SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC. 20549

      -------------------------------------------------------------------

                                    FORM 20-F


    [  ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                                       OR

    [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934 For the fiscal year ended DECEMBER 31, 2004

                                       OR

    [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

        For the transition period from _______________ to _______________


                         Commission file number 1-13750


                                GRAPHIC OMITTED



             (Exact name of Registrant as specified in its charter)

                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED
                 (Translation of Registrant's name into English)

                         THE PEOPLE'S REPUBLIC OF CHINA
                 (Jurisdiction of incorporation or organization)

     NO. 9 LONGTAN STREET, LONGTAN DISTRICT, JILIN CITY, JILIN PROVINCE, PRC
                    (Address of principal executive offices)


                  Securities registered or to be registered pursuant to Section
12(b) of the Act.


       Title of Each Class            Name of Each Exchange on which Registered
 AMERICAN DEPOSITARY SHARES                     NEW YORK STOCK EXCHANGE
  CLASS H ORDINARY SHARES,             THE STOCK EXCHANGE OF HONG KONG LIMITED
PAR VALUE RMB 1.00 PER SHARE

                  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 Classes)


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 the annual
report.

                              964,778,000 H SHARES
                     2,596,300,000 DOMESTIC INVESTED SHARES

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 of
1934 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
filing requirements for the past 90 days.

Yes X             No
    -                --

Indicate by check mark which financial statement item the registrant has elected
to follow.

Item 17           Item 18 X
        --                -


<PAGE>


                                TABLE OF CONTENTS


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS......................3
    PART I.....................................................................5
       Item 1.   Identity of Directors, Senior Management and Advisers.........5
       Item 2.   Offer Statistics and Expected Timetable.......................5
       Item 3.   Key Information...............................................5
       Item 4.   Information on the Company...................................14
       Item 5.   Operating and Financial Review and Prospects.................37
       Item 6.   Directors, Senior Management and Employees...................48
       Item 7.   Major Shareholders and Related Party Transactions............54
       Item 8.   Financial Information........................................59
       Item 9.   The Offer and Listing........................................60
       Item 10.  Additional Information.......................................62
       Item 11.  Quantitative and Qualitative Disclosures about Market Risk...75
       Item 12.  Description of Securities Other than Equity Securities.......76
    PART II ..................................................................76
       Item 13.  Defaults, Dividend Arrearages and Delinquencies..............76
       Item 14.  Material Modifications to the Rights of Security Holders
                   and Use of Proceeds.79
       Item 15.  Controls and Procedures......................................76
       Item 16A  Audit Committee Financial Expert.............................77
       Item 16B  Code of Ethics...............................................77
       Item 16C  Principal Accountant Fees and Services.......................77
       Item 16D  Exemptions from the Listing Standards for
                    Audit Committees..........................................78
       Item 16E  Purchases of Equity Securities by the Issuer and
                    Affiliated Purchasers.....................................78
    PART III .................................................................79
       Item 17.  Financial Statements.........................................79
       Item 18.  Financial Statements.........................................79
       Item 19.  Exhibits.....................................................79










<PAGE>



            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain information contained in this annual report which does not relate to
historical financial information may be deemed to constitute forward-looking
statements. These statements are made under the "safe harbor" provisions of the
U.S. Private Securities Reform Act of 1995. You can identify these
forward-looking statement by terminology such as "will likely result," "are
expected to," "will continue," "is anticipated," "estimate," "project,"
"believe," "intends to" or similar expressions. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical results and those presently anticipated or projected.
We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Factors that
could cause our actual results in the future to differ materially from any
opinions or statements expressed with respect to future periods include, but are
not limited to, crude oil allocation and pricing, increased foreign competition,
effects of PRC macroeconomic policy and the PRC transport system. We do not
undertake any obligation to update this forward-looking information, except as
required under applicable law.


EXCHANGE RATES

Unless otherwise specified, references in this annual report to "US dollars" or
"US$" are to United States dollars, references to "HK dollars" or "HK$" are to
Hong Kong dollars and references to "Renminbi" or "RMB" are to Renminbi yuan,
which is the legal currency of the PRC.

Translation of amounts from Renminbi to US dollars for the convenience of the
reader have been made in this annual report, except as otherwise noted, at the
exchange rate published daily by the People's Bank of China, or the PBOC Rate,
on December 31, 2004 of US$1 = RMB 8.2765. No representation is made that the
Renminbi amounts could have been or could be converted into US dollars at that
rate or at any other rate.


OTHER CONVENTIONS

As used in this annual report, unless context otherwise requires, the following
terms have the meaning set forth below:

"Combined Offering" means the initial global public offering of our securities
in 1995.

"Parent" or "Parent Company" means prior to November 5, 1999, Jilin Chemical
Group Corporation, or Jilin Group, and from November 5, 1999, PetroChina Company
Limited, or PetroChina.

"PRC" or "China" means the People's Republic of China.

"Predecessor" means Jilin Chemical Industrial Complex as the operator of the
chemical businesses transferred to us in the Restructuring.




                                      -3-
<PAGE>


"Restructuring" means transfer to us, effective as of October 1, 1994, of the
principal chemical businesses and certain assets and liabilities of the
Predecessor, including certain ancillary and businesses support functions, and
the formation of us as the wholly-owned subsidiary of Jilin Chemical Group
Corporation.

"Rated Capacity" is the output capacity of a given production unit or, where
appropriate, the throughput capacity, calculated by estimating the number of
days in a year that such production unit is expected to operate, including
downtime for regular maintenance, and multiplying that number by an amount equal
to the unit's optimal daily output or throughput, as the case may be.

"Tons" or "ton" means metric ton(s) and "t/a" means tons per year.

"We", "our" and "us" are references to Jilin Chemical Industrial Company
Limited, and unless the context otherwise requires, joint ventures we control
and, prior to the Restructuring, relate to the chemical business carried on by
the Predecessor.










                                      -4-
<PAGE>



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

SELECTED FINANCIAL DATA

The following financial data as of December 31, 2003 and 2004 and for each of
the years ended December 31, 2002, 2003 and 2004 are derived from our audited
consolidated financial statements included elsewhere in this annual report. The
financial data as of December 31, 2000, 2001 and 2002 and for each of the years
ended December 31, 2000 and 2001 are derived from our historical consolidated
financial statements not included in this annual report. You should read the
selected financial data set forth below in conjunction with our Consolidated
Financial Statements and the corresponding notes thereto and ITEM 5. OPERATING
AND FINANCIAL REVIEW AND Prospects. Consolidated Financial Statements have been
prepared in accordance with International Financial Reporting Standards
("IFRS"), which differ from accounting principles generally accepted in the
United States of America ("US GAAP"). For a discussion of the significant
differences between IFRS and US GAAP, see ITEM 18. FINANCIAL STATEMENTS --
CONSOLIDATED FINANCIAL STATEMENTS -- NOTE 31.
<TABLE>
<CAPTION>


                                                                 SUMMARY FINANCIAL INFORMATION
                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF SHARES)

                                                2000          2001           2002           2003          2004           2004(a)
                                             --------------------------------------------------------------------------------------
                                               (RMB)          (RMB)          (RMB)          (RMB)         (RMB)           (US$)

STATEMENTS OF OPERATIONS DATA
Amounts in Accordance with IFRS:
<S>                                          <C>            <C>            <C>            <C>            <C>             <C>
   Net sales:                                13,396,247     12,518,532     13,138,387     20,652,809     31,857,423      3,849,142
    Petroleum products                        5,410,401      5,207,953      5,166,188      9,320,066     13,377,835      1,616,363
    Petrochemical and organic
      chemical products                       5,830,795      5,386,480      5,750,075      7,783,091     12,768,259      1,542,713
    Synthetic rubber                            878,455        781,690        782,559      1,133,031      1,793,689        216,720
    Chemical fertilizers and inorganic
      chemical products                         458,212        107,090        123,325        164,861        664,246         80,257
    Other                                       818,384      1,035,319      1,316,240      2,251,760      3,253,394        393,089
   Income/(loss) from operations               (334,593)    (1,308,480)      (506,036)       895,318      2,593,028        313,300
   Interest expenses                           (641,124)      (598,882)      (474,370)      (429,782)      (270,071)       (32,631)
   Net income/(loss)                           (835,990)    (1,817,369)    (1,023,099)       427,609      2,544,510        307,438
   Basic and diluted earnings/(loss)
     per share                                    (0.24)         (0.51)         (0.29)          0.12           0.71           0.09
Amounts in Accordance with US GAAP:(b)
   Net income/(loss)                           (782,117)    (2,160,673)      (685,579)       369,709      2,486,408        300,418
   Basic and diluted earnings/(losses)
     per share                                    (0.22)         (0.61)         (0.19)          0.10           0.70           0.08
CASH FLOW DATA
   Net cash provided  by/(used for)
     operating activities                      (545,537)     1,772,458      1,329,003      3,578,324      3,074,779        371,507
   Net cash used for investing activities    (1,396,895)      (867,158)      (863,352)      (722,137)      (567,842)       (68,609)
   Net cash provided  by/(used for)
     financing activities                     1,924,700     (1,097,347)      (469,763)    (2,853,493)    (2,527,807)      (305,419)
OTHER FINANCIAL DATA
   Depreciation and amortization                867,028        966,795      1,108,522      1,032,007      1,147,278        138,619
   Purchase of property, plant and
     equipment                               (1,396,985)      (866,858)      (791,725)      (675,078)      (642,091)       (77,580)
     Capital Stock                            3,561,078      3,561,078      3,561,078      3,561,078      3,561,078        430,264

</TABLE>


                                      -5-
<PAGE>

<TABLE>
<CAPTION>

                                                                      As of December 31,
                                                    2000            2001        2002         2003          2004         2004(a)
                                                 ----------------------------------------------------------------------------------
                                                    (RMB)          (RMB)        (RMB)        (RMB)         (RMB)         (US$)

BALANCE SHEET DATA

Amounts in Accordance with IFRS:
<S>                                                <C>         <C>           <C>           <C>           <C>            <C>
    Net working capital                            1,302,811   (2,061,875)   (5,256,695)   (5,660,445)   (4,301,022)    (519,666)
    Fixed assets                                  11,417,297   10,426,277    10,687,084     9,929,535     9,368,990    1,131,999
    Total assets                                  17,973,843   13,829,838    13,665,141    12,665,589    13,594,197    1,642,506
    Short term debt (including current             3,043,831    3,541,485     5,536,685     4,101,999     3,086,075      372,872
      portion of long-term debt)
    Long term debt (excluding current portion)     7,580,101    5,985,563     3,826,805     2,407,898       896,015      108,260
    Owner's/shareholders' equity                   5,873,895    3,106,046     2,082,947     2,510,556     5,055,066      610,773
Amounts in Accordance with US GAAP: (b)
    Fixed assets                                  10,336,870   10,407,165    10,995,294    10,170,684     9,519,956    1,150,239
    Owner's /shareholders' equity                  5,086,452    2,924,327     2,240,200     2,609,909     5,096,317      615,757

<FN>

(a)      Translated solely for convenience into US dollars based on the exchange
   rate prevailing on December 31, 2004 as quoted by the People's Bank of
   China of US$1 = RMB 8.2765.
(b)      Amounts for 2000 have been restated.
</FN>
</TABLE>


         DIVIDENDS

The following table sets forth certain information concerning the dividends paid
by us since 2000:

          DIVIDEND PERIOD                        DIVIDEND AMOUNT (PER SHARE)
      JANUARY 1 - DECEMBER 31
                                              RMB                 US$ EQUIVALENT

                2000                      No dividends             No dividends
                2001                      No dividends             No dividends
                2002                      No dividends             No dividends
                2003                      No dividends             No dividends
                2004                      No dividends             No dividends

         EXCHANGE RATES

The PRC government imposes control over its foreign currency reserves in part
through direct regulation of the conversion of Renminbi into foreign exchange
and through restrictions on foreign trade. See ITEM 10. ADDITIONAL INFORMATION.

The noon buying rate in New York City for cable transfers in foreign currencies
as certified for customs purposes by the Federal Reserve Bank of New York on May
16, 2005 was US$1.00 = RMB8.2765. In addition, the following table sets forth
certain historical information concerning exchange rates between Renminbi and US
dollars for the periods indicated:


                                                          NOON BUYING RATE
                                                     (EXPRESSED IN RMB PER US$)
               PERIOD                                       AVERAGE((1))

                2000...............................            8.2784
                2001...............................            8.2770
                2002..............................             8.2770
                2003...............................            8.2771
                2004...............................            8.2768

NOTES: (1) The average rate means the average of the exchange rates on the last
day of each month during that period.



                                      -6-
<PAGE>


                                                         NOON BUYING RATE
                                                    (EXPRESSED IN RMB PER US$)
            PERIOD                                    HIGH             LOW
            ------                                    ----             ---
             November, 2004.....................     8.2765           8.2764
             December, 2004.....................     8.2767           8.2765
             January, 2005......................     8.2765           8.2765
             February, 2005.....................     8.2765           8.2765
             March, 2005........................     8.2765           8.2765
             April, 2005........................     8.2765           8.2765


CAPITALIZATION AND INDEBTEDNESS

Not Applicable.

REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable.

RISK FACTORS

         THE PRICE OF CRUDE OIL, OUR PRINCIPAL RAW MATERIAL, IS SUBJECT TO THE
CONTROL OF THE PRC GOVERNMENT.

Crude oil is our primary raw material. In the PRC the price of crude oil is
subject to a system of government control adopted in 1998. Under this pricing
scheme, the State Planning Commission (together with its successor, initially,
the State Development and Planning Commission and subsequently, the National
Development and Reform Commission) has established, on a monthly basis, a single
indicative price for each grade of domestic onshore crude oil based on
comparable international market prices inclusive of any duties that would have
been imposed had the oil been imported. To this single state indicative price, a
surcharge within certain government stipulated guidelines is imposed on all
domestically produced onshore crude oil as determined and agreed to by China
National Petrochemical Corporation, or CNPC, and China Petrochemical Group
Corporation, or Sinopec Group, to reflect any transportation and other
miscellaneous costs that would have been incurred in having the oil delivered to
various refineries. Accordingly, since June 1998 we have been purchasing crude
oil at prices that reflect the applicable state indicative price plus the
applicable surcharge. We believe that this oil pricing regime has resulted in
costs of crude oil that more closely reflect trends in international markets;
however, there may be a lag in timing between the changes in international
prices and any changes to the state indicative price, which may expose us to a
potentially higher price than the then current international market price. While
we believe that the current pricing policy will not change in the foreseeable
future, any changes in this pricing scheme could affect the price of our crude
oil and could adversely affect our operating results. As the PRC oil pricing
scheme reflects prices of crude oil in international markets, the cost of our
crude oil is subject to fluctuations in the price of crude oil in international
markets. These fluctuations may materially and adversely affect our operating
results. See ITEM 4. INFORMATION ON THE COMPANY -- RAW MATERIALS AND ENERGY
SUPPLY -- CRUDE OIL.



                                      -7-
<PAGE>


         WE ARE DEPENDENT ON OUR PARENT FOR SUPPLIES OF OUR PRINCIPAL RAW
MATERIALS.

We are required to purchase crude oil and cracking feedstock, the raw materials
for the production of ethylene such as naphtha and light industrial oil, through
our Parent. Therefore neither the availability nor prices of crude oil nor other
cracking feedstock can be predicted by us, and no assurance can be given that
limited availability of crude oil or other cracking feedstock or substantially
higher prices will not have a material adverse effect on our operating results.

Since July 1998, PetroChina has been responsible for allocating all of our crude
oil from domestic sources. Our Parent has confirmed to us its intention to
allocate to us sufficient amounts of crude oil and other cracking feedstock
necessary to meet our needs for 2005.

         OUR OPERATIONS HAVE BEEN AND MAY CONTINUE TO BE ADVERSELY AFFECTED BY
THE CYCLICAL NATURE OF THE PETROLEUM AND PETROCHEMICAL MARKET AND BY THE
VOLATILITY OF PRICES OF PETROLEUM AND PETROCHEMICAL PRODUCTS.

Most of our revenues are attributable to petroleum and petrochemical products
which have historically been cyclical and sensitive to the availability and
price of feedstock's and general economic conditions. Regional and global
markets for many of our products are sensitive to changes in industry capacity
and output levels, cyclical changes in regional and global economic conditions,
the price and availability of substitute products and changes in consumer
demand, which from time to time have had a significant impact on product prices
in the regional and global markets. Historically, the markets for these products
have experienced alternating periods of tight supply, causing prices and margins
to increase, followed by periods of capacity additions, possibly resulting in
oversupply and declining prices and margins. As tariffs and other import
restrictions are reduced and the control of product allocation and pricing
relaxed in China, the domestic markets for many of our products have become
increasingly subject to the cyclical nature of regional and global markets.
Historically, international and domestic prices of petroleum and petrochemical
products have fluctuated widely due to many other factors that are beyond our
control. Although we have implemented various measures to overcome the
unfavorable market conditions, including streamlining internal management and
reducing expenses, our business and results of operations and financial
condition may continue to be adversely affected if the results of those measures
fail to offset the adverse effects of the market conditions.

Pursuant to PRC law, our domestic-listed shares were suspended from trading on
the Shenzhen Stock Exchange on April 30, 2003 as a result of our reporting of
three consecutive years of net losses from January 1, 2000 to December 31, 2002.
Following our report of net profits for the period ended June 30, 2003, our
domestic-listed shares resumed trading on September 25, 2003 on the Shenzhen
Stock Exchange under the "special treatment" category provided under PRC law.
Following the release of our financial results for the year ended December 31,
2003, which recorded net profits for the year, our domestic-listed share no
longer face the risk of delistment unless we record another three years of
consecutive losses. However, for the year 2004 our domestic-listed shares
continued to trade under the "special treatment" category due to net asset value
lower than share par value and faced trading suspension for any trading day if
there is trading price volatility of 5% or more in that trading day. According
to financial results for the year ended December 31, 2004, our net asset per
share is higher than the par value of A shares.






                                      -8-
<PAGE>

Therefore, Shenzhen Stock Exchange cancelled its special treatment to our A
shares on March 28, 2005. The trade name of our A shares was changed thereafter
from "ST Jihua" into "Jilin Chemical", and the limit to daily fluctuation of
share price also changed from 5% to 10%. In general, PRC law provides that
companies listed on the Shenzhen Stock Exchange will face trading suspension if
there is trading price volatility of 10% or more in that trading day. Although
the suspension of trading of our domestic-listed shares will not directly affect
the listing and trading of our foreign-invested share listed on the Hong Kong
Stock Exchange, or the H Shares, and our American Depositary Shares listed on
the New York Stock Exchange, or the ADSs, the trading prices for H Shares and
ADSs may be directly affected due to lack of liquidity of our Domestic Shares.

         WE HAVE SIGNIFICANT ACCOUNTS OF FOREIGN CURRENCY DEBTS RELATED TO THE
ETHYLENE PROJECT.

In November 1993, we participated in the construction of a highly integrated
petrochemical complex, consisting of 11 principal facilities and related
ancillary and support facilities centered around an ethylene production facility
with a Rated Capacity of 300,000 tons, which we refer to in this annual report
as the Ethylene Project.

Total investment in the Ethylene Project was approximately RMB 19.88 billion of
which approximately US$889 million in foreign exchange was borrowed by us and
Jilin Group between 1993 and 1997. As a result, both we and Jilin Group have
significant indebtedness denominated in foreign currencies. Further to an
agreement between us and Jilin Group effective September 30, 1998, Jilin Group
assumed the foreign currency loans borrowed by us and agreed to make periodic
loan repayments on our behalf and in turn, we agreed to pay Jilin Group the
Renminbi equivalent of such repayments at an exchange rate determined as at
September 30, 1998. We re-assumed these foreign currency loans effective January
1, 2000. As a result, we will have significant financial risks with respect to
our ability to service and repay the foreign exchange indebtedness, given that
almost all of our revenues at the present time are received in Renminbi.
Fluctuation in the Renminbi exchange rate against the relevant borrowed
currencies may result in significant foreign exchange gains or losses for us. As
of December 31, 2004, the outstanding foreign exchanged indebtedness was RMB
1,063 million.

         WE RELY ON OUR PARENT TO PURCHASE THE PRODUCTS PRODUCED BY THE ORIGINAL
FOUR FACILITIES.

While we own four of the Ethylene Project's 11 facilities, or the Original Four
Facilities, PetroChina and Jilin Group own five and two of the remaining seven
facilities, respectively, or the Additional Seven Facilities. As ethylene and
certain other products of the Original Four Facilities are sold to our Parent as
feedstock for the Additional Seven Facilities, the ability of our Parent to
operate profitably the Additional Seven Facilities will directly affect the
financial performance of the Original Four Facilities and success of the
Ethylene Project as a whole. Because of the impracticability of transporting
ethylene and certain other products to be produced by the Original Four
Facilities, we will not have alternative customers for the majority of these
products in the event that our Parent is unable to purchase them as feedstock
for the Additional Seven Facilities.



                                      -9-
<PAGE>


         WE ARE BECOMING INCREASINGLY SUBJECT TO FOREIGN COMPETITION.

Historically, the PRC government has provided the PRC chemical industry (except
for chemical fertilizers) with certain protection from foreign competition
through three primary practices: maintaining relatively high import tariffs,
imposing import license requirements and controlling the availability of foreign
exchange required to pay for imported products. These practices affect the
majority of the product types produced by us. These tariffs and import
restrictions are intended, in part, to protect domestic producers of these
products, such as us.

China became a member of the World Trade Organization, or WTO, on December 11,
2001. As part of its WTO accession commitments, the PRC government will
gradually eliminate import quotas and import license systems, reduce tariffs,
and permit foreign invested enterprises to engage in domestic distribution and
retail for all of our major products. China will also eliminate state trading
for our major products exclusive of petroleum products and chemical fertilizer.

Increased competition from imported products resulting from China's accession to
the WTO may have a material adverse effect on our business and operations. We
do, however, believe that our products have been and will continue generally to
be competitive with imported products in the PRC. Tariff reductions, however,
could reduce our profit margins or otherwise negatively impact our revenue from
certain products, including a small number of significant products. The PRC
government may also reduce the tariffs imposed on production equipment that we
may import in the future, as well as the restrictions on availability of
imported raw materials (such as crude oil) currently enforced by the PRC. We are
unable to determine accurately at this time the net effect on our business and
results of operations of China's accession to the WTO.

         THE OUTBREAK OF AN EPIDEMIC MAY AFFECT OUR BUSINESS.

The outbreak of Severe Acute Respiratory Syndrome, or SARS, in the PRC in early
2003 has had a negative impact on the PRC economy. The outbreak of avian
influenza in certain east and southeast Asian countries in early 2004 had a
tendency to spread to other countries. If there is an outbreak of SARS or avian
influenza or other widespread health problem, the forecasted economic growth in
the PRC may be negatively affected and our revenues, cost of revenues and
results of operations would be negatively impacted. If the outbreak leads to
quarantine of a significant number of our employees or closure of our facilities
and other properties, our business would be seriously harmed. Although we will
take necessary preventative measures in respect of our facilities and other
properties, the development and spread of an epidemic is usually unpredictable
and we will be unable to quantify the potential impact of any epidemic on our
operations and financial performance. We have implemented preventative measures,
including establishing a personal hygiene policy among our staff and increasing
our premises' disinfecting program, and we will continue to carefully monitor
the situation.

         POLITICAL AND ECONOMIC POLICIES OF THE PRC GOVERNMENT COULD AFFECT OUR
BUSINESS.

The economy of China differs from the economies of most countries belonging to
the Organization for Economic Co-operation and Development in a number of
respects, including:

     o    structure;

     o    level of government;

     o    level of capital reinvestment;

     o    control of foreign exchange; and

     o    allocation of resources.



                                      -10-
<PAGE>


Before its adoption of reform and open-door policies beginning in 1978, China
was primarily a planned economy. Since that time, the PRC government has been
reforming the PRC economic system, and has also begun reforming the government
structure in recent years. These reforms have resulted in significant economic
growth and social progress. Although the PRC government still owns a significant
portion of the productive assets in China, economic reform policies since the
late 1970s have emphasized autonomous enterprises and the utilization of market
mechanisms. We currently expect that the PRC government will continue these
reforms, further reduce governmental intervention with enterprises and rely more
heavily on market mechanisms to allocate resources. Although we believe these
reforms will have a positive effect on our overall and long-term development, we
cannot predict whether certain changes to China's political, economic and social
conditions, laws, regulations and policies will have any adverse effect on our
current or future business or results of operations.

         CERTAIN CHANGES IN FOREIGN EXCHANGE REGULATIONS MAY ADVERSELY AFFECT
OUR FINANCIAL CONDITION.

We receive almost all of our revenues in Renminbi, which is not freely
convertible into foreign exchange. However, we require foreign currency to fund
a portion of our operations. For example, we require, and expect to require in
the future, US dollars to purchase equipment for expansion projects. We will
also need foreign currency to repay foreign currency loans related to the
Ethylene Project. In addition, profits will need to be converted into United
States dollars, Hong Kong dollars and other currencies in the amounts needed for
us to pay dividends and discharge obligations denominated in foreign currency.

Under the existing foreign exchange regulations in China, domestic enterprises
and institutions are permitted to buy foreign exchange from State-designated
banks at designated times upon presentation of appropriate documentation
establishing the existence of import contracts or payment notes of overseas
financial institutions. Such enterprises and institutions also are permitted to
purchase foreign exchange for the import of certain products subject to quotas,
import permits and registration controls. Domestic enterprises are permitted to
apply to purchase foreign exchange for the payment of dividends that have been
authorized as payable in foreign currency. Conversion and payment must be
effected through certain documentation, including a written resolution on profit
distribution passed by the enterprise's board of directors and evidence that the
enterprise has paid all required PRC taxes. However, uncertainty exists as to
whether the PRC government may restrict access to foreign currency for the above
transactions if foreign currency becomes scarce in the PRC.

Foreign exchange transactions which are included in our capital account,
including principal payments in respect of foreign currency-denominated
obligations, continue to be subject to limitations and require the prior
approval of the State Administration of Foreign Exchange, or SAFE. These
limitations could affect our ability to obtain foreign exchange through debt
financing, or to obtain foreign exchange for capital expenditures.



                                      -11-
<PAGE>


         FLUCTUATION OF THE RENMINBI COULD MATERIALLY AFFECT OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

The value of the Renminbi is subject to changes in the PRC government's policies
and depends to a large extent on China's domestic and international economic and
political developments, as well as supply and demand in the local market. Since
1994, the official exchange rate for the conversion of Renminbi to US dollars
has generally been stable, and the Renminbi has appreciated slightly against the
US dollar. However, we cannot give any assurance that the value of the Renminbi
will continue to remain stable against the US dollar or any other foreign
currency. Any devaluation of the Renminbi may adversely affect the value of, and
dividends payable on, the H Shares in foreign currency terms since we receive
revenues and express our profits in Renminbi.

         THE PRC LEGAL SYSTEM IS NOT FULLY DEVELOPED.

                         THERE ARE UNCERTAINTIES REGARDING THE INTERPRETATION
AND ENFORCEMENT OF PRC LAWS AND REGULATIONS

The PRC legal system is based on statutory law. Under this system, prior court
decisions may be cited as persuasive authority but do not have binding
precedential effect. Since 1979, the PRC government has been developing a
comprehensive system of commercial laws and considerable progress has been made
in the promulgation of laws and regulations dealing with economic matters, such
as corporate organization and governance, foreign investment, commerce, taxation
and trade. Because these laws, regulations and legal requirements are relatively
new and because of the limited volume of published case law and judicial
interpretations and the non-binding nature of prior court decisions, the
interpretation and enforcement of these laws, regulations and legal requirements
involve some uncertainty.

                         OUR SHAREHOLDERS MAY NOT ENJOY PROTECTIONS THAT THEY
MAY BE ENTITLED TO IN OTHER JURISDICTIONS

As substantially all of our business is conducted in the PRC, our operations are
governed principally by the laws of the PRC. As a PRC company with shares listed
and traded outside the PRC, we are subject to the PRC Special Regulations on the
Overseas Offering and Listing of Shares by Joint Stock Limited Companies issued
by the PRC State Council on August 4, 1994 and amended from time to time, or the
Special Regulations, and to the Mandatory Provisions for Articles of Association
of Companies Listing Overseas issued by the then PRC State Council Securities
Commission and the State Commission for Restructuring the Economic System on
August 27, 1994, or the Mandatory Provisions. The Mandatory Provisions contain
certain provisions that are required to be included in the articles of
association of PRC companies to be listed abroad and are intended to regulate
the internal affairs of those companies. The PRC Company Law promulgated by the
PRC National People's Congress and made effective on July 1, 1994 and the
Special Regulations, in general, and the provisions for the protection of
shareholders' rights and access to information, in particular, are less
developed than those applicable to companies incorporated in Hong Kong, the
United Kingdom, the United States and other developed countries or regions.



                                      -12-
<PAGE>


The PRC Company Law is different in certain important aspects from company laws
in Hong Kong, the United States and other common law countries or regions,
particularly with regard to investor protection, including in such areas as
derivative actions by minority shareholders and other minority protections,
restrictions on directors, financial disclosure, variations of class rights,
procedures at general meetings and payments of dividends.

The limited nature of investor protection under the PRC Company Law is
compensated for, to a certain extent, by the introduction of the Mandatory
Provisions and certain additional requirements that are imposed by the Listing
Rules of The Stock Exchange of Hong Kong Limited, or the Listing Rules, which
are intended to reduce the scope of differences between Hong Kong company law
and the PRC Company Law. The Mandatory Provisions and those additional
requirements must be included in the articles of association of all PRC
companies applying to be listed in Hong Kong. Our Articles of Association have
incorporated the provisions required by the Mandatory Provisions and the Listing
Rules. Despite the incorporation of those provisions, our shareholders may not
enjoy the full extent of protections that they may be entitled to in other
jurisdictions.

         WE ARE CONTROLLED BY OUR PARENT, WHOSE INTERESTS MAY DIFFER FROM THOSE
OF OUR OTHER SHAREHOLDERS.

As of April 29, 2005, our Parent owned 67.29% of our issued share capital, and
is our controlling shareholder. Our Articles of Association provide certain
protection against the abuse of a controlling shareholder's powers by
stipulating that, in addition to any obligation imposed by law, a controlling
shareholder shall not exercise its voting rights in a manner prejudicial to the
interests of the minority shareholders with respect to certain enumerated
matters of fundamental importance to shareholders. However, we cannot give any
assurance that our Parent, as controlling shareholder, will always vote its
shares in a way that benefits our minority shareholders.

         WE MAY BE ADVERSELY AFFECTED BY ENVIRONMENTAL REGULATIONS.

We are subject to PRC national and local environmental protection regulations
which currently impose fees for the discharge of waste substances, require the
payment of fines for pollution, and provide for the closure by the PRC
government of any facility that fails to comply with orders requiring us to
cease or improve upon certain activities causing environmental damage. Due to
the nature of our business, we produce significant amounts of waste water, gas,
and solid waste materials during the course of our production. We believe our
environmental protection facilities and systems are adequate for us to comply
with the existing national, provincial, and local environmental protection
regulations. However, PRC national, provincial, or local authorities may impose
additional or more stringent regulations which would require additional
expenditure on environmental matters or changes in our processes or systems.




                                      -13-
<PAGE>


         OUR INSURANCE COVERAGE MAY NOT BE ADEQUATE TO COVER RISKS RELATED TO
OUR PRODUCTION AND OTHER OPERATIONS.

The amount of our insurance coverage for our buildings and equipment is less
than their value, and we have no plans to increase the coverage. The amount of
our insurance coverage for our inventory is also less than its book value, and
we also have no plans to increase this coverage. In accordance with what we
believe is customary practice among chemical producers in the PRC, we insure
only high risk assets, such as production property and equipment, inventory and
explosive or otherwise hazardous facilities. However, our underinsurance of
properties, facilities and inventory in accordance with this PRC practice
exposes us to substantial risks so that in the event of a major accident, our
insurance recovery may be inadequate.

We do not currently carry third party liability insurance to cover claims in
respect of bodily injury, property or environmental damage arising from
accidents on our property or relating to our operations. We also do not carry
business interruption insurance as such coverage is not customary in the PRC.

Losses incurred or payments required to be made by us which are not fully
insured could have a material adverse effect on our financial condition. See
ITEM 4. INFORMATION ON THE COMPANY -- INSURANCE.

ITEM 4. INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT

Our legal name is Jilin Chemical Industrial Company Limited. We were established
on December 13, 1994 as a joint stock limited company in the PRC pursuant to the
PRC Company Law. Our executive offices are located at No. 9 Longtan Road,
Longtan District, Jilin City, Jilin Province, People's Republic of China. Our
telephone number is (86 432) 390-3912.

We and Jilin Group were established from the Predecessor. We were established as
a joint stock limited company in the PRC as a result of the Restructuring. The
Restructuring was carried out in preparation for the Combined Offering and in
order for us to conduct a focused line of business as a large-scale diversified
chemical enterprise. As a result of the Restructuring, we became a wholly-owned
subsidiary of Jilin Group and the Predecessor transferred to us its principal
chemical businesses and certain assets and liabilities together with certain
ancillary and business support functions. Until July 1998, Jilin Group was a
State-owned enterprise under the administrative control of the Jilin Provincial
Government. In July 1998, as a result of the restructuring of the PRC
petrochemical and chemical industries approved by the PRC State Council, or the
Industry Restructuring, Jilin Group became a wholly-owned subsidiary of CNPC.
Effective November 5, 1999, as part of a reorganization of CNPC, or the CNPC
Reorganization, Jilin Group transferred to PetroChina all of its ownership
interest in us, represented by Domestic Shares constituting 70.25% of our entire
capital stock, causing PetroChina to become our Parent. Following the issuance
of 150,000,000 additional Domestic Shares on January 27, 2000, PetroChina
remains our controlling shareholder holding approximately 67.29% of our issued
share capital. See "Business Overview -- The PRC Chemical Industry and Relevant
Markets".

The Predecessor was a large-scale chemical industrial enterprise, with a special
emphasis on the production of coal chemical and salt chemical products, which
also operated an oil refining facility and an ethylene facility. The Predecessor
also constructed 30 major chemical industrial production facilities and, in
November 1993, began construction of the Ethylene Project. During our
development, we have replaced and modified our production facilities from time
to time in order to maintain the facilities in as advanced and efficient a state
as possible, given the limitations on the availability of resources in the PRC.
None of our current principal production facilities were operational prior to
1972.



                                      -14-
<PAGE>


Our most significant development project has been our participation in the
Ethylene Project. The Ethylene Project is designed as a vertically integrated
complex and is comprised of 11 production facilities and certain ancillary and
support facilities. All facilities comprising the Ethylene Project have been
engaged in commercial production since October 1998. While we own four of the
Ethylene Project's 11 facilities, or the Original Four Facilities, PetroChina
and Jilin Group own five and two of the remaining seven facilities,
respectively, or the Additional Seven Facilities. We were granted an option by
our Parent to acquire all or part of the Additional Seven Facilities, which
expired on December 31, 2002 unexercised by us. Therefore, we no longer have the
option to acquire the Additional Seven Facilities.

