**EXHIBIT 11.1**
**CODE OF ETHICS**
**Code of Conduct (Business Ethics Policy of LJ International Inc.)**
1. LJ International Inc. believes that honesty, integrity and fairplay areimportant company assets in business. It is therefore important for allof you to ensure that the Company’s reputation is not tarnished bydishonesty, disloyalty or corruption. The following guidelines set outthe standards of behavior expected and explain how you should respond todifferent situations in business dealings:
**Legal Requirements**
2. Any employee soliciting or accepting an advantage in connection with hiswork without the permission of the employer commits an offence under thePrevention of Bribery Ordinance. The offerer will also commit an offence.The term “advantage” is defined in the Ordinance and includes gift, loan,fee, reward, office, employment, contract, service and favor.
**Soliciting Advantages**
3. It is the policy of LJ International Inc. to prohibit employees tosolicit any advantage from clients, contractors, suppliers or any personin connection with company business.
**Accepting Advantages**
4. If the acceptance of an advantage could affect your objectivity or induceyou to act against the Company’s interests, you should decline to accept.Similarly, if acceptance could lead to questions or complaints of bias orimpropriety, the offer should also be declined. 5. Where an advantage is voluntarily given, you could consider acceptingonly if:-
 a) the acceptance will not influence your performance;  b) you will not feel obliged to do something in return for theofferor;  c) you are able to openly discuss the acceptance without reservation;and  d) the nature (e.g. advertising or promotional gift, customary gift orlucky money given during festive occasions) and the value (e.g. notexceeding HK$100) of the advantage are such that refusal could be seenas unsociable or impolite.
**Offering Advantages**
6. Under no circumstance should an employee offer bribes to any person orcompany for the purpose of obtaining or retaining business. It is alsoillegal to offer advantages to influence public servants and bribes inrelations to public contracts, tenders and auctions.
 

 

**Conflict Of Interest**
7. Conflict of interest situations arise when the personal interests of anemployee compete or conflict with the interests of the Company. Youshould avoid such situations, actual or potential, which may compromiseyour integrity and put the Company’s interests and reputation at stake.You must declare to the Company and financial interest, direct orindirect, which you or members of your immediate family may have, in anybusiness or other organization which competes with the Company or withwhich the Company has business dealings.
**Outside Employment/Investment**
8. Employee should refrain from engaging in outside employment, business,investments or activities that might conflict with Company interests. Ifyou wish to take concurrent employment, either regular or on a consultingbasis, you must seek the prior written approval before accepting theemployment.
**Entertainment/Loans/Gambling**
9. Although entertainment is an acceptable form of business and socialbehavior, you should turn down invitations to meals or entertainment thatare excessive in nature or frequently, so as to avoid embarrassment orloss of objectivity when conducting Company business. 10. You or your immediate family should not grant or guarantee a loan to, oraccept a loan from or through the assistance of any individual ororganization having dealing with the Company. There is, however, norestriction on normal bank lendings. 11. You are advised not to engage in frequent and excessive gambling of anykind, including games of mahjong, with persons having business dealingswith the Company. In social games with clients, contractors or suppliers,you must exercise judgement and withdraw from any high stake games.
**Handling Company Property/Confidential Information**
12. Appropriation of Company properties, including raw material and finishedgoods by employees for personal use or for resale is strictly prohibited.In these cases, the Company may, without notice or payment in lieu,dismiss the offending employee. 13. You are not allowed at any time to disclose any confidential informationto anybody outside the Company or use such information to further personalinterest e.g. insider trading.
**Compliance With The Company Code**
14. All employees should familiarize themselves with the content of andcomply with the Company Code of Conduct. In case of doubt, you shouldconsult Human Resources Department. All reports
 

 

  on conflicts of interest or applications for acceptance of advantages/outside employment etc shouldbe permitted by Human Resources Department in advance.
**Discipline/Complaint**
15. Anyone breaching the Code will be disciplined, including termination ofemployment and may, in some circumstances, be prosecuted under thePrevention of Bribery Ordinance. 16. Any complaints on possible breach of this Code can be made to HumanResources Chief Executive (Contact Phone No. 852-27643622 or86-755-25261301) and will be treated promptly and fairly.
**Review of Company Code of Conduct**
17. This Code of Conduct will be reviewed and updated from time to time.    Signature:    Company Chop Employee Name:
Date: