Largest cotton textile producer Weiqiao Textile Company Limited announced its unaudited consolidated interim results for the six months ended June 2005 (the "Period"). In the review period, the Group recorded a turnover of RMB 6,916 million, representing an increase of 51.1 percent over the same period of 2004. Net profit attributable to equity holders of the parent was RMB 472 million, a substantial increase of 32.2 percent over the same period of 2004. Basic earnings per share were RMB 0.54.

Zhang Bo, Chairman of Weiqiao Textile, commented, "The sharp increase in net profit was primarily a result of the Group''s ever expanding scale of production and enhanced sales momentum. With continuous improvement in production facilities, equipment and technology standards, the Group managed to produce more value-added products to meet the demand of the international and domestic markets."

The increase in the proportion of grey fabric in the Group''s turnover to 52.2 percent and the decrease in the proportion of denim were due to the Group scaling up the production of grey fabric in response to market demand and the use of some of the denim production equipment to produce grey fabric. The increase in the proportion of cotton yarns sales to 39.6 percent from 36.6 percent last year was mainly due to increased sales of high-end cotton yarns as the Group was able to cope with thriving market demand for high end cotton yarn.

Earlier, Management had anticipated such an increase in demand and prepared for it by adopting flexible marketing strategies and adjusting its marketing structure. In the review period, the gross profit margin of cotton yarn increased from 23.5 percent at the end of the first half of 2004 to 24.4 percent at the end of the first half of 2005. While the gross profit margin of grey fabric decreased from 13.7 percent at the end of the first half of 2004 to 10.6 percent at the end of the first half of 2005, the gross profit ratio of Denim increased from 20.9 percent to 26.4 percent.

The Group continued to maintain a strong customer base. As at 30 June 2005, the Group had over 5,500 customers in 30 provinces and municipalities in the PRC and had approximately 560 customers in 20 countries, representing an increase of 37.5 percent and 40.0 percent respectively when compared with the first half of 2004. Such growth is due to the Group''s expansion in the domestic and overseas markets as well as strong market demand.

With respect to the protective measures adopted by the United States and the EU, Chairman Zhang Bo expressed that "These factors will have a limited impact on the Group primarily because Weiqiao Textile is positioned in the upstream sector and these protective measure are aiming at downstream products such as fashion. Weiqiao Textile''s domestic customers mainly sell their products in the Chinese domestic market and in ''non-quota'' regions. They believe that, in the long-run, the elimination of quotas will benefit consumers globally as well as a highly competitive company like Weiqiao Textile."

China has been experiencing regular electricity shortages. Although the Group benefited from stable electricity supply from its parent, Shandong Weiqiao Chuangye Group Company Limited, electricity prices continued to increase. In order to ease the pressure arising from increasing electricity cost, the Group announced, on 13 August 2005, an Asset Transfer Agreement with its parent for the purchase of its parent''s electricity assets.

The transaction, which qualifies as a related transaction, will be completed after approval by the Group''s independent shareholders and both parties to the Agreement satisfactorily meet all terms and conditions of the transaction. The Group expects that the transaction will result in relatively reliable energy supply and improve energy cost control.

Weiqiao Textile is located in Shandong, China''s second largest cotton producing province. The Group has four production bases in Weiqiao, Binzhou, Weihai and Zouping and employs more than 150,000 people. In the first half of 2005, the Group produced 296,000 tonnes of cotton yarn, 687 million meters of grey fabric and 59 million meters of denim.

During the past ten years, the Group developed large-scale production capabilities by capitalizing on China''s rapid economic growth. It has achieved strong positioning in the global textile markets by employing advance technology in state-of-the-art facilities.
 
Weiqiao Textile Company Limited