In 2001, we expanded the Rated Capacity of our principal ethylene production
facilities from 300,000 t/a to 380,000 t/a, which increased the aggregate Rated
Capacity of our ethylene production facilities to 530,000 t/a and significantly
increased our capability to produce downstream, higher-margin ethylene-based
chemical products. We have become one of the largest ethylene manufacturers in
the PRC.

BUSINESS OVERVIEW

         THE COMPANY

We are located in Jilin Province in north-eastern China. North-eastern China
contains a substantial concentration of the PRC's largest industrial complexes,
several of the PRC's most significant oilfields (including our two sources of
crude oil, Daqing oilfield, which is the PRC's largest producer of crude oil, in
Heilongjiang Province, and Fuyu (Jilin) oilfield in Jilin Province) and a
relatively well developed rail system. Growth and development of the industrial
base in north-eastern China has had and is expected to continue to have a
significant impact on the demand for our products. We believe that our location
in north-eastern China provides us with the strategic advantages of proximity to
a substantial customer base, ready access to sources of crude oil, our principal
raw material, and ready access to transportation needed for the transport of
both raw materials and products.

We are one of the largest producers of basic chemicals and chemical raw
materials, and one of the largest diversified chemical enterprises in the PRC.
We are also one of the largest producers of ethylene in the PRC, accounting for
approximately 10% of China's ethylene production in 2004. Our principal
businesses consist of the production of petroleum products, petrochemical and
organic chemical products, synthetic rubber, chemical fertilizers and inorganic
chemical products, and other chemical products. We are the PRC's leading
producer of certain synthetic rubber products and certain petrochemical and
organic chemical products, and we believe we have a strong market position with
respect to most of our principal products. As a result of our efforts to phase
out technologically obsolete production facilities, we ceased production of
dyestuff, certain dye intermediate products and some chemical fertilizer
products in 2000.



                                      -15-
<PAGE>



In 2004, we had sales of approximately RMB31,857.42 million (US$3,849.14
million) and a profit before income taxation of approximately RMB 2,356.6
million (US$284.7 million). Of our 2004 sales revenue, 41.99% consisted of sales
of petroleum products, 40.08% of sales of petrochemical and organic chemical
products, 5.63% of sales of synthetic rubber products, 2.09% of sales of
chemical fertilizers and inorganic chemical products, and the remaining 10.21%
consisted of sales of other chemical products and other goods and services.

We currently comprise 11 operating units, of which six are major production
units and the remaining five units perform ancillary functions. The six major
production units are:

     --   a petroleum refinery with facilities to produce petroleum products;
     --   an organic synthesis plant with facilities to produce petrochemical
          and organic chemical products and synthetic rubber;
     --   a calcium carbide plant with facilities to produce petrochemical and
          organic chemical products;
     --   a dyestuff plant with facilities to produce aniline, a benzene
          derivative used in the manufacture of dyes;
     --   a chemical fertilizer plant with facilities to produce chemical
          fertilizers and other chemical products; and
     --   an ethylene plant to produce ethylene.

The five units performing ancillary functions are:

     --   a power plant to supply a portion of our electricity and steam needs;
     --   a waste water treatment plant;
     --   a railway transportation branch;
     --   a sales and marketing branch; and
     --   a procurement branch.

Our H Shares, par value RMB 1.00 per share, are listed and trade on the Hong
Kong Stock Exchange. Our ADSs, each representing 100 H Shares, which are held by
The Bank of New York as depositary, are listed and trade on the New York Stock
Exchange under the symbol "JCC." Certain of our Domestic Shares, par value RMB
1.00 per share, are listed on the Shenzhen Stock Exchange which were suspended
from trading on April 30, 2003, but resumed trading on September 25, 2003 on the
Shenzhen Stock Exchange under the "special treatment" category provided under
PRC law. On March 28, 2005, Shenzhen Stock Exchange cancelled its special
treatment to our domestic-listed shares. As of April 29, 2005, PetroChina was
our controlling shareholder holding approximately 67.29% of our issued share
capital.

         THE PRC CHEMICAL INDUSTRY AND RELEVANT MARKETS

The chemical industry in the PRC constitutes a basic industrial sector which has
been a major focus for development by the PRC government. In the four segments
of the chemical industry in which the vast majority of our products fall
(petroleum products, petrochemical and organic chemical products, synthetic
rubber products, and chemical fertilizers and inorganic chemical products), per
capita consumption in the PRC remains significantly lower than that in major
OECD countries. We believe that, as the PRC economy undergoes further
industrialization and development of consumer markets, demand for chemical
products will increase and decrease as general economic activities in the PRC
change but on average continue to grow at rates that are high relative to more
industrialized countries.



                                      -16-
<PAGE>


Although historically the PRC government has asserted substantial control over
all aspects of the chemical industry, during the past decade, the PRC government
has implemented various economic liberalization measures which have materially
affected the PRC chemical industry in areas such as cost and allocation of raw
materials, product pricing and marketing and distribution of products. China's
accession into WTO is expected to continue this trend, particularly in areas of
import and distribution of raw materials. A portion of the PRC chemical industry
and certain of our product markets, including petroleum products and chemical
fertilizers, remain under various degrees of control by the PRC government. We
expect, and are preparing for, liberalization measures to continue and a more
competitive environment to develop. See "Business Overview -- Competition."

In the first half of 1998, the PRC government carried out the Industry
Restructuring to restructure and consolidate many of the then existing
governmental agencies in the chemical and petrochemical industries. Prior to the
Industry Restructuring, various governmental agencies had responsibilities for
administrative oversight of the chemical and petrochemical industries including
the Ministry of Chemical Industries, China National Petrochemical Corporation
and China National Oil and Gas Corporation. Pursuant to the Industry
Restructuring, the PRC government created the State Oil and Chemical Industries
Bureau, or the SOCIB, and transferred to SOCIB most of the responsibilities for
the national-level oversight then held by Ministry of Chemical Industries, China
National Petrochemical Corporation and China National Oil and Gas Corporation.
In July 1998, the PRC government created CNPC from China National Oil and Gas
Corporation and Sinopec Group from China National Petrochemical Corporation.
CNPC and Sinopec are currently the two corporate entities which operate a
majority of the entire petrochemical and chemical business in the PRC. Jilin
Group then became a subsidiary of CNPC, a State-owned enterprise currently
authorized to conduct business in the petrochemical industry in the northern and
western regions of China and also to oversee the exploration of oil and natural
gas resources. As a result of the Industry Restructuring, we are one of the
group companies that are owned or otherwise affiliated with CNPC. Effective
November 5, 1999, as a result of the CNPC Reorganization, PetroChina became our
new Parent Company.

In February 2001, SOCIB was dissolved by the PRC government and its functions
were assumed by the State Economic and Trade Commission. In March 2003, the
State Economic and Trade Commission was dissolved by the PRC government, and its
functions in directing the reform and management of State-owned enterprises were
assumed by the State Assets Regulatory and Management Commission, its functions
in industry planning and policy making were assumed by the National Development
and Reform Commission, and its functions in administering domestic trade,
coordinating and implementing import and export plans of critical industrial
products and raw materials were assumed by the Ministry of Commerce. We are
currently subject to the industrial oversight of these three new government
agencies at the national level.



                                      -17-
<PAGE>


                  CRUDE OIL AND PETROLEUM PRODUCTS

Crude oil and petroleum products are regarded as key commodities of strategic
significance to the PRC economy by the PRC government, which has traditionally
exercised a high degree of control over their production, distribution, pricing
and import and export. The PRC government maintains state plans consisting of
minimum production targets for certain domestic products. Pursuant to the state
plans with respect to the production and distribution of domestic crude oil and
most petroleum products, the PRC government sets production levels for domestic
oilfields, establishes import quotas and allocates crude oil to refineries and
other crude oil users. As part of its WTO accession commitments, the PRC
government will gradually eliminate import quotas and restrictions on domestic
distribution for crude oil and petroleum products. Nevertheless, crude oil and
petroleum products are still subject to state trading and petroleum products are
still subject to government guidance pricing. See "Business Overview -- Product
Pricing", "Business Overview -- Raw Materials and Energy Supply -- Crude Oil."
and "Business Overview -- Competition".

                  CHEMICAL FERTILIZERS

Due to the importance of agriculture to the PRC's economy, the production,
allocation, pricing and import and export of chemical fertilizers in the PRC
have always been subject to the PRC government control. Prior to March 1998, the
National Development and Reform Commission, based on suggestions from the
Ministry of Chemical Industries, set annual production and allocation plans for
chemical fertilizers. Thereafter, the SOCIB was established and assumed such
advisory role of the Ministry of Chemical Industries. In February 2001, the
SOCIB's responsibilities have been assumed by the State Economic and Trade
Commission. In March 2003, the State Economic and Trade Commission's
responsibilities have been assumed by the State Assets Regulatory and Management
Commission, the National Development and Reform Commission and the Ministry of
Commerce. Although some chemical fertilizers are subject to government guidance
pricing, the prices of the chemical fertilizers produced by us are not subject
to such controls. See "Business Overview -- Product Pricing."

         BUSINESS STRATEGY

Our strategy is focused on meeting the significant challenges and taking
advantage of the significant opportunities that we expect to encounter as the
PRC chemical industry changes and develops in the coming years. Generally, we
expect that the PRC economy will for the foreseeable future sustain growth
comparable to what has been recorded in recent years. As this economic growth
continues, we expect that both industrial and consumer-based demand for
chemicals and chemical-based products will grow. We also expect that, generally,
the economic liberalization which has been undertaken by the PRC government will
continue and is accelerating as a result of China's accession to the WTO. On
this basis, the PRC chemical industry is expected to become increasingly
deregulated, thereby providing for market forces and competition to become
increasingly important factors in determining our financial performance and
growth prospects.

In order to capitalize on these opportunities, we focus on three primary
strategic objectives. First, increasing the production capacity of certain
products by acquiring additional capacity and improving the production
efficiency of existing facilities through the use of new technologies. Capacity
expansion should enable us to build a stronger competitive position in those
products through greater economies of scale and market share gains. Second,
increasing profitability by adjusting product mix and introducing new
higher-margin products. Adjusting product mix should give us flexibility needed
to take advantage of greater cost efficiencies through vertical integration and
to increase sales of higher-margin products. Third, becoming more market- and
customer-oriented through delivery of superior service. We intend to strengthen
the incentive and management of the our sales staff and continue to improve the
quality of service through the entire sales process, from marketing to
after-sales support. We believe that by pursuing and fulfilling these strategic
objectives we will achieve significant competitive advantages and strengthen our
market position in the PRC chemical industry.



                                      -18-
<PAGE>


In terms of production capacity expansion, we have completed our most
significant expansion initiative, the construction of the Original Four
Facilities of the Ethylene Project in 1997. These four facilities substantially
increased our production capabilities for a number of the important chemical raw
materials, including ethylene and propylene, and for synthetic rubber products.

In addition, we increased the Rated Capacity of our butanol and 2-ethylhexanol
facility from 70,000 ton Rated Capacity to 130,000 ton Rated Capacity in 1999
and 2000. We expanded and renovated our synthetic ammonia and catalytic cracking
facility during the period from 2000 to 2002, our principal ethylene facility
and aromatic abstraction facilities in 2001 and our styrene facility from 2001
to 2002. We acquired the remaining 35.0% equity interest in Jilian, our
jointly-controlled entity, in December 2002 for total consideration of RMB 135
million and integrated its business of manufacturing petrochemical products into
our business. Jilian was subsequently dissolved in the same month. In 2003, our
300,000 t/a synthetic ammonia facility commenced operation upon completion of
technical upgrade. We also acquired certain assets from Jilin Group. In 2004, we
have completed energy saving renovations to the 150,000 ton Rated Capacity
ethylene facilities and atmospheric and vacuum distillation units. Other than
the aforementioned project, we did not make any other material capital
expenditures and divestitures between January 1, 2001 and December 31, 2004.

Our capital expansion projects were and are expected to be financed with
operational income and commercial loans. We do not plan to make any material
investment in 2005.

Our domestic sales network is served by two regional sales centers in Guangzhou
and Shanghai, which are responsible for establishing and overseeing sub-regional
sales offices in the region. Through this network, we are able to improve our
services to and communications with existing customers, and develop new
customers and promote new products.

         PRINCIPAL PRODUCTS

Our principal products consist of four categories, petroleum products,
petrochemical and organic chemical products, synthetic rubber, chemical
fertilizers and inorganic chemical products. Beginning the second half of 2000,
we ceased production of dyestuff and certain dye intermediate products as a
result of our phasing out technologically obsolete production facilities.

Our production processes are highly integrated, and many of our petroleum
products and petrochemical and organic products are consumed internally as
feedstock for the production of our downstream products. The table below sets
forth our principal products, on the basis of 2004 sales volume and net sales
revenue (for third party usage only). For the purpose of this table, with
respect to "other" products in each main category of our products, no single
product constitute more than 1.0% of net sales in 2004. "Other products" do not
include those products under the category of "other" for each main category of
our products. "N/A" represents sales volume for certain products, the
measurement of which in tons does not provide a meaningful comparison vis-a-vis
products in other product categories. Sales volume under the category of "total"
does not include sales volume under the category of "other products".







                                      -19-
<PAGE>

<TABLE>
<CAPTION>



                                                                       2004
                                                        -----------------------------------
                                                                     NET SALES    % OF NET
                                                        SALES VOLUME   REVENUE     SALES
                                                        -----------------------------------
PRINCIPAL PRODUCTS                                      (`000 TONS) (RMB MILLION)

PETROCHEMICAL AND ORGANIC CHEMICAL PRODUCTS
<S>                                                         <C>       <C>          <C>
     Ethylene                                               381.62    3,044.11     9.56
     Propylene                                              210.87    1,248.60     3.92

     Styrene                                                138.81    1,232.45     3.87
     Aniline                                                 69.30    1,188.55     3.73
     O-xylene                                               116.61      679.23     2.13
     Octanol                                                 58.48      428.41     1.34
     Alcohol ether                                           39.56      393.15     1.23
     Butyl acrylate                                          24.35      351.08     1.10
     Acetic anhydride                                        55.02      323.60     1.02
     Acetic acid                                             64.10      293.48     0.92
     Ethanol                                                  6.96       18.08     0.06
     Xylene                                                   2.11       10.71     0.03

     Other                                                  707.16    3,556.81    11.17



PETROLEUM PRODUCTS
     Diesel oil                                           2,740.05    7,440.06    23.35
     Gasoline                                             1,032.55    2,602.08     8.17
     Residue                                              1,102.57    1,835.57     5.76
     Catalytic diesel oil                                   347.77      889.77     2.79
     Solvent oil                                              6.30       19.91     0.06
     Other                                                  240.09      590.45     1.86

SYNTHETIC RUBBER
     Styrene - butadiene rubber                             104.32    1,469.98     4.61
     Other                                                   27.09      323.71     1.02

CHEMICAL FERTILIZERS AND INORGANIC CHEMICAL PRODUCTS
     Inorganic chemical products and other                  553.31      663.38     2.08
     Nitrosamine                                              0.67        0.87     0.00

OTHER  PRODUCTS                                               N/A     3,253.39    10.22


Total                                                     8,029.67   31,857.42      100
</TABLE>


We introduced no new products in 2002, 2003 and 2004.

         PRODUCT PRICING

The majority of our products are priced according to market demand. The prices
of certain products, however, remain subject to the PRC government control. In
particular, certain petroleum products are subject to sale at prices determined
by the PRC government. In 2002, 2003 and 2004, 75.0%, 58.9% and 61.9%,
respectively, of all petroleum products sold by us were subject to the PRC
government pricing control. In 2002, 2003 and 2004, the percentage of our total
sales revenue attributable to sales of products subject to price controls was
38.9%, 51.4%, and 51.0% respectively.



                                      -20-
<PAGE>


Our petroleum products are subject to guidance prices established by the
National Development and Reform Commission, which are adjusted from time to time
and permit price variations within a narrow band of the guidance price. In
addition, with respect to gasoline and diesel oil following the Industry
Restructuring, the refining and sales division of PetroChina (Northeast) Company
Jilin division (CPSC), became the only entity authorized to purchase and
distribute these products in north-eastern China. As a result, currently we are
permitted to sell our gasoline and diesel oil only to CPSC. The terms of the
sale of gasoline and diesel oil to CPSC are based on the prices set by
PetroChina on behalf of the PRC government. Accordingly, our principal petroleum
products continue to be subject to governmental controls.

With respect to our products which are not subject to price control, our product
pricing decisions are currently made at each operating unit, with reference to
prices in the major PRC chemical commodities markets in Jilin Province and other
parts of the PRC. We believe that, for the principal products with respect to
which we have pricing discretion, our production facilities have relative
economies of scale which may not be present in the operation of many of our
competitors and that, therefore, when we sell our products at similar price
levels to such competitors, our profitability is generally equal to, or better
than, the profitability of such competitors in the domestic market.

         PRODUCTION PROCESS

Our production processes are primarily based on the processing of petroleum.

                  PETROLEUM PRODUCTS

Our petroleum products are produced from crude oil, which is processed by
atmospheric and vacuum distillation, catalytic cracking, deasphalting with
solvent, liquefied petroleum gas separating and reforming and hydrogenating into
gasoline, solvent oil, diesel oil, chemical light oil and residual oil.

