10:20     WEIQIAO TEXTILE<02698> - Announcement (5)                           

    131,000,000 meters of denim for the year ended 31 December 2004. Due      
    to the full operation of the First Production Area of Binzhou             
    Industrial Park, the partial operation of the Second Production Area      
    of Binzhou Industrial Park, the full operation of the First               
    Industrial Park of Zouping at Zouping Production Base and the partial     
    operation of the Second Industrial Park of Zouping during the year        
    ended 31 December 2004, the aggregate volume of cotton yarn and grey      
    fabric increased significantly by 68% and 106%, respectively, as          
    compared to the same period in 2003.                                      
                                                                              
    The Group expects that further improvement of the production              
    capacity, development of higher valued products and the upgrading of      
    the quality of the existing products of the Group will have a             
    positive impact on the turnover of the Group for the financial years      
    ending 31 December 2005 to 2007.                                          
                                                                              
    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 and       
    stability 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 of 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 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.                              
                                                                              
    The increase in the costs of electricity and steam arising from the       
    Transaction would increase the production costs of the Group in the       
    future.                                                                   
                                                                              
    6.                                                                        
    General                                                                   
    The Group is principally engaged in the production, sale and              
    distribution of cotton yarn, grey fabric and denim. Holding Company       
    is principally engaged in the processing and sale of cotton, lint         
    cotton, cotton seed oil, fabrics, cotton yarn, print cloth, retail        
    and distribution of garment.                                              
                                                                              
    7.                                                                        
    Listing Rules Requirements                                                
    Holding Company currently holds 410,311,100 Domestic Shares,              
    representing approximately 46.87% of the entire issued share capital      
    of the Company. As Holding Company is one of the promoters and the        
    controlling shareholder of the Company, it constitutes a connected        
    person of the Company.                                                    
                                                                              
    In respect of the transactions contemplated under the Supply of           
    Electricity and Steam Agreement, the Company has obtained a waiver        
    from the Stock Exchange from strict compliance with the shareholders'     
    approval and/or announcement requirements set out in the abrogated        
    Chapter 14 of the Listing Rules. Due to the entering into of the          
    Supplemental Agreement, the Company is required to take appropriate       
    steps to comply with Chapter 14A of the Listing Rules.                    
                                                                              
                                                                              
    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%.