10:18     WEIQIAO TEXTILE<02698> - Announcement (1)                           

    The Stock Exchange of Hong Kong Limited takes no responsibility for       
    the contents of this announcement, makes no representation as to its      
    accuracy or completeness and expressly disclaims any liability            
    whatsoever for any loss howsoever arising from or in reliance upon        
    the whole or any part of the contents of this announcement.               
                                                                              
                                                                              
                                                                              
                                                                              
    WEIQIAO TEXTILE COMPANY LIMITED*                                          
    (a joint stock limited company incorporated in the People's Republic      
    of China with limited liability)                                          
                                                                              
    (Stock Code: 2698)                                                        
                                                                              
    CONTINUING CONNECTED TRANSACTION AND                                      
    DISCLOSEABLE TRANSACTION                                                  
                                                                              
    SUPPLEMENTAL AGREEMENT TO THE SUPPLY                                      
    OF ELECTRICITY AND STEAM AGREEMENT                                        
                                                                              
                                                                              
    Reference is made to the prospectus of the Company dated 15               
    September 2003 which states that the Company and Holding Company          
    entered into the Supply of Electricity and Steam Agreement on 25          
    August 2003. Under the Supply of Electricity and Steam Agreement,         
    Holding Company has agreed to supply electricity and steam to the         
    Group for a term of 10 years commencing from the date thereof.            
                                                                              
    For the reasons set out in the section headed `Reasons for and            
    benefits of entering into the Transaction', on 13 May 2005, the           
    Company and Holding Company entered into the Supplemental Agreement       
    for the purpose of specifying the pricing bases under the Supply of       
    Electricity and Steam Agreement for the three years ending 31             
    December 2007. Thereafter, the Company and Holding Company may            
    negotiate a new set of pricing bases, depending on the market and         
    industry conditions then.                                                 
                                                                              
    As a result of the significant increase in the operation and              
    production volume of the Group, its demand for electricity has            
    increased correspondingly. At present, the coal-fired power plants of     
    Holding Company supply electricity and steam to the Group. Coal is        
    the main fuel used in Holding Company's coal-fired power plants. The      
    price of coal has increased significantly from RMB258 per ton in          
    September 2003 to the present RMB420 per ton, and is expected to          
    remain at a high level in the medium term. Consequently, the              
    electricity generation costs of Holding Company are expected to be        
    high as a result of the significant increase in the costs of              
    purchasing coal.                                                          
                                                                              
                                                                              
                                                                              
    Further, the Group's business has sustained rapid growth since            
    the H shares of the Company were first listed on the Stock Exchange       
    in September 2003. Holding Company estimates that the total amount of     
    electricity to be supplied to the Group in 2005 would exceed the          
    amount as originally contemplated when the Company and Holding            
    Company entered into the Supply of Electricity and Steam Agreement.       
    Considering the accelerated growth of the Group's business in both        
    the immediate and medium terms, the Directors believe that the            
    Group's demand for electricity and steam would remain consistently        
    high. Holding Company has already incurred substantial investments in     
    its power plants to enhance its electricity generation capacity so as     
    to meet the demands of the Group. Accordingly, such investments would     
    result in  financial burden to Holding Company.                           
                                                                              
    Based on the above reasons, Holding Company has informed the Company      
    of the necessity to adjust the pricing bases set out in the Supply of     
    Electricity and Steam Agreement. The Directors consider that as a         
    stable electricity and steam supply from Holding Company is               
    significant to the daily operation of the Group, the entering into of     
    the Supplemental Agreement is beneficial to the Group in the the long     
    run because the Group can continue to benefit from the stable supply      
    of electricity and steam at favourable capped rates that would either     
    be lower than or at market rates from Holding Company, given the          
    recent severe power shortage conditions in the PRC.                       
                                                                              
    Holding Company is one of the promoters and the controlling               
    shareholder of the Company. It therefore constitutes a connected          
    person of the Company. As certain applicable percentage ratios (as        
    defined in Listing Rule 14.07), calculated on an annual basis, are        
    more than 2.5%, the Transaction constitutes a non-exempt continuing       
    connected transaction of the Company under Listing Rule 14A.35. The       
    Transaction is not only subject to the reporting and announcement         
    requirements under Listing Rules 14A.45 to 14A.47 but also require        
    the approval of the Independent Shareholders under Listing Rule           
    14A.48.                                                                   
                                                                              
    The Transaction also constitutes a discloseable transaction of the        
    Company for the purpose of the Listing Rules since certain applicable     
    percentage ratios (as defined in Listing Rule 14.07) exceed 5% but        
    are less than 25%.                                                        
                                                                              
    The terms and conditions of the Transaction have been negotiated on