                  PETROCHEMICAL AND ORGANIC CHEMICAL PRODUCTS

Our petrochemical products are produced from chemical light oil, which is
separated by a cracking process into ethylene, propylene, hydrogenated gasoline
and C4 fraction. A portion of the ethylene is processed to produce ethylene
oxide and acetaldehyde, which are then further processed to produce acetic acid,
acetic anhydride and alcohol polyoxy ethylene ether. The rest of our ethylene is
used to produce styrene. A portion of our propylene is processed to produce
butanol and 2-ethylhexanol. The rest of the propylene is used to produce acrylic
acid and its esters. Benzene, toluene and xylene are extracted from hydrogenated
gasoline through the aromatics unit. Butadiene is extracted from C4 fraction
through the extraction facility. Butadiene is further processed to produce
butene-1 and MTBE.

In our coal chemical production processes, coal is first converted into coke and
coke is for commercial sales, and the sideline coal gas will be used as fuel for
internal consumption.

In our salt chemical production process, salt is first converted into chlorine
and hydrogen through an electrolysis process, with the chlorine then being
liquefied into liquid chlorine to be used by our organic silicon facility. The
electrolytic fluid is then used to produce caustic soda after a further
evaporation process.



                                      -21-
<PAGE>


                  SYNTHETIC RUBBER

The butadiene, styrene, acrylonitrile and organic silicon monomers produced by
our petrochemical products facilities are processed through a polymerization
process into styrene-butadiene rubber, acrylonitrile-butadiene rubber,
ethylene-propylene rubber, organic silicon rubber and other types of synthetic
rubber.

                  CHEMICAL FERTILIZERS

Our chemical fertilizers use residual oil as raw material by using the hydrogen
separated from synthesis gas and nitrogen separated from air through an air
separation unit to produce ammonia.

         THE ETHYLENE PROJECT

Our most significant development project has been our participation in the
Ethylene Project. The Ethylene Project was initially conceived to address
existing shortfalls in production and expected increases in domestic demand for
ethylene. The Original Four Facilities of the Ethylene Project and their
technological upgrades have increased our annual Rated Capacity by 380,000 tons
to 530,000 tons, making us one of the largest ethylene producers in the PRC.

The Ethylene Project as a whole produces, in addition to ethylene, substantial
quantities of relatively high value-added downstream products such as acetone,
phthalic anhydride, a-advanced alcohol, toluene, xylene, ethylene-propylene
rubber, ABS, polyethylene, phenol, acetone, phthalic anhydride and ethylene
glycol.

The Ethylene Project is designed as a vertically integrated complex and is
comprised of 11 production facilities and certain ancillary and support
facilities. The core of the Ethylene Project is a 300,000 ton Rated Capacity
ethylene production facility. Of the Original Four Facilities owned and operated
by us, the ethylene facility and the hydrocracking facility mainly produce raw
materials. The integrated aromatics facility and the ethylene-propylene rubber
facility, and the Additional Seven Facilities, mainly produce downstream
petrochemical products. Each of the Original Four Facilities began commercial
production in 1997. Four of the Additional Seven Facilities, including the
polyethylene facility, the ethylene glycol facility, the phenol acetone facility
and the phthalic anhydride, began commercial production in 1997. The remaining
three of the Additional Seven Facilities began commercial production in 1998.
Since its completion and commissioning to service, the Ethylene Project has
substantially increased our production capacity and the production capacity of
Jilin Group and PetroChina.

As part of the CNPC Reorganization, five of the Additional Seven Facilities,
namely the phthalic anhydride facility, the phenol acetone facility, the
ethylene glycol facility, the polyethylene facility and the ABS facility, were
transferred to PetroChina. The (alpha)-advanced alcohol facility and the
acrylonitrile facility remain with the Jilin Group. In connection with the CNPC
Reorganization, PetroChina and the Jilin Group have each confirmed that each
will have sole responsibility for the operation of the Additional Seven
Facilities that it respectively owns.

The total investment required for the Ethylene Project, including capitalized
interest, was approximately RMB 19.88 billion, including approximately US$889
million in foreign exchange loans. All facilities under the Ethylene Project
have been constructed on the premises of our six production units, except for
the ABS facility, which was constructed on a separate site due to space
availability and engineering restrictions. The Original Four Facilities consist
of the ethylene, hydrocracking and integrated aromatics facilities and an
ethylene-propylene rubber facility.




                                      -22-
<PAGE>

We had agreed with our Parent to apportion the 11 Ethylene Project facilities
among ourselves primarily because the aggregate capital expenditures which were
required to construct all 11 Ethylene Project facilities, if paid entirely by
one company, would likely have required that company to incur very substantial
indebtedness and foreign exchange exposure over a two to three year period. The
Original Four Facilities were assumed by us because three of the facilities,
namely the ethylene, hydrocracking and integrated aromatics facilities, form the
core of the entire Ethylene Project and produce products which will be used as
feedstock by the remaining facilities; furthermore, the ethylene-propylene
rubber facility will add to the variety and production volume of synthetic
rubber, a category of products already being produced by us.

The Original Four Facilities are operated at full capacity only to the extent
that the Additional Seven Facilities are commercially operating because the
majority of the products of the Original Four Facilities will be used as
feedstock for the Additional Seven Facilities; in addition, it is impractical to
transport ethylene and certain other products produced by the Original Four
Facilities to customers other than Additional Seven Facilities, all of which are
located next to the Original Four Facilities. We will not have alternative
customers for the majority of these products in the event Jilin Group and
PetroChina are unable to purchase them as feedstock for the Additional Seven
Facilities. The ability of Jilin Group and PetroChina to operate profitably the
Additional Seven Facilities will directly affect the financial performance of
the Original Four Facilities and the Ethylene Project as a whole.

                  ORIGINAL FOUR FACILITIES

All of the Original Four Facilities utilize imported technology except the
hydrocracking facility, which utilizes advanced PRC technology. The
ethylene-propylene rubber facility is among the largest of its kind in the PRC.
The total investment expended to construct the Original Four Facilities, all of
which was borne by us, was approximately RMB 7.30 billion, including
approximately US$408 million in foreign exchange.

                  ETHYLENE FACILITY

The expanded 380,000 ton Rated Capacity ethylene facility utilizes proprietary
technology imported from Linde AG of Germany and sources raw materials from our
hydrocracking, atmospheric and vacuum distillation, integrated aromatics and
catalytic cracking facilities to produce:

     --   ethylene, which is used as feedstock for production of a-advanced
          alcohol, polyethylene, ethylene glycol and ethylene-propylene rubber,
          and

     --   propylene, which is used as feedstock for production of phenol,
          acetone, acrylonitrile and ethylene-propylene rubber.



                                      -23-
<PAGE>

                  HYDROCRACKING FACILITY

Our 600,000 ton Rated Capacity hydrocracking facility utilizes technology
obtained from the Luoyang Petrochemical Engineering Company (an affiliate of
Sinopec Group) and raw materials provided by our atmospheric and vacuum
distillation and catalytic cracking facilities to produce feedstock for the
ethylene and integrated aromatics facilities. The light diesel oil produced by
the facility can also be used to produce low freezing point, high-grade diesel
oil.

                  INTEGRATED AROMATICS FACILITY

The 400,000 ton Rated Capacity integrated aromatics facility utilizes
proprietary technology imported from UOP Corporation of the United States and
feedstock from our ethylene, hydrocracking, atmospheric and vacuum distillation
and reformation facilities for production of benzene, toluene, o-xylene, xylene,
heavy aromatics and aromatics extraction. Benzene and o-xylene are used as raw
materials for the Ethylene Project's phenol-acetone facility and phthalic
anhydride facility. Aromatics extraction and heavy aromatics are used as
cracking materials for our ethylene facility. Toluene and xylene are sold by us
to unrelated parties.

                  ETHYLENE-PROPYLENE RUBBER FACILITY

The ethylene-propylene rubber facility utilizes proprietary technology imported
from Mitsui Petrochemical Co. of Japan. This facility uses ethylene and
propylene produced by our ethylene facility to produce 20,000 tons of
ethylene-propylene rubber per year.

                  THE ETHYLENE PROJECT OPTION

We were granted an option from PetroChina and Jilin Group to purchase any one or
more of the Additional Seven Facilities for a price based on the net asset value
of the relevant facility or facilities. We did not exercise this option, and it
expired on December 31, 2002.

We continue to supply substantial amounts of ethylene and other products of the
Original Four Facilities as feedstock to some or all of the Additional Seven
Facilities at market prices. Additionally, the Original Four Facilities share
certain infrastructure, research and other support facilities with the
Additional Seven Facilities. We pay a proportional amount of the costs for such
support facilities utilized in connection with the Original Four Facilities.
Similarly, to the extent that the Additional Seven Facilities share certain of
our existing infrastructure or support facilities, each of PetroChina and the
Jilin Group reimburses us for the relevant proportion of its corresponding
costs. We believe that the Additional Seven Facilities are not competitive with
our business.

                  FINANCING FOR THE ETHYLENE PROJECT

Total investment for the Ethylene Project was approximately RMB 19.9 billion
(including approximately US$889.0 million in foreign exchange), of which
approximately RMB 7.3 billion (including approximately US$408.0 million in
foreign exchange) was required for the Original Four Facilities, and
approximately RMB 12.6 billion (including approximately US$481.0 million in
foreign exchange) was required for the Additional Seven Facilities, of which
approximately RMB 2.8 billion was needed for ancillary and support facilities.
The total investment was calculated to include interest capitalized during the
construction period.



                                      -24-
<PAGE>


The Ethylene Project was approved by the National Development and Reform
Commission. The bulk of the foreign exchange portion of the funding for the
entire Ethylene Project was in the form of export credit in connection with the
import or licensing of foreign technology and equipment, with the balance
provided by the Bank of China primarily to fund interest payments and for
working capital during construction. At the time, Renminbi loan funding for this
purpose was provided by PRC state banks and provincial financial institutions at
the direction of the National Development and Reform Commission in coordination
with the then Ministry of Chemical Industries and the Jilin Provincial
Government. As for the balance of the Renminbi funding for the entire Ethylene
Project, we have relied primarily on cash generated through operations and
proceeds from our Combined Offering and Jilin Group has relied primarily on the
sale of corporate bonds.

The foreign exchange requirement for the entire Ethylene Project was
approximately US$889 million, all of which was borrowed by us and Jilin Group
between 1993 and 1997. As a result, we both have significant indebtedness
denominated in foreign currency. Further to an agreement between us and Jilin
Group effective September 30, 1998, Jilin Group assumed the foreign currency
loans borrowed by us and agreed to make periodic loan repayments on our behalf
and in turn, we agreed to pay Jilin Group the Renminbi equivalent of such
repayments at an exchange rate determined as at September 30, 1998. We
re-assumed some of these foreign currency loans effective January 1, 2000. These
loans were denominated in Renminbi in our financial statements until January 1,
2000. As a result, we have significant financial risks with respect to our
ability to service and repay the foreign exchange indebtedness, given that
almost all of our revenues at the present time are received in Renminbi.
Fluctuation in the Renminbi exchange rate against the relevant borrowed
currencies may result in significant foreign exchange gains or losses.

Prior to the Restructuring, all of the loan funding commitments for the Ethylene
Project were arranged by the Predecessor. After the Restructuring, all of the
funding commitments for the Ethylene Project were for the account of our Parent.
In respect of the Original Four Facilities and to the extent that funds were not
borrowed by us, funds were first made available to our Parent, and equal amounts
were then lent by our Parent to us on the same terms as to principal and
interest payments as the original funds advanced to our Parent. The Parent
obtained all necessary consents from lenders and the relevant regulatory
authorities for such lending.

         RAW MATERIALS AND ENERGY SUPPLY

Our Parent is our largest supplier for raw materials and energy. In 2004, the
costs of raw materials purchased from our Parent accounted for 67.4% of our
total raw material costs and 64.9% of our total raw material and energy costs.
In 2004, total costs of raw materials and energy accounted for approximately
74.6% of our total cost of sales. In 2004, the costs of raw materials purchased
from our five largest suppliers, including our Parent, accounted for 90.5% of
our total raw material costs and 87.1% of our total raw material and energy
costs.



                                      -25-
<PAGE>


                  CRUDE OIL

                  CRUDE OIL SUPPLY AND PRICING

Crude oil is our primary raw material. Prior to February 2001, SOCIB was
responsible for industry and market oversight of China's petrochemical industry.
In February 2001 SOCIB was dissolved and its responsibilities were transferred
to State Economic and Trade Commission. Currently, Sinopec Group and CNPC
determine the allocations of crude oil among the enterprises under their
respective ownership and control.

The pricing for domestic onshore crude oil is determined with the participation
of the PRC government. Under the current pricing scheme, the National
Development and Reform Commission on a monthly basis establishes a single
indicative price for each grade of domestic onshore crude oil based on
comparable international market prices inclusive of any duties that would have
been imposed had the oil been imported. To this single state indicative price, a
surcharge within certain government stipulated guidelines is imposed on all
domestically produced onshore crude oil as determined and agreed to by CNPC and
Sinopec Group to reflect any transportation and other miscellaneous costs that
would have been incurred in having the oil delivered to various refineries.
Accordingly, we purchase domestic onshore crude oil at prices that reflect the
applicable state indicative price plus the applicable surcharge. We believe that
the pricing regime for domestic onshore crude oil has resulted in costs of
domestic onshore crude oil that reflect trends in international markets,
however, the timing of the adjustments to the indicative price may result in
prices that differ significantly from the then current international market
prices. While we believe that the current pricing policy will not change in the
foreseeable future, there can be no assurance that the PRC government will not
make significant changes in the future to the current crude oil pricing
policies. We began to purchase and use imported oil in 2000. The price of
imported oil is determined by PetroChina based on the then existing
international market price.

The following table shows the volume and purchase prices for the crude oil
purchased by us during the years ended December 31, 2002, 2003 and 2004. For
purposes of this table, price refers to a weighted average ex-works price and
includes value added tax of 17%:

                               2002               2003                2004
VOLUME (TONS)           4,508,600.0          5,547,700           6,712,527
PRICE (RMB PER TON)         1,740.0              1,768               2,629


                  CRUDE OIL ALLOCATION

Under PRC crude oil pricing and allocation policies, PetroChina is responsible
for allocating all of our crude oil from all sources.

In 2004, we processed 6.41 million tons of crude oil and expect to process
approximately 7.00 million tons of crude oil in 2005. Subsequent to the Industry
Restructuring, our Parent develops an annual plan for the allocation and
distribution of crude oil and cracking feedstock among its various subsidiaries,
including us. Our Parent has confirmed to us its intention to allocate to us
sufficient amounts of crude oil and other cracking feedstock necessary to meet
our needs for 2005, including for the full operation of the Ethylene Project in
2005.



                                      -26-
<PAGE>


As we are required to purchase crude oil and cracking feedstock through our
Parent, we are able to predict the availability or prices of crude oil or other
cracking feedstock. Limited availability of crude oil or other cracking
feedstock or any substantially higher prices could have a material adverse
effect on our operating results.

                  SOURCES OF CRUDE OIL

Our principal sources of crude oil supplies are Daqing oilfield, the largest
source of crude oil in China, in Heilongjiang Province and Fuyu (Jilin) oilfield
in Jilin Province. These two oilfields are controlled by our Parent and each
supplied 29% and 50% of our crude oil purchase amount in 2004 while imported
crude oil accounted for the remaining 21%. We anticipate that the Daqing and
Fuyu (Jilin) oilfields will continue to be the principal sources of our crude
oil and that imported crude oil will not become a major source although we
expect to increase our usage of imported crude oil in 2005.

Due to the current PRC government policy relating to imports of crude oil, we
currently are not permitted to directly import crude oil, and the imported crude
oil purchased by us in 2004 was allocated and purchased from our Parent. As the
supply of domestic onshore crude oil is lagging behind the demand created by the
rapid economic growth in China, we believe that by increasing our use of crude
oil from alternative sources, we will gradually reduce our dependence on
domestic onshore crude oil and diversify our risk of not being able to acquire
sufficient crude oil for our production.

With China's accession into WTO, the PRC government has undertaken to open to
foreign investment domestic distribution of crude oil and gradually increase
quotas for non-state traded crude oil. We anticipate those measures will
generally expand crude oil supply sources for domestic petrochemical companies.
However, if PetroChina does not change its current policy to allocate crude oil
to us, those policy changes will not materially affect our crude oil supply.

                  TRANSPORT OF CRUDE OIL

The crude oil from the Daqing and Fuyu (Jilin) oilfields is transported through
an oil pipeline and by rail transportation. We constructed our own pipeline in
October 1995 to transport crude oil. As a result, we reduced our use of rail
transportation, enhanced our total transport capacity and satisfied the
increased crude oil requirements of the Ethylene Project. The pipeline connects
to the supply of oil from the Daqing and Fuyu (Jilin) oilfields. During 2004, we
transported by the pipeline approximately 4.56 million tons or 68.0% of our
crude oil. The transport capacity of the pipeline is 4.00 million tons of crude
oil per annum. We expect that we will continue to receive the rail transport
capacity necessary to meet our increased transportation needs for both incoming
raw materials and supplies and outgoing product shipments.

In 2004, in order to satisfy our transportation requirements for raw materials
and products, we obtained PRC railway transport capacity of 10.77 million tons,
of which approximately 2.11 million tons were used for crude oil transportation.



                                      -27-
<PAGE>


                  STABILITY OF CRUDE OIL SUPPLY

In the past, we have not experienced any material disruption of production due
to lack of crude oil supplies. We have crude oil storage tanks adjacent to our
production facilities which are capable of storing approximately 200,000 tons of
crude oil, constituting 10 to 12 days of our crude oil requirements at current
production rates. Generally, in order to ensure that production will not be
affected by a temporary suspension of crude oil supplies, we store approximately
100,000 tons of crude oil or, when transport delays related to adverse weather
are anticipated in the winter, 120,000 tons of crude oil.

