2016, thegross amounts received from customers in excess of revenues recognized were US$280.2 million and US$605.6 million, respectively. Any losses occurred or forecast to occur on real estate transactions are recognized in the period in which the loss is first anticipated. Full accrual method Revenue from sales of development properties in the United States where the construction period, the period from the construction permit award dateto the unit delivery date is expected to be 12 months or less, or the construction period is expected to be longer than 12 months and sales prices are notcertain to be collected is recognized by the full accrual method when the sale is consummated and the unit has been delivered. Revenue from the sale ofproperties held for sale is recognized by the full accrual method at the time of the closing of an individual unit sale. This occurs when title to the property istransferred to the buyer. A sale is not considered consummated until (a) the parties are bound by the terms of a contract, (b) all consideration has beenexchanged, (c) any permanent financing of which the seller is responsible has been arranged, (d) all conditions precedent to closing have been performed, (e)the seller does not have substantial continuing involvement with the property, and (f) the usual risks and rewards of ownership have been transferred to thebuyer. In addition, the buyer’s initial and continuing investment must be adequate to demonstrate a commitment to pay for the property, and the buyer’sreceivable, if any, must not be subject to future subordination. Sales transactions not meeting all the conditions of the full accrual method are accounted forusing the deposit method in which all costs are capitalized as incurred, and payments received from the buyer are recorded as a deposit liability. Cost of salesis recognized by determining the ratio of the area of the relevant units completed and sold to the estimated total project area, and applying that ratio to theestimated total project costs. For the year ended December 31, 2014, revenue under the full accrual method was recognized in the amount of US$4.9 million for the sales of 7 of15 finished condominium units located in Irvine, California. For the year ended December 31, 2015, revenue was recognized in the amount of US$0.8 millionfor the resale of the remaining parcels of the Northern Nevada Land Portfolio and US$0.8 million for the sales of the remaining 1 finished condominium unitlocated in Irvine, California. For the year ended December 31, 2016, revenue was recognized in the amount of US$152.0 million for the sales of 106 units ofOosten project, located in New York. F-26  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Real estate management services income is recognized ratably as services are provided over the term of the property management agreements.Employee salaries, and maintenance charges are recorded as the cost of real estate management services income. Real estate lease income is generally recognized on a straight-line basis over the terms of the tenancy agreements. Depreciation cost andmaintenance cost of the property are recorded as the cost of real estate lease income. Other revenue includes services ancillary to the Group’s real estate projects, including landscaping and computer network engineering. Landscapingand computer network engineering income is recognized when services are provided. (i)Accounts receivable Accounts receivable consists of balances due from customers for the sale of residential units in the PRC and United States. These balances areunsecured, bear no interest and are due within a year from the date of the sale. Accounts receivable are reviewed periodically as to whether their carrying value has become impaired. The Group considers the assets to beimpaired if the collectability of the balances become doubtful. As of December 31, 2015 and 2016, there was no allowance for doubtful debts. (j)Other receivables Other receivables consist of various cash advances to unrelated companies and individuals with which the Group has business relationships. Other receivables are reviewed periodically as to whether their carrying value has become impaired. The Group considers the assets to be impaired ifthe collectability of the balances becomes doubtful. As of December 31, 2015 and 2016, there was no allowance for doubtful debts. (k)Deposits for land use rights Deposits for land use rights consist of upfront cash payments made to local land bureaus to secure land use rights under executed short-term or long-term land framework cooperation agreements or land use rights agreements. Deposits for land use rights are reviewed periodically as to whether their carrying value has become impaired. The Group considers the assets to beimpaired if the collectability of the balances become doubtful. There were no impairment losses for any periods presented. (l)Other deposits and prepayments Other deposits and prepayments mainly consist of upfront cash payments made to third parties related to the direct negotiation model in acquiringland parcels. Other deposits and prepayments are reviewed periodically as to whether their carrying value has become impaired. The Group considers the assets tobe impaired if the collectability of the balances become doubtful. There were no impairment losses for any periods presented. (m)Advances to suppliers Advances to suppliers consist of balances paid to contractors and vendors for services and materials that have not been provided or received andgenerally relate to the development and construction of residential units in the PRC. Advances to suppliers are reviewed periodically to determine whethertheir carrying value has become impaired. The Group considers the assets to be impaired if it is doubtful that the services and materials can be provided. As ofDecember 31, 2015 and 2016, there was no allowance provided. F-27  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (n)Customer deposits Customer deposits consist of sales proceeds received from customers from the sale of residential units in the PRC. In the PRC, customers willgenerally obtain financing for the purchase of their residential unit prior to the completion of the project. The lending institution will provide the funding tothe Group upon the completion of the financing rather than the completion of the project. The Group receives these funds and recognizes them as a customerdeposit current liability until the revenue can be recognized. (o)Notes payable and other payables Notes payable represents short-term bank acceptance notes issued by financial institutions that entitle the holder to receive the stated amount fromthe financial institutions at the maturity date of the notes. The Group has utilized notes payable to settle amounts owed to suppliers and contractors. Thenotes payable is non-interest bearing and is normally settled within six months. Notes payable was US$46,986,399 and US$ 38,652,794 as of December 31,2015 and 2016, respectively. Other payables consist of balances for non-construction costs with unrelated companies and individuals with which the Group has businessrelationships. (p)Real estate properties held for lease, net Real estate properties held for lease are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method overthe estimated useful lives of the assets. Estimated useful lives of the real estate properties held for lease are 20-60 years. Maintenance, repairs and minor renewals are charged directly to expenses as incurred. Major additions and improvements to the real estateproperties held for lease are capitalized. In accordance with ASC 360, Property, Plant and Equipment, real estate properties held for lease is subject to valuation adjustments when thecarrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. Thecarrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets. For the years ended December 31, 2014, 2015 and 2016, the Group did not recognize any impairment for real estate properties held for lease. (q)Property and equipment, net Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over theestimated useful lives of the assets. Estimated useful lives of the assets are as follows: Corporate aircraft 15 years Vehicles 5 years Furniture and fixtures 5 years Maintenance, repairs and minor renewals are charged directly to expense as incurred unless such expenditures extend the useful life or represent abetterment, in which case they are capitalized. F-28  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (r)Long-term investments The Group accounts for long-term investments as equity method investment and cost method investments as follows: Where the Group has significant influence over the investee, the Group applies the equity method of accounting in accordance with ASC subtopic323-10-20, Investments-Equity Method and Joint Ventures (“ASC 323-10-20”). The reporting dates and accounting policies of the equity investee are thesame as the Group. The investment in the equity investee is stated at cost, including the Group’s share of the equity investee’s net gain or loss, less anyimpairment in value. The Group recognizes in its consolidated statement of comprehensive income its share of the net income of the equity investees. In accordance with ASC subtopic 325-20, Investments-Other: Cost Method Investments (“ASC 325-20”), for investments in an investee over whichthe Company does not have significant influence and which do not have readily determinable fair value, the Company carries the investment at cost and onlyadjusts for other-than-temporary declines in fair value and distributions of earnings that exceed the Company’s share of earnings since its investment.Management regularly evaluates the impairment of the cost method investments based on performance and financial position of the investee as well as otherevidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financing, projected and historicalfinancial performance, cash flow forecasts and financing needs. An impairment loss is recognized in earnings equal to the excess of the investment’s cost overits fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value would then become the new cost basis ofinvestment. Cost method accounting is also applied to investments that are not considered as “in-substance” common stock investments, and do not havereadily determinable fair values. As of December 31, 2015 and 2016, the Group has a 1.85% investment in Zhengzhou Lianhe Real Estate Co., Ltd. The Group does not exercisesignificant influence over Zhengzhou Lianhe Real Estate Co., Ltd. and therefore, the Group accounts for the investment under the cost method. Investmentincome is recognized by the Group when the investee declares a dividend and the Group believes it is collectible. There was nil dividend received for the years ended December 31, 2014, 2015 and 2016. No impairment provision was provided for the Company’s long-term investments for any of the periods presented. (s)Capitalized interest The Group capitalizes interest as a component of building construction costs in accordance with ASC 835, Interest (“ASC 835”). As a result of the total interest costs capitalized during the period, the interest expense for the years ended December 31, 2014, 2015 and 2016, wasas follows: 2014 2015 2016 US$ US$ US$ Amortization of issuance cost related to other long term debt 3,744,695 6,554,767 9,371,957 Interest expense related to capital leases 2,896,977 2,617,000 2,055,995 Interest on borrowings 128,014,504 171,035,655 196,243,562 Total interest costs 134,656,176 180,207,422 207,671,514 Total interest costs capitalized (106,455,409) (159,926,006) (177,814,682) Interest expense, net 28,200,767 20,281,416 29,856,832 F-29  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (t)Retirement benefits Regulations in the PRC require the Group to contribute to a defined contribution retirement plan for all permanent employees. Pursuant to themandatory requirement from the local authority in the PRC, the retirement pension insurance, unemployment insurance, health insurance and housing fundwere established for the employees during the term they are employed. For the years ended December 31, 2014, 2015 and 2016, the level of contribution tothese funds for each employee was determined at 43% of their average salary determined by the Social Welfare Bureau. For the year ended December 31,2016, the Group recorded expense in the amount of US$11,023,291 (2014: US$7,328,091; 2015: US$10,664,576). Employee benefits for the remainingwholly owned subsidiaries were immaterial. (u)Distribution of earnings and reserve fund The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions from its subsidiaries. The earnings reflectedin the consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of theCompany’s subsidiaries. In accordance with the PRC Company Law, the PRC subsidiaries are required to transfer 10% of their profit after tax, as determinedin accordance with PRC accounting standards and regulations, to the statutory surplus reserve (the “SSR”) until such reserve reaches 50% of the registeredcapital of the subsidiaries. Subject to certain restrictions set out in the PRC Company Law, the SSR may be distributed to stockholders in the form of sharebonus issues to increase share capital, provided that the remaining balance after the capitalization is not less than 25% of the registered capital. (v)Income taxes The Group accounts for income tax using the balance sheet method. Deferred taxes are provided for the net tax effects of temporary differencesbetween the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as unutilized netoperating losses. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Group is able torealize their benefits, or that future utilization is uncertain. The Group assesses its need for valuation allowances by tax reporting unit by jurisdiction. Interest and penalties arising from underpayment of income taxes is recognized according to the relevant tax law. The amount of interest expense tobe recognized is computed by applying the applicable statutory rate of interest to the difference between the tax position recognized and the amountpreviously taken or expected to be taken in a tax return. Interest recognized in accordance with ASC 740-10, Income Tax (“ASC 740-10”) is classified in theconsolidated financial statements as interest expense, while penalties recognized in accordance with this interpretation are classified in the consolidatedfinancial statements as other expenses. In accordance with the provisions of ASC 740-10, the Group recognizes in its consolidated financial statements the impact of a tax position if a taxreturn’s position or future tax position is “more likely than not” to prevail (defined as a likelihood of more than fifty percent of being sustained upon audit,based on the technical merits of the tax position). Tax positions that meet the “more likely than not” threshold are measured (using a probability weightedapproach) at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. The Group’s estimatedliability for unrecognized tax benefits is periodically assessed for adequacy and may be affected by changing interpretations of laws, rulings by taxauthorities, certain changes and/or developments with respect to audits, and expiration of the statute of limitations. The outcome for a particular audit cannotbe determined with certainty prior to the conclusion of the audit and, in some cases, appeal or litigation process. The actual benefits ultimately realized maydiffer from the Group’s estimates. As each audit is concluded, adjustments, if any, are appropriately recorded in the Group’s consolidated financial statements.Additionally, in future periods, changes in facts, circumstances, and new information may require the Group to adjust the recognition and measurementestimates with regards to individual tax positions. Changes in recognition and measurement estimates are recognized in the period in which the changesoccur. F-30  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (w)Land Appreciation Tax (“LAT”) In accordance with the relevant taxation laws for real estate companies of the provinces in which the subsidiaries operate in the PRC, the local taxauthorities levy LAT based on progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties lessdeductible expenditures, including borrowing costs and all property development expenditures. LAT is prepaid based on a fixed percentage (varying bylocal tax jurisdiction) of customer deposits and is expensed when the related revenue is recognized, as explained in Note 2(h). (x)Comprehensive income Comprehensive income is defined as the changes in equity of the Group during a period from transactions and other events and circumstancesexcluding transactions resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220, Comprehensive Income,requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in afinancial statement that is displayed with the same prominence as other financial statements. For each of the periods presented, the Group’s comprehensiveincome includes net income and foreign currency translation adjustments and is presented in the consolidated statement of comprehensive income. (y)Advertising and promotion expenses Advertising and promotion costs are expensed as incurred, or the first time the activity takes place, in accordance with ASC 720-35, AdvertisingCosts. For the year ended December 31, 2016, the Group recorded advertising and promotion expenses of US$39,718,114 (2014: US$32,137,186; 2015:US$35,350,419). (z)Leases In accordance with ASC 840, Leases, leases are classified at the inception date as either a capital lease or an operating lease. For the lessee, a lease isa capital lease if any of the following conditions exist: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchaseoption, c) the lease term is at least 75% of the property’s estimated remaining economic life or d) the present value of the minimum lease payments at thebeginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if therewas an acquisition of an asset and an incurrence of an obligation at the inception of the lease. Capital leases are measured at the commencement of the lease at an amount equal to the present value at the beginning of the lease term of minimumlease payments during the lease term excluding that portion of the payments representing executory costs (such as insurance, maintenance, and taxes to bepaid by the lessor) including any profit thereon. During the lease term, each minimum lease payment is allocated between a reduction of the obligation andinterest expense to produce a constant periodic rate of interest on the remaining balance of the obligation (the interest method). A leased asset is amortized ina manner consistent with the Group’s normal depreciation policy for owned assets (see Note 6). All other leases are accounted for as operating leases wherein rental payments are expensed as incurred. Certain lease arrangements containescalation clauses. For the year ended December 31, 2016, the Group recorded operating lease expenses of US$6,626,414 (2014: US$6,031,670; 2015: US$7,613,448). F-31  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (aa)Property warranty The Company and its subsidiaries provide customers with warranties which cover major defects of building structure and certain fittings andfacilities of properties sold as stipulated in the relevant sales contracts. The warranty period varies from two months to three years, depending on differentproperty components the warranty covers. The Group regularly estimates potential costs for materials and labor with regards to warranty-type claims expected to be incurred subsequent to thedelivery of a property. Reserves are determined based on historical data and trends with respect to similar property types and geographical areas. The Groupregularly monitors the warranty reserve and makes adjustments to its pre-existing warranties, if any, in order to reflect changes in trends and historical data asinformation becomes available. The Group may seek recourse against its contractors or any related third parties if it can be demonstrated they are at fault. Inaddition, the Group withholds up to 5% of the contract cost from sub-contractors for periods of 2 to 5 years. These amounts are included in current liabilities,and are only paid to the extent that there has been no warranty claim against the Group relating to the work performed or materials supplied by thesubcontractors. For the years ended December 31, 2014, 2015 and 2016, the Group had not recognized any warranty liability or incurred any warranty costsin excess of the amount retained from subcontractors. (ab)Earnings per share Earnings per share are calculated in accordance with ASC 260, Earnings per Share. Basic earnings per share is computed by dividing net incomeattributable to holders of common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per commonshare reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares.Common shares issuable upon the conversion of the convertible note, were included in diluted earnings per common share computation for the period duringwhich they were outstanding using the if-converted method. Common share equivalents consists of common shares issuable upon the exercise of the shareoptions and vesting of restricted shares units using treasury stock method. Common equivalents shares are excluded from the computation of diluted earningsper share if their effects would be anti-dilutive. The non-vested options granted with performance conditions are excluded in the computation of diluted EPSunless the options are dilutive and unless their conditions (a) have been satisfied at the reporting date or (b) would have been satisfied if the reporting datewas the end of the contingency period. (ac)Treasury Shares The Company accounted for shares repurchased as treasury shares at cost in accordance to ASC Subtopic 505-30, Treasury Shares. When theCompany decides to retire the treasury shares, the difference between the original issuance price and the repurchase price may be allocated betweenadditional paid-in capital and retained earnings. On July 12, 2013, the Board of Directors unanimously authorized management to repurchase up to US$60 million of the Company’s shares from theapproval date to July 5, 2015. On December 28, 2015, the Board of Directors unanimously authorized management to repurchase up to US$40 million of theCompany’s shares from the approval date to the end of 2017. The Board of Directors also agreed to review the Company’s share repurchase programperiodically and to adjust the amount authorized for repurchase as necessary. As of December 31, 2016, the Company had a balance of 26,668,726 (2015:13,470,488) treasury shares amounting to US$53,734,088 (2015: US$24,045,440). F-32  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (ad)Senior Secured Notes On May 3, 2013, the Company issued notes with an aggregate principal amount of US$200,000,000 due on May 3, 2018 (the “May 2018 SeniorSecured Notes”) at a coupon rate of 13.25% per annum payable semi-annually. Interest is payable on May 3 and November 3 of each year, commencingNovember 3, 2013. Given that the May 2018 Senior Secured Notes is debt in its legal form and is not a derivative in its entirety, it has been classified as otherlong-term debt. The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from the May 2018 Senior SecuredNotes under the requirements of ASC 815, Derivatives and Hedging (“ASC 815”). The embedded redemption options and repurchase features did not qualifyfor derivative accounting because the embedded derivatives were considered clearly and closely related to the characteristics of the May 2018 SeniorSecured Notes. The May 2018 Senior Secured Notes were issued at par. On December 6, 2013, the Company issued notes with an aggregate principal amount of US$200,000,000 due on June 6, 2019 (the “June 2019Senior Secured Notes”) at a coupon rate of 13% per annum payable semi-annually. Interest is payable on June 6 and December 6 of each year, commencingJune 6, 2014. Given that the June 2019 Senior Secured Notes is debt in its legal form and is not a derivative in its entirety, it has been classified as other long-term debt. The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from the June 2019 Senior Secured Notesunder the requirements of ASC 815. The embedded redemption options and repurchase features did not qualify for derivative accounting because theembedded derivatives were considered clearly and closely related to the characteristics of the June 2019 Senior Secured Notes. The June 2019 Senior SecuredNotes were issued at par. On February 13, 2015, through a consent solicitation to the holders of the May 2018 Senior Secured Notes and the June 2019 Senior Secured Notes,the Company amended the indentures governing the May 2018 Senior Secured Notes and the June 2019 Senior Secured Notes (the “May 2018 Indenture”,and the “June 2019 Indenture”, respectively, and each, an "Indenture") to provide it with additional flexibility in pursuing new business opportunities andnew sources of capital. The amendments to the Indentures include changes to: (i) incur additional Indebtedness (as defined in the Indentures) in furtheranceof the Company's business plans; (ii) make certain Restricted Payments (as defined in the Indentures) and Permitted Investments (as defined in theIndentures); and (iii) make certain deemed Investments (as defined in the Indentures) without having to satisfy the Fixed Charge Coverage Ratio (as definedin the Indentures) requirement. The amendments also amend (i) the “Limitation on Issuances of Guarantees by Restricted Subsidiaries” covenant in theIndentures to the extent that the Company believes necessary as a result of the amendments to other covenants and (ii) the “Limitation on Asset Sales”covenant in the Indentures to remove the Fixed Charge Coverage Ratio requirement for Asset Dispositions (as defined in the Indentures). The amendmentsalso amended certain related definitions in the Indentures. The Company accounted for the amendments, which did not result in a debt extinguishmentpursuant to ASC 470-50, Debt – Modifications and Exchanges (“ASC 470-50”). On February 3, 2016, through a consent solicitation to the holders of the May 2018 Senior Secured Notes and the June 2019 Secured Notes, theCompany amended the Indentures to provide it with additional flexibility in pursuing new business opportunities and new sources of capital. Theamendments to the Indentures include: (i) amending the provisions relating to future Subsidiary Guarantors, JV Subsidiary Guarantors and pledgedsubsidiary Capital Stock (each, as defined in the Indentures); (ii) amending the “Limitation on Indebtedness and Preferred Stock” covenant; (iii) amendingthe “Limitation on Transactions with Shareholders and Affiliates” covenant and the provisions relating to “Designation of Restricted Subsidiaries andUnrestricted Subsidiaries”; (iv) amending the definition of “Permitted Investment” and the “Limitation on Restricted Payments” covenant; and (v) removingthe “Limitation on the Company’s Business Activities” covenant and amend the related definitions and provisions. The amendments also clarify certainother provisions in the Indentures. The Company accounted for the amendments, which did not result in a debt extinguishment pursuant to ASC 470-50,Debt – Modifications and Exchanges. F-33  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) On August 30, 2016, the Company issued notes with an aggregate principal amount of US$300,000,000 due on August 30, 2019 (the “August 2019Senior Secured Notes”) at a coupon rate of 8.125% per annum payable semi-annually. Interest is payable on February 28 and August 30 of each year,commencing February 28, 2017. The August 2019 Senior Secured Notes have a three year term maturing on August 30, 2019. Given that the August 2019Senior Secured Notes is debt in its legal form and is not a derivative in its entirety, it has been classified as other long-term debt. The Company has evaluatedand determined that there was no embedded derivative requiring bifurcation from the August 2019 Senior Secured Notes under the requirements of ASC 815.The embedded redemption options and repurchase features did not qualify for derivative accounting because the embedded derivatives were consideredclearly and closely related to the characteristics of the August 2019 Senior Secured Notes. The August 2019 Senior Secured Notes were issued at par. Onshore corporate bonds In 2015 and 2016, Xinyuan (China) Real Estate, Ltd. issued series of onshore corporate bonds. See Note 12 for a discussion of the onshore corporatebonds. Given that each onshore corporate bond (see Note 12 for information regarding our onshore corporate bonds) individually is debt in its legal form andis not a derivative in its entirety, it has been classified as other long-term debt. The Company has evaluated and determined that there was no embeddedderivative requiring bifurcation from these onshore corporate bonds under the requirements of ASC 815 “Derivatives and Hedging”. The onshore corporatebonds were issued at par. (ae)Change of accounting policy On January 1, 2016, the Company adopted Accounting Standards Update (“ASU”) No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30):Simplifying the Presentation of Debt Issuance Costs using the required full retrospective method and, as a result, the Company reclassified deferred debtissuance costs amounting to US$12,504,255 previously reported within deferred charges into other long-term debt to reduce the carrying amount of debtliability as of December 31, 2015. (af)Short-term investments All highly liquid investments with original maturities of greater than three months, but less than 12 months, are classified as short-term investments.Investments that are expected to be realized in cash during the next 12 months are also included in short-term investments. The Company accounts for itsinvestments in debt and equity securities in accordance with ASC 320-10, Investments-Debt and Equity Securities: Overall (“ASC 320-10”). The Companyclassifies the investments in debt and equity securities as “held-to-maturity”, “trading” or “available-for-sale”, whose classification determines the respectiveaccounting methods stipulated by ASC 320-10. Dividend and interest income, including amortization of the premium and discount arising at acquisition, forall categories of investments in securities are included in earnings. Any realized gains or losses on the sale of the short-term investments are determined on aspecific identification method, and such gains and losses are reflected in earnings during the period in which such gains or losses are realized. The securities that the Company has positive intent and ability to hold to maturity are classified as held-to-maturity securities and stated atamortized cost. For individual securities classified as held-to-maturity securities, the Company evaluates whether a decline in fair value below the amortizedcost basis is other-than-temporary in accordance with the Company’s policy and ASC 320-10. When the Company intends to sell an impaired debt security orit is more likely than not that it will be required to sell prior to recovery of its amortized cost basis, an other-than-temporary impairment is deemed to haveoccurred. In these instances, the other-than-temporary impairment loss is recognized in earnings equal to the entire excess of the debt security’s amortizedcost basis over its fair value at the balance sheet date of the reporting period for which the assessment is made. When the Company does not intend to sell animpaired debt security and it is more-likely-than-not that it will not be required to sell prior to recovery of its amortized cost basis, the Company mustdetermine whether or not it will recover its amortized cost basis. If the Company concludes that it will not, an other-than-temporary impairment exists andthat portion of the credit loss is recognized in earnings, while the portion of loss related to all other factors is recognized in other comprehensive income. F-34  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) The securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Realized gainsand losses, and unrealized gains and losses for trading securities are included in earnings. Investments not classified as trading or as held-to-maturity are classified as available-for-sale securities. Available-for-sale securities are reported atfair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Realized gains or losses are charged to earningsduring the period in which the gain or loss is realized. An impairment loss on available-for-sale securities would be recognized in the consolidated statementsof comprehensive income when the decline in value is determined to be other-than-temporary. (ag)Assets acquisition and business combinations Pursuant to ASC 805, Business Combinations (“ASC 805”), the Company determines whether a transaction or other event is a business combinationby applying the definition below, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired are not abusiness, the reporting entity shall account for the transaction or other event as an assets acquisition. A business consists of inputs and processes applied tothose inputs that have the ability to create outputs. Although businesses usually have outputs, outputs are not required for an integrated set to qualify as abusiness. The three elements of a business are defined as follows: a. Input. Any economic resource that creates, or has the ability to create, outputs when one or more processes are applied to it. b. Process. Any system, standard, protocol, convention, or rule that when applied to an input or inputs, creates or has the ability to create outputs. c. Output. The result of inputs and processes applied to those inputs that provide or have the ability to provide a return in the form of dividends,lower costs, or other economic benefits directly to investors or other owners, members, or participants. The Company accounted for its acquisitions of Shandong Renju, Hunan Erli and Ruihao Rongtong on March 2, 2015, August 1, 2016 and August 4,2016 as assets acquisition, respectively, since the acquired entities had no processes in place to apply to inputs to have the ability to create outputs. (ah)Effect of change in estimate Revisions in estimated gross profit margins related to percentage of completion revenues are made in the period in which circumstances requiringthe revisions become known. During the year ended December 31, 2016 real estate development projects (Chengdu Thriving Family, Chengdu XinyuanSplendid I, Zhengzhou Xin City, Henan Thriving Family, Suzhou Xin City, Suzhou Lake Royal Palace, Jinan Royal Palace, Kunshan Royal Palace, Xi’anMetropolitan, Shanghai Royal Palace, Zhengzhou Xindo Park, Jinan Xin Central, Henan Xin Central I, Zhengzhou Fancy City I, Tianjin Spring Royal Palace), which recognized gross profits in 2015, had changes in their estimated gross profit margins. As of December 31, 2016, each of these projects has apercentage of completion at 36.5% or more. As the unit sales and selling prices were on an upward trend during the year ended December 31, 2016, the Grouprevised upwards its prior estimates related to selling prices and total estimated sales values in conjunction with the change in total estimated costs, which ledto a decrease of the percentage sold and thus a decrease in the recognized costs. As a result of the changes in estimate above, gross profit, net income andbasic and diluted earnings per share increased by US$61.2 million (2014: US$10.8 million, 2015: US$52.1 million), US$45.9 million (2014: US$8.1 million,2015: US$39.1 million), US$0.34 per share (2014: US$0.05 per share, 2015: US$0.27 per share), US$0.33 per share (2014: US$0.05 per share, 2015: US$0.27per share), respectively, for the year ended December 31, 2016. F-35  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (ai)Share-based compensation The Group has adopted ASC 718, Compensation-Stock Compensation, which requires that share-based payment transactions with employees, suchas restricted shares or stock options, be measured based on the grant-date fair value of the equity instrument issued and the Company has elected to recognizecompensation expense using the straight-line method for all restricted shares and stock options granted with service conditions that have a graded vestingschedule. The Company has a policy of using authorized shares in the existing pool to satisfy any future exercise of share options and shares repurchasedheld by a third party trustee to satisfy the RSUs granted under the Company’s 2014 Restricted Stock Unit plan. For options granted with performance conditions, share-based compensation expense is recognized based on the probable outcome of theperformance condition. A performance condition is not taken into consideration in determining fair value of the non-vested shares granted. (aj)Segment Reporting In accordance with ASC 280, Segment Reporting, segment reporting is determined based on how the Group’s chief operating decision maker reviewsoperating results to make decisions about allocating resources and assessing performance for the Group. According to the management approach, the Groupoperates in geographical segments. Therefore, each of its individual property developments is a discrete operating segment. The Group has aggregated itssegments on a provincial basis as property development projects undertaken within a province have similar expected economic characteristics, type ofproperties offering, customers and market and regulatory environment (see Note 21). (ak)Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, (“ASU 2014-09”).ASU 2014-09 provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes mostcurrent revenue recognition guidance, including industry-specific guidance. ASU 2014-09 will require an entity to recognize revenue when it transferspromised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods orservices. This update creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include (i)identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv)allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. In July2015, the FASB deferred the effective date by one year and permitted early adoption of the standard, but not before the original effective date; therefore, ASU2014-09 will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. The Company has the option to applythe provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of applying thisASU recognized at the date of initial application. F-36  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Subsequent to the issuance of ASU 2014-09, the FASB has issued several ASUs such as ASU 2016-08, Revenue from Contracts with Customers(Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10, Revenue from Contracts with Customers (Topic606): Identifying Performance Obligations and Licensing, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-ScopeImprovements and Practical Expedients among others. These ASUs do not change the core principle of the guidance stated in ASU 2014-09, instead theseamendments are intended to clarify and improve operability of certain topics included within the revenue standard. These ASUs will have the same effectivedate and transition requirements as ASU 2014-09. The Company is currently assessing how the adoption of ASU 2014-09 and these ASUs will impact theconsolidated financial statements and plan to adopt the guidance using the full retrospective approach for the fiscal year beginning January 1, 2018.Interpretations are on-going and upon initial evaluation, the Company believes the most significant effect relates to the timing of the recognition of realestate sales under the percentage-of-completion method. In November 2015, FASB issued ASU No. 2015-17, Income Taxes-Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). Theamendments in this update simplify the presentation of deferred income taxes. ASU 2015-17 requires that deferred tax liabilities and assets be classified asnoncurrent in a classified statement of financial position. The amendments in ASU 2015-17 are effective for fiscal years beginning after December 15, 2016including interim periods within those fiscal years. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period.The adoption of the guidance on January 1, 2017 is not expected to have significant impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 modifies existing guidance for off-balance sheet treatment of a lessees’ operating leases by requiring lessees to recognize lease assets and lease liabilities. Under ASU 2016-02, lessoraccounting is largely unchanged. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscalyears. Early adoption is permitted. The Company is evaluating this guidance and the impact to the Company, as both lessor and lessee, on the consolidatedfinancial statements. In March 2016, the FASB issued ASU 2016-07, Investments- Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method ofAccounting (“ASU 2016-07”). ASU 2016-07 eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entityobtains significant influence over a previously held investment. ASU 2016-07 is effective for fiscal years, and interim periods within those fiscal years,beginning after December 15, 2016. Early adoption is permitted. The adoption of ASU 2016-07 on January 1, 2017 is not expected to have a material effecton the Company’s consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-basedPayment Accounting (“ASU 2016-09”) to simplify the accounting for share-based payment transactions, including the income tax consequences, an optionto recognize gross share-based compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement ofcash flows. ASU 2016-09 is effective for public companies for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years.Early adoption is permitted. The adoption of ASU 2016-09 on January 1, 2017 is not expected to have a material effect on the Company’s consolidatedfinancial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments(“ASU 2016-15”). ASU 2016-15 reduces the existing diversity in practice in financial reporting across all industries by clarifying certain existing principlesin ASC 230, Statement of Cash Flows, (“ASC 230”) including providing additional guidance on how and what an entity should consider in determining theclassification of certain cash flows. In addition, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash(“ASU 2016-18”). ASU 2016-18 clarifies certain existing principles in ASC 230, including providing additional guidance related to transfers between cashand restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect the restricted cashaccounts. These ASUs will be effective for the Company’s fiscal year beginning December 1, 2018 and subsequent interim periods. Early adoption ispermitted. The adoption of ASU 2016-15 and ASU 2016-18 will modify the Company's current disclosures and classifications within the consolidatedstatement of cash flows but they are not expected to have a material effect on the Company’s consolidated financial statements. F-37  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Under thenew standard, the selling (transferring) entity is required to recognize a current tax expense or benefit upon transfer of the asset. Similarly, the purchasing(receiving) entity is required to recognize a deferred tax asset or liability, as well as the related deferred tax benefit or expense, upon purchase or receipt of theasset. This pronouncement is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is stillevaluating the effect that this guidance will have on the consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying Definition of a Business (“ASU 2017-01”).ASU 2017-01 clarifies the framework for determining whether an integrated set of assets and activities meets the definition of a business. The revisedframework establishes a screen for determining whether an integrated set of assets and activities is a business and narrows the definition of a business, whichis expected to result in fewer transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do notmeet the definition of a business are accounted for as asset acquisitions. This update is effective for fiscal years, and for interim periods within those fiscalyears, beginning after December 15, 2017, with early adoption permitted for transactions that have not been reported in previously issued (or available to beissued) financial statements. The Company does not believe this standard will have a material impact on the results of operations or financial condition. 3.Short-term investments The short-term investments represent investments in REITs publicly traded on the Hong Kong Stock Exchange, money market instruments andpublicly traded debt and equity securities, which are expected to be realized in cash during the next 12 months. The Company accounts for the short-terminvestments in accordance with ASC subtopic 320-10, Investments-Debt and Equity Securities: Overall. The Company classified the REITs, investment indebt and equity securities, and money market instruments as trading securities which are bought and held principally for the purpose of selling them in thenear term. The Company uses quoted prices in active markets for identical assets (consistent with the Level 1 definition in the fair value hierarchy) to measurethe fair value of its investments on a recurring basis pursuant to ASC 820, Fair Value Measurement. The realized gains, and unrealized losses presented in the accompanying statements of comprehensive income are related to trading securities heldas of December 31, 2016. The following summarizes the short-term investments measured at fair value at December 31, 2015 and 2016: December 31, 2015 US$ Aggregate fair value Cost Unrealized gain in profit and loss Trading securities: REITs 1,167,647 1,124,293 43,354 Money market instruments 76,999 70,910 6,089 Total 1,244,646 1,195,203 49,443 F-38  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) December 31, 2016 US$ Aggregate fair value Cost Unrealized gain in profit and loss Trading securities: Debt securities 20,601,816 20,599,683 2,133 REITs 15,612,864 15,266,447 346,417 Money market instruments 866,630 864,927 1,703 Equity securities 2,229,285 2,344,204 (114,919) Total 39,310,595 39,075,261 235,334 During the year ended December 31, 2016, US$2,505,696 (2015: US$456,149) net realized gain and US$235,334 (2015: US$49,443) unrealizedgain for trading securities are included in earnings. 4.Real estate properties development completed and under development The following summarizes the components of real estate properties development completed and under development at December 31, 2015 and2016: December 31, 2015 December 31,2016 US$ US$ Development completed: Zhengzhou Century East A 4,775,131 2,277,168 Suzhou International City Garden 2,018,240 89,490 Suzhou Xin City 16,736,651 16,624,117 Kunshan International City Garden 546,537 867,612 Jinan Xinyuan Splendid - 2,309,387 Zhengzhou Xin City - 15,762,256 Beijing Xindo Park - 52,671,437 Suzhou Lake Royal Palace - 76,426,976 Xingyang Splendid Phase I - 11,344,548 Zhengzhou Xindo Park (residential) - 9,985,798 Shanghai Yipin Royal Palace - 91,307,299 New York Oosten - 197,513,164 Real estate properties development completed 24,076,559 477,179,252 Under development: Current: Jinan Xinyuan Splendid 40,847,827 - Xuzhou Colorful City 54,157,809 39,910,908 Zhengzhou Xin City 46,165,101 - Beijing Xindo Park 176,553,742 - Kunshan Royal Palace 215,917,469 106,317,899 Suzhou Lake Royal Palace 267,569,547 - Xingyang Splendid Phase I 32,010,140 - Xingyang Splendid Phase II 43,311,674 65,914,086 Xingyang Splendid Phase III 23,896,026 25,059,220 Xingyang Splendid Phase IV 6,762,190 7,355,332 Zhengzhou Xindo Park (residential) 29,098,191 - Zhengzhou Xindo Park (commercial) 73,294,372 97,287,900 Jinan Royal Palace 261,268,961 267,899,017 Sanya Yazhou Bay No. 1 109,896,103 142,950,465 Shanghai Yipin Royal Palace 215,117,468 - Changsha Xinyuan Splendid 194,444,916 213,231,900 Chengdu Thriving Family 258,173,028 265,695,975 Jinan Xin Central 163,174,394 120,430,389 Zhengzhou Fancy City 71,896,698 67,957,047 Tianjin Spring Royal Palace 65,583,961 90,412,297 Henan Xin Central I 127,696,203 112,073,981 Henan Xin Central II 39,117,259 51,633,387 Zhengzhou Fancy City II(South) - 52,819,852 Zhengzhou Fancy City II(North) - 36,768,148 Xi’an Metropolitan - 228,453,322 Kunshan Xindo Park - 94,591,527 Zhengzhou International New City I - 140,971,898 Zhengzhou International New City II - 58,441,356 Beijing Liyuan project - 149,726,569 Changsha New project - 53,014,425 XIN Eco Marine Group Properties Sdn Bhd 8,165,745 9,961,455 New York Oosten 226,208,448 - Hudson Garden project - 64,926,299 Flushing - 68,572,237 2,750,327,272 2,632,376,891 Profit recognized 347,083,874 332,294,461 Less: progress billings (see Note 14) (1,210,089,345) (1,245,536,188) Total real estate properties under development 1,887,321,801 1,719,135,164 Total real estate properties development completed and under development 1,911,398,360 2,196,314,416 F-39  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) As of December 31, 2016, land use rights included in the real estate properties under development totaled US$1,231,794,738 (December 31, 2015:US$1,130,109,973). As of December 31, 2016, land use rights with an aggregate net book value of US$379,078,976 (December 31, 2015: US$1,018,987,851) waspledged as collateral for certain bank loans and other debts. 5.Real estate properties held for lease, net December 31, 2015 December 31, 2016 US$ US$ Elementary schools 3,284,593 3,074,648 Basement parking 10,181,887 9,531,080 Kindergartens 7,576,396 8,269,659 Parking facilities 18,128,308 16,969,627 Clubhouses 6,418,720 6,008,447 Shopping mall 38,499,378 130,952,922 Total costs 84,089,282 174,806,383 Accumulated depreciation (12,956,700) (14,932,449) Real estate properties held for lease, net 71,132,582 159,873,934 Depreciation expense for real estate properties held for lease for the year ended December 31, 2016 amounted to US$2,929,277 (2014:US$2,032,019; 2015: US$2,303,340). As of December 31, 2016, US$23,696,316 of real estate properties held for lease were pledged as collateral for other debts (2015: US$36,550,198). As of December 31, 2016, minimum future rental income on non-cancellable leases (none of which contain any contingent rental clauses), in theaggregate and for each of the five succeeding fiscal years and thereafter, is as follows: F-40  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Year Amount US$ 2017 8,486,637 2018 9,066,109 2019 9,068,282 2020 8,556,525 2021 and thereafter 69,119,979 Total 104,297,532 6.Property and equipment, net Property and equipment consisted of the following: December 31, 2015 December 31, 2016 US$ US$ Corporate aircraft (Note 13) 40,693,020 37,095,612 Vehicles 4,636,135 4,748,877 Furniture and fixtures 7,044,387 8,996,395 Total 52,373,542 50,840,884 Accumulated depreciation (13,050,220) (16,750,788) Property and equipment, net 39,323,322 34,090,096 Depreciation expense for property and equipment for the year ended December 31, 2016 amounted to US$5,093,038 (2014: US$4,543,419; 2015:US$4,947,575) which includes amortization expense related to the corporate aircraft capital lease (Note 13) amounting to US$2,461,283 (2014:US$2,868,205; 2015: US$2,713,085). Accumulated depreciation expense for property and equipment as of December 31, 2016 amounted to US$16,750,788 (2014: US$8,543,148; 2015:US$13,050,220) which includes accumulated amortization expense related to the corporate aircraft capital lease (Note 13) amounting to US$8,175,540(2014: US$3,585,257; 2015: US$6,104,441). 7.Other long-term investment As of December 31, 2015 and 2016, the other long-term investment accounted for at cost consisted of the following: Cost method investee Initial Cost Ownership December 31,2015 US$ US$ Ruihao Rongtong 30,865,904 80% 30,865,904 Zhengzhou Lianhe Real Estate Co., Ltd. 241,648 1.85% 241,648 31,107,552 Initial Cost Ownership December 31,2016 US$ US$ Zhengzhou Lianhe Real Estate Co., Ltd. 241,648 1.85% 241,648 F-41  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) On May 6, 2015, the Company acquired 80% equity interest of Ruihao Rongtong at a consideration of US$30,865,904. The remaining 20% equityinterest was held by the founder of Ruihao Rongtong (“Founder”). In accordance with ASC 325-20, Cost Method Investments, cost method accounting wasapplied as the investment did not qualify as in-substance common stock and did not have a readily determinable fair value. Pursuant to the Share TransferAgreements which were unanimously approved by both the Company and the Founder, the Company transferred 20% and 5% of its equity interest in RuihaoRongtong to Ping’an trust on March 1, 2016 and June 28, 2016, respectively (see Note 2a). On August 4, 2016, the Company purchased the Founder’s 20%equity interest in Ruihao Rongtong and obtained control over Ruihao Rongtong through the amendment of the articles of association. The RuihaoRongtong acquisition was accounted for as an assets acquisition. On September 18, 2016, the Company transferred an additional 10% equity interest ofRuihao Rongtong to Ping’an trust (see Note 2a). As of December 31, 2016, the Company’s holds a 65% equity interest in Ruihao Rongtong. For the years ended December 31, 2014, 2015 and 2016, the Group recognized no investment profit or loss. As of December 31, 2015 and 2016,management noted no indicators of impairment related to these investments. 8.Investment in joint ventures On October 21, 2013, the Group acquired a 51% equity interest in Shaanxi Zhongmao. The Group and the other remaining shareholder exercisesjoint control over Shaanxi Zhongmao. The purpose of the joint venture is to undertake residential property development projects in Xi’an, Shaanxi Province.On February 23, 2016, upon the amendment of the articles of association, the Company obtained control over Shaanxi Zhongmao, which was previouslyaccounted under equity method investment (see Note 9). On March 19, 2014, the Group together with four other independent shareholders established a joint venture called Huayi Xincheng (Beijing)Intelligent City Construction Co., Ltd. (“Huayi Xincheng”), in which the Group holds a 40% equity interest. The purpose of the joint venture is to undertakeresidential property development projects in Beijing. As at December 31, 2016, the joint venture has no active residential projects. On May 27, 2015, the Group together with an unrelated company, Nanjing Starry Sky Studios Management Co., Ltd. established a joint venturecalled Beijing Starry Sky Cinema Co., Ltd. (“Beijing Starry Sky Cinema”), in which the Group holds a 51% equity interest. The purpose of the joint ventureis to operate movie theatres. The articles of association does not allow for the Company to exercise control over relevant activities of the investee. On January 11, 2016, the Group together with two other entities established a joint venture called Shenzhen Zhong An Financial Lease Co., Ltd.(“Shenzhen Zhong An”), in which the Group holds a 25% equity interest. The purpose of the joint venture is to undertake financial lease businesses. On November 3, 2016, the Group together with two other entities established a joint venture called Zhengzhou Xinci Health Service Co., Ltd.(“Zhengzhou Xinci”), in which the Group holds a 60% equity interest. The purpose of the joint venture is to provide health service in Zhengzhou. Thearticles of association does not allow for the Company to exercise control over relevant activities of the investee. On December 26, 2016, the Group together with one other entity established a joint venture called Wuhan Qiaoxin Real Estate Co., Ltd. (“WuhanQiaoxin”), in which the Group holds a 49% equity interest. The purpose of the joint venture is to undertake residential property development projects inWuhan. As at December 31, 2016, the joint venture has no active residential projects. As of December 31, 2016, the Group’s investment in the investees in the aggregate exceeded its proportionate share of the net assets of the equitymethod investee by nil (December 31, 2015: $3,982,603). This difference represents equity method goodwill and therefore, is not amortized. Selectedfinancial information of the equity method investees have not been presented as the effects were not material. F-42  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) 9.Acquisition of subsidiaries Acquisition of Shaanxi Zhongmao Economy Development Co., Ltd. On February 23, 2016, the Group acquired an additional 14.98% equity interest of Shaanxi Zhongmao Economy Development Co., Ltd. (“ShaanxiZhongmao”) for a consideration of US$516,086 and the articles of association of Shaanxi Zhongmao were amended to require simple majority of votinginterests for approval of significant financial and operating decisions. Upon completion of this acquisition, the Group obtained control over ShaanxiZhongmao through its 65.98% voting interests of Shaanxi Zhongmao. The purchase was accounted for under the acquisition method of accounting. Accordingly, the impact related to this transaction is included in theGroup’s financial statements only since the effective date of acquisition. The purchased assets and assumed liabilities were recorded at their respectiveacquisition date fair values. A gain is recorded equal to the amount by which the fair value of net identifiable assets exceeded the consideration paid. Assuch, the Group recognized a bargain purchase gain of US$2,004,507 in relation to acquisition. The seller was willing to accept a lower price due to cashneed in a very short timeframe at the time of negotiation, the terms negotiated included a purchase price is lower than Shaanxi Zhongmao’s equity value as aresult. This gain is shown as a component of other income on the Group’s consolidated statement of comprehensive income. The results of Shaanxi Zhongmao have been included in the Group’s consolidated financial statements since February 23, 2016. An analysis of the cash flows in respect of the acquisition of Shaanxi Zhongmao is as follows: US$ Cash consideration paid - Cash and cash equivalents acquired 15,055,431 Net inflow of cash and cash equivalents 15,055,431 The purchase price allocation for the acquisition is primarily based on a valuation determined by the Group with the assistance of an independentthird party valuation firm. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition on February23, 2016. US$ Purchase consideration 516,086 Fair value of non-controlling interest 5,724,339 Fair value of previously held equity interests (i) 8,581,461 Bargain purchase gain recognized in other income 2,004,507 16,826,393 Fair value of net identifiable assets acquired: Cash and cash equivalents 15,055,431 Restricted cash 16,560,251 Real estate properties under development 180,647,050 Property and equipment, net 329,582 Current assets 54,780,760 Current liabilities (250,546,681) Net assets acquired 16,826,393 F-43  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (i) A measurement gain of US$2,100,563 was recognized and recorded in other income in relation to the revaluation of the Group’s previously heldequity interest of Shaanxi Zhongmao in the consolidated statement of comprehensive income for the year ended December 31, 2016. As Shaanxi Zhongmaois a private company, the fair value of the Group’s previously held equity interest is estimated based on asset-based approach using significant unobservableinputs that market participants would consider, which mainly include estimated revenue and estimated cost for the construction project. This acquisition was consistent with the Group’s strategy to develop residential real estate markets in high growth tier two cities in China. The actual results of operation after the acquisition date and pro forma results of operations for the acquisition have not been presented because theeffects were not material. 10.Short-term bank loans and other debt Short-term bank loans represent amounts due to various banks and are due on the dates indicated below. Short-term bank loans at December 31,2015 and 2016 consisted of the following: December 31, December 31, 2015 2016 US$ US$ Loan from The Bank of East Asia Due June 2, 2016, at 2.00% plus 3 month LIBOR(1) 9,675,655 - Due August 16, 2016, at 1.40% plus 3 month LIBOR(1) 20,000,000 - Due August 31, 2016, at 1.40% plus 3 month LIBOR(1) 9,700,000 - Due September 20, 2016, at 1.40% plus 3 month LIBOR(1) 2,220,000 - Due October 27, 2016, at 1.40% plus 3 month LIBOR(2) 13,250,000 - Due November 18, 2016, at 1.25% plus 3 month LIBOR(2) 14,958,974 - Due November 23, 2016, at 1.25% plus 3 month LIBOR(3) 34,421,617 - Due June 2, 2017, at 1.1% plus 3 month LIBOR(3) - 34,421,617 104,226,246 34,421,617 Loan from Bank of China Tokyo Branch Due July 21, 2016, at 1.2% per annum(2) 30,000,000 - Due September 26, 2016, at 1.55% per annum(2) 13,000,000 - Due October 11, 2016, at 1.55% per annum(2) 20,000,000 - 63,000,000 - Loan from Industrial and Commercial Bank of China (Asia) Limited (“ICBC (Asia)”) Due May 18, 2016, at 2% plus 3 month LIBOR(2) 10,000,000 - Due October 5, 2016, at 1.6% plus 3 month LIBOR(2) 20,000,000 - 30,000,000 - Loan from Industrial and Commercial Bank of China (Thai) Public Company Limited (“ICBC (Thai)”) Due September 21, 2016, at 1.7% plus 3 month LIBOR(2) 25,000,000 - Loan from Ping’an Real estate Co., Ltd. Due April 20, 2017, at 6.00% per annum(4) - 43,246,360 Loan from Huarong International Trust Co., Ltd. Due September 30, 2017, at 8.30% per annum(5) - 100,908,174 Total short-term bank loans and other debt 222,226,246 178,576,151 F-44  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (1)Pursuant to the new due dates of these loans after amendment, these four loans are classified as long term loans on the consolidated balance sheets as ofDecember 31, 2016. The Company accounted for the amendments, which did not result in a debt extinguishment pursuant to ASC 470-50, Debt –Modifications and Exchanges. These loans were secured by restricted cash of US$43,276,457 as of December 31, 2015. (2)These loans were paid in full during 2016. (3)The loan contract with the Bank of East Asia was amended to extend the maturity date of the loan. The Company accounted for the amendments, whichdid not result in a debt extinguishment pursuant to ASC 470-50, Debt – Modifications and Exchanges. Pursuant to the amended loan contract, this loanis denominated in US$ and is secured by restricted cash of US$36,471,097 (December 31, 2015: US$35,878,403). (4)Pursuant to the agreements with Ping’an Real Estate Co., Ltd., this other short-term debt is secured by the Group’s 51% equity interest of ZhengzhouXinnan. (5)Pursuant to the agreements with Huarong International Trust Co., Ltd, this other short-term debt is secured by the Group’s 65.98% equity interest ofShaanxi Zhongmao and the Group’s land use rights with net book value of US$24,975,886 (December 31, 2015: nil) and Group’s real estate propertiesunder development with net book value of US$27,560,029 (December 31, 2015: nil). As of December 31, 2016, except when otherwise indicated the Group’s short-term bank loans were denominated in RMB and were mainly securedby the Group’s real estate properties under development with net book value of US$27,560,029 (December 31, 2015: nil), land use rights with net book valueof US$24,975,886 (December 31, 2015: nil). The weighted average interest rate on short-term bank loans and other debt as of December 31, 2016 was 6.53% (December 31, 2015: 1.71%). F-45  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) 11.Long-term bank loans Long-term bank loans as of December 31, 2015 and 2016 consisted of the following: December 31, December 31, 2015 2016 US$ US$ Loan from ICBC Due July 20, 2016 at 5.25% per annum(2) 10,779,845 - Due December 26, 2021, at 6.175% per annum(1) - 144,154,534 10,779,845 144,154,534 Loan from Agricultural Bank of China Due May 18, 2016, at 5.78% per annum(2) 6,159,911 - Loan from China Guangfa Bank Due May 29, 2016, at 8.00% per annum(2) 3,233,953 - Due December 23, 2017, at 8.4% per annum(2) 6,159,911 - Due February 17, 2018, at 8.4% per annum(2) 30,799,556 - Due December 15, 2018, at 4.75% per annum(1) - 4,612,945 40,193,420 4,612,945 Loan from Bank of China Due March 27, 2018, at 5.230% per annum(1) - 43,246,360 Loan from China Construction Bank Due January 23, 2017, at 5.70% per annum(2) 76,998,891 - Loan from Bank of Shanghai Due April 30, 2017, at 9.10% per annum(2) 35,419,490 - Loan from The Bank of East Asia Due April 27, 2018, at 6.18% per annum(2) 47,428,237 - Loan from Ping An Bank Due March 20, 2018, at 9.25% per annum(2) 43,119,380 - Loan from Bank of Bohai Due March 14, 2019 at 5.415% per annum(1) - 42,525,587 Loan from Bank of Beijing Due October 31, 2019 at 6.175% per annum(1) - 18,740,089 Loan from The Bank of East Asia Due April 26, 2018, at 1.25% plus 3 month LIBOR(3) - 13,250,000 Due June 1, 2018, at 1.25% plus 3 month LIBOR(3) - 9,675,655 Due June 5, 2018, at 1.25% plus 3 month LIBOR(3) - 10,000,000 Due August 15, 2018, at 1.25% plus 3 month LIBOR(3) - 20,000,000 Due August 30, 2018, at 1.1% plus 3 month LIBOR(3) - 9,700,000 Due September 19, 2018, at 1.1% plus 3 month LIBOR(3) - 2,220,000 - 64,845,655 Total 260,099,174 318,125,170 Less: current portion of long-term bank loans 246,239,374 82,240,161 Total long-term bank loans 13,859,800 235,885,009 As of December 31, 2016, the contractual maturities of these loans are as follows: Year Amount US$ 2017 - 2018 112,704,960 2019 61,265,676 2020 - 2021 and thereafter 144,154,534 Less: current portion of long-term bank loans 82,240,161 Total: long-term bank loans 235,885,009 F-46  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (1)Pursuant to the loan contracts, if the Group achieves an agreed upon sales target from the sales of the underlying real estate properties underdevelopment, the Group has an obligation to repay the loan before the maturity date. Therefore, the respective current portions of these loans have beenclassified as current liabilities as of December 31, 2016. (2)These loans were paid in full during 2016. (3)Pursuant to the loan contract with The Bank of East Asia, these six loans from The Bank of East Asia, amounting to US$13.3 million, US$9.7 million,US$10.0 million, US$20.0 million, US$9.7 million and US$2.2 million respectively, are denominated in US$ and are secured by restricted cash ofUS$13,168,517 (December 31, 2015: nil), US$9,802,508 (December 31, 2015: nil), US$10,090,817 (December 31, 2015: nil), US$20,498,775 (December31, 2015: nil), US$9,949,546 (December 31, 2015: nil), and US$2,277,642 (December 31, 2015: nil) respectively. As of December 31, 2016, except when otherwise indicated, the Group’s long term bank loans were all denominated in RMB and were mainlysecured by the Group’s real estate properties under development with net book value of nil (December 31, 2015: US$93,755,346), land use rights with netbook value of US$103,643,167 (December 31, 2015: US$424,058,251) and restricted cash with net book value of US$65,787,805 (December 31, 2015: nil). The interest rates of these bank loans are adjustable based on the range of 100% to 130% of the PBOC prime rate. The weighted average interest rateon long-term bank loans as of December 31, 2016 was 5.07% (December 31, 2015: 7.23%). 12.Other long-term debt As of December 31, 2015 and 2016, other long-term debt consisted of the following: December 31, December 31, 2015 2016 US$ US$ May 2018 Senior Secured Notes due on May 3, 2018 at 13.25% 190,519,754 - June 2019 Senior Secured Notes due on June 6, 2019 at 13% 200,000,000 187,314,242 August 2019 Senior Notes due on August 30, 2019 at 8.125% - 294,819,248 Corporate bonds due on December 28, 2020 at 7.5% 152,962,917 143,484,912 Corporate bonds due on January 27, 2021 at 7.47% - 100,618,930 Corporate bonds due on March 14, 2021 at 7.09% - 71,860,897 Corporate bonds due on August 15, 2019 at 7.50% - 215,084,667 Collateralized loan due on April 3, 2016 at 11%(1) 38,453,246 - Collateralized loan due on December 23, 2017 at 11%(1) 61,221,818 - Collateralized loan due on July 9, 2017 at 9%(1) 54,484,415 - Collateralized loan due on December 31, 2016 at 12.5%(1) 69,129,605 - Collateralized loan due on June 30, 2017 at 12.5%(1) 3,079,956 - Collateralized loan due on March 31, 2017 at 11%(1) 38,499,446 - Collateralized loan due on November 20, 2016 at 12.5%(1) 46,199,335 - Collateralized loan due on June 30, 2017 at 11.8%(1) 17,709,745 - Collateralized loan due on July 15, 2017 at 11.8%(1) 14,583,590 - Collateralized loan due on June 25, 2017 at 8.5%(2) 69,299,002 43,246,360 Collateralized loan due on September 17, 2017 at 9%(1) 10,779,844 - Collateralized loan due on March 31, 2018 at 11% - 21,623,180 Collateralized loan due on November 6, 2018 at 8.2% - 23,064,725 Collateralized loan due on May 10, 2018 at 9.4% - 26,668,589 Collateralized loan due on May 30, 2018 at 9.0%(3) - 64,869,540 Collateralized loan due on June 19, 2018 at 9.5% - 50,454,087 Collateralized loan due on July 31, 2021 at 8.0% - 46,129,451 Collateralized loan due on August 2, 2021 at 8.0% - 5,333,718 Collateralized loan due on November 23, 2024 at 6.9% - 43,246,360 Non-controlling shareholder’s loan due on June 30, 2016 at 11.24%(4) 28,489,590 - Non-controlling shareholder’s loan due on March 13, 2017 at 10.98%(5) 81,002,834 - Non-controlling shareholder’s loan due on May 13, 2017 at 11%(6) 35,881,483 - Non-controlling shareholder’s loan due on February 28, 2018 at 10.5%(7) - 20,614,098 Non-controlling shareholder’s loan due on February 28, 2018 at 8.5%(7) - 103,719,187 Fortress Credit Co. LLC loan due on June 9, 2017 at 7.25% plus LIBOR(8) 96,306,200 48,457,937 Kent EB-5 LLC loan due on January 23, 2020 at 5.95%(9) 10,000,000 10,000,000 Kent EB-5 LLC loan due on April 30, 2020 at 5.95%(9) 5,000,000 5,000,000 Kent EB-5 LLC loan due on June 25, 2020 at 5.95%(9) 5,000,000 5,000,000 Kent EB-5 LLC loan due on August 4, 2020 at 5.95%(9) 5,000,000 5,000,000 Kent EB-5 LLC loan due on August 20, 2020 at 5.95%(9) 5,000,000 5,000,000 Kent EB-5 LLC loan due on October 1, 2020 at 5.95%(9) 10,000,000 10,000,000 Kent EB-5 LLC loan due on November 23, 2020 at 5.95%(9) 10,000,000 10,000,000 Kent EB-5 LLC loan due on March 15, 2021 at 5.95%(9) - 9,500,000 Kent EB-5 LLC loan due on September 12, 2021 at 5.95%(9) - 500,000 Ozarks loan due on July 13, 2017 at 4.50% plus 1 month LIBOR(10) - 26,636,117 Total principal of other long-term debt 1,258,602,780 1,597,246,245 Total 1,258,602,780 1,597,246,245 Less: current portion of other long-term debt 348,594,822 622,454,921 Total other long-term debt 910,007,958 974,791,324 F-47  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) The May 2018 Senior Secured Notes, the June 2019 Senior Secured Notes and the August 2019 Senior Secured Notes are senior secured pari passuobligations of the Company. As of December 31, 2016, the contractual maturities of these debts are as follows: Year Amount US$ 2017 118,340,414 2018 311,013,406 2019 697,218,157 2020 193,484,912 2021 and thereafter 277,189,356 Less: current portion of other long term debt 622,454,921 Total: Other long-term debt 974,791,324 (1)These loans were paid in full in 2016. (2)Pursuant to the agreements with Ping An Trust Co., Ltd., this other long-term debt is secured by the Group’s 100% equity interest of ShandongRenju. This other long term debt was partially paid down in 2016. (3)Pursuant to the agreements with Ping An Trust Co., Ltd., this other long-term debt is secured by the Group’s 100% equity interest of ChangshaWanzhuo. (4)Pursuant to the agreements with Shenzhen Ping’an Dahua Huitong Wealth Management Co., Ltd. entered into on June 24, 2014, which was the non-controlling shareholder of Jinan Wanzhuo, this other long-term debt was secured by the Group’s 95% equity interest in Jinan Wanzhuo and theGroup’s land use rights. This other long-term debt was paid in full in 2016. (5)Pursuant to the agreements with Shenzhen Ping’an Dahua Huitong Wealth Management Co., Ltd. entered into on March 10, 2015, which was thenon-controlling shareholder of Zhengzhou Shengdao, this other long-term debt was secured by the Group’s 80% equity interest in ZhengzhouShengdao and the Group’s land use rights. This other long-term debt was paid in full in 2016. F-48  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (6)Pursuant to the agreements with Wanxiang Trustee Co., Ltd. entered into on May 9, 2015, which was the non-controlling shareholder of HenanQuansheng, this other debt was secured by the Group’s 90% equity interest in Henan Quansheng and the Group’s land use rights and Group’s realestate properties under development. This other long-term debt was paid in full in 2016. (7)Pursuant to the agreements with Ping An Trust Co., Ltd., which is the non-controlling shareholder of Ruihao Rongtong, this other long-term debt issecured by the Group’s 65% equity interest in Ruihao Rongtong and the Group’s land use rights with net book value of US$76,002,595 (December31, 2015: nil). (8)Pursuant to the agreements with Fortress Credit Co. LLC entered into on June 9, 2014, this other long-term debt amounting to US$165 million intotal with US$48.5 million utilized, is denominated in US$ and is secured by restricted cash of US$24,610,419 (December 31, 2015:US$29,918,940). This other long term debt was partially paid down in 2016. (9)Pursuant to the agreements with Kent EB-5 LLC, this other long-term debt amounting to US$60 million in total, is denominated in US$ withmaturity dates that vary from January 23, 2020 to September 12, 2021. (10)Pursuant to the agreements with Bank of Ozarks ("Ozarks"), Hudson 888 Owner LLC has agreed to provide security in the form of mortgages andassignment of leases and rents. In addition, XIN Development Group International Inc., agreed to, jointly and severally, provide a number ofguarantees, including carve out guaranty, completion guaranty, repayment guaranty and carry guaranty to Ozarks and its successors in relation tothe mortgaged property, liabilities of and/or payments to Ozarks. As of December 31, 2016, except when otherwise indicated, the Group’s other long-term debt was all denominated in RMB and mainly secured bythe Group’s real estate properties under development with net book value of US$91,648,575 (December 31, 2015: US$128,389,745), land use rights with netbook value of US$250,459,922 (December 31, 2015: US$731,783,438), real estate properties held for lease with net book value of US$23,696,316(December 31, 2015: US$36,550,198) and real estate properties held for sale with net book value of US$13,437,413 (December 31, 2015: nil). May 2018 Senior Secured Notes On May 3, 2013, the Company issued the May 2018 Senior Secured Notes with an aggregate principal amount of US$200,000,000 due May 3,2018. Until redemption in October 2016, the May 2018 Senior Secured Notes bore interest at 13.25% per annum payable semi-annually. Interest is payableon May 3 and November 3 of each year, commencing November 3, 2013. The effective interest rate of the May 2018 Senior Secured Notes is 14.44%. The May 2018 Senior Secured Notes were issued pursuant to the May 2018 Indenture, dated May 3, 2013, between, the Company, the “SubsidiaryGuarantors” identified below and Citicorp International Limited, as trustee and collateral agent. The Company’s obligations under the May 2018 Indentureand the May 2018 Senior Secured Notes were guaranteed by certain of the Company’s wholly-owned subsidiaries, Xinyuan Real Estate, Ltd., XinyuanInternational Property Investment Co., Ltd., Victory Good Development Ltd., South Glory International Ltd., Elite Quest Holdings Ltd. and XinyuanInternational (HK) Property Investment Co., Limited (the “Subsidiary Guarantors”) and would have been guaranteed by such other future subsidiaries of theCompany as is set forth in and in accordance with the terms of the May 2018 Indenture. The Company’s obligations under the May 2018 Indenture and theMay 2018 Senior Secured Notes were secured by a pledge of the capital stock of the Company’s wholly-owned subsidiaries, Xinyuan Real Estate, Ltd. ,Xinyuan International Property Investment Co., Ltd., Victory Good Development Ltd., South Glory International Ltd. and Elite Quest Holdings Ltd. F-49  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) The Company could redeem the May 2018 Senior Secured Notes, in whole or in part, at 106.6250% and 103.3125% of principal amount, plusaccrued and unpaid interest, if any, to (but excluding) the redemption date during the 12 month period commencing on May 3, 2016 and May 3, 2017,respectively. At any time prior to May 3, 2016, the Company could redeem up to 35% of the aggregate principal amount of the May 2018 Senior Secured Notes,in whole but not in part, at a redemption price equal to 100.0% of the principal amount of the May 2018 Senior Secured Notes plus the Applicable Premiumas of, and accrued and unpaid interest, if any, to (but not including) the redemption date. “Applicable Premium” meant with respect to any Note at anyredemption date, the greater of (i) 1.00% of the principal amount of such Note and (ii) the excess of (A) the present value at such redemption date of theredemption price of such Note on May 3, 2016, plus all required remaining scheduled interest payments due on such Note through May 3, 2016 (butexcluding accrued and unpaid interest to the redemption date), computed using a discount rate equal to the Adjusted Treasury Rate (as defined in the May2018 Indenture) plus 100 basis points, over (B) the principal amount of such Note on such redemption date. At any time prior to May 3, 2016, the Company could redeem up to 35% of the aggregate principal amount of the May 2018 Senior Secured Noteswith the net cash proceeds of one or more sales of the Company’s common shares in certain equity offerings, within a specified period after the equityoffering, at a redemption price of 113.25% of the principal amount of the May 2018 Senior Secured Notes, plus accrued and unpaid interest, if any, to (butnot including) the redemption date, provided that at least 65% of the aggregate principal amount of the May 2018 Senior Secured Notes remainedoutstanding after each such redemption. The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from the May 2018 Senior Secured Notesunder the requirements of ASC 815, Derivatives and Hedging. The embedded redemption options and repurchase features did not qualify for derivativeaccounting because the embedded derivatives were considered clearly and closely related to the characteristics of the May 2018 Senior Secured Notes. The May 2018 Indenture, as amended, contained certain covenants that, among others, restricted the Company’s ability and the ability of theCompany’s Restricted Subsidiaries (as defined in the May 2018 Indenture) to incur additional debt or to issue preferred stock, to make certain payments orinvestments, to pay dividends or purchase or redeem capital stock, to sell assets (including limitations on the use of proceeds of asset sales), to grant liens onthe collateral securing the May 2018 Senior Secured Notes or other assets, to make certain other payments or to engage in transactions with affiliates andholders of more than 10% of the Company’s common shares, subject to certain qualifications and exceptions and satisfaction, in certain circumstances ofspecified conditions, such as a Fixed Charge Coverage Ratio (as defined in the May 2018 Indenture) of 2.75 to 1.0 (reduced from 3.0 to 1.0 effective February2016). For a further discussion of the amendments to the May 2018 Indenture, see Note 2 (ad) above. On October 18, 2016, the Company redeemed the May 2018 Senior Secured Notes for a total redemption amount of $206,237,340 consisting of theentire outstanding principal balance, interest to the redemption date and debt extinguishment loss amounting to US$183,000,000, US$11,113,590 andUS$12,123,750 (equal to the 6.625% of the outstanding principal amount), respectively. The Company funded the redemption using the proceeds from theissuance of its August 2019 Senior Secured Notes. June 2019 Senior Secured Notes On December 6, 2013, the Company issued senior notes with an aggregate principal amount of US$200,000,000 due June 6, 2019 at a coupon rateof 13% per annum payable semi-annually. Interest is payable on June 6 and December 6 of each year, commencing June 6, 2014. F-50  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) The effective interest rate of June 2019 Senior Secured Notes is 14.05%. The June 2019 Senior Secured Notes were issued pursuant to the June 2019 Indenture, dated December 6, 2013, between the Company, the“Subsidiary Guarantors” identified below and Citicorp International Limited, as trustee and collateral agent. The Company’s obligations under the June 2019Indenture and the June 2019 Senior Secured Notes have been guaranteed by certain of the Company’s wholly-owned subsidiaries, Xinyuan Real Estate, Ltd.,Xinyuan International Property Investment Co., Ltd., Victory Good Development Ltd., South Glory International Ltd., Elite Quest Holdings Ltd. and XinyuanInternational (HK) Property Investment Co., Limited (the “Subsidiary Guarantors”) and will be guaranteed by such other future subsidiaries of the Companyas is set forth in and in accordance with the terms of the June 2019 Indenture. The Company’s obligations under the June 2019 Indenture and the June 2019Senior Secured Notes are secured by a pledge of the capital stock of the Company’s wholly-owned subsidiaries, Xinyuan Real Estate, Ltd., XinyuanInternational Property Investment Co., Ltd., Victory Good Development Ltd., South Glory International Ltd. and Elite Quest Holdings Ltd. The Company may redeem the June 2019 Senior Secured Notes, in whole or in part, at 106.5% and 103.25% of principal amount, plus accrued andunpaid interest, if any, to (but excluding) the redemption date during the 12 month period commencing on June 6, 2017 and June 6, 2018, respectively. At any time prior to June 6, 2017, the Company may at its option redeem the June 2019 Senior Secured Notes, in whole but not in part, at aredemption price equal to 100.0% of the principal amount of the June 2019 Senior Secured Notes plus the Applicable Premium as of, and accrued and unpaidinterest, if any, to (but not including) the redemption date. “Applicable Premium” means with respect to any Note at any redemption date, the greater of (i)1.00% of the principal amount of such Note and (ii) the excess of (A) the present value at such redemption date of the redemption price of such Note on June6, 2017, plus all required remaining scheduled interest payments due on such Note through June 6, 2017 (but excluding accrued and unpaid interest to theredemption date), computed using a discount rate equal to the Adjusted Treasury Rate (as defined in the June 2019 Indenture) plus 100 basis points, over (B)the principal amount of such Note on such redemption date. At any time prior to June 6, 2017, the Company may redeem up to 35% of the aggregate principal amount of the June 2019 Senior Secured Noteswith the net cash proceeds of one or more sales of the Company’s common shares in certain equity offerings, within a specified period after the equityoffering, at a redemption price of 113% the principal amount of the June 2019 Senior Secured Notes, plus accrued and unpaid interest, if any, to (but notincluding) the redemption date, provided that at least 65% of the aggregate principal amount of the June 2019 Senior Secured Notes issued on December 6,2013 remain outstanding after each such redemption. The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from the June 2019 Senior Secured Notesunder the requirements of ASC 815. The embedded redemption options and repurchase features did not qualify for derivative accounting because theembedded derivatives were considered clearly and closely related to the characteristics of the June 2019 Secured Senior Notes. The June 2019 Indenture, as amended, contains certain covenants that, among others, restrict the Company’s ability and the ability of theCompany’s Restricted Subsidiaries (as defined in the June 2019 Indenture) to incur additional debt or to issue preferred stock, to make certain payments orinvestments, to pay dividends or purchase or redeem capital stock, to sell assets (including limitations on the use of proceeds of asset sales), to grant liens onthe collateral securing the June 2019 Senior Secured Notes or other assets, to make certain other payments or to engage in transactions with affiliates andholders of more than 10% of the Company’s Common Shares, subject to certain qualifications and exceptions and satisfaction, in certain circumstances ofspecified conditions, such as a Fixed Charge Coverage Ratio (as defined in the June 2019 Indenture) of 2.75 to 1.0 (reduced from 3.0 to 1.0 effective February2016). The Company accounted for the amendments, which did not result in a debt extinguishment pursuant to ASC 470-50, Debt – Modifications andExchanges. For a further discussion of the amendments to the June 2019 Indenture, see Note 2 (ad) above. F-51  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) August 2019 Senior Secured Notes On August 30, 2016, the Company issued an aggregate principal amount of US$300,000,000 of the August 2019 Senior Secured Notes. The August2019 Senior Secured Notes bear interest at 8.125% per annum payable semi-annually. Interest will be payable on February 28 and August 30 of each year,commencing February 28, 2017. The effective interest rate of August 2019 Senior Secured Notes is 9.06%. The August 2019 Senior Secured Notes were issued pursuant to an indenture, dated August 30, 2016, between the Company, the “SubsidiaryGuarantors” identified below and Citicorp International Limited, as trustee and collateral agent (the “August 2019 Indenture”). The Company’s obligationsunder the August 2019 Indenture and the August 2019 Senior Secured Notes have been guaranteed by certain of the Company’s wholly-owned subsidiaries,Xinyuan Real Estate, Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Ltd., South Glory International Ltd., Elite QuestHoldings Ltd. and Xinyuan International (HK) Property Investment Co., Limited (the “Subsidiary Guarantors”) and will be guaranteed by such other futuresubsidiaries of the Company as is set forth in and in accordance with the terms of the August 2019 Indenture. The Company’s obligations under the August2019 Indenture and the August 2019 Senior Secured Notes are secured by a pledge of the capital stock of the Company’s wholly-owned subsidiaries,Xinyuan Real Estate, Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Limited, South Glory International Limited andElite Quest Holdings Ltd.. At any time prior to August 30, 2019, the Company may at its option redeem the August 2019 Senior Secured Notes, in whole but not in part, at aredemption price equal to 100.0% of the principal amount of the August 2019 Senior Secured Notes plus the Applicable Premium as of, and accrued andunpaid interest, if any, to (but not including) the redemption date. “Applicable Premium” means with respect to any August 2019 Senior Secured Note at anyredemption date, the greater of (i) 1.00% of the principal amount of such August 2019 Senior Secured Note and (ii) the excess of (A) the present value at suchredemption date of the principal amount of such August 2019 Senior Secured Note, plus all required remaining scheduled interest payments due on suchAugust 2019 Senior Secured Note through the maturity date of the August 2019 Senior Secured Notes (but excluding accrued and unpaid interest to theredemption date), computed using a discount rate equal to the Adjusted Treasury Rate (as defined in the August 2019 Indenture) plus 100 basis points, over(B) the principal amount of such August 2019 Senior Secured Note on such redemption date. At any time prior to August 30, 2019, the Company may redeem up to 35% of the aggregate principal amount of the August 2019 Senior SecuredNotes with the net cash proceeds of one or more sales of our common shares in certain equity offerings, within a specified period after the equity offering, at aredemption price of 108.125% of the principal amount of the August 2019 Senior Secured Notes, plus accrued and unpaid interest, if any, to (but notincluding) the redemption date, provided that at least 65% of the aggregate principal amount of the August 2019 Senior Secured Notes issued on August 30,2016 remain outstanding after each such redemption. The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from the August 2019 Senior SecuredNotes under the requirements of ASC 815. The embedded redemption options and repurchase features did not qualify for derivative accounting because theembedded derivatives were considered clearly and closely related to the characteristics of the August 2019 Secured Senior Notes. F-52  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) The August 2019 Indenture, contains certain covenants that, among others, restrict the Company’s ability and the ability of the Company’sRestricted Subsidiaries (as defined in the August 2019 Indenture) to incur additional debt or to issue preferred stock, to make certain payments orinvestments, to pay dividends or purchase or redeem capital stock, to sell assets (including limitations on the use of proceeds of asset sales), to grant liens onthe collateral securing the August 2019 Senior Secured Notes or other assets, to make certain other payments or to engage in transactions with affiliates andholders of more than 10% of the Company’s Common Shares, subject to certain qualifications and exceptions and satisfaction, in certain circumstances ofspecified conditions, such as a Fixed Charge Coverage Ratio (as defined in the August 2019 Indenture) of 2.50 to 1.0. Convertible Note On September 19, 2013, the Company issued and sold a senior secured Convertible Note in the aggregate principal amount of US$75,761,009 at par.Until redemption in November 2014, the Convertible Note bore interest at 5.00% per annum payable semi-annually. Interest was payable on March 19 andSeptember 19 of each year, commencing March 19, 2014. The final maturity date of the Convertible Note was September 19, 2018. The Convertible Note was convertible at the option of the holder at any time in integral multiples of $100,000 to 25,253,670 ordinary shares(12,626,835 ADS) at an initial conversion price of $3.00 per Common Share ($6.00 per ADS). The initial conversion price was subject to adjustments forshare splits, reverse splits, share dividends and distributions, certain issuances (or deemed issuances) of Common Shares for consideration less than theconversion price then in effect, and certain Extraordinary Cash Dividends (as defined in the Convertible Note). The Company’s obligations under the Convertible Note were guaranteed by certain of the Company’s wholly-owned subsidiaries, Xinyuan RealEstate, Ltd., Xinyuan International Property Investment Co., Ltd., Victory Good Development Limited, South Glory International Limited, Elite QuestHoldings Limited and Xinyuan International (HK) Property Investment Co., Limited (each, a “CN Subsidiary Guarantor” and collectively, the “CNSubsidiary Guarantors”) and was to be guaranteed by such other future subsidiaries of the Company as was set forth in and in accordance with the terms of theConvertible Note. The Company’s obligations under the Convertible Note were secured by a pledge of the capital stock of the Company’s wholly-ownedsubsidiaries, Xinyuan Real Estate, Ltd. and Xinyuan International Property Investment Co., Ltd., and the obligations of Xinyuan Real Estate, Ltd. as a CNSubsidiary Guarantor were secured by a pledge of the capital stock of its wholly-owned subsidiaries, Victory Good Development Limited, South GloryInternational Limited and Elite Quest Holdings Limited. The CN Subsidiary Guarantors are the same “Subsidiary Guarantors” of the Company’s May 2018Senior Secured Notes and June 2019 Senior Secured Notes (collectively, the “Senior Secured Notes”), and the shares of the subsidiaries pledged to secure theobligations of the Company and of Xinyuan Real Estate, Ltd. as a CN Subsidiary Guarantor have also been pledged as collateral with respect to theCompany’s Senior Secured Notes. In connection with the issuance of the Convertible Note, the Company entered into an Intercreditor Agreement withCiticorp International Limited, as trustee under the indenture for the Senior Secured Notes, the purchaser of the Convertible Note and Xinyuan Real Estate,Ltd., pursuant to which Citicorp International Limited acted as Shared Security Agent for the holders of the Senior Secured Notes and the Convertible Note. The Convertible Note was not redeemable in whole or in part at the option of the Company. However, upon an event of default, the holders couldrequire the Company to redeem the Convertible Note at a redemption price equal to the greater of (i) 150% of the outstanding principal amount, plus accruedand unpaid interest to the redemption date and (ii) an amount equal to (A) the outstanding principal divided by two, multiplied by the conversion price thenin effect, times (B) the closing price of the Common Shares, plus accrued and unpaid interest to the redemption date. F-53  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Following a Change of Control or a Fundamental Transaction, the Company was required to make an offer to purchase all outstanding ConvertibleNote at a purchase price equal to 150% of the principal amount thereof plus accrued and unpaid interest to the payment date. A “Change of Control” wasdefined in the Convertible Note to include certain mergers, consolidations or asset sales with persons who are not or are not controlled by Permitted Holders,certain share acquisitions by persons or groups other than Permitted Holders, a majority of the Company’s directors ceasing to be persons who are not, or whowere not approved by, the current directors, and the adoption of a plan relating to the liquidation or dissolution of the Company. “Permitted Holders” wereMr. Zhang Yong, Chairman of the Company, Ms. Yang Yuyan, and entities in which one or both of them owns 90% of the capital stock. A “FundamentalTransaction” was defined in the Convertible Note to include a consolidation or merger of the Company with or into, or a sale, lease, license or other transferor of the Company’ assets to, another person, a business combination in which another person acquires more than 50% of the Company’s voting stock, and areorganization or recapitalization of the Company or reclassification of the Common Shares. The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from the Convertible Note under therequirements of ASC 815. The Company evaluated and determined that the embedded conversion option, redemption options and anti-dilution feature donot require bifurcation from the Convertible Note under the requirements of ASC 815-10 because they are clearly and closely related to the debt hostinstrument. Beneficial conversion features (“BCF”) exist when the conversion price of the Convertible Note is lower than the fair value of the ordinary shareat the commitment date. Since the Convertible Note was convertible from inception but contain conversion terms that change upon the occurrence of a futureevent, the contingent beneficial conversion feature was measured at the commitment date but not recognized until the contingency is resolved. No BCF wasrecognized because the conversion price is greater than the fair value of the Company’s ordinary shares at the commitment date. The Convertible Note contained certain covenants that, among others, restricted the Company’s ability and the ability of the Company’s RestrictedSubsidiaries (as defined in the Convertible Note) and, in certain cases, all of its subsidiaries, to incur additional debt or to issue preferred stock, to makecertain payments or investments, to pay dividends or purchase of redeem capital stock, to sell assets (including limitations on the use of proceeds of assetsales), to grant liens on the collateral securing the Convertible Note or other assets, to make certain other payments or to engage in transactions with affiliates,subject to certain qualifications and exceptions and satisfaction, in certain circumstances, of specified conditions, such as a Consolidated Fixed ChargeCoverage Ratio (as defined in the Convertible Note) of 3.0 to 1.0 (which was also to be maintained as of the end of each fiscal quarter of the Company whilethe Convertible Note is outstanding). On November 21, 2014, pursuant to a note redemption agreement entered into with TPG Asia, the Company redeemed the Convertible Note in fullfor a total redemption amount of $86,272,849 consisting of the entire outstanding principal balance, interest to the redemption date and debt extinguishmentloss amounting to US$9,848,931, equal to 13% of the outstanding principal amount. In connection with the redemption, the Company agreed with TPG Asiato waivers of the covenants requiring the Company to maintain a Fixed Charge Coverage Ratio of not less than 3.0 to 1.0 and limiting the ability of theCompany and its Restricted Subsidiaries to incur indebtedness, except under limited circumstances. Onshore Corporate Bonds On December 28, 2015, Xinyuan (China) Real Estate, Ltd. issued the first tranche of the onshore corporate bonds with an aggregate principal amountof RMB1 billion (US$154 million) due on December 28, 2020 (the “First Tranche Bonds”) at a coupon rate of 7.5% per annum payable annually. Interest ispayable on December 28 of each year, commencing December 28, 2016. On January 27, 2016, Xinyuan (China) Real Estate, Ltd. issued the second tranche of the onshore corporate bonds with an aggregate principalamount of RMB0.7 billion (US$107 million) due on January 27, 2021 (the “Second Tranche Bonds”) at a coupon rate of 7.47% per annum payable annually.Interest is payable on January 27 of each year, commencing January 27, 2017. F-54  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) On March 14, 2016, Xinyuan (China) Real Estate, Ltd. issued the third tranche of the onshore corporate bonds with an aggregate principal amount ofRMB0.5 billion (US$77 million) due on March 14, 2021 (the “Third Tranche Bonds”) at a coupon rate of 7.09% per annum payable annually. Interest ispayable on March 14 of each year, commencing March 14, 2017. Given that above three tranches of onshore corporate bonds is debt in its legal form and is not a derivative in its entirety, it has been classified asother long-term debt. The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from these three tranches ofonshore corporate bonds under the requirements of ASC 815 “Derivatives and Hedging”. These three tranches of onshore corporate bonds were issued at par.Upon the third anniversary of the issuance of each tranche of bonds, Xinyuan (China) Real Estate Ltd may adjust the applicable coupon rate and the holdershave the right within a specified time period to require the Company to repurchase the bonds following the Company’s announcement of whether it intendsto adjust the interest rate. On August 15, 2016, Xinyuan (China) Real Estate, Ltd. issued a new tranche of onshore corporate bonds with an aggregate principal amount ofRMB1.5 billion (US$216 million) due on August 15, 2019 (the “New Tranche”) at a coupon rate of 7.5% per annum payable annually. Interest is payable onAugust 15 of each year, commencing August 15, 2017. Given that the New Tranche is debt in its legal form and is not a derivative in its entirety, it has beenclassified as other long-term debt. The Company has evaluated and determined that there was no embedded derivative requiring bifurcation from the NewTranche under the requirements of ASC 815, Derivatives and Hedging. The New Tranche was issued at par. Upon the first anniversary of the issuance of theNew Tranche, Xinyuan (China) Real Estate Ltd may adjust the applicable coupon rate and the holders have the right within a specified time period to requirethe Company to repurchase the bonds following the Company’s announcement of whether it intends to adjust the interest rate. Therefore, the entire amountof the New Tranche has been classified as current liabilities as of December 31, 2016. 13.Capital lease obligations On October 23, 2012, the Group entered into an agreement with Minsheng Hongtai (Tianjin) Aircraft Leasing Co., Ltd. (“Minsheng”) to lease acorporate aircraft. The lease meets the transfer-of-ownership to the lessee criterion and is therefore, classified as a capital lease. The corporate aircraft wasdelivered on September 12, 2013, and the capital lease commenced on September 15, 2013 (the “Commencement Date”). The lease has an eight year termand expires on September 15, 2021. The Group has to make 32 quarterly lease payments of US$1,426,435 starting from the Commencement Date. In 2012,Henan Xinyuan paid a deposit in the amount of US$6.7 million to Minsheng. Upon the expiration of the lease agreement, the deposit in the amount ofUS$6.7 million may be used as full and final payment to Minsheng to purchase the corporate aircraft. The effective interest rate for the capital leaseobligation is 10.47%. On August 1, 2016, the Group entered into a sale and leaseback agreement with Shenzhen Zhong An for shopping mall equipment. Upon expirationof the lease period and settlement of all the lease payments, the Group is entitled to purchase the leased assets at a nominal amount. The lease meets thetransfer-of-ownership to the lessee criterion and is therefore, classified as a capital lease. The capital lease commenced on August 1, 2016 (the“Commencement Date”). The lease has a three year term and expires on July 31, 2019. The Group has to make 12 quarterly lease payments of US$260,143starting from the Commencement Date. The effective interest rate for the capital lease obligation is 5.58%. F-55  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Capital lease obligations are summarized as follows: December 31,2015 December 31,2016 US$ US$ Capital lease obligations, net of current maturities Due to Minsheng 18,111,007 13,518,898 Due to related party - Shenzhen Zhong An - 1,496,610 18,111,007 15,015,508 Current maturities of capital lease obligations Due to Minsheng 3,065,612 2,869,663 Due to related party - Shenzhen Zhong An - 1,053,731 3,065,612 3,923,394 Total capital lease obligations 21,176,619 18,938,902 14.Customer deposits Advances for real estate properties comprise of sales proceeds received from customers for the pre-sale of residential units in the PRC. Advances forreal estate properties are typically funded up to 40% - 80% by mortgage loans made by banks to the customers. The Group holds certain cash balances inrestricted cash accounts at the relevant banks (see Note 2 (f)). The Group, in turn, has a right to withhold transfer of title to the customer until outstandingamounts are fully settled. December 31,2015 December 31,2016 US$ US$ Advances for real estate properties 1,255,600,108 1,412,304,143 Add: increase/(decrease) in revenue recognized in excess of amounts received from customers 18,940,748 (16,222,702)Less: recognized as progress billings (see Note 4) 1,210,089,345 1,245,536,188 Customer deposits (Note 2h,2n) 64,451,511 150,545,253 15.Income taxes (a)Corporate income tax (“CIT”) Under the current law of the Cayman Islands, the Company is not subject to income tax. The Company’s PRC subsidiaries are subject to income tax at the statutory rate of 25% in accordance to the PRC corporate income tax laws andregulations. Further, under the same tax guidance, dividends paid by PRC enterprises out of profits earned post-2007 to non-PRC tax resident investors aresubject to PRC dividend withholding tax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain jurisdictions. The Company’s HK subsidiaries are subject to income tax at the statutory rate of 16.5% in accordance to the HK Corporate Income Tax Laws andregulations. For the years ended December 31, 2014, 2015 and 2016, the Company did not make any provisions for Hong Kong profit tax as there were noassessable profits derived from or earned in Hong Kong for any of the periods presented. Under the Hong Kong tax law, the Company’s HK subsidiaries areexempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends. The Company’s US subsidiaries are subject to income tax at the effective rate of approximately 48% in accordance with US corporate income taxlaws and regulations. The Company’s Malaysian subsidiaries are subject to income tax at the statutory rate of 25% in accordance with Malaysia corporate income tax lawsand regulations. F-56  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) There is no provision for income taxes for the Company’s Malaysian subsidiaries because these subsidiaries were in a cumulative loss positions forall the periods presented. Income before income tax expenses consists of: Year ended December 31, 2014 2015 2016 US$ US$ US$ PRC 112,781,760 154,833,605 211,620,233 Non PRC (33,727,777) (35,840,702) (45,909,678) Total 79,053,983 118,992,903 165,710,555 Income tax expenses for the years ended December 31, 2014, 2015 and 2016 are summarized as follows: Year ended December 31, 2014 2015 2016 US$ US$ US$ Current: CIT tax expense 20,791,855 48,523,618 70,285,607 Land Appreciation Tax (“LAT”) expense (3,771,248) 23,223,407 33,254,340 Deferred tax expense/(benefit) 13,537,011 (19,235,707) (17,292,072) Income tax expense 30,557,618 52,511,318 86,247,875 The Group’s income tax expense differs from the tax expense computed by applying the statutory CIT rate of 25% for the years ended December 31,2014, 2015 and 2016, are as follows: Year ended December 31, 2014 2015 2016 US$ US$ US$ CIT at rate of 25% 19,763,496 29,748,226 41,427,639 Tax effect of non-deductible expenses 6,535,308 2,028,153 7,425,406 Unrecognized tax benefits (8,628,537) (6,354,200) (1,949,726)LAT expense (3,771,248) 23,223,407 33,254,340 CIT benefit of LAT 942,812 (5,805,852) (8,313,585)Changes in valuation allowance - 4,274,501 (1,161,335)International rate difference 10,681,232 6,075,360 17,814,114 Income tax on undistributed earnings of PRC subsidiaries 440,464 3,675,156 - Adjustment of estimated income tax accruals 3,953,417 (4,412,050) (1,979,380)Others 640,674 58,617 (269,598) Actual income tax expense 30,557,618 52,511,318 86,247,875 Income tax on undistributed earnings of PRC subsidiaries represents accrued withholding tax related to the portion of the Group’s retained earningsthat were not considered permanently reinvested. (b)Unrecognized tax benefit The following table summarizes the activities related to the Group’s unrecognized tax benefits: 2014 2015 2016 US$ US$ US$ Balance at January 1 16,313,513 14,005,004 17,842,283 Additions for tax positions of current year 6,400,006 11,592,738 5,549,004 Movement in current year due to foreign exchange rate fluctuation (79,978) (313,640) (68,926)Reductions for tax positions of prior years (4,125,703) (3,669,272) (880,647)Lapse of statute of limitations (4,502,834) (3,772,547) (1,949,726) Balance at December 31 14,005,004 17,842,283 20,491,988 F-57  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) The movement in the liability for unrecognized tax benefits of US$6,400,006 in 2014 was partly due to Henan Xinyuan with the application of thedeemed profit method by the local tax authority of Zhengzhou city related to the Zhengzhou Modern City project upon completion of the developmentproject. The Group believes that the possibility exists for reinterpretation of the application of the tax regulations by higher tax authorities in the PRC,potentially overturning the decision made by the local tax authority to apply the deemed profit method. Because of the uncertainty surrounding whether theapplication of the deemed profit method for Zhengzhou Modern City project will be re-evaluated and the taxes adjusted, the difference between the taxes duebased on taxable income calculated according to statutory taxable income method and the taxes due based on the deemed profit method has been recorded asan additional receivable or payable and has been included in unrecognized tax benefits. The remaining balance of the current year movement in the liabilityfor unrecognized tax benefits were mainly due to deemed interest income from subsidiaries of the Company during the year. The movement in the liabilityfor unrecognized tax benefits of US$79,978 was due to the fluctuation of US$/RMB exchange rate, and therefore was recorded as other comprehensiveincome arising from the foreign currency translation. The remaining change of US$4,502,834 was recognized as a reduction of unrecognized tax benefits dueto the expiration of the statute of limitations period, and the amount of US$4,125,703 was recognized due to the receipt of the official tax invoice in 2014. The movement in the liability for unrecognized tax benefits of US$11,592,738 in 2015 was due to deemed interest income from subsidiaries of theCompany during the year. The movement in the liability for unrecognized tax benefits of US$313,640 was due to the fluctuation of US$/RMB exchange rate,and therefore was recorded as other comprehensive income arising from the foreign currency translation. The remaining change of US$3,772,547 wasrecognized as a reduction of unrecognized tax benefits mainly due to the expiration of the statute of limitations period, and the amount of US$3,669,272 wasrecognized due to the availability for taxation deductions in 2015. The current year movement in the liability for unrecognized tax benefits of US$5,549,004 in 2016 was due to deemed interest income fromsubsidiaries of the Company during the year. The movement in the liability for unrecognized tax benefits of US$68,926 was due to the fluctuation ofUS$/RMB exchange rate, and therefore was recorded as other comprehensive income arising from the foreign currency translation. The remaining change ofUS$1,949,726 was recognized as a reduction of unrecognized tax benefits mainly due to the expiration of the statute of limitations period, and the amount ofUS$880,647 was recognized due to the availability for taxation deductions in 2016. As of December 31, 2015 and 2016, unrecognized tax benefits of US$1,993,721 and nil, respectively, if ultimately recognized, will impact theeffective tax rate. The Group anticipates new unrecognized tax benefits, related to tax positions similar to those giving rise to its existing unrecognized taxbenefits, to originate after December 31, 2016. It is possible that the amount of uncertain tax positions will change in the next twelve months, however, anestimate of the range of the possible outcomes cannot be made at this time. The PRC income tax returns for fiscal year 2012 through fiscal year 2016 remain open to potential examination. In addition, local tax authoritiesmay exercise broad discretion in applying the tax law, thus potentially exposing the PRC subsidiaries to audits of tax years outside the general statute oflimitations. It is the Group’s continuing practice to recognize interest and penalties related to uncertain tax positions in interest expenses and other expenses,respectively. For the years ended December 31, 2014, 2015 and 2016, no interests and penalties have been recognized under ASC 740-10 as managementbelieves that there will be no interest and penalties charged relating to a re-evaluation of a tax levy method. F-58  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (c)LAT Since January 1, 1994, LAT has been applicable at progressive tax rates ranging from 30% to 60% on the appreciation of land values, with anexemption provided for the sales of ordinary residential properties if the appreciation values do not exceed certain thresholds specified in the relevant taxlaws. However, prior to September 2004, the local tax authority in Zhengzhou city did not impose the regulation on real estate companies in its area ofadministration. Since September 2004, the local tax authority has levied the LAT at the rate of 0.8% or 1.0% against total cash receipts from sales of realestate properties, rather than according to the progressive rates. In early 2007, the national PRC tax authorities clarified the regulations to require the fullpayment of LAT in accordance with the progressive rates. For the years ended December 31, 2014, 2015 and 2016, the Group has made provision for LAT with respect to properties sold up to December 31,2016 in accordance with the requirements set forth in the relevant PRC tax laws and regulations. (d)Deferred tax The tax effects of temporary differences that give rise to the Group’s net current deferred tax assets and liabilities as of December 31, 2015 and 2016are as follows: December 31, 2015 December 31, 2016 US$ US$ Current deferred tax assets: Tax loss carried forward 9,858,503 4,098,537 Accruals and provisions 6,269,775 15,756,338 Deemed interest income 14,868,874 - Unrealized profit at consolidation 2,946,297 4,667,343 Allowance for deferred tax assets (4,274,501) (2,913,798) Total current deferred tax assets 29,668,948 21,608,420 Current deferred tax liabilities: Revenue recognized based on percentage of completion (38,623,934) (57,670,568)Real estate properties accelerated cost deduction (1,282,034) (794,822)Taxable temporary differences arising from business combinations and assets acquisition (47,409,723) (42,703,964)Others (45,532) (45,533) Total current deferred tax liabilities (87,361,223) (101,214,887) Net current deferred tax liabilities (57,692,275) (79,606,467) The tax effects of temporary differences that give rise to the Group’s net long-term deferred tax assets and liabilities as of December 31, 2015 and2016 are as follows: December 31, 2015 December 31, 2016 US$ US$ Long-term deferred tax assets: Tax loss carried forward 5,553,093 20,064,937 Revenue recognition of real estate lease income on a straight-line basis 8,955,776 9,132,603 Deemed interest income - 20,417,879 Others 979,688 74,109 Total long-term deferred tax assets 15,488,557 49,689,528 Long-term deferred tax liabilities: Income tax on undistributed earnings of PRC subsidiaries (13,500,239) (13,500,239) Total long-term deferred tax liabilities (13,500,239) (13,500,239) Net long-term deferred tax assets 1,988,318 36,189,289 F-59  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Certain of the Company’s PRC subsidiaries have PRC tax net operating loss carry forwards of US$96.6 million (2015: US$39.4 million) which willexpire in one to five years, if unutilized. Losses incurred in the U.S. amounting to US$1.8 million (2015: US$9.0 million) can be carried forward for 20 years. During 2015 and 2016, the Company has considered its operational funding needs, future development initiatives and its dividend distribution planand is permanently reinvesting all but US$332.9 million and US$482.6 million (including US$393.9 million that may be remitted on a tax-free basis that iswithin the parent company’s control and presently available) of its PRC subsidiaries earnings as at December 31, 2015 and 2016, respectively. Accordingly,the Company accrued deferred income tax liabilities of US$13.5 million and US$13.5 million for the withholding tax liability associated with thedistribution of retained earnings that are not permanently reinvested as at December 31, 2015 and 2016, respectively. As of December 2015 and 2016, thetotal amount of undistributed earnings from the Company’s PRC subsidiaries that are considered to be permanently reinvested were US$509.1 million andUS$407.7 million, and the related unrecognized deferred tax liabilities were approximately US$50.9 million and US$40.8 million, respectively. TheCompany’s remaining subsidiaries do not have retained earnings for all the periods presented. For each subsidiary, deferred tax assets have been netted against deferred tax liabilities by current classification, as the reversal of the underlyingtemporary differences is expected to occur in the same future periods. In assessing the ability to realize the deferred tax assets, the Group has considered whether it is more likely than not that some portion or all of thedeferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during theperiods in which those temporary differences become deductible. Accordingly, the Group recorded valuation allowance amounting US$4,274,501 andUS$2,913,798 as of December 31, 2015 and 2016, respectively. 16.Share-based compensation As of December 31, 2016, the Company has four share-based compensation plans under which awards may be granted to both employees and non-employees, namely, the 2007 Equity Incentive Plan (the “Plan”), 2007 Long Term Incentive Plan (the “2007 Plan”), 2015 Long Term Incentive Plan (the“2015 Plan”), and 2014 Restricted Stock Unit Plan (the “2014 RSU Plan”). Compensation cost of US$7,828,255 (2014: US$3,232,940, 2015: US$4,904,626)was recorded in general and administrative expenses for those plans with a corresponding credit to additional paid-in capital in the year ended December 31,2016. The compensation cost is regarded as a permanent difference for income tax purposes as the options were granted by the Company, which is registeredin the Cayman Islands, a tax free jurisdiction. Hence, no tax benefit was recognized upon the recognition of compensation cost. The Company has a policy ofusing authorized shares in the existing pool to satisfy any future exercise of share options and shares repurchased held by a third party trustee to satisfy theRSUs granted under the 2014 RSU Plan. Plan On August 11, 2007, the Company granted share options to purchase up to 6,125,374 common shares to its directors and employees, at exerciseprices ranging from US$0.0001 to US$2.50 per share. These options have a weighted average grant date fair value of US$2.67 per option, and a totalexpected compensation cost, net of expected forfeitures, of US$15,564,801. These options have vesting periods based on length of service ranging from 10 to60 months and will expire no later than August 10, 2017. These options are performance-based and did not begin vesting until the Company’s IPO was ineffect. However, upon the effectiveness of the IPO, these awards had an immediate vesting of all shares that would have vested between the grant date and theeffectiveness of the IPO. F-60  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) 2007 Plan In November 2007, the Company adopted the 2007 Plan which provides for the grant of options, restricted shares, restricted stock units, stockappreciation rights and other stock-based awards to purchase its common shares. The maximum aggregate number of common shares which may be issuedpursuant to all awards, including options, is 10 million common shares, subject to adjustment to account for changes in the capitalization of the Company. On June 25, 2014, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 600,000 common shares toone employee, at an exercise price of US$2.045 per share. These options have a weighted average grant date fair value of US$0.52 per option and a totalexpected compensation cost, net of expected forfeitures, of US$311,098. These options have vesting periods based on length of service of 36 months and willexpire no later than June 25, 2024. On June 30, 2014, under the 2007 Plan, the Company granted share options to purchase up to 907,000 common shares to six employees, at anexercise price of US$1.21 per share. These options have a weighted average grant date fair value of US$0.81 per option and a total expected compensationcost, net of expected forfeitures, of US$734,181. These options became vested and exercisable immediately. On February 26, 2015, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 200,000 common sharesto one employee, at an exercise price of US$1.255 per share. These options have a weighted average grant date fair value of US$0.36 per option and a totalexpected compensation cost, net of expected forfeitures, of US$71,853. These options have vesting periods based on length of service of 36 months and willexpire no later than February 26, 2025. On April 10, 2015, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 600,000 common shares toone employee, at an exercise price of US$1.605 per share. These options have a weighted average grant date fair value of US$0.52 per option and a totalexpected compensation cost, net of expected forfeitures, of US$312,671. These options have vesting periods based on length of service of 36 months and willexpire no later than April 10, 2025. On July 1, 2015, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 1,200,000 common shares totwo employees, at an exercise price of US$1.71 per share. These options have a weighted average grant date fair value of US$0.48 per option and a totalexpected compensation cost, net of expected forfeitures, of US$577,836. These options have vesting periods based on length of service of 36 months and willexpire no later than July 1, 2025. On September 30, 2015, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 200,000 common sharesto one employee, at an exercise price of US$1.39 per share. These options have a weighted average grant date fair value of US$0.50 per option and a totalexpected compensation cost, net of expected forfeitures, of US$100,243. These options have vesting periods based on length of service of 36 months and willexpire no later than September 30, 2025. On November 6, 2015, under the 2007 Plan, the Company granted share options with service conditions to purchase up to 200,000 common sharesto one employee, at an exercise price of US$1.81 per share. These options have a weighted average grant date fair value of US$0.61 per option and a totalexpected compensation cost, net of expected forfeitures, of US$122,109. These options have vesting periods based on length of service of 36 months and willexpire no later than November 6, 2025. F-61  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) 2015 Plan In June 2015, the Company approved the 2015 Plan to provide grant of options to purchase shares of company stock with maximum aggregatenumber of 20 million common shares, subject to adjustment to account for changes in the capitalization of the Company. On July 1, 2015, under the 2015 Plan, the Company granted share options with service conditions to purchase up to 6,574,600 common shares totwenty-two employees, at an exercise price of US$1.71 per share. These options have a weighted average grant date fair value of US$0.48 per option and atotal expected compensation cost, net of expected forfeitures, of US$3,165,867. These options have vesting periods based on length of service of 34 monthsand will expire no later than July 1, 2025. On July 29, 2015, under the 2015 Plan, the Company granted share options with service conditions to purchase up to 81,600 common shares to oneemployee, at an exercise price of US$1.71 per share. These options have a weighted average grant date fair value of US$0.42 per option and a total expectedcompensation cost, net of expected forfeitures, of US$34,294. These options have vesting periods based on length of service of 33 months and will expire nolater than July 29, 2025. Assumptions The Company assumed the forfeiture ratios of 0% for non-executive employees and executives in arriving at the total compensation expense. Alloutstanding unvested stock options as of December 31, 2016 under the Plan, the 2007 Plan and the 2015 Plan were related to executives and therefore, areexpected to vest in full. No options were granted during the year ended December 31, 2016. The fair value of each option is estimated on the date of grant using the Dividend Adjusted Black-Scholes option-pricing model that uses theassumptions noted below. Options Granted in2014Under the 2007 Plan Options Granted in 2015Under the 2007 Plan Options Granted in 2015 Under the 2015 Plan Average risk-free rate of return 2.5% 1.82-1.92% 1.57-1.92%Expected term 5-6 Years 6 Years 6 Years Volatility rate 40.5-41.4% 46.3-55.2% 55.0-55.9%Dividend yield 5% 5% 5% The risk-free rate for periods within the expected life of the option is based on the implied yield rates of U.S treasury yield curve in effect at the timeof grant. The expected life of options represents the period of time the granted options are expected to be outstanding. The Company had limited historicalexercise data. Therefore, the expected life was estimated as the average of the contractual term and the vesting period. The dividend yield was based on theCompany’s dividend distribution plan. The expected volatility was based on the historical daily stock price of the Company, annualized. F-62  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Share Option Activity The following table is a summary of the Company’s share option activity under the Plan (in US$, except options): Options under the Plan Number of Options WeightedAverageExercisePrice WeightedRemainingContractualLife (Years) AggregateIntrinsicValue Outstanding, January 1, 2016 2.50 (exercise price) 557,396 2.5 1.58 - Granted - - - - Exercised 2.50 (exercise price) 1,746 2.5 - 262 Forfeited 2.50 (exercise price) 944 2.5 - - Outstanding, December 31, 2016 2.50 (exercise price) 554,706 2.5 0.58 - Exercisable as at December 31, 2016 2.50 (exercise price) 554,706 2.5 0.58 The aggregate intrinsic value in the table above represents the total intrinsic value (the aggregate difference between the Company’s closing stockprice of US$2.48 per common share as of December 31, 2016 and the exercise price for in-the-money options) that would have been received by the optionholders if all in-the-money options had been exercised on December 31, 2016. All the options were fully vested as of December 31, 2012. As of December 31, 2016, there was no unrecognized compensation cost related to unvested share-based compensation arrangements granted toemployees and non-employees under the Plan. The following table is a summary of the Company’s share option activity under the 2007 Plan (in US$, except options): Options Under the 2007 Plan Number ofOptions WeightedAverageExercise Price WeightedRemainingContractualLife (Years) AggregateIntrinsicValue Outstanding, January 1, 2016 7.0 (exercise price) 792,056 7.00 1.83 - 2.975 (exercise price) 180,000 2.975 2.50 - 1.87 (exercise price) 93,334 1.87 3.25 - 1.21 (exercise price) 754,000 1.21 4.95 478,790 1.085 (exercise price) 100,000 1.085 5.50 76,000 1.64 (exercise price) 200,000 1.64 6.87 41,000 2.105 (exercise price) 600,000 2.105 7.50 - 2.86 (exercise price) 600,000 2.86 7.67 - 1.21 (exercise price) 873,000 1.21 8.50 554,355 1.255(exercise price) 200,000 1.255 9.16 118,000 1.605(exercise price) 600,000 1.605 9.27 144,000 1.71(exercise price) 1,200,000 1.71 9.50 162,000 1.39(exercise price) 200,000 1.39 9.75 91,000 1.81(exercise price) 200,000 1.81 9.85 7,000 Granted - - - - Exercised 1.21 (exercise price) 530,600 1.21 - 467,357 2.105 (exercise price) 40,876 2.105 - 17,176 1.87 (exercise price) 93,334 1.87 - 72,263 1.255 (exercise price) 200,000 1.255 - 270,374 1.605 (exercise price) 200,000 1.605 - 207,269 1.71 (exercise price) 400,000 1.71 - 382,836 1.81 (exercise price) 66,000 1.81 - 48,858  F-63  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Options Under the 2007 Plan Number ofOptions WeightedAverageExercise Price WeightedRemainingContractualLife (Years) AggregateIntrinsicValue Forfeited 1.605 (exercise price) 400,000 1.605 - - 1.71 (exercise price) 800,000 1.71 - - 1.39 (exercise price) 200,000 1.39 - - Outstanding, December 31, 2016 7.0 (exercise price) 792,056 7.00 0.83 - 2.975 (exercise price) 180,000 2.975 1.50 - 1.21 (exercise price) 754,000 1.21 3.95 957,580 1.085 (exercise price) 100,000 1.085 4.50 139,500 1.64 (exercise price) 200,000 1.64 5.87 168,000 2.105 (exercise price) 559,124 2.105 6.50 209,672 2.86 (exercise price) 600,000 2.86 6.67 - 1.21 (exercise price) 342,400 1.21 7.50 434,848 1.81(exercise price) 134,000 1.81 8.85 89,780 Exercisable as at December 31, 2016 7.0 (exercise price) 792,056 7.00 0.83 - 2.975 (exercise price) 180,000 2.975 1.50 - 1.21 (exercise price) 754,000 1.21 3.95 957,580 1.085 (exercise price) 100,000 1.085 4.50 139,500 1.64 (exercise price) 200,000 1.64 5.87 168,000 2.105 (exercise price) 559,124 2.105 6.50 209,672 2.86 (exercise price) 600,000 2.86 6.67 - 1.21 (exercise price) 342,400 1.21 7.50 434,848 The aggregate intrinsic value in the table above represents the total intrinsic value (the aggregate difference between the Company’s closing stockprice of US$2.48 per common share as of December 31, 2016 and the exercise price for in-the-money options) that would have been received by the optionholders if all in-the-money options had been exercised on December 31, 2016. As of December 31, 2016, there was US$74,622 of total unrecognizedcompensation cost related to non-vested share-based compensation arrangements granted to employees, under the 2007 Plan. The cost is expected to berecognized using a straight-line method over a weighted-average period of 1.85 years. Total fair value of options vested during the year ended December 31,2014, 2015 and 2016 was US$1,206,372, and US$633,113, and US$362,487, respectively. The following table is a summary of the Company’s share option activity under the 2015 Plan (in US$, except options): Options Under the 2015 Plan Number ofOptions WeightedAverageExercisePrice WeightedRemainingContractualLife (Years) AggregateIntrinsicValue Outstanding, January 1, 2016 1.71(exercise price) 81,600 1.71 9.58 11,016 1.71(exercise price) 6,574,600 1.71 9.50 887,571 Granted - - - - Exercised 1.71(exercise price) 628,328 1.71 - 544,274 Forfeited 1.71 (exercise price) 1,155,072 1.71 - - Outstanding, December 31, 2016 1.71(exercise price) 81,600 1.71 8.58 62,832 1.71(exercise price) 4,791,200 1.71 8.50 3,689,224 Exercisable as at December 31, 2016 1.71(exercise price) 27,200 1.71 8.58 20,944 1.71(exercise price) 1,563,192 1.71 8.50 1,203,658  F-64  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) The aggregate intrinsic value in the table above represents the total intrinsic value (the aggregate difference between the Company’s closing stockprice of US$2.48 per common share as of December 31, 2016 and the exercise price for in-the-money options) that would have been received by the optionholders if all in-the-money options had been exercised on December 31, 2016. As of December 31, 2016, there was US$1,051,494 of total unrecognizedcompensation cost related to non-vested share-based compensation arrangements granted to employees, under the 2015 Plan. The cost is expected to berecognized using a straight-line method over a weighted-average period of 1.5 years. Total fair value of options vested during the year ended December 31,2015 and 2016 was US$639,524 and US$952,941, respectively. 2014 RSU Plan On May 23, 2014, the Board of Directors approved the 2014 RSU Plan, which is administered by the Compensation Committee of the Board ofDirectors. The 2014 RSU Plan provides for discretionary grants of restricted stock units, or RSUs, to or for the benefit of participating employees. Themaximum number of common shares that may be delivered to 2014 RSU Plan participants in connection with RSUs granted under the 2014 RSU Plan is10,000,000, subject to adjustment if the Company’s outstanding common shares are increased, decreased, changed into or exchanged for a different numberor kind of shares or securities of the Company through a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split orother similar transaction. On May 23, 2014, the Company established a trust that is governed by a third party trustee and deposited US$7,042,725 into the trust. The trusteeused the funds to acquire 4,234,884 common shares in the open market. The awards vest ratably over a three year service vesting period. The aggregate fairvalue of the restricted shares granted at the grant date shall be recognized as compensation expense using the straight-line method. On April 10, 2015, under the 2014 RSU Plan, the Company deposited US$3,259,998 into the trust. The trustee used the funds to acquire 2,076,964common shares from the open market. The awards vest ratably over a three year service vesting period. The aggregate fair value of the restricted sharesgranted at the grant date shall be recognized as compensation expense using the straight-line method. On April 18, 2016, under the 2014 RSU Plan, the Company deposited US$4,003,999 into the trust. The trustee used the funds to acquire 1,614,220common shares from the open market. The awards vest ratably over a three year service vesting period. The aggregate fair value of the restricted sharesgranted at the grant date shall be recognized as compensation expense using the straight-line method. The weighted average grant-date fair value of restricted shares granted during the years ended December 31, 2014, 2015 and 2016 was US$2.01,US$1.605 and US$2.75, respectively, which was derived from the fair value of the underlying ordinary shares. F-65  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Other awards On December 29, 2014, Xinyuan International (Hong Kong) Property Investment Inc. (“XYHK”) signed an agreement to acquire a 100% equityinterest in XIN Eco Marine Group Properties Sdn Bhd (formerly named as EMG Group Properties Sdn Bhd) (“EMG”) for purpose of acquiring a landreclamation development located in Pekan Klebang, Section II, District of Melaka Tengah, Malaysia. On the acquisition date, EMG signed an agreement (“Service Agreement”) with one of the selling shareholders, Mr. Alex Teh Chee Teong(“Mr.Teh”),appointing Mr. Teh as a project manager to assist XYHK in supervising and completing the land reclamation development within twenty fourmonths from the reclamation works commencement date. Under the same Service Agreement, EMG granted Mr. Teh an option to purchase 25% of EMG’sequity interest (“Share Option”) in exchange for post-acquisition services subject to the fulfillment of certain performance conditions. The Company with theassistance of an independent valuator determined that the fair value of the Share Option at the acquisition date is US$3,167,000. However, no compensationexpense was recorded as of December 31, 2014, 2015 and 2016 since such performance conditions were not met. 17.Other payables and accrued liabilities The components of other payables and accrued liabilities are as follows: December 31, 2015 December 31, 2016 US$ US$ Contract deposit 31,740,289 81,095,384 Accrued expense 22,170,906 22,325,547 Deed tax and maintenance fund withheld for customers 13,318,504 10,566,064 Bidding deposit 1,881,217 1,959,950 Welfare payable 1,590,932 1,489,242 Other tax payable 14,178,760 7,908,792 Accrued aircraft operating expense 701,721 1,251,952 Accrued interest expense 8,445,279 42,371,395 Others 12,098,761 30,692,839 Total 106,126,369 199,661,165 18.Related party and employee transactions (a)Amounts due from related parties December 31,2015 December 31, 2016 US$ US$ Shaanxi Zhongmao 45,072,727 - Ruihao Rongtong 10,816,284 - Beijing Starry Sky Cinema Co., Ltd. 2,741,161 17,731,875 58,630,172 17,731,875 As of December 31, 2015, the balance due from Shaanxi Zhongmao, Ruihao Rongtong and Beijing Starry Sky Cinema are related to advances foroperational needs without any fixed payments terms. This balance is unsecured, bears no interest, and is expected to be repaid in one year. As of December 31, 2016, the balance due from Beijing Starry Sky Cinema is related to advances for operational needs without any fixed paymentsterms. This balance is unsecured, bears no interest, and is expected to be repaid in one year. F-66  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) During the year ended December 31, 2016, the Group received full reimbursement of US$3.12 million relating to software technical services fromBeijing Aijieli Technology Development Co., Ltd. (“Aijieli”), a company owned by senior management members of the Company. During the year endedDecember 31, 2016, the Group also made advances to Aijieli for its start-up needs amounting to US$4.35 million, which was repaid in full by Aijieli as ofDecember 31, 2016. On June 28, 2016, the Group sold 6% of its equity interest in Xinyuan Service to key management personnel (see Note 25) for US$506,696, whichwas based on an appraised value by an independent valuer. On November 10, 2016, the Group sold 21.05% of its equity interest in Shanghai Hexinli (see Note 25), a dormant company with no operations tokey management personnel for US$337,344, calculated by multiplying the percentage sold with Shanghai Hexinli’s paid-in capital. (b)Amounts due to related party December 31,2015 December 31, 2016 US$ US$ Shenzhen Pingjia Investment Management Co., Ltd. - 66,229,724 Shenzhen Pingjia Investment Management Co., Ltd. (“Shenzhen Pingjia”) is the non-controlling interest shareholder of Zhengzhou Xinnan, one ofthe Company’s subsidiaries (see Note 25). As of December 31, 2016, Shenzhen Pingjia advanced US$63,572,149 of working capital funds to ZhengzhouXinnan that is expected to be repaid in one year. Of the amount advanced, US$24,086,781 was in the form of an unsecured interest bearing loan at an annualrate of 12%, which has no fixed payment terms, and bears accrued interest amounting US$2,657,575 as of December 31, 2016. The remaining advances wereunsecured and bore no interest. On August 1, 2016, the Group entered into a sale and leaseback of shopping mall equipment agreement with Shenzhen Zhong An, which is a jointventure of the Group (see Note 13). On November 10, 2016, the Group acquired 70% of Xinrock, a dormant company with no operations from a senior management member at nilconsideration. The remaining 30% equity interest in Xinrock is held by key management personnel (see Note 25). (c)Amounts due from employees December 31,2015 December 31, 2016 US$ US$ Advances to employees 350,919 620,462 The balance represents cash advances to employees for traveling expenses and other expenses. The balances are unsecured, bear no interest and haveno fixed payment terms. (d)Others For the year ended December 31, 2016, total directors’ remuneration amounted to US$10,295,641 (2014: US$8,145,311; 2015: US$8,549,672). All other related party transactions have been disclosed in Notes 2a and 12. F-67  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) 19.Equity (i)As at December 31, 2016, the Company’s authorized share capital was 500 million common shares, par value US$0.0001 per share(December 31, 2015: 500 million common shares). (ii)During the year ended December 31, 2014, 33,000 options were exercised at US$1.21 per share under the 2007 Plan. (iii)During the year ended December 31, 2014, 9,025,690 common shares were repurchased at a total cost of US$17,610,787. (iv)During the year ended December 31, 2014, 4,234,884 common shares were repurchased at a total cost of US$7,042,725 under the 2014 RSUPlan, which were granted to employees and directors. (v)During the year ended December 31, 2014, the Company distributed quarterly dividends of US$0.025 per common share to commonshareholders amounting to a total of US$15,288,919. (vi)During the year ended December 31, 2015, 40,000 options were exercised at US$1.21 per share under the 2007 Plan. (vii)During the year ended December 31, 2015, 2,179,902 common shares were repurchased at a total cost of US$3,349,172. (viii)During the year ended December 31, 2015, 2,076,964 common shares were repurchased at a total cost of US$3,259,998 under the 2014 RSUPlan, which were granted to employees and directors. (ix)During the year ended December 31, 2015, the Company distributed quarterly dividends of US$0.025 per common share to commonshareholders amounting to a total of US$14,751,704. (x)During the year ended December 31, 2016, 1,746 options were exercised at US$2.50 per share under the Plan. (xi)During the year ended December 31, 2016, 530,600 options were exercised at US$1.21 per share under the 2007 Plan. (xii)During the year ended December 31, 2016, 40,876 options were exercised at US$2.105 per share under the 2007 Plan. (xiii)During the year ended December 31, 2016, 93,334 options were exercised at US$1.87 per share under the 2007 Plan. (xiv)During the year ended December 31, 2016, 200,000 options were exercised at US$1.255 per share under the 2007 Plan. (xv)During the year ended December 31, 2016, 200,000 options were exercised at US$1.605 per share under the 2007 Plan. (xvi)During the year ended December 31, 2016, 400,000 options were exercised at US$1.71 per share under the 2007 Plan. (xvii)During the year ended December 31, 2016, 66,000 options were exercised at US$1.81 per share under the 2007 Plan. F-68  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (xviii)During the year ended December 31, 2016, 628,328 options were exercised at US$1.71 per share under the 2015 Plan. (xix)During the year ended December 31, 2016, 13,198,238 common shares were repurchased at a total cost of US$29,688,648. (xx)During the year ended December 31, 2016, 1,614,220 common shares were repurchased at a total cost of US$ 4,003,999 under the 2014RSU Plan, which were granted to employees and directors. (xxi)In the first half of 2016, the Company distributed quarterly dividends of US$0.025 per common share to common shareholders amountingto a total of US$7,015,794. In the second half of 2016, the Company distributed quarterly dividends of US$0.05 per common share tocommon shareholders amounting to a total of US$13,529,463. 20.Earnings per share Basic and diluted net earnings per share for each period presented are calculated as follows: December 31, 2014 2015 2016 US$ US$ US$ Numerator: Net income attributable to Xinyuan Real Estate Co., Ltd. Shareholders – basic 48,515,730 66,482,107 72,977,548 Interest expense associated with the Convertible Note 2,690,572 - - Net income attributable to Xinyuan Real Estate Co., Ltd. shareholders – diluted 51,206,302 66,482,107 72,977,548 Denominator: Weighted average number of shares outstanding, basic* 151,935,765 142,625,427 133,261,510 Convertible Note (Note 12) 24,561,789 - - Stock options 620,681 348,603 1,271,209 Restricted stock units - 3,513,919 3,120,310 Weighted average number of shares outstanding-diluted 177,118,235 146,487,949 137,653,029 Basic earnings per share 0.32 0.47 0.55 Diluted earnings per share 0.29 0.45 0.53 *The restricted shares repurchased by the trustee that are unvested are excluded from the number of shares outstanding for purposes of computingbasic earnings per share in accordance with ASC 260. However, these unvested restricted shares are factored into the computation of diluted earningsper share using the treasury stock method. During the year ended December 31, 2016, 2,260,762 (2014: 4,086,084; 2015: 11,878,986) stock options were excluded from the calculation ofearnings per share because their effect would be anti-dilutive. 21.Segment reporting The Group’s long-lived assets and revenue are mainly located in and derived from the PRC. Starting in 2012, a relatively smaller portion of theGroup’s long-lived assets and revenue are located in and derived from the United States. The Group considers that each of its individual propertydevelopments is a discrete operating segment. The Group has aggregated its segments on a provincial basis as property development projects undertakenwithin a province have similar expected economic characteristics, type of properties offered, customers and market and regulatory environment. The Group’sreportable operating segments are comprised of Henan Province, Shandong Province, Jiangsu Province, Sichuan Province, Beijing, Hainan Province, HunanProvince, Shaanxi Province, Shanghai, and Tianjin in the PRC; and the United States. F-69  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Each geographic operating segment is principally engaged in the construction and development of residential real estate units. The “other” categoryrelates to investment holdings, property management services, installation of intercom systems, landscaping, engineering and management, real estate sale,purchase and lease activities. The accounting policies of the various segments are the same as those described in Note 2, “Summary of SignificantAccounting Policies”. The Group’s chief operating decision maker relies upon net sales, gross profit and net income when making decisions about allocating resources andassessing performance of the Group. Net sales for geographic segments are generally based on the location of the project development. Net income for eachsegment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Capital expenditures for eachsegment includes cost for acquisition of subsidiaries, vehicles, fixtures and furniture and computer network equipment and accumulation of properties heldfor lease related to newly completed projects. F-70  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) No single customer accounted for more than 10% of net sales for the years ended December 31, 2014, 2015 and 2016. Summary information by operating segment is as follows: December 31,2014 Henan Shandong Jiangsu Sichuan Beijing Hainan Hunan Shanghai United States Others Consolidated US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ Net real estate sales 310,236,873 192,437,765 175,960,358 9,912,254 188,579,891 6,526,065 4,109,978 - 4,921,331 141,377 892,825,892 Real estate lease income 2,991,909 218,320 651 - - - - - - 1,725,306 4,936,186 Real estate managementservices income - - - - - - - - - 21,563,570 21,563,570 Other revenue 110,500 110,166 57,357 29,585 11,717 391 244 - - 102,065 422,025 Total revenue 313,339,282 192,766,251 176,018,366 9,941,839 188,591,608 6,526,456 4,110,222 - 4,921,331 23,532,318 919,747,673 Cost of real estate sales (210,789,926) (146,862,778) (138,838,903) (9,125,435) (133,519,235) (4,137,467) (3,632,997) - (4,643,722) 977,293 (650,573,170)Cost of real estate leaseincome (2,574,534) 29,388 (575,529) - - - - - - (52,540) (3,173,215)Cost of real estatemanagement services (557,509) - - - - - - - - (19,882,036) (20,439,545)Other costs (1,247,446) (1,303,518) (391,538) (16,975) (364,326) (17) (32,560) - - (39,807) (3,396,187) Total cost of revenue (215,169,415) (148,136,908) (139,805,970) (9,142,410) (133,883,561) (4,137,484) (3,665,557) - (4,643,722) (18,997,090) (677,582,117)Gross profit 98,169,867 44,629,343 36,212,396 799,429 54,708,047 2,388,972 444,665 - 277,609 4,535,228 242,165,556 Operating expenses (58,981,130) (8,891,116) (12,928,183) (3,229,614) (27,689,927) (3,855,809) (3,234,163) (2,353,439) (5,783,635) (18,169,045) (145,116,061) Operating income/(loss) 39,188,737 35,738,227 23,284,213 (2,430,185) 27,018,120 (1,466,837) (2,789,498) (2,353,439) (5,506,026) (13,633,817) 97,049,495 Interest income 10,797,806 903,353 471,254 8,312 375,674 4,974 16,913 9,647 - 1,989,389 14,577,322 Interest expense (471,635) - - - - - - - - (27,729,132) (28,200,767)Net realized gain onshort-term investments 3,128,014 - - - - - - - - - 3,128,014 Share of income (loss)in an equity investee (1,691,897) - - - - - - - - - (1,691,897)Loss on extinguishmentof debt - - - - - - - - - (9,848,931) (9,848,931)Exchange gains 706,108 - - - - - - - - 706,108 Unrealized income onshort-term investments 120,146 - - - 1,887 - - - - - 122,033 Other income - 3,212,606 - - - - - - - - 3,212,606 Income/(loss) beforeincome taxes 51,777,279 39,854,186 23,755,467 (2,421,873) 27,395,681 (1,461,863) (2,772,585) (2,343,792) (5,506,026) (49,222,491) 79,053,983 Income tax benefit/(expense) 1,897,892 (9,997,111) (3,452,056) 681,784 (18,646,689) (737,457) (543,422) (505,771) 2,243,056 (1,497,844) (30,557,618) Net income/(loss) 53,675,171 29,857,075 20,303,411 (1,740,089) 8,748,992 (2,199,320) (3,316,007) (2,849,563) (3,262,970) (50,720,335) 48,496,365 Depreciation andamortization 5,056,099 255,701 684,087 38,685 446,531 95,456 24,944 35,727 147,349 213,543 6,998,122 Capital expenditure 6,317,246 187,745 175,551 296,976 57,767 698,842 242,276 371,198 10,130,497 217,835 18,695,933 Real estate propertiesdevelopment for sale - - - - - - - - 1,185,217 - 1,185,217 Real estate propertiesdevelopment completed 10,174,728 778,376 1,069,768 - - - - - - 286,127 12,308,999 Real estate propertiesunder development 122,442,706 230,512,631 476,026,887 213,243,863 124,555,677 80,188,420 145,738,966 192,275,659 119,947,878 9,642,365 1,714,575,052 Real estate propertiesheld for lease 45,892,107 5,053,480 17,464,831 - - - - - - 813,330 69,223,748 Total long-lived assets 91,997,422 7,323,161 23,139,244 10,904,402 3,896,449 690,086 528,484 761,721 11,488,178 10,338,428 161,067,575 Total assets 868,110,770 501,351,668 642,378,579 125,561,644 427,431,672 52,944,306 99,029,288 197,356,138 36,990,997 280,371,172 3,231,526,234 F-71  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) December 31,2015 Henan Shandong Jiangsu Sichuan Beijing Hainan Hunan Shanghai Tianjin United States Others Consolidated US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ Net real estatesales 251,681,188 186,222,554 371,469,943 36,372,298 166,775,534 3,534,278 42,191,276 70,058,447 4,631,258 1,530,000 - 1,134,466,776 Real estatelease income 4,484,591 202,892 - - - - - - - - 1,885,780 6,573,263 Real estatemanagementservicesincome - - - - - - - - - - 21,611,201 21,611,201 Other revenue 1,396,463 30,659 308,026 80,142 318,271 8,157 2,332 - 1,333 - (472,625) 1,672,758 Total revenue 257,562,242 186,456,105 371,777,969 36,452,440 167,093,805 3,542,435 42,193,608 70,058,447 4,632,591 1,530,000 23,024,356 1,164,323,998 Cost of realestate sales (160,197,316) (149,867,847) (305,417,991) (32,313,894) (118,868,527) (2,337,677) (30,095,959) (62,366,015) (3,534,525) (1,243,112) - (866,242,863)Cost of realestate leaseincome (2,202,367) (285,974) (1,416,157) - - - - - - - (51,824) (3,956,322)Cost of realestatemanagementservices (18,161) - - - - - - - - - (19,424,698) (19,442,859)Other costs 178,610 (376,070) (641,646) (3,615) (835,555) (324) - - (8,424) - (4,824) (1,691,848) Total cost ofrevenue (162,239,234) (150,529,891) (307,475,794) (32,317,509) (119,704,082) (2,338,001) (30,095,959) (62,366,015) (3,542,949) (1,243,112) (19,481,346) (891,333,892)Gross profit 95,323,008 35,926,214 64,302,175 4,134,931 47,389,723 1,204,434 12,097,649 7,692,432 1,089,642 286,888 3,543,010 272,990,106 Operatingexpenses (51,882,922) (13,528,548) (15,826,805) (3,672,935) (32,178,776) (6,617,557) (5,090,601) (4,346,174) (10,002,768) (4,971,109) (19,336,890) (167,455,085) Operatingincome/(loss) 43,440,086 22,397,666 48,475,370 461,996 15,210,947 (5,413,123) 7,007,048 3,346,258 (8,913,126) (4,684,221) (15,793,880) 105,535,021 Interest income 23,284,854 237,687 442,560 18,752 331,042 3,968 45,592 134,580 2,966 - 1,735 24,503,736 Interestexpense 21,612,239 - - - - - - - - 17,587,083 (59,480,738) (20,281,416)Net realizedgain on short-terminvestments - - - - - - - - - - 603,078 603,078 Share ofincome in anequity investee 2,234,635 - - - - - - - - - - 2,234,635 Loss onextinguishmentof debt - - - - - - - - - - - - Exchange gains 403,286 - - - - - - - - - 403,286 Unrealizedincome onshort-terminvestments - - - - - - - - - - 49,443 49,443 Other income - - - - - 4,677,244 - - - 2,950 1,264,926 5,945,120 Income/(loss)before incometaxes 90,975,100 22,635,353 48,917,930 480,748 15,541,989 (731,911) 7,052,640 3,480,838 (8,910,160) 12,905,812 (73,355,436) 118,992,903 Income taxbenefit/(expense) (16,234,099) (9,901,175) (32,061) (1,344,687) (13,479,368) 163,491 (5,634,909) (1,259,900) 1,739,065 2,825,203 (9,352,878) (52,511,318) Netincome/(loss) 74,741,001 12,734,178 48,885,869 (863,939) 2,062,621 (568,420) 1,417,731 2,220,938 (7,171,095) 15,731,015 (82,708,314) 66,481,585 Depreciationandamortization 5,569,343 400,733 1,542,209 64,082 515,150 208,486 76,304 83,175 3,839 50,985 237,358 8,751,664 Capitalexpenditure 4,249,718 172,853 31,524 - 33,952,563 127,550 146,074 - 52,401 136,065 256,824 39,125,572 Real estatepropertiesdevelopmentfor sale - - - - - - - - - - - - Real estatepropertiesdevelopmentcompleted 4,775,131 - 19,301,428 - - - - - - - - 24,076,559 Real estatepropertiesunderdevelopment 313,105,983 275,709,393 307,172,930 223,653,822 62,561,492 101,059,710 157,166,855 155,309,860 57,207,564 226,208,448 8,165,744 1,887,321,801 Real estateproperties heldfor lease 42,511,937 4,487,714 23,416,217 - - - - - - - 716,714 71,132,582 Total long-lived assets 221,202,024 6,683,031 27,947,425 9,036,881 6,958,865 553,186 468,620 391,481 751,519 8,659,744 3,266,691 285,919,467 Total assets 1,064,084,941 457,041,948 655,880,819 206,485,216 346,527,256 135,047,439 110,988,357 128,502,762 19,201,186 162,538,391 262,584,869 3,548,883,184 F-72  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) December 31,2016 Henan Shandong Jiangsu Sichuan Beijing Hainan Hunan Shanghai Tianjin Shaanxi UnitedStates Others Consolidated US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ Net real estatesales 368,866,778 169,605,220 349,616,790 76,489,749 23,722,289 12,699,957 105,494,573 100,003,503 39,912,406 126,550,015 152,007,123 - 1,524,968,403 Real estatelease income 3,588,434 172,198 - - - - - - - 284,294 - 1,901,125 5,946,051 Real estatemanagementservices income 1,161,150 - - - - - - - - - - 28,861,597 30,022,747 Other revenue 303,521 102,415 471 - 280,007 - - - 1,078 - - - 687,492 Total revenue 373,919,883 169,879,833 349,617,261 76,489,749 24,002,296 12,699,957 105,494,573 100,003,503 39,913,484 126,834,309 152,007,123 30,762,722 1,561,624,693 Cost of realestate sales (252,522,117) (142,763,272) (273,738,274) (58,762,806) (30,743,520) (8,544,624) (75,514,694) (89,067,765) (22,837,517) (91,274,052) (128,803,285) - (1,174,571,926)Cost of realestate leaseincome (1,792,349) (287,832) (1,328,100) - - - - - - (225,776) - (48,588) (3,682,645)Cost of realestatemanagementservices (979,218) - - - - - - - - - - (23,302,224) (24,281,442)Other costs (525,052) (100,695) (69,971) - (404,649) - - - - - - - (1,100,367) Total cost ofrevenue (255,818,736) (143,151,799) (275,136,345) (58,762,806) (31,148,169) (8,544,624) (75,514,694) (89,067,765) (22,837,517) (91,499,828) (128,803,285) (23,350,812) (1,203,636,380)Gross profit 118,101,147 26,728,034 74,480,916 17,726,943 (7,145,873) 4,155,333 29,979,879 10,935,738 17,075,967 35,334,481 23,203,838 7,411,910 357,988,313 Operatingexpenses (41,459,159) (8,682,365) (12,234,106) (3,329,524) (38,841,455) (4,028,044) (6,372,468) (3,120,707) (16,533,371) (10,239,653) (11,002,123) (22,786,372) (178,629,347) Operatingincome/(loss) 76,641,988 18,045,669 62,246,810 14,397,419 (45,987,328) 127,289 23,607,411 7,815,031 542,596 25,094,828 12,201,715 (15,374,462) 179,358,966 Interest income 18,611,346 974,322 262,675 71,673 246,892 18,809 91,757 83,756 123,642 92,040 - 339,655 20,916,567 Interestexpense (6,312,134) - - - - - - - - - (3,444,399) (20,100,299) (29,856,832)Net realizedgain on short-terminvestments 1,316,577 - - - (1,742) - - - - - - 1,190,861 2,505,696 Share of incomein an equityinvestee (688,363) - - - - - - - - - - 363,751 (324,612)Loss onextinguishmentof debt - - - - - - - - - - - (12,123,750) (12,123,750)Exchange gains 461,627 - - - (130,591) - - - - - - 127,923 458,959 Unrealizedincome onshort-terminvestments 7,862 - - - - - - - - - 227,472 235,334 Other income 4,534,357 - - - - - - - - 2,487 3,383 4,540,227 Income/(loss)before incometaxes 94,573,260 19,019,991 62,509,485 14,469,092 (45,872,769) 146,098 23,699,168 7,898,787 666,238 25,186,868 8,759,803 (45,345,466) 165,710,555 Income taxexpense (13,089,933) (11,666,859) (28,647,951) (5,223,645) 15,322,784 (556,388) (13,925,672) (3,089,750) (3,217,994) (12,955,165) (8,388,686) (808,616) (86,247,875) Netincome/(loss) 81,483,327 7,353,132 33,861,534 9,245,447 (30,549,985) (410,290) 9,773,496 4,809,037 (2,551,756) 12,231,703 371,117 (46,154,082) 79,462,680 Depreciationandamortization 5,477,178 411,694 1,442,768 61,572 454,728 208,161 82,330 77,851 8,278 106,653 106,407 250,763 8,688,383 Capitalexpenditure 5,257,710 57,511 19,302 11,035 744,844 28,005 13,599 1,029 8,593 25,770 294,134 6,461,532 Real estatepropertiesdevelopmentfor sale - - - - - - - - - - - - - Real estatepropertiesdevelopmentcompleted 39,369,770 2,309,387 94,008,195 - 52,671,437 - - 91,307,299 - - 197,513,164 - 477,179,252 Real estatepropertiesunderdevelopment 376,001,881 236,984,737 104,989,367 202,565,917 149,726,569 137,338,481 188,578,773 - 13,222,946 166,266,501 133,498,536 9,961,456 1,719,135,164 Real estateproperties heldfor lease 38,584,030 5,604,196 20,648,238 - - - - - - 94,413,043 - 624,427 159,873,934 Total long-lived assets 104,319,601 11,597,849 23,848,516 6,708,295 3,241,238 408,197 728,371 2,935,885 704,754 126,050,051 2,622,106 21,835,308 305,000,171 Total assets 1,376,946,330 372,574,301 355,881,279 228,454,473 284,898,971 207,361,083 276,634,140 111,855,238 96,510,964 357,288,809 405,887,507 162,152,195 4,236,445,290 F-73  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) 22.Commitments and contingencies Operating lease commitments The Group leases certain of its office properties under non-cancellable operating lease arrangements. The terms of the leases do not contain rentescalation, or contingent rent, renewal, or purchase options. There are no restrictions placed upon the Group by entering into these leases. As of December 31, 2016, the Group had the following operating lease obligations falling due in: Amount US$ 2017 4,883,794 2018 3,963,404 2019 393,308 2020 and thereafter - Total 9,240,506 Capital lease commitments The Group leases corporate aircraft and equipment under non-cancellable capital lease arrangements. The terms of the lease do not containcontingent rent clauses. As of December 31, 2016, the Group had the following minimum lease payments (excluding the portion of the payments representing executorycosts, including any profit thereon) falling due in: Amount US$ 2017 5,836,659 2018 5,836,659 2019 5,311,944 2020 4,787,230 2021 and thereafter 2,393,615 Total minimum lease payments 24,166,107 Less interest (5,227,205) Capital lease obligations 18,938,902 Less current maturities of capital lease obligations (3,923,394) Long-term capital lease obligations 15,015,508 Other commitments As of December 31, 2016, the Group had outstanding commitments with respect to non-cancellable construction contracts for real estatedevelopment and land use rights purchases as follows: Amount US$ 2017 317,776,075 2018 18,536,275 2019 7,245,297 2020 3,587,830 2021 and thereafter - Total 347,145,477 F-74  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Contingencies As at December 31, 2016, the Group provided guarantees of US$1,672,868,791 (2015: US$1,513,664,015), in favor of its customers in respect ofmortgage loans granted by banks to such customers for their purchases of the Group’s properties where the underlying real estate ownership certificates canonly be provided to the banks on a time delay manner due to administrative procedures in the PRC. Pursuant to the terms of the guarantees, upon default inmortgage payments by these purchasers, the Group is responsible to repay the outstanding mortgage principal together with the accrued interest and penaltyowed by the defaulted purchasers to the bank and the Group is entitled to take over the legal titles and possession of the related properties. The Group’sguarantee period starts from the date of grant of the relevant mortgage loan and ends upon issuance of real estate ownership certificate which will generallybe available within six to twelve months after the purchaser takes possession of the relevant property. The Group paid US$1,478,386, US$555,969, andUS$1,820,324 to satisfy guarantee obligations related to customer defaults for the years ended December 2014, 2015 and 2016, respectively. The fair value of the guarantees is not significantly different than the net realizable value of the properties and management considers that in case ofdefault in payments, the net realizable value of the related properties can cover the repayment of the outstanding mortgage principal together with theaccrued interest and penalty and therefore no provision has been made for the guarantees. On May 30, 2014, the Zhengzhou Modern City project developed by Henan Xinyuan, completed the LAT final settlement with the local tax bureau.The Company received a tax clearance certificate, which confirmed that the Company’s accrual under the deemed profit method was adequate and there wasno additional tax adjustments assessed by the local tax bureau as of May 30, 2014. Based on the above, management performed a reassessment andconcluded that the likelihood of the deemed profit method being overturned is only reasonably possible, and accordingly reversed the LAT liability accruedfor the project amounting to US$16.2 million as of December 31, 2014. The Group’s estimate for the reasonably possible contingency related to theZhengzhou Modern City project amounted to US$16.2 million and 16.2 million as of December 31, 2015 and December 31, 2016. In December 2016, 421 Kent Development LLC ("421 Kent"), the property company for the Group's Oosten project, terminated its contract with itsgeneral contractor. The contractor has construction liens against the Oosten project in an aggregate amount of approximately US$20 million. The contractorhas filed a lawsuit against 421 Kent claiming the amount of the construction liens and punitive damages. As of March 21, 2017, 421 Kent had not beenserved in the litigation. 