                  COAL

We utilize coal as an indirect raw material for our power plant.

Coal is in abundant supply and is of good quality in north-eastern China where
we are located. We purchase coal directly from mines in Jilin Province and
neighboring Heilongjiang Province. Generally, we store an amount of coal
sufficient to support one month of our coal requirements at current production
rates. We have in the past obtained, and believe that in the foreseeable future
we will be able to obtain, adequate supplies of coal for both production and
fuel purposes.

                  NAPHTHA

In 1999, we began using naphtha as a lower-cost alternative to some of the light
industrial oil we produce and use in the ethylene production process. This has
resulted in cost savings for us and has also allowed us to sell more of our
light industrial oil as diesel at a relatively high profit margin. In 2004, we
used approximately 548,000 tons of naphtha, most of which was purchased from
PetroChina. We intend to continue to use naphtha as one of our principal raw
materials in the future.

                  OTHER RAW MATERIALS

The other principal raw materials which we purchase are salt and naphthalene.
All of our naphthalene is purchased from outside sources. We believe that our
naphthalene sources will continue to provide an adequate supply of naphthalene
to meet our needs in the foreseeable future.

                  ELECTRICITY AND STEAM

Electricity is our main source of energy. In 2004, we purchased approximately
1.27 billion kilowatt hours of electricity from the PRC's north-eastern power
grid. Generally, the price of electricity in the PRC is set by the PRC
government, although under certain state regulations electricity consumed by our
chemical fertilizer production facilities is purchased at a preferential rate.

Our power plant is used primarily to produce a portion of our annual
requirements for steam. In 2004, we produced approximately 90.9% of our steam
requirements internally and purchased the remaining steam requirements from a
non-affiliated entity.

Our power plants consist primarily of several coal-fired power generating units
and their total power generation capacity is 149,000 kilowatts at any one time.
They generated an aggregate of 472 million kilowatt hours in 2004. Because of
the increasing demand for electricity in north-eastern China due to economic
growth, no assurance can be given that shortages of electricity within the
north-eastern grid will not occur in the future.



                                      -28-
<PAGE>


         SALES AND MARKETING

Domestic sales accounted for approximately 99.7%, 99.3% and 99.2% of our sales
revenue in 2002, 2003 and 2004, respectively. Due to the high transportation
costs and limited rail transport capacity in the PRC and the structural
development of the PRC chemical industry, sales of our products are concentrated
in the north-eastern and northern regions of China. The following chart
describes the sales of our products by geographic areas:


                                  SALES (RMB BILLION)
                NORTH-EASTERN   NORTHERN     EASTERN AND
                    CHINA         CHINA    SOUTHERN CHINA     OTHER AREAS

     2002           10.38          1.71          0.92             0.13
     2003           17.66          1.76          1.06             0.17
     2004           22.30          5.42          3.82             0.32

North-eastern China was the first area in which PRC industries, especially heavy
industries, emerged and developed. Since then, industrial development has
continued in the north-eastern region while the northern region of China has
also developed as an industrial base. Owing to our established reputation and
experience in these regions, plus our geographic advantages, the north-eastern
and northern regions of China have become and remain the largest markets for our
products.

Among our products, virtually all petroleum products can only be sold in
accordance with the distribution scheme set by the National Development and
Reform Commission. Accordingly, for most of our petroleum products, marketing
decisions are limited and competition among producers is minimized. Under the
current distribution scheme, our petroleum products are primarily sold to our
Parent. See "Business Overview -- Product Pricing" and "Business Overview --
Competition."

Except for our petroleum products, our products can be freely sold and marketed
throughout the PRC and are generally sold to large- and medium-sized
manufacturing enterprises and large trading companies in the north-eastern and
northern regions of the PRC with whom we typically have long-standing trading
relationships. While these long-standing relationships provide us with a
generally dependable and stable customer base, we are continuously focusing on
developing new customers, with an emphasis on finding additional manufacturing
customers. We develop new customers and market our products through our domestic
sales network comprising regional sales centers and sub-regional sales offices.
As part of our efforts to become more market- and customer-oriented, in 2004, we
continued to direct greater resources towards developing our sales and marketing
capabilities. See "Business Overview -- Business Strategy."

Prior to 2001, our sales policy required our customers to make payments upon
delivery and we discontinued delivery of products to customers who did not make
timely payments. In 2001, we implemented a new sales policy requiring our
customers to provide payment in full before delivery.



                                      -29-
<PAGE>


In 2004, revenue from sales to our five largest customers accounted for 75.3% of
our total sales revenue. As a result of the CNPC Reorganization, a significant
number of our existing customers became subsidiaries of our Parent and our
Parent in turn became our largest customer. Revenue from sales to our Parent,
purchaser of our petroleum products and petrochemical and chemical fertilizer
products, accounted for 69.9% of our total sales revenue. Of our five largest
customers, the other four were purchasers of our petrochemical and organic
chemical products. Other than our five largest customers, none of our other
customers purchased products accounting for more than 1.00% of our total sales
revenue in 2004.

Jilin Group's subsidiary, Jilin Chemical Import and Export Company, currently
acts as our agent for the import of equipment and technology and raw materials
and it also purchases all of our products for export. In 2002, 2003 and 2004,
our sales revenue from exports through Jilin Chemical Import and Export Company
amounted to approximately US$4.6 million, US$9.8 million and US$31.89 million,
respectively, which accounted for approximately 0.3%, 0.4% and 0.8% of our total
sales revenue, respectively. Due to sufficient domestic demand for most of our
products, we do not have any plans to increase our exports of these products
significantly in the near future.

         PRODUCT TRANSPORT

Approximately 85.0% of our products were transported by rail in 2004. In 2004,
we used aggregate rail transport capacity of 10.77 million tons, approximately
10.36 million tons of which were obtained from the PRC railway system with the
remainder available from our internal railway system. Approximately 5.25 million
tons were used for the transport of our products, and the balance for the
transport of raw material and supplies. The development of the PRC railway
system still lags behind the development of the PRC economy as a whole and
discrepancies between capacity and volume of transportation are severe in many
areas of the PRC. Whether a company is allocated sufficient railroad cars to
transport its products is largely dependent on the destination of the cargo and
the approval of the railroad authority at such destination. Currently, most of
our customers are located in, and, therefore, most of our products are
transported to, either north-eastern or northern China, where capacity is
readily available to it.

The vast majority of our products are in liquid form, requiring them to be
loaded into industrial chemical tank cars when transported by rail. In order for
us to utilize the annual rail transport capacity received by us most
efficiently, we require a substantial number of industrial chemical tank cars.
We believe that the tank cars we currently own, together with our established
internal railway system and other facilities in our railway transportation unit,
will satisfy our product transportation equipment needs in the foreseeable
future.

         COMPETITION

Since approximately 99.2% of our sales revenue in 2004 was generated from sales
in the PRC, we focus on competition primarily with respect to the domestic PRC
market, and in particular, the northern and north-eastern regions of China. In
general, we believe that our current primary competitive advantages with respect
to most of our products include product quality and diversity, economies of
scale and proximity to raw materials and our long-standing relationships with
our customers. With the exception of our petroleum products, which are at
present subject to allocation and price restrictions imposed by the PRC
government and therefore do not face substantial competition in the market, all
of our products are subject to competition in the domestic market. See "Business
Overview -- Product Pricing."



                                      -30-
<PAGE>


                  PETROLEUM PRODUCTS

Our petroleum products are currently subject to allocation and pricing control
by the PRC government and, therefore, competition in the petroleum product
marketplace in which we compete is minimized. Prior to the PRC's accession into
WTO, import of petroleum products were also subject to strict import quotas and
import licenses. As part of its WTO accession commitments, the PRC government is
expected to eliminate many barriers to competition, including the import quotas
and import license requirements for the import of petroleum products and
restrictions on foreign invested enterprises to provide domestic distribution
and retail services for petroleum products. Although petroleum products will
continue to be subject to pricing control of the PRC government, it is not clear
whether the government's control over allocation of petroleum products will
change; the implementation of new policies and elimination of those
anti-competition barriers could significantly increase competition in the
markets for our products from both foreign and domestic competitors.

                  PETROCHEMICAL AND ORGANIC CHEMICAL PRODUCTS

We are one of the largest producers of petrochemical and organic chemical
products in the PRC. We have become one of the largest producers of ethylene in
the PRC with the commissioning to service of the Ethylene Project in 1998,
although most of the ethylene produced is used internally. Our petrochemical
products, including ethylene, constitute a broad range of the basic raw
materials for the organic chemical industry.

We believe that we are one of the largest suppliers of petrochemical and organic
chemical products in the north-eastern and northern regions of the PRC. We
believe that our competition in this marketplace is limited to a few large
petrochemical product manufacturers also serving these regional markets.

                  SYNTHETIC RUBBER

We believe that we are one of the largest PRC producers of synthetic rubber. Of
the major synthetic rubber products produced in China, styrene-butadiene rubber
comprises one of the largest shares of the PRC synthetic rubber market. We
believe that, including us, there are only three major styrene-butadiene rubber
producers in the PRC.

                  CHEMICAL FERTILIZERS

Due to the importance of agricultural development in the PRC and the significant
contribution that the chemical fertilizer industry makes to such development,
the PRC government has historically maintained significant control over the
chemical fertilizer market. In 2004, the prices of chemical fertilizers remained
the same as in late 2003. To protect domestic producers of chemical fertilizers,
in 2004 the PRC government continued to implement certain measures to control
the import of chemical fertilizers. However, import quotas and import licenses
for import of chemical fertilizers will gradually be eliminated after the PRC's
accession into WTO.



                                      -31-
<PAGE>


                  FOREIGN COMPETITION AND WTO

Historically, the PRC government has provided the PRC chemical industry (other
than chemical fertilizers) with certain protection from foreign competition
through three primary practices: maintaining relatively high import tariffs,
imposing import license requirements and controlling the availability of foreign
exchange required to pay for imported products. These tariffs and import
restrictions are intended, in part, to protect domestic producers of these
products, such as us and they affect the majority of the product types produced
by us. These protective actions, however, are effective only to the extent that
they are fully and consistently implemented. To the extent they are not
implemented, imported products can have a significant effect on the pricing and
demand for our products. Imports remain a significant factor in determining the
prices of many of our products.

In recent years, the PRC government has implemented a policy of gradually
lowering import barriers and reducing tariffs. As part of its WTO accession
commitments, the PRC government will gradually eliminate import quotas and
import license systems, reduce tariffs, and permit foreign invested enterprises
to engage in domestic distribution and retail sales for all of our major
products. The PRC will also eliminate state trading for our major products
exclusive of petroleum products and chemical fertilizer. We expect those
measures to increase competition from imported products.

Although we believe that our products have been and will continue generally to
be competitive with imported products in the PRC, increased competition from
imported products resulting from the PRC's WTO accession may still have a
material adverse effect on our business and operations. Based on our wide range
of production capabilities and our familiarity with regional customers and
markets, we believe that we are well-positioned to meet potential foreign
competition. The tariff reductions, however, could reduce profit margins or
otherwise negatively impact our revenue from certain products, including a small
number of our significant products. The ultimate impact of any tariff reductions
on our business and results of operations will depend on a variety of factors,
including general market conditions for various products, our ability of to
increase production efficiency or lower our costs and the extent to which other
import barriers remain intact.

The PRC government may also reduce the tariffs imposed on production equipment
that we may import in the future, as well as the restrictions on availability of
imported raw materials (such as crude oil) currently enforced by the PRC
government. We are unable to determine accurately at this time the net effect on
our business and results of operations of the PRC's accession to WTO.

         ENVIRONMENTAL PROTECTION

We are subject to PRC national, provincial and local environmental protection
regulations. According to the PRC Environmental Protection Law, the State
Environmental Protection Administration sets national environmental protection
standards, while local environmental protection bureau may set stricter local
standards. Enterprises must comply with local standards if local environmental
protection bureau have set their own standards. Since neither the Jilin
Provincial Government nor the Jilin City Government has set standards regarding
the discharge of water, gases and solid waste materials, the standards set by
the State Environmental Protection Administration for the discharge of these
materials are those which regulate our operations.



                                      -32-
<PAGE>


The State Environmental Protection Administration sets discharge standards for
emissions into the air and water and delegates to the Jilin City Environmental
Protection Bureau the responsibility for monitoring enterprises in Jilin with
respect to the discharge of waste water, gases and solid waste materials. The
PRC Environmental Protection Law also provides schedules of base-level discharge
fees for various polluting substances. If the polluting substances exceed a
certain limit, the Jilin City Environmental Protection Bureau may charge the
polluting entity additional discharge fees and issue an order to cease or reduce
such discharge levels which, if not obeyed, may result in fines. The PRC
Environmental Protection Law also provides that, where pollution is causing
environmental damage, the Jilin City Government has the authority to issue an
order requiring the polluting entity to cure the problem within a certain
period. Non-compliance with such an order may result in the facility being shut
down. We have never incurred any fines, nor have we ever received such an order.

Due to the nature of our business, we produce significant amounts of waste
water, gas and solid waste materials in the course of our production. We believe
that our environmental protection facilities and surveillance and management
systems are adequate to enable us to comply with applicable environmental
protection laws and regulations in all material respects. We have made
substantial efforts with respect to the prevention and treatment of pollution,
including the construction and maintenance of a comprehensive waste water
treatment plant, a sludge incinerator and a waste residue dump. Currently, our
waste water treatment plant has a daily treatment capacity of 240,000 tons and
provides waste water treatment services for us, our Parent and certain other
companies in the same area. We charge fees for the services we provide to our
Parent and other companies based on the amount and quality of the waste water to
be treated. In addition to our environmental facilities, we have an
environmental management and surveillance system, including a comprehensive set
of environmental protection procedures and a substantial professional
environmental protection staff.

We conduct a detailed analysis of the solid waste generated by our facilities
and dispose of such solid waste in accordance with applicable national,
provincial and local environmental protection regulations. The PRC Environmental
Protection Law regarding the discharge or disposal of solid waste specify that
certain toxic wastes may not be buried directly in the ground and measures must
be taken to prevent leakage. Violations of such provisions can result in fines.
However, we have not been fined for any such violations.

Our environmental protection-related expenses consist of pollutant discharge
fees paid to the Jilin City Environmental Protection Bureau and costs related to
the upgrading and maintenance of our environmental protection facilities. In
2002, 2003 and 2004, our environmental protection-related expenses were
approximately RMB 88.29 million, RMB 70.70 million and RMB 82.73 million,
respectively.

We believe that our environmental protection facilities and systems are adequate
for us to comply with the existing national, provincial and local environmental
protection regulations. However, there can be no assurance that national,
provincial or local authorities will not impose additional or more stringent
regulations which would require additional expenditure on environmental matters
or changes in our processes or systems.



                                      -33-
<PAGE>


         RESEARCH AND DEVELOPMENT

Prior to 2004, our research and development department engaged in the research
and development of technologies, products, processes and equipment for our
businesses. Our research and development aided our ability to develop new
products and improve product quality. Our expenditures for research and
development were approximately RMB 3.9 million and RMB 1.8 million in 2002 and
2003, respectively. The decrease in our research and development expenditures
for 2003 was a result of our streamlining the research and development team. In
2004, in order to enhance our standards of research and development, we
entrusted an experienced research institution under our controlling shareholder
to undertake the research and development work for us. As of December 31, 2004,
we paid approximately RMB 2.7 million to such research institution. We
introduced no new principal products in 2004.

  INSURANCE

We maintained insurance coverage of approximately RMB 8.1 billion on our
properties and facilities and RMB 179 million on our inventory in 2004. We have
no plans to increase this coverage. The book value of our buildings and
equipment, including projects under construction, was approximately RMB 9.37
billion as of December 31, 2004. The amount of the coverage of our inventory is
also less than its book value, which was approximately RMB2.6 billion as of
December 31, 2004. In accordance with what we believe is customary practice
among chemical producers in the PRC, we insure only high-risk assets, such as
production property and equipment, inventories and explosive or otherwise
hazardous facilities. However, the underinsurance of our properties, facilities
and inventory in accordance with this PRC practice exposes us to substantial
risks such that, in the event of a major accident, our insurance recovery may be
inadequate.

Beginning November 1, 1999, we began participating in the insurance programs
established by CNPC and approved by the PRC government. See ITEM 7. MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS - RELATED PARTY TRANSACTIONS - CNPC
INSURANCE PROGRAMS.

We do not currently carry any third party liability insurance to cover claims in
respect of personal injury, property or environmental damage arising from
accidents on our property or relating to our operations. We also do not carry
business interruption insurance, as such coverage is not customary in the PRC.

Losses incurred or payments required to be made by us which are not fully
insured could have a material adverse effect on our financial condition.

ORGANIZATIONAL STRUCTURE

We are a subsidiary of PetroChina which held approximately 67.29% of our issued
share capital as of April 29, 2005. PetroChina is one of the largest companies
in China in terms of sales and engages in a broad range of petroleum-related
activities. PetroChina is currently listed on the Hong Kong Stock Exchange and
New York Stock Exchange.

As of December 31, 2004, we had the following subsidiaries:

NAME OF SUBSIDIARY                       DOMICILE          OWNERSHIP INTEREST
                                                              HELD BY (%)
Jilin Jihua Jianxiu Company Limited      PRC                     99.0%
Jilin Jihua Jinxiang Pressure Vessel
   Inspection                            PRC                     94.0%
Jilin Xinhua Nitrochloro-benzene         PRC
   Company Limited                                               75.0%
Jilin Winsway Chemical Industrial
   Store and Transport Limited           PRC                     70.0%
Jilin City Songmei Acetic Acid Co.,      PRC                     66.0%
   Ltd.