421 Kent believes the contractor’s liens and claims are without merit and intends to contest vigorously such claims. Based on theabove, 421 Kent cannot predict the outcome of this lawsuit or a judgment against 421 Kent, whether in whole or in part, may result in a loss, if any. And anestimate for the reasonably possible loss or a range of reasonably possible losses cannot be made at this time. 23.Concentration of risk The Group’s operations are conducted mainly in the PRC. Starting in 2012, a relatively smaller portion of the Group’s operations is conducted in theUnited States. Accordingly, the Group’s business, financial condition and results of operations is primarily influenced by the political, economic and legalenvironments in the PRC and by the general state of the PRC economy. The Group’s operations in the PRC are subject to special considerations and significant risks. These include risks associated with, among others, thepolitical, economic and legal environments and foreign currency exchange. The Group’s results may be adversely affected by changes in the political andsocial conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversionand remittance abroad, and rates and methods of taxation, among other things. The Group transacts most of its business in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions takeplace either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of foreigncurrency payments by the PBOC or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documentsand signed contracts. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the US$. Under the new policy, the RMBis permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in a 16.2%appreciation of the RMB against the US$ from July 21, 2005 to December 31, 2016. F-75  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) To the extent that the Company needs to convert US$ into RMB for capital expenditures and working capital and other business purposes,appreciation of RMB against US$ would have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if theCompany decides to convert RMB into US$ for the purpose of making payments for dividends on ordinary shares, strategic acquisitions or investments orother business purposes, appreciation of US$ against RMB would have a negative effect on the US$ amount available to the Company. In addition, asignificant depreciation of the RMB against the US$ may significantly reduce the US$ equivalent of the Company’s earnings or losses. The Group offers certain homebuyers seller-financing arrangements. All the homebuyers that entered into such arrangements were subject to creditverification procedures. In addition, accounts receivable balances are unsecured, but monitored on an ongoing basis via the Group’s management reportingprocedures. The Group provides longer payment terms to particular home buyers after applying strict credit requirements based on the Group’s credit policy.As of December 31, 2015 and 2016, there is no concentration of credit risk with respect to receivables and the Group does not have a significant exposure toany individual debtor. In 2013, PRC banks tightened the conditions on which mortgage loans are extended to homebuyers. Therefore, mortgage loans for homebuyers havebeen subject to longer processing periods or even denied by the banks. The Group monitors its homebuyers’ outstanding mortgage loans on an ongoing basisvia the Group’s management reporting procedures and took the position that contracts with underlying mortgage loans with processing periods exceedingone year cannot be recognized as revenue under the percentage of completion method (see Note 2(h) for further detail). As a result, the Group reversedcontracted sales amounts of US$10.6 million in aggregate related to sales contracts of 79 apartments when determining revenue to be recognized under thepercentage of completion method in 2016. In addition, no single customer or supplier accounted for more than 10% of revenue or project expenditures for the years ended December 31, 2014,2015 and 2016. 24.Accumulated other comprehensive income/(loss) During the years ended December 31, 2014, 2015 and 2016, the other comprehensive income/(loss) attributable to non-controlling interest wasrelated to foreign currency translation adjustments amounting to US$75 (loss), US$1,143 (income) and US$638,863 (loss), respectively. The movement of accumulated other comprehensive income attributable to Xinyuan Real Estate Co., Ltd. is as follows: Foreign currency translation adjustments US$ Balance as of January 1, 2013 82,000,020 Other comprehensive income 25,910,940 Balance as of December 31, 2013 107,910,960 Other comprehensive loss (3,353,952)Balance as of December 31, 2014 104,557,008 Other comprehensive loss (73,605,171)Balance as of December 31, 2015 30,951,837 Other comprehensive loss (65,634,725)Balance as of December 31, 2016 (34,682,888) F-76  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) During the years ended December 31, 2014, 2015, and 2016, the entire unrealized gain associated with the available for sale securities amounting tonil, US$146,929, and nil, respectively, was reclassified from accumulated other comprehensive income to net income as a result of the disposal of available-for-sale securities. 25.Non-controlling interests As of December 31, 2015, the non-controlling interests consisted of the following: Ownership December 31, 2015 US$ Beijing Economy Cooperation Ruifeng Investment Co., Ltd. 10% 18,819 As of December 31, 2016, the non-controlling interests consisted of the following: Ownership December 31, 2016 US$ Beijing Economy Cooperation Ruifeng Investment Co., Ltd. 10% 18,081 Shaanxi Zhongmao 34.02% (11,271,378)Zhengzhou Xinnan 49% (3,802,744)Xinyuan Service 6% (579,986)Xinrock 30% 67,160 Shanghai Hexinli 21.05% (322,846) Total (15,891,713) 26.Subsequent events On January 20, 2017, Henan Xinyuan Guangsheng Real Estate Co., Ltd. acquired three parcels of land in Zhengzhou, Henan Province for a purchaseprice of RMB696.5 million, equivalent to US$100.4 million. On January 25, 2017, Changsha Xinyuan Real Estate, Ltd. acquired a parcel of land in Changsha, Hunan Province for a purchase price of RMB236.0million, equivalent to US$35.3 million. On February 28, 2017, the Company issued senior notes with an aggregate principal amount of US$300,000,000 due February 28, 2021 (the“February 2021 Senior Secured Notes”). The February 2021 Senior Secured Notes bear interest at 7.75% per annum payable semi-annually. Interest will bepayable on February 28 and August 28 of each year, commencing August 28, 2017. The February 2021 Senior Secured Notes have a four year term maturingon February 28, 2021. As of March 21, 2017 approximately US$30 million of real estate properties development completed under one U.S. project is subject to liens. 27.Condensed financial information of the Company The condensed financial statements of Xinyuan Real Estate Co., Ltd. have been prepared in accordance with U.S. GAAP. Under the PRC laws andregulations, the Company’s PRC subsidiaries are restricted in their ability to transfer certain of their net assets to the Company in the form of dividendpayments, loans or advances. The amounts restricted include paid-in capital and statutory reserves, as determined pursuant to PRC generally acceptedaccounting principles, totaling US$582,973,296 as of December 31, 2016 (2015: US$387,450,518). F-77  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Condensed Balance Sheets Year ended December 31 2015 2016 US$ US$ ASSETS Current assets Cash and cash equivalents 1,295,835 36,497,233 Other deposits and prepayments 2,389,045 - Other current assets 28 1,900,557 Due from subsidiaries 592,565,997 394,050,421 Total current assets 596,250,905 432,448,211 Investments in subsidiaries 962,901,445 1,068,115,589 TOTAL ASSETS 1,559,152,350 1,500,563,800 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Short-term bank loan 222,226,246 34,421,617 PRC income tax payable 13,388 13,388 PRC other tax payable 902,190 902,190 Other payable and accrued liabilities 8,194,395 11,873,498 Payroll and welfare payables - 119,167 Total current liabilities 231,336,219 47,329,860 Long term bank loan - 64,845,655 Other long-term debt 391,845,710 488,127,820 Total liabilities 623,181,929 600,303,335 Shareholders’ equity Common shares, $0.0001 par value: Authorized-500,000,000 shares, issued and outstanding-131,426,741 shares for 2015 (2015: 142,802,936 shares) 15,835 16,051 Treasury shares (24,045,440) (53,734,088)Additional paid-in capital 531,233,336 538,414,246 Retained earnings 428,766,690 415,564,256 Total shareholders’ equity 935,970,421 900,260,465 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1,559,152,350 1,500,563,800 F-78  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Condensed Statements of Comprehensive Income Year ended December 31 2014 2015 2016 US$ US$ US$ General and administrative expenses (8,860,382) (10,301,067) (20,081,338) Operating loss (8,860,382) (10,301,067) (20,081,338)Interest expense (58,515,706) (58,576,635) (65,092,711)Interest income 1,289,907 3,533 127,852 Loss on extinguishment of debt (9,848,931) - (12,123,750)Other expenses 40,922 Equity in profit of subsidiaries, net 124,450,842 135,356,276 170,106,573 Income from operations before income taxes 48,515,730 66,482,107 72,977,548 Income taxes - - - Net income attributable to common shareholders 48,515,730 66,482,107 72,977,548 Other comprehensive income, net of tax of nil Foreign currency translation adjustments (3,353,952) (73,605,171) (65,634,725) Comprehensive income/(loss) attributable to shareholders 45,161,778 (7,123,064) 7,342,823 F-79  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) Condensed Statements of Cash Flows Year ended December 31 2014 2015 2016 US$ US$ US$ Cash flows from operating activities: Net income 48,515,730 66,482,107 72,977,548 Adjustment to reconcile net income to net cash provided by operating activities: Equity in profit of subsidiaries, net (124,450,842) (135,356,276) (170,106,573)Stock based compensation expense 1,912,471 3,326,175 7,085,958 Amortization of deferred charges 1,620,695 2,378,767 7,067,935 Loss on extinguishment of debt 9,848,931 - 12,123,750 Other deposits and prepayments 10,916,056 (615,013) 2,389,045 Other current assets 45,434 233,446 2,320 Other payable and accrued liabilities (737,739) (521,582) 3,679,102 Payroll and welfare payables (5,149,011) - 119,168 Net cash used in operating activities (57,478,275) (64,072,376) (64,661,747) Cash flows from financing activities: Changes in due from a subsidiary (140,334,182) (6,809,170) 181,515,577 Proceeds from short-term bank loans 130,024,345 207,805,203 - Repayments of short-term bank loans (35,000,000) (115,603,302) (146,208,974)Proceeds from long-term bank loans - - 23,250,000 Proceeds from other long-term debts - - 300,000,000 Repayment of other long-term debts (75,761,009) - (186,164,616)Purchase of treasury shares (17,610,787) (3,349,172) (29,688,648)Dividends to shareholders (15,288,919) (14,751,704) (20,545,257)Deferred charges - (3,104,812) (7,621,208)Purchase of shares under RSU plan (7,042,725) (3,259,998) (4,003,999)Loss on extinguishment of debt (9,848,931) - (12,123,750)Proceeds from exercise of stock options 1,080,530 48,400 1,454,020 Net cash (used in)/ provided by financing activities (169,781,678) 60,975,445 99,863,145 Net(decrease)/increase in cash and cash equivalents (227,259,953) (3,096,931) 35,201,398 Cash and cash equivalents, at the beginning of the year 231,652,719 4,392,766 1,295,835 Cash and cash equivalents, at end of the period 4,392,766 1,295,835 36,497,233 F-80  XINYUAN REAL ESTATE CO., LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(All amounts stated in US$, except for number of shares data) (a)Basis of presentation In the company-only financial statements, the Company’s investment in subsidiaries is stated at cost plus its equity interest in undistributedearnings of subsidiaries since inception. The company-only financial statements should be read in conjunction with the Company’s consolidated financialstatements. The Company records its investment in its subsidiaries under the equity method of accounting as prescribed in ASC 323, Investment-Equity Methodand Joint Ventures. Such investment is presented on the balance sheet as “Investments in subsidiaries” and share of the subsidiaries’ profit or loss as “Equityin profit of subsidiaries, net” on the condensed statements of comprehensive income. The subsidiaries did not pay any dividends to the Company for the periods presented. (b)Related party transactions As of December 31, 2015 and 2016, the Company had US$521,416,425 and US$344,948,542 due from its wholly-owned subsidiaries. Theseamounts mainly reflect intercompany loans from the Company to Xinyuan Real Estate, Ltd. While intercompany loans have no fixed payments terms, theCompany has a legal enforceable right to demand payment at any time, and Xinyuan Real Estate, Ltd. has the ability to repay the outstanding balance ondemand. In 2013, the Company also entered into a separate loan facility agreement with XIN Development Group International Inc. Pursuant to theagreement, the Company will provide a loan facility to XIN Development for the period from July 1, 2013 to January 18, 2017 amounting to US$50,000,000at 17.5% per annum. As of December 31, 2016, the Company has US$84,455,955 (2015: US$71,149,572) including accrued interest of US$35,354,076(2015: US$22,047,693), due from XIN Development under this loan facility. (c)Commitments The Company does not have significant commitments or long-term obligations as of the period end presented. F-81  Exhibit 8.1 Xinyuan Real Estate Co., Ltd. List of Subsidiaries as of March 15, 2017* Company Name Jurisdiction of Incorporation Xinyuan Real Estate, Ltd. Cayman IslandsXinyuan International Property Investment Co., Ltd. Cayman IslandsXinyuan International (HK) Property Investment Co., Limited Hong KongXIN Development Group International Inc. United StatesSouth Glory International Ltd. Hong KongVictory Good Development Ltd. Hong KongElite Quest Holdings Ltd. Hong KongXIN Irvine, LLC United StatesVista Sierra, LLC United StatesXIN Development Management East, LLC United StatesXIN NY Holding, LLC United StatesXIN Eco Marine Group Properties Sdn Bhd Malaysia421 Kent Development, LLC United StatesXinyuan Sailing Co., Ltd. Hong KongAWAN Plasma Sdn. Bhd. MalaysiaZhengzhou Yasheng Construction Material Co., Ltd. ChinaZhengzhou Jiasheng Real Estate Co., Ltd ChinaZhengzhou Yusheng Landscape Design Co., Ltd. ChinaXinyuan (China) Real Estate, Ltd. ChinaBeijing Yue-Mart Commerce and Trade Co., Ltd. ChinaHenan Xinyuan Real Estate Co., Ltd. ChinaXi'an Xinyuan Metropolitan Business Management Co., Ltd. ChinaTianjin Xinyuan Real Estate Co., Ltd. ChinaChangsha Xinyuan Wanzhuo Real Estate Co., Ltd. ChinaBeijing Xinleju Technology Development Co., Ltd. ChinaHenan Yue-Mart Commerce and Trade Co., Ltd. ChinaQingdao Xinyuan Xiangrui Real Estate Co., Ltd. ChinaShandong Xinyuan Real Estate Co., Ltd. ChinaZhengzhou Hengsheng Real Estate Co., Ltd. ChinaZhengzhou Mingyuan Landscape Engineering Co., Ltd. ChinaZhengzhou Xinyuan Computer Network Engineering Co., Ltd. ChinaHenan Xinyuan Wanzhuo Real Estate Co., Ltd. ChinaSuzhou Xinyuan Real Estate Development Co., Ltd. China 1 Anhui Xinyuan Real Estate Co., Ltd. ChinaKunshan Xinyuan Real Estate Co., Ltd. ChinaXinyuan Real Estate (Chengdu) Co., Ltd. ChinaXuzhou Xinyuan Real Estate Co., Ltd. ChinaHenan Xinyuan Jiye Real Estate Co., Ltd. ChinaBeijing Xinyuan Wanzhong Real Estate Co., Ltd. ChinaBeijing Heju Management Consulting Service, Ltd ChinaXinyuan Renju (Beijing) Asset Management Co., Ltd. ChinaZhengzhou Jiantou Xinyuan Real Estate Co., Ltd. ChinaBeijing Xinyuan Priority Real Estate Consulting Co., Ltd. ChinaHenan Xinyuan Quansheng Real Estate Co., Ltd. ChinaSuzhou Xinyuan Wanzhuo Real Estate Co., Ltd. ChinaJiangsu Jiajing Real Estate Co., Ltd. ChinaBeijing Economy Cooperation Ruifeng Investment Co., Ltd. ChinaHenan Xinyuan Priority Commercial Management Co., Ltd. ChinaBeijing XIN Media Co., Ltd. ChinaBeijing Xinyuan Xindo Park E-Commerce Co., Ltd. ChinaXingyang Xinyuan Real Estate Co., Ltd. ChinaAPEC Construction Investment (Beijing) Co., Ltd. ChinaZhengzhou Shengdao Real Estate Co., Ltd. ChinaBeijing Xinxiang Huicheng Decoration Co., Ltd. ChinaJinan Xinyuan Wanzhuo Real Estate Co., Ltd. ChinaShandong Xinyuan Renju Real Estate Co., Ltd. ChinaXinrongji (Beijing) Investment Co., Ltd. ChinaSanya Beida Science and Technology Park Industrial Development Co., Ltd. ChinaChengdu Xinyuan Wanzhuo Real Estate Co., Ltd. ChinaShanghai Junxin Real Estate Co., Ltd. ChinaXinyuan Internet Finance Co., Ltd. Cayman IslandsNew Dawn International Ltd. Cayman IslandsNew Legend International Ltd. Cayman IslandsNewPoint International Ltd. Cayman IslandsNewGrace International Ltd. Cayman IslandsChina Online Finance Research Institute Limited Hong KongGenesis Ocean Investments Ltd. Hong KongHonest View Development Ltd. Hong KongHonour Triumph Enterprises Ltd. Hong KongWell Poly Holdings Ltd. Hong KongBeijing Xinhe Investment Development Co., Ltd ChinaJinan Yue-Mart Commerce and Trade Co., Ltd ChinaHenan Xinyuan Guangsheng Real Estate Co., Ltd. China 2 Shanghai Hexinli Property Management Center ChinaShenzhen Xilefu Internet Financial Service Co., Ltd. ChinaShenzhen Xileju Technology Development Co., Ltd. ChinaHenan Xinyuan Real Estate Marketing Co., Ltd. ChinaXIN Manhattan Holding LLC United States421 Kent Holding Co, Ltd United StatesHudson 888 Holding LLC United StatesHudson 888 Owner LLC United StatesShenzhen Xinchuang Investment Consulting Co., Ltd ChinaShenzhen Keye Investment Co., Ltd ChinaZhengzhou Xinnan Real Estate Co., Ltd ChinaHenan Xinyuan Shunsheng Real Estate Co., Ltd ChinaXinyuan Technology Service Co., Ltd ChinaShaanxi Zhongmao Real Estate Co., Ltd ChinaHenan Yueshenghang Property Service Co., Ltd ChinaHunan Erli Real Estate Co., Ltd ChinaNingbo Meishan Bonded Port Xinshoulei Investment Management Co., Limited ChinaXinYuan (China) Technology Research Institute Limited Hong KongXIN Queens Holding LLC United StatesQueens Theatre Holdco LLC United StatesQueens Theatre Owner LLC United StatesXinyuan Future Science & Technology Research (Beijing) Co., Limited ChinaXinyuan Investment Management Co., Limited ChinaHangzhou Investment Consulting Co., Limited ChinaHunan Yue-Mart Commerce and Trade Co., Ltd ChinaXinyuan Tianjin Technology Development Co., Limited ChinaHenan Xinyuan Industrial Co., Limited ChinaBeijing Ruihaoronghong Real Estate Development Co., Ltd ChinaChengdu Xinyuan Commercial Management Co., Limited ChinaBeijing Xinju Technology Co., Ltd** China *The list does not include various new entities created by Xinyuan Real Estate Co., Ltd. that are being held for future ventures. **Formed in 2017. 3  EXHIBIT 12.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Lizhou Zhang, certify that: 1 I have reviewed this Annual Report on Form 20-F of Xinyuan Real Estate Co., Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for thecompany and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by theannual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to thecompany’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internalcontrol over financial reporting. Date: March 27, 2017/s/ Lizhou Zhang Lizhou Zhang Chief Executive Officer (Principal Executive Officer)  EXHIBIT 12.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Yuan (Helen) Zhang, certify that: 1 I have reviewed this Annual Report on Form 20-F of Xinyuan Real Estate Co., Ltd.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; 4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for thecompany and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by theannual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and 5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to thecompany’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internalcontrol over financial reporting. Date: March 27, 2017/s/ Yuan (Helen) Zhang Yuan (Helen) Zhang Chief Financial Officer (Principal Financial Officer)  EXHIBIT 13.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICERPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the undersigned officer of Xinyuan Real EstateCo., Ltd. (the “Company”), hereby certifies that the Company’s Annual Report on Form 20-F for the year ended December 31, 2016 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d), as applicable, of the Exchange Act and that the information contained in the Report fairly presents,in all material respects, the financial condition and results of operations of the Company. Date: March 27, 2017 /s/ Lizhou Zhang Lizhou ZhangChief Executive Officer(Principal Executive Officer) The foregoing certification is being furnished solely pursuant to Rule 13a-14(b) under the Exchange Act and will not be deemed “filed” for purposes ofSection 18 of the Exchange Act, or otherwise subject to the liability of that section.  EXHIBIT 13.2 CERTIFICATION OF CHIEF FINANCIAL OFFICERPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the undersigned officer of Xinyuan Real EstateCo., Ltd. (the “Company”), hereby certifies that the Company’s Annual Report on Form 20-F for the year ended December 31, 2016 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d), as applicable, of the Exchange Act and that the information contained in the Report fairly presents,in all material respects, the financial condition and results of operations of the Company. Date: March 27, 2017/s/ Yuan (Helen) Zhang Yuan (Helen) ZhangChief Financial Officer(Principal Financial Officer) The foregoing certification is being furnished solely pursuant to Rule 13a-14(b) under the Exchange Act and will not be deemed “filed” for purposes ofSection 18 of the Exchange Act, or otherwise subject to the liability of that section.  Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement and related Prospectus (Form F-3 No. 333-192046) of Xinyuan Real Estate Co., Ltd., (2)Registration Statement (Form S-8 No. 333-152637) pertaining to the Xinyuan Real Estate Co., Ltd. 2007 Equity Incentive Plan and the XinyuanReal Estate Co., Ltd. 2007 Long Term Incentive Plan of Xinyuan Real Estate Co., Ltd., (3)Registration Statement (Form S-8 No. 333-198525) pertaining to the Xinyuan Real Estate Co., Ltd. 2014 Restricted Stock Unit Plan, and (4)Registration Statement (Form S-8 No. 333-205371) pertaining to the Xinyuan Real Estate Co., Ltd. 2015 Stock Option Plan of our reports dated March 27, 2017, with respect to the consolidated financial statements of Xinyuan Real Estate Co., Ltd. and the effectiveness of internalcontrol over financial reporting of Xinyuan Real Estate Co., Ltd. included in this Annual Report (Form 20-F) for the year ended December 31, 2016. /s/ Ernst & Young Hua Ming LLP Beijing, People’s Republic of China March 27, 2017 

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