                                      -34-
<PAGE>


PROPERTY, PLANTS AND EQUIPMENT

Our corporate headquarters and production and ancillary facilities occupy an
area of approximately 8.5 square kilometers in Jilin City, Jilin Province,
located in north-eastern China. The total gross floor area of our production and
other facilities is approximately 1.5 million square meters. We own all of the
buildings and facilities on our premises and have freely transferable land use
rights for a term of 50 years in respect of the land upon which such buildings
and facilities are located.

         PRINCIPAL PRODUCTION FACILITIES

The table below sets out our principal production facilities, their Rated
Capacities, their utilization rates in 2004, the years in which they first
became operational and the sources of their technologies. For purposes of this
chart, utilization rates which exceed 100.0% represent facilities which are
currently operated at a rate higher than their respective designed Rated
Capacities.

<TABLE>
<CAPTION>

                                        ANNUAL RATED   UTILIZATION RATE  YEAR OF FIRST    SOURCE OF
                  FACILITY                CAPACITY                         OPERATION     TECHNOLOGY
                                        (`000 TONS)          (%)
<S>                                          <C>              <C>             <C>         <C>
  1.     Atmospheric and vacuum
            distillation                     5,300            121.13          1979               PRC
  2.     Wax oil catalytic cracking          1,400            103.80          1979               PRC
  3.     Heavy oil catalytic
            cracking                           700             98.86          1990               PRC
  4.     LPG separating                        250            114.04          1992               PRC
  5.     Secondary ethylene facility           150            101.56          1982               PRC
  6.     Principal ethylene                    380            112.66          1996           Germany
         facility
  7.     Synthetic ethanol                     100              5.68          1982           Germany
  8.     Acetaldehyde                          160             75.47          1982           Germany
  9.     Acetic acid                           210             60.34          1982               PRC
  10.    Butanol and 2-ethylhexanol            120            104.72          1982           Germany
  11.    Acetic anhydride                       50            105.73          1983               PRC
  12.    Styrene-butadiene rubber               80            131.88          1982               PRC
  13.    Aniline                                66            110.60          1985               PRC
  14.    Concentrated nitric acid              100            106.79          1992               PRC
  15.    Styrene                               140            115.73          1997               USA
  16.    Hydrocracking                         600            120.18          1996               PRC
  17.    Integrated aromatics                  400            124.32          1996               USA
  18.    Ethylene-propylene rubber              20            108.78          1997             Japan
</TABLE>

The annual Rated Capacity of these facilities occasionally changes from time to
time as a result of technical upgrades, renovations or expansions of the
facilities. For example, in 1998, we started a technological renovation of our
synthetic ammonia facility with a Rated Capacity of 300,000 tons as part of our
efforts to achieve economies of scale for production of synthetic ammonia. The
project was completed in December 2002.



                                      -35-
<PAGE>


To date, our capital expansion projects have been financed with operating income
and commercial loans. In general, we believe that most of our principal
production facilities are more advanced than similar facilities of other
companies in the PRC. We further believe that, on the whole, our current and
future production facilities are adequate for conducting our current and planned
future business.

         ANCILLARY FACILITIES

We have a principal power plant which was built in 1980 and is used primarily to
provide heat to our facilities, with the provision of electrical power being of
secondary importance.

Currently, the principal power plant is equipped with four steam boilers which
provided approximately 32.6% of our steam requirements in 2004. The power plant
has three power generators with a total installed capacity of 125,000 kilowatts
which generated electricity of 457 million kilowatt hours in 2004.

Our waste water treatment plant was built in 1979. The plant has the capacity to
process 240,000 tons of waste water daily, which can satisfy not only our needs,
but also the needs of our Parent and certain other companies in the same
geographical area.

Our railway transportation unit was formed in 1958. Currently, the railway
transportation unit consists of 6 traffic control stations, 15 locomotives, 744
industrial chemical tank cars and an established internal railway network which
links many of our facilities. This railway transportation unit provides
transportation among our production facilities and facilitates the production of
our downstream products. We believe that our railway transportation unit can
enable us to utilize our allocated rail transport capacity in the most efficient
fashion.

         MAINTENANCE

The maintenance of our production facilities follows a scheduled maintenance
program. Our facilities operate 24 hours a day. We historically shut down our
production facilities once every two years for maintenance, we have now modified
our maintenance schedule so that we shut down our production facilities once
every three years. We believe that such shutdowns are consistent with achieving
the most efficient use of our facilities. We undertake maintenance projects,
both major and minor, on an as-needed basis. In 2002, we spent approximately RMB
560.0 million on maintenance of our facilities, which included our biennial
maintenance program, general repairs and replacement of spare parts, as well as
labor costs and subcontractors' fees which were primarily paid to third parties.
In 2003 and 2004, we spent approximately RMB 264.6 million and RMB 351.9
million, respectively, on facilities, including expenses for general
maintenance, replacement of parts and components, and labor cost and
subcontractor expenses paid to third parties. Total maintenance expenses
accounted for approximately 1.22% of our total cost of sales in 2004.



                                      -36-
<PAGE>



ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS


OPERATING RESULTS

This discussion should be read in conjunction with the information contained in
ITEM 18. FINANCIAL STATEMENTS. For numerous reasons, including those relating to
the economic reform programs of the PRC government, changes in the PRC
government policies concerning crude oil supply, pricing and allocation and the
introduction of new taxes or changes in existing taxes such as consumption tax,
income tax and value added tax, our consolidated financial statements may not be
indicative of our future financial results.

Our historical financial performance has been affected significantly by factors
arising from operating in a planned economy which are beyond our control.
Although government controls have relaxed over time, controls over allocation
and pricing of crude oil and petroleum products still exist. We believe that
these controls are intended to enable the PRC government to control and moderate
the effect of changes in availability and pricing of crude oil and petroleum
products and should provide generally for greater stability in our operating
results with respect to crude oil costs and petroleum product sales.

The PRC entered into the WTO on December 11, 2001. As part of its WTO accession
commitments, the PRC government has agreed to gradually eliminate import quota
and import license systems, reduce tariffs, and permit foreign invested
enterprises to engage in the domestic distribution and retail for all of our
major products. The PRC will also eliminate state trading of our major products
exclusive of petroleum products and chemical fertilizer. These commitments, as
being carried out, are expected to gradually cause the prices of our raw
materials and products to become more aligned with those in the international
markets and thus affect the stability in our operating results.

In 2004, the world economy continued to improve. China's economy also continued
to grow rapidly. We experienced dramatic increases in product prices as well as
increases in sales volume of most of our major products due to significant rises
in the market prices of our petrochemical products and strong demand for our
petrochemical products. Demand for our products reflects China's continued
economic growth and market concerns about the rapidly rising price of crude oil.

CRITICAL ACCOUNTING POLICIES

We have identified the accounting policies below as critical to our business
operations and the understanding of our results of operations. For a detailed
discussion on the application of these and other accounting policies, see Note 2
to the consolidated financial statements. The application of these policies may
require management to make judgments and estimates that affect the reported
amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of our financial statements, and the reported amounts of
revenue and expenses during the reporting period. Management uses historical
experience and all available information to make these estimates and judgments,
and different amounts could be reported using different assumptions and
estimates.

     o    REVENUE RECOGNITION. Our revenue recognition policy is critical
          because our revenue is a key component to our results. We follow very
          specific and detailed accounting guidelines in measuring revenue.
          However, certain judgments affect the application of our revenue
          policy. Should changes in conditions cause management to determine
          these criteria are not met for certain future transactions, revenue
          recognized for any reporting period could be adversely affected.



                                      -37-
<PAGE>


     o    PROVISION FOR ACCOUNTS RECEIVABLES. Accounts receivables are carried
          at original invoice amount less provision for impairment. We
          specifically analyze historical bad debts, ageing receivables,
          customer concentrations, customer credit-worthiness, current economic
          trends and changes in our customer payment terms when evaluating the
          adequacy of the allowance for doubtful accounts. If the financial
          condition of our customers were to deteriorate, resulting in an
          impairment of their ability to make payments, additional allowances
          may be required.

     o    INVENTORIES. Inventories are stated at the lower of cost or net
          realizable value. We estimate net realizable value based on intended
          use, current market value and inventory ageing analyses. We write down
          our inventory for estimated obsolescence or unmarketable inventory
          equal to the difference between the cost of inventory and the
          estimated market value based upon assumptions about future demand and
          market conditions. If actual market conditions are less favorable than
          those projected by management, additional inventory write-downs may be
          required.

     o    PROPERTY, PLANT AND EQUIPMENT. We record property, plant and equipment
          initially at cost less accumulated depreciation. Subsequent to their
          initial recognition, the value of property, plant and equipment are
          carried at revalued amount, being the estimated fair value at the date
          of revaluation less accumulated depreciation and impairment losses.
          Revaluations are performed by independent qualified appraisers on a
          regular basis to ensure that the carrying amount does not differ
          materially from what would be determined using fair value at the
          balance sheet date. As disclosed in Note 16 to our consolidated
          financial statements, our most recent revaluation of property, plant
          and equipment was carried out as of December 31, 2003.

     o    IMPAIRMENT OF LONG-LIVED ASSETS. We review long-lived assets for
          possible impairment by evaluating whether the carrying amount of
          assets exceed its recoverable amount. Our judgment regarding the
          existence of impairment indicators is based on legal factors, market
          conditions and operational performance of our assets. Future adverse
          changes in legal environment, market conditions or poor operating
          results could result in losses or an inability to recover the carrying
          value of the long-lived assets, thereby possibly requiring an
          impairment charge in the future.

     o    DEFERRED INCOME TAXES. Deferred income tax is provided in full, using
          the liability method, on temporary differences arising between the tax
          bases of assets and liabilities and their carrying values in the
          financial statements. Currently enacted tax rates are used in
          determination of deferred income tax. Deferred tax assets are
          recognized to the extent that it is probable that future taxable
          income will be available against which the temporary differences can
          be utilized. Deferred income tax is provided on temporary differences
          arising on investments in subsidiaries, associated companies and
          jointly controlled entities, except where the timing of the reversal
          of the temporary difference can be controlled and it is probable that
          the temporary difference will not reverse in the foreseeable future.



                                      -38-
<PAGE>


The following table sets forth our sales volume, net sales and percentage of net
sales in total net sales for the periods indicated. For purposes of the table,
"N/A" represents sales volume for certain products, the measurement of which in
tons does not provide a meaningful comparison to products in other product
categories. Sales volume under the category of "total" does not include sales
volume under the category of "other".
<TABLE>
<CAPTION>

                                                      2004                                        2003
                                    Sales        Net Sales                        Sales      Net Sales
                                   Volume             (RMB           % OF        Volume           (RMB          % OF
                              (`000 TONS)       THOUSANDS)      NET SALES   (`000 TONS)     THOUSANDS)     NET SALES
<S>                               <C>           <C>                  <C>        <C>          <C>                <C>
Petrochemical and
   organic chemical
   products                       1,875.0       12,768,259           40.1       1,837.1      7,783,091          37.7
Petroleum products                5,469.3       13,377,835           42.0       4,382.3      9,320,066          45.1
Synthetic rubber
   products                         131.4        1,793,689            5.6         128.8      1,133,031           5.5
Chemical fertilizers and
   inorganic chemical
   products                         554.0          664,246            2.1         241.0        164,861           0.8
Other                                 N/A        3,253,394           10.2           N/A      2,251,760          10.9
                             -------------    -------------    -----------  ------------   ------------   -----------

Total                             8,029.7       31,857,423          100.0       6,589.2     20,652,809         100.0
                             =============    =============    ===========  ============   ============   ===========

</TABLE>

The following table sets forth our financial information for the periods
indicated:
<TABLE>
<CAPTION>

                                                       YEAR ENDED                      YEAR ENDED
                                                    DECEMBER 31, 2004              DECEMBER 31, 2003
                                             RMB THOUSANDS   % OF NET SALES   RMB THOUSANDS   % OF NET SALES

<S>                                             <C>                  <C>        <C>                    <C>
Sales                                           31,857,423           100.0      20,652,809            100.0
Cost of sales                                  (28,821,880)          (90.5)    (19,125,842)           (92.6)
Distribution costs and administrative
expenses                                          (465,246)           (1.5)       (603,389)            (2.9)
Profit  from operations                          2,593,028             8.1         895,318              4.3
Interest expense                                  (270,071)           (0.8)       (429,782)            (2.1)
Taxation                                           171,418             0.5           (270)                -
Net profit                                       2,544,510             8.0         427,609              2.1
                                           ================  ==============   ==============  ==============
</TABLE>



         YEAR ENDED DECEMBER 31, 2004 COMPARED WITH YEAR ENDED DECEMBER 31, 2003

Total net sales increased by 54.3% to RMB 31,857.4 million in 2004 compared with
RMB 20,652.8 million in 2003. This increase was primarily due to dramatic
increases in product sales prices and increases in sales volume of our major
products. These increases reflect increases in market prices and demand for
petrochemical products resulting from increased crude oil prices and strong
economic growth in China.



                                      -39-
<PAGE>


Net sales of petrochemical and organic chemical products increased by 64.1% to
RMB 12,768.3 million in 2004 from RMB 7,783.1 million in 2003, accounting for
40.1% of aggregate net sales in 2004, up from 37.7% in 2003. The weighted
average price of petrochemical and organic chemical products increased by 47.3%
when compared to 2003, primarily due to the increase in the price of propylene,
ethylene and acrylic acid. Sales volume of petrochemical and organic chemical
products rose only slightly as our production facilities were already operating
at capacity compared with 2003.

Net sales of petroleum products increased by 43.5% to RMB 13,377.8 million in
2004 from RMB 9,320.1 million in 2003, accounting for 42.0% of aggregate net
sales in 2003, down from 45.1% in 2003. The increase in net sales was due to an
increase of sales volume by 24.8% and an increase of weighted average price of
products in this segment by 13.4% in 2004 compared with 2003. The increase in
sales volume was primarily due to an increase in the volume of crude oil
processing.

Net sales of synthetic rubber increased by 58.3% to RMB 1,793.7 million in 2004
from RMB 1,133.0 million in 2003, accounting for 5.6% of aggregate net sales in
2004, slightly up from 5.5% in 2003. The weighted average price of synthetic
rubber increased by 22.2% over 2003 due to increases in the prices of
ethylene-propylene rubber and styrene butadiene rubber, while sales volume
increased only slightly.

Net sales of chemical fertilizers and inorganic chemical products increased by
302.9% to RMB 664.2 million in 2004 from RMB 164.9 million in 2003, accounting
for 2.1% of aggregate net sales in 2004, up from 0.8% in 2003. Sales volume
increased by 129.9% and the weighted average price of products in this segment
also increased significantly by 75.0% primarily due to the increase in sales
volume of liquid ammonia and other inorganic chemical, which commercial prices
are higher than our previous inorganic chemical products, after our synthetic
ammonia unit commenced operation.

Net sales from other products and services increased by 44.5% to RMB 3,253.4
million in 2004 from RMB 2,251.8 million in 2003, primarily due to the
construction or expansion of certain downstream facilities by enterprises such
as PetroChina, Jilin Branch, and Jilin Chemical Group, which resulted in a
significant increase in our supply of raw materials and services to them in
2004.

Cost of sales increased by 50.7% to RMB 28,821.9 million in 2004 from RMB
19,125.8 million in 2003, representing 90.5% and 92.6% of total net sales in
2004 and 2003, respectively. The increase in cost of sales was due primarily to
the dramatic increase in the cost of crude oil, that comprised the major
component of our cost of sales in 2004, and also to increases in the volume of
products that we produced and sold in 2004. However, cost of sales as percentage
of net sales decreased due to the higher increase in net sales. In 2004, we
processed 6.4 million tons of crude oil, up from 5.7 million tons in 2003. The
weighted average price of our crude oil increased by 25.4% to RMB 2,351 per ton
in 2004 from RMB 1,875 per ton in 2003.



                                      -40-
<PAGE>


Distribution costs and administrative expenses decreased by 22.9% from RMB 603.4
million in 2003 to RMB 465.2 million in 2004, primarily because of a decrease in
the provision for impairment of receivables and other current assets from RMB
100.7 million in 2003 to RMB 12.4 million in 2004 and our energy saving efforts.

Based on the above factors, our profits from operations increased by 189.6% in
2004 to RMB 2,593.0 million compared with a profit of RMB 895.3 million in 2003.

Interest expenses decreased by 37.2% from RMB 429.8 million in 2003 to RMB 270.1
million in 2004. The decrease in interest expenses was primarily due to early
repayment of outstanding loans from other banks by borrowing lower interest
loans to repay higher interest loans in 2003, which led to significant decrease
in the amount of higher interest loans. We also reduced our total amount of
borrowings to RMB 3,982.1 million in 2004 from RMB 6,509.9 million in 2003.

In 2004, we had a net foreign exchange loss of RMB 8.7 million, compared with a
net foreign exchange loss of RMB 36.6 million in 2003. Such decrease was due to
the fluctuations of foreign exchange rate in 2004, especially the change in the
exchange rate of RMB with Japanese Yuan and RMB with Euro. Our outstanding
foreign currency loans are subject to float in foreign exchange rate.

Our share of profit of a jointly controlled entity was increased to RMB 36.1
million in 2004 from RMB 9.7 million in 2003 reflecting increased profitability
of Jilin Province BASF JCIC NPG Co., Ltd.

Based on the foregoing, our profit before tax increased by 453.0% to RMB 2,356.6
million in 2004, compared with a profit before tax of RMB 426.1 million in 2003.

In 2004, our income tax benefit was RMB 171.4 million as compared with income
tax expense of RMB 0.27 million in 2003, primarily due to recognition and
realization of deferred income taxes that were not recognized in 2003.

Our minority interests were RMB 16.5 million in 2004, compared with the minority
interests of RMB 1.8 million in 2003 due to the increase of the subsidiaries'
losses.

Based on the foregoing, our net profit increased by RMB 2,116.9 million to RMB
2,544.5 million in 2004 compared with 2003.

         YEAR ENDED DECEMBER 31, 2003 COMPARED WITH YEAR ENDED DECEMBER 31, 2002

Aggregate net sales increased by 57.2% to RMB 20,652.8 million in 2003 compared
with RMB 13,138.4 million in 2002. This increase was due to significant increase
in both price and sales volume of most of our major products resulting from a
strong economic growth in China.

Net sales of petroleum products increased by 80.4% to RMB 9,320.1 million in
2003 from RMB 5,166.2 million in 2002, accounting for 45.1% of aggregate net
sales in 2003, up from 39.3% in 2002. This increase was due to an increase of
weighted average price of products in this segment by 12.8% and an increase of
sales volume by 57.4% in 2003 compared with 2002.



                                      -41-
<PAGE>


Net sales of petrochemical and organic chemical products increased by 35.4% to
RMB 7,783.1 million in 2003 from RMB 5,750.1 million in 2002, accounting for
37.7% of aggregate net sales in 2003, down from 43.8% in 2002. Weighted average
price and sales volume of petrochemical and organic chemical products increased
by 16.5% and 15.8% over 2002, respectively.

Net sales of synthetic rubber increased by 44.8% to RMB 1,133.0 million in 2003
from RMB 782.6 million in 2002, accounting for 5.5% of aggregate net sales in
2003, down from 6.0% in 2002. Weighted average price of synthetic rubber
increased by 25.0% and sales volume increased by 16.2% over 2002.

Net sales of chemical fertilizers and inorganic chemical products increased by
33.7% to RMB 164.9 million in 2003 from RMB 123.3 million in 2002, accounting
for 0.8% of aggregate net sales in 2003, down from 0.9% in 2002. Although
weighted average price of products in this segment decreased by 21.2%, sales
volume increased by 70.3%, which more than offset the adverse effect on net
sales caused by decreased price.

Revenue from other products and services increased by 71.1% to RMB 2,251.8
million in 2003 from RMB 1,316.2 million in 2002, primarily due to a significant
increase in our provision of materials and services to other companies in 2003.

Cost of sales increased by 52.8% to RMB 19,125.8 million in 2003 from RMB
12,519.0 million in 2002, representing 92.6% and 95.3% of aggregate net sales in
2003 and 2002, respectively. The increase in cost of sales was due primarily to
the significant increase of the volume of products that we produced and sold in
2003. In 2003, we processed 5.7 million tons of crude oil, up from 4.6 million
tons in 2002. The weighted average price of our crude oil increased form
RMB1,740 per ton in 2002 to RMB1,768 per ton in 2003.

Distribution costs, administrative expenses and expenses for shut down of
manufacturing assets decreased by 45.9% from RMB 1,115.8 million in 2002 to RMB
603.4 million in 2003. Administrative expenses decreased by 28.0% from RMB 797.4
million in 2002 to RMB 574.1 million, primarily because (i) there was no
write-down of carrying value of property, plant and equipment in 2003 while such
expense was RMB 323.8 million in 2002; and (ii) there were no expenses for shut
down of manufacturing assets in 2003, while such expenses in 2002 were RMB 283.4
million. Such decreases were partially offset by an increase in provision for
impairment of receivables and other current assets from RMB 51.5 million in 2002
to RMB 100.7 million in 2003.

Based on the above factors, our profits from operations in 2003 was RMB 895.3
million while there was a loss from operations of RMB 506.0 million in 2002.

Interest expenses decreased by 9.4% from RMB 474.4 million in 2002 to RMB 429.8
million in 2003. The decrease in interest expenses was primarily because our
repayment of borrowings exceeded new borrowings in 2003.

Our share of loss of an associated company was RMB 14.0 million in 2003 while we
had a RMB 0.1 million income of an associated company in 2002. Such change was
primarily because our associated company, Jilin Lianli Industrial Co., Ltd.,
made bad debt provision of RMB16.7 million in 2003 as a result of the
deteriorated financial status of two customers.



                                      -42-
<PAGE>



Our net profit was RMB 427.6 million in 2003, compared with a net loss of RMB
1,023.1 million in 2002. This increase in net profit was due primarily to
increase in net sales and decrease in administrative expenses and expenses for
shut down of manufacturing assets.

LIQUIDITY AND CAPITAL RESOURCES

We depend upon cash flow from operation, loans from affiliates and banks, and
equity financing to satisfy our ongoing liquidity and capital needs. Our cash
position in 2004 decreased by RMB 20.9 million compared to an increase of RMB
2.7 million in 2003.

Net cash provided by operating activities decreased to RMB 3,074.8 million in
2004 compared with RMB 3,578.3 million in 2003. This decrease of cash inflow
reflects a significant increase in net profit to RMB 2,544.5 million in 2004
compared to RMB 427.6 million in 2003 but was impacted by an increase of RMB
1,115.5 million in inventories compared with limited inventory growth in 2003
primarily related to increased purchases of crude oil in anticipation of further
rises in the price of crude oil. Cash inflow was also impacted by both (i) an
increase in accounts and other receivables of RMB 256.5 million in 2004 compared
with a decrease of RMB 330.0 million in 2003 and (ii) continued increases in
accounts payable and accrued liabilities reflecting ongoing growth in the volume
of raw materials purchased from PetroChina and corresponding accounts payable to
PetroChina. Accounts payable and accrued liabilities increased by RMB 1,045.4
million in 2004 compared to an increase of RMB 1,831.0 million in 2003 .

Net cash used for investing activities decreased to RMB 567.8 million in 2004
from RMB 722.1 million in 2003. The decrease was primarily due to a decrease in
capital expenditures for the fixed assets in 2004, but also reflects a higher
level of capital expenditures in 2003 due to payments in that period.

Net cash used for financing activities decreased to RMB 2,527.8 million in 2004
from RMB 2,853.5 million in 2003. This decrease in cash outflow was primarily
due to a net repayment of borrowings of RMB 2,527.8 million in 2004 compared
with a net repayment of borrowings of RMB 2,853.5 million in 2003.

As at December 31, 2004, our current assets were RMB 3,327.8 million compared to
RMB 2,055.9 million in 2003, primarily reflecting an increase in inventories.
Our current liabilities were RMB 7,628.8 million compared to RMB 7,716.3 million
reflecting a decrease in short-term borrowings that was partially offset by
increases in our accounts payable and accrued liabilities.

As at December 31, 2004, we had a negative working capital of RMB 4,301.0
million, compared with a negative working capital of RMB 5,660.4 million as at
December 31, 2003. The decrease of negative working capital was primarily due to
increases in inventories and accounts receivable and decrease of short-term
borrowings that were only partially offset by an increase of accounts payable.
Inventories increased to RMB 2,606.1 million in 2004 from RMB 1,568.1 million in
2003, primarily due to an increase in our stock of crude oil due to increases in



                                      -43-
<PAGE>

price and in the volume of crude oil held. Accounts receivable increased to RMB
265.2 million in 2004 from RMB 184.8 million in 2003, primarily attributable to
an increased receivables by PetroChina and its affiliates in 2004 compared with
2003. Accounts payable and accrued liabilities increased to RMB 4,429.7 million
in 2004 from RMB 3,613.0 million in 2003, primarily attributable to increased
volume and price of purchase of crude oil and other raw materials purchased from
PetroChina. We have historically relied on short term funding to satisfy our
short-term obligations through the refinancing of indebtedness and other
measures. In accordance with the facility undertaking letter from China
Petroleum Finance Company Limited, or CP Finance, a subsidiary of our ultimate
shareholder CNPC dated February 6, 2004, CP Finance provides us with a loan
facility up to RMB 8 billion which will expire on December 31, 2005. As at
December 31, 2004, the outstanding amount under that loan facility was RMB
2,874.3 million. With this facility and cash generated from our operations, we
believe that we have more than sufficient resources to meet our foreseeable
working capital needs. In the event that cash generated from our operations
fails to meet our working capital needs in 2005, we will seek an extension of
this credit facility. Our gearing ratio was 15.0% as at December 31, 2004 and
48.7% as at December 31, 2003 (gearing ratio is calculated as the ratio between
long-term debt and the sum of equity and long-term debt).

As at December 31, 2004, our liquidity ratio was 43.6%, quick ratio was 9.5%,
and inventory ratio was 1,375.5%.

As at December 31, 2004, borrowings were RMB 3,982.1 million, a decrease of RMB
2,527.8 million as compared with December 31, 2003, among which short-term
borrowings were RMB 3,086.1 million, representing a decrease of RMB 1,015.9
million as compared with December 31, 2003, and long-term borrowings were RMB
896.0 million, representing a decrease of RMB 1,511.9 million as compared with
December 31, 2003. These changes reflected our efforts to reduce borrowings in
2004. As a result, our interest expense decreased from RMB 429.8 million in 2003
to RMB 270.1 million in 2004.

As at December 31, 2004, the weighted average interest rate of our borrowings
ranged from 5.11% to 5.15%. Fixed-rate borrowings represented 89.6% of the total
borrowings. As at December 31, 2004, the maturity of 15.7% of the long-term
borrowings was within one year, the maturity of 15.7% of the long-term
borrowings was between one year and two years, the maturity of 61.2% of the
long-term borrowings was between two and five years and the maturity of 7.4% of
our long-term borrowings was above five years.

We do not have seasonal demands for capital. The terms and conditions of our
existing bank loans do not restrict our ability to pay dividends on our shares.

As at December 31, 2004, all of our short-term borrowings were denominated in
Renminbi. All of our long-term borrowings were foreign currency-denominated
loans with a total amount of RMB 1,063.1 million requiring repayment in the
relevant foreign currency. These loans include a foreign currency loan
equivalent to RMB 333.2 million from Jilin Group. The foreign currencies in
which our loans are denominated include United States Dollar, Japanese Yen and
Euro Dollar. In addition to foreign exchange risk that may arise from these
foreign currency loans, we also have foreign exchange risk related to our
payments for imported raw materials and machinery, which require us to convert
Renminbi into the applicable foreign currency. In addition, dividends for H



                                      -44-
<PAGE>

shares are payable in foreign currency. We believe fluctuations in foreign
currency exchange rates will continue to have a significant impact on us. In
2004, we had a net foreign exchange loss of RMB 8.7 million, compared with a net
foreign exchange loss of RMB 36.6 million in 2003. Such decrease was due to the
fluctuations of foreign exchange rate in 2004, especially the change in the
exchange rate of RMB with Japanese Yuan and RMB with Euro. The outstanding
foreign currency loans are effected to continue to expose us to risk
from the foreign exchange rate fluctuations.

Our ability to obtain external financing in the future and the cost of such
financing are subject to a variety of uncertainties, including:

-    obtaining the PRC government approvals required to access domestic or
     international financing or to undertake any project involving significant
     capital investment, which, depending on the circumstances, may include one
     or more approvals from the State Development and Reform Commission, the
     State Administration of Foreign Exchange, the Ministry of Commerce and the
     China Securities Regulatory Commission;

-    our future results of operations, financial condition and cash flows;

-    the cost of financing and the condition of financial markets; and

-    the potential changes in monetary policy of the PRC government with respect
     to bank interest rates and lending practices.

Our cash and cash equivalents are denominated in Renminbi. We did not engage in
any hedging activities relating to foreign exchange, interest rates or other
risks in 2004.

In 2004, we completed the 150,000 ton rated capacity small-scale ethylene energy
saving renovation project and technological renovation project. Our overall
expenditures for the purchase of property, plant and equipment amounted to RMB
642.1 million in 2004.

We anticipate our capital expenditure for 2005 to be approximately RMB 200
million. The capital for these expenditures is expected to be financed by our
operating income.

         US GAAP RECONCILIATION

We prepared our consolidated financial statements in accordance with IFRS, which
differs in certain significant respects from US GAAP. The following discussion
and analysis of our financial position and results of operation under US GAAP
should be read in conjunction with ITEM 18. FINANCIAL STATEMENTS -- CONSOLIDATED
FINANCIAL STATEMENTS -- NOTE 31 "SIGNIFICANT DIFFERENCES BETWEEN IFRS AND US
GAAP".

Note 31 to the Consolidated Financial Statements provides a reconciliation
between IFRS and US GAAP of our financial position and results of operation.
Significant differences relevant to the reconciliation of our financial
information from IFRS to US GAAP primarily include revaluation of fixed assets
and deferred taxes.



                                      -45-
<PAGE>


Our net profit in 2004 under US GAAP was RMB2,486.4 million, 2.3% lower than our
net profit of RMB2,544.5 million under IFRS primarily due to the difference of
RMB25 million additional depreciation charge under U.S. GAAP on fixed assets
previously written down under IFRS, RMB25 million of loss difference resulting
from write-off of fixed assets in current year of which the book value has been
written down previously under IFRS, and RMB20 million increase in deferred tax
liability under U.S. GAAP, partially offset by RMB 11 million lower depreciation
charge under U.S. GAAP on fixed assets previously revalued under IFRS. Our net
profit in 2003 under US GAAP was RMB369.7 million, 13.5% lower than our net
profit of RMB427.6 million under IFRS primarily due to a RMB 42.7 million
impairment charge and a RMB 28.0 million depreciation charge recorded under US
GAAP in 2003 on fixed assets previously written down under IFRS. Our net loss in
2002 under US GAAP was RMB685.6 million, 33.0% lower than our net loss of
RMB1,023.1 million under IFRS primarily due to write down of carrying amount
(net of minority interest) of fixed assets in the amount of RMB322.2 million
under IFRS which could not be charged to our income statement under US GAAP.

Our shareholders' equity as of December 31, 2004 was RMB5,096.3 million under US
GAAP, 0.8% higher than our shareholders' equity of RMB5,055.1 million reported
under IFRS primarily due to the net value of the fixed assets at end of 2004
reported under US GAAP is higher than that reported under IFRS, which was the
result of the comprehensive factors such as different accounting requirements
under US GAAP on fixed assets revaluation, write-down and foreign exchange gain
capitalization. Our shareholders' equity as of December 31, 2003 was RMB2,610.0
million under US GAAP, 4.0% higher than our shareholders' equity of RMB2,510.6
million reported under IFRS primarily due to the reversal of fixed assets
written-down under IFRS in 2002.


RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Prior to 2004, we had a research and development department engaged in the
research and development of technologies, products, processes and equipment for
our businesses. In 2004, in order to enhance our standard of research and
development, we decided not to keep such research and development department in
our Company, instead, we entrusted an experienced research institution under our
controlling shareholder to do the research and development work.

Our expenditures for research and development were approximately, RMB 3.9
million, RMB 1.8 million and RMB 2.7 million in 2002, 2003 and 2004,
respectively.

TREND INFORMATION

Other than as disclosed in the above paragraphs or elsewhere in this annual
report, we are not aware of any trends, uncertainties, demands, commitments or
events in the period from December 31, 2004 to the date of this annual report
that are reasonably likely to have a material effect on our net revenues,
income, profitability, liquidity or capital resources, or that would cause the
disclosed financial information not necessarily to be indicative of our future
operating results or financial conditions.



                                      -46-
<PAGE>


         OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2004, we did not have any off-balance sheet arrangements.

         CONTRACTUAL OBLIGATIONS

The following table sets forth our obligations to make future payments under
contracts effective as of December 31, 2004.


<TABLE>
<CAPTION>


                                                        As of December 31, 2004


                                                        Payment due by period
------------------- ------------------------------------------------------------------------------------------


                                   Less than 1                                                         After 5
                          Total           year     1-2 years    2-3 years   3-4 years    4-5 years       years
                      (RMB'000)      (RMB'000)     (RMB'000)    (RMB'000)   (RMB'000)    (RMB'000)   (RMB'000)
------------------- ------------ -------------- ------------ ------------ ----------- ------------ -----------

------------------- ------------ -------------- ------------ ------------ ----------- ------------ -----------

<S>                   <C>            <C>           <C>          <C>        <C>        <C>           <C>
SHORT-TERM DEBT       3,086,075      3,086,075        --            --           --            --           --
------------------- ------------ -------------- ------------ ------------ ----------- ------------ -----------

LONG-TERM DEBT          896,015          --          167,105      526,055      76,417       47,412      79,026
------------------- ------------ -------------- ------------ ------------ ----------- ------------ -----------


TOTAL CONTRACTUAL
OBLIGATIONS           3,982,090      3,086,075       167,105      526,055      76,417       47,412      79,026
------------------- ------------ -------------- ------------ ------------ ----------- ------------ -----------
</TABLE>

OTHER INFORMATION

         SIGNIFICANT INVESTMENT

Unless otherwise disclosed in this annual report, we did not make any
significant investment in the year ended December 31, 2004.


         MATERIAL ACQUISITIONS AND DISPOSALS

Unless otherwise disclosed in this annual report, we did not make any material
acquisitions or disposals of subsidiaries and associated companies in the year
ended December 31, 2004.

         EMPLOYEES

As of December 31, 2004, the number of our employees was 20,445. Our employees'
total remuneration for the year ended December 31, 2004 was RMB 747.8 million.

         CHARGES ON ASSETS

Unless otherwise disclosed in this annual report, we did not have charges on any
of our principal assets as at December 31, 2004.



                                      -47-
<PAGE>



         CONTINGENT LIABILITIES

Unless otherwise disclosed in this annual report, we did not have contingent
liabilities as at December 31, 2004.


ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS AND SENIOR MANAGEMENT

The table below sets forth certain information concerning our directors,
executive officers and members of the supervisory committee, or Board of
Supervisors. All directors and supervisors were elected on April 20, 2004. All
directors will serve terms of three years or until the election of their
respective successors.

NAME                               AGE    POSITION

DIRECTORS
Yu Li                              45     Chairman of the Board of Directors
Xu Fengli                          58     Deputy Chairman of the
                                                Board of Directors
Shi Jianxun                        60     General Manager; Director
Zhang Xingfu                       52     Deputy General Manager; Director
Lan Yunsheng                       47     Director
Ni Muhua                           54     Director
Jiang Jixiang                      52     Director
Lu Yanfeng                         45     Independent Director
Wang Peirong                       49     Independent Director
Fanny Li                           43     Independent Director
Zhou Henglong                      43     Independent Director

OTHER EXECUTIVE OFFICERS
Li Chongjie                        42     Deputy General Manager
Zhang Liyan                        54     Deputy Chief Financial Officer;
                                                Secretary of the Board

BOARD OF SUPERVISORS
Zou Haifeng                        59     Chairman of the Board of Supervisors
Yang Jigang                        42     Supervisor
Yan Weidong                        58     Supervisor
Li Shumin                          55     Supervisor
Wang Huaiqing                      48     Supervisor

         DIRECTORS

YU LI, male, aged 45, a senior engineer, is the Chairman of the Board of
Directors of the Company and general manager of PetroChina Jilin Petrochemical
Company. Mr. Yu graduated from Northeast University and China Social Sciences
Institute. Mr. Yu has held several executive positions, including vice director
of Fushun Petrochemical Detergent Plant, assistant manager and deputy manager of
Fushun Petrochemical Company, deputy general manager of Fushun Petrochemical
Company, and manager of Fushun Petrochemical Company. Mr. Yu has extensive
experience in the administration of large scale petroleum and petrochemical
enterprises. Mr. Yu has been our director since June 2002.



                                      -48-
<PAGE>


XU FENGLI, male, aged 58, a senior accountant, is deputy chairman of the
Company, supervisor and chief of the general office of PetroChina's board of
supervisors. Mr. Xu graduated from Xian Petroleum Institute. He was appointed as
chief accountant of Fushun Petrochemical Company, vice director of Finance and
Assets Department of CNPC, a member of Preparatory Group of Refining and
Marketing Company and a deputy general manager of the finance department of
PetroChina. Mr. Xu has extensive experience in refining and financial
management. Mr. Xu has been our director since February 2000.

SHI JIANXUN, male, aged 60, a senior engineer, is the general manager of the
Company. He graduated from East China Chemical Engineering Institute in 1966,
and joined the Predecessor in the same year. He has held several executive
positions with the Predecessor, including Director of the Predecessor Design
Institute and deputy general manager of Jilin Group. Mr. Shi has rich
experiences in administration and construction of large scale of petroleum and
petrochemical projects. Mr. Shi has been our director since December 1994.

ZHANG XINGFU, male, aged 52, is a senior engineer and a deputy manager of the
Company. Mr. Zhang joined the Predecessor in 1982 after graduating from Daqing
Oil Institute. He held positions including deputy director of the refining plant
of the Company and deputy manager of Jilin Group. Mr. Zhang has extensive
experience in administration of chemical production. Mr. Zhang has been our
director since December 1997.

LAN YUNSHENG, male, aged 47, a senior accountant, is a deputy general manager of
CP. Finance Mr. Lan graduated from Jilin University in 1999. He was appointed as
director of the finance department of Fushun Ethylene Plant, deputy chief
accountant and chief accountant of Fushun Petrochemical Company, and our deputy
general manager and chief financial officer. Mr. Lan has extensive experience in
financial management. Mr. Lan has been our director since February 2000.

NI MUHUA, male, aged 54, a senior economic advisor, is a deputy manager of
PetroChina Jilin Petrochemical Company. He is also the chairman of Jilin Lianli
Gongmao Co., Ltd., Jilin Winswav Chemical Industrial Store and Transport Limited
and Jilin City Songmei Acetic Acid Co., Ltd. Mr. Ni graduated from Jilin
Chemical Engineering Institute in 1984. Mr. Ni has held several executive
positions with the Predecessor and was appointed as deputy general manger of the
Company. Mr. Ni has extensive experience in the administration of marketing and
sales. Mr. Ni has been our director since December 1994.

JIANG JIXIANG, male, aged 52, is a senior economic advisor and a deputy manager
of PetroChina Jilin Petrochemical Company. Mr. Jiang graduated from Jilin
Industrial University and joined the Predecessor in 1970. Mr. Jiang was
appointed as chief dispatcher, director assistant and vice director of the
Refining Plant, chief of Basic Construction Headquarters and director of
Management Department of Basic Construction of Jilin Chemical Group Corporation.
Mr. Jiang has extensive experience in refining industry and construction of
chemical industry. Mr. Jiang has been our director since February 2000.




                                      -49-
<PAGE>


LU YANFENG, male, aged 45, J.D., is professor of law, independent non-executive
director of the Company, vice dean of Jilin University School of Law, member of
the standing committee of the People's Congress of Jilin province, director of
Chinese Society of International Law, vice chairman of the Chinese Society of
Private International Law, vice chairman of Law Society of Changchun, member of
Advisory Committee for Economic, Social Development and Environment for Jilin
Provincial Government, member of Advisory Committee for Decision Making of Jilin
Provincial Party Committee, arbitrator of Guangzhou Arbitration Association,
arbitrator of Changchun Arbitration Association, part-time lawyer and member of
Political Consultative Conference of Changchun City and member of its Society
and Law Committee. He graduated from the law department of Jilin University in
1982. Mr. Lu successively held the positions of lecturer, associate professor,
professor at Jilin University School of Law, with accomplishments in the fields
of international law, civil and commercial law, criminal law and economic law .
Mr. Lu has been our director since June 2002.

WANG PEIRONG, male, aged 49, a registered accountant, is an independent
non-executive director of the Company. He is also the president of the
investment banking division at China Dragon Securities Co., Ltd. Mr. Wang
received his Master's degree in administration from Xian Jiaotong University. He
has served as a member of the State Restructuring and Reform Commission and
State Economic and Trade Commission, handling approval matters on the
restructuring of state-owned enterprises and on company formation. Mr. Wang has
extensive experience in restructuring, mergers and acquisitions, share options
and reform of state-owned enterprises. Mr. Wang has been our director since June
2003.

FANNY LI, female, aged 43, is an independent non-executive director of the
Company, a partner of BOD McCabe Lo in Hong Kong. She graduated from the
University of Hong Kong and obtained a Master's degree in international
accounting from the City University of Hong Kong. She has over 18 years of
experience in international auditing and accounting work. She has served as a
member of the Expert Panel on Auditing & Assurance Standard Committee and the
Administrative Control Committee of the Hong Kong Society of Accountants. Ms Li
has significant experience in initial public offerings of companies. Ms. Li has
been our director since April 2004.

ZHOU HENGLONG, male, aged 43, a senior economist, is an independent
non-executive director of the Company. He is also the chairman of Da Xiang
Investment Company Limited. He graduated from Hunan College of Finance and
Economics. He has held positions including chief of Policy and Regulations
Division of the original Ministry of Chemical Industry in the PRC and deputy
general manager at the headquarters of the investment bank division of Guo Xin
Securities Company Limited. He has extensive experience in restructuring,
mergers and acquisitions, share options and reform of stated-owned enterprises.
Mr. Zhou has been our director since April 2004.

         OTHER EXECUTIVE OFFICERS

LI CHONGJIE, male, aged 42, a senior engineer, is a deputy manager of the
Company. Mr. Li graduated from Jilin Engineering Institute and Tianjin
University. He has held several positions in the Company including director of
SBR plant of Organic Synthesis Factory and chief of production and technology
department of the Company. Mr. Li has extensive experience in petrochemical
production and management.

ZHANG LIYAN, female, aged 54, a senior accountant, is secretary of the Board and
deputy chief financial officer of the Company. Ms. Zhang graduated from Jilin
Finance and Trade Institute and joined the Predecessor in 1968. She has held
several positions including deputy chief of the finance department at the
Predecessor, director of the capital and securities department of the Company
and chief of the finance department of the Company.



                                      -50-
<PAGE>


         BOARD OF SUPERVISORS

We have a Board of Supervisors whose primary duty is the supervision of our
senior management, including the Board of Directors, managers and senior
officers. The function of the Board of Supervisors is to ensure that senior
management acts in the interest of us, our shareholders and employees and does
not perform acts which violate PRC law. The Board of Supervisors reports to the
shareholders in general meetings. The Articles of Association provide the Board
of Supervisors with the right to investigate our business and financial affairs
and to convene shareholders' meetings from time to time. The Board of
Supervisors currently comprises five members.

ZOU HAIFENG, male, aged 59, a senior engineer, is chairman of the Board of
Supervisors of the Company and a Director of PetroChina, Deputy Party Secretary,
Deputy General Manager of the Company, Secretary of Disciplinary Committee,
Chairman of Labor Union of the Company, and Deputy Party Secretary of Chemical
Group Corporation. Mr. Zou graduated from Northeast China Engineering Institute
in 1968. He joined the Predecessor in 1977 and has held various executive
positions, including Deputy Chief Engineer, executive director and deputy
manager of the Company. Mr. Zou has been a member of our Board of Supervisors
since February 2001.

YANG JIGANG, male, aged 42, a senior engineer with a master degree, is deputy
chief manager and chief engineer of Chemical Production and Marketing Company of
PetroChina. Mr. Yang graduated from Lanzhou University in 1987. He was appointed
as vice director of Lanzhou Chemical Company, chief engineer of Refining and
Chemical Production Department of CNPC. Mr. Yang has been a member of our Board
of Supervisors since February 2001.

YAN WEIDONG, male, aged 58, is a senior accountant. Mr. Yan graduated from
People's University of China in 1990 and joined the Predecessor in 1968 and was
appointed as our Chief of Financial Department and our chief of the Auditing
Department. Mr. Yan has been a member of our Board of Supervisors since December
1997.

LI SHUMIN, male, aged 55, is a senior economic advisor and the deputy director
of the supervisory department of the Company. Mr. Li graduated from Nanjing
Chemical Engineering Institute in 1983 and joined the Predecessor in 1970 and
was appointed as Deputy Party Secretary of the dyestuff plant of the Company in
1986. Mr. Li has been a member of our Board of Supervisors since December 1997.

WANG HUAIQING, male, aged 48, is an engineer and a model worker. He is deputy
director of Ethylene Plant of the Company. Mr. Wang graduated from Jilin
Chemical Engineering Institute in 1987. Mr. Wang has been a member of our Board
of Supervisors since February 2000.

COMPENSATION OF DIRECTORS, SUPERVISORS AND OFFICERS

The aggregate amount of cash remuneration paid by us to the directors,
supervisors and officers during the year ended December 31, 2004 was
approximately RMB 764,000. In addition, officers and directors who are also our
officers or employees receive certain other benefits in kind, such as subsidized
or free health care services, housing and transportation, customarily provided
by enterprises in the PRC to their employees. See "Employees".



                                      -51-
<PAGE>


BOARD PRACTICES

Each of our executive directors and supervisors has entered into a service
agreement with us for a term of three years. None of our executive directors or
supervisors shall receive benefits upon termination of employment under such
agreements. No other service contracts exist or have been proposed between us or
any of our subsidiaries and any of the directors or supervisors.

The Audit Committee of the Board of Directors consists of Wang Peirong, Fanny
Li, Lu Yanfeng and Zhou Henglong. The Audit Committee is primarily responsible
for selecting auditor, monitoring our internal auditing system, reviewing
interim and annual financial statements, coordinating internal and external
audit and review our material related party transactions.

The Remuneration and Examining Committee of the Board of Directors, or
Remuneration Committee, consists of Shi Jianxun, Zhou Henglong, Wang Peirong and
Lu Yanfeng. The Remuneration and Examining Committee is primarily responsible
for proposing to the Board of Directors the remuneration plan for our directors
and executive officers, conducting annual review on performance of directors and
executive officers and monitoring the implementation of our remuneration system.

The Strategy Committee of the Board of Directors consists of Yu Li, Shi Jianxun,
Lu Yanfeng and Fanny Li. The Strategy Committee is primarily responsible for
studying and advising on our long-term development strategy and major investment
plans.

The Nominating Committee of the Board of Directors consists of Yu Li, Shi
Jianxun, Wang Peirong and Lu Yanfeng. The Nominating Committee is primarily
responsible for nominating directors and managers.

EMPLOYEES

As of December 31,2002, 2003 and 2004, we employed approximately 22,725, 21,771
and 20,445 persons respectively. As of December 31, 2004, of our total
employees, approximately 1,750 were management and administrative personnel,
approximately 1,620 were engineers and technicians, approximately 10,584 were
factory personnel directly involved in production and the remainder are
ancillary service workers and other personnel. Approximately 15.18% of our work
force graduated from universities or technical colleges.

Currently, all members of our work force are employed under employment contracts
which specify the employee's position, responsibilities, remuneration and
grounds for termination. We believe that such a contract system imposes
discipline, provides work incentives and gives us a greater degree of management
control. We believe that, by protecting the respective rights of the enterprise
and our employees and by linking remuneration to productivity, the contract
system has also improved employee morale. Our employees generally sign contracts
specifying terms of one, three or eight years.



                                      -52-
<PAGE>


As part of the trade union structure of our Parent, we have a trade union which
protects employees' rights, aims to assist in the fulfillment of our economic
objectives, encourages employee participation in management decisions and
assists in mediating disputes between us and union members. Each of our nine
operating units has a separate branch of the trade union. We have not been
subjected to any strikes or other labor disturbances which have interfered with
our operations, and we believe that our relations with our employees are good.

We participate with our employees in a pension plan managed by the Jilin
Provincial Government, pursuant to which we and our employees pay an annual
contribution to the plan. We annually contribute an amount equal to 24.0% of the
annual salary (including base salary, over-time payments, allowances and
bonuses) of each employee to a pension fund. In 2004, our total contribution to
our employees' pension plan was RMB 106.29 million. Each employee is also
required to contribute a certain percentage of his or her salary to a pension
fund. The employees' contribution percentage can be adjusted by the Jilin
Provincial Government and in 2004 the percentage was 8%. Upon retirement, all of
our employees are entitled to pension payments from the plan. Jilin Group
Pension Funds Management Centre (also known as Jilin Provincial Social Insurance
Company Jilin Group Agency Office) has been entrusted by the Jilin City
Government with collecting contributions and making payments to retired
employees. We do, however, pay the cost of retiree medical benefits.

We do not currently carry workers' compensation or other similar insurance.
However, all employees who are unable to work due to illness or disability are
entitled to receive certain benefits during the period of their absence from the
workplace. Generally, if the illness or disability is job-related, the employee
is entitled to receive 100.0% of his or her base salary without any time
limitation. If the illness or disability is not job-related, pursuant to the PRC
government regulations, based on the length of the employee's employment, he or
she will receive not less than 60.0% of his or her base salary for a period of
six months, and 40.0% to 60.0% of his or her base salary thereafter.

With respect to healthcare, in accordance with PRC state policy, companies are
required to maintain a health insurance fund in order to provide healthcare
benefits to employees. Under this system, contributions to the health insurance
fund are made by both us and our employees. We make annual contributions equal
to 10.0% of the total annual salaries paid in the previous year to existing
employees, and employees make monthly contributions equal to 1.0% of their
average monthly salary received in the previous year.

In 1996, we began implementing an employee housing reform program, as required
by the PRC government policy, pursuant to which we are encouraged to provide
opportunities to our employees to purchase ownership interests in their housing.
In general, housing is constructed by our Parent and assigned to our employees.
Employees are provided with an option to purchase their assigned housing at
preferential prices which are generally lower than our Parent's cost of
construction. We have agreed to reimburse our Parent for the differential
between our Parent's cost of construction and the preferential sales price of
housing which is constructed and distributed after January 1, 1997, and with
respect to which an employee has exercised such a purchase option. The expenses
incurred by us in connection with this program did not materially impact our
results in 2004 and such expenses are not expected to materially impact the
results in the future.



                                      -53-
<PAGE>


SHARE OWNERSHIP

The following chart sets forth the shareholding information for our directors,
supervisors and other executive officers who held their offices in 2004 as of
December 31, 2004.

                                                                   PERCENT OF
                                                                  OUTSTANDING
NAME                   TITLE OF CLASS           AMOUNT OWNED        SHARES(1)
----                  --------------            ------------        ---------

DIRECTORS

Yu Li                     N/A                           0              0
Xu Fengli                 N/A                           0              0
Shi Jianxun               Domestic Shares           3,550              *
Zhang Xingfu              N/A                           0              0
Lan Yunsheng              N/A                           0              0
Ni Muhua                  Domestic Shares           3,550              *
Jiang Jixiang             N/A                           0              0
Wang Peirong              N/A                           0              0
Lu Yanfeng                N/A                           0              0
Fanny Li                  N/A                           0              0
Zhou Henglong             N/A                           0              0

OTHER EXECUTIVE OFFICERS
Li Chongjie               N/A                           0              0
Zhang Liyan               N/A                           0              0

SUPERVISORS
Zou Haifeng               Domestic Shares           3,550              *
Yang Jigang               N/A                           0              0
Yan Weidong               N/A                           0              0
Li Shumin                 Domestic Shares           7,000              *
Wang Huaiqing             N/A                           0              0


(1) "*" Represents less than one percent of the class of shares. None of the
shares have different voting rights.

We have never established or maintained a share option plan for our directors,
executive officers, supervisors or other employees. We have not made any
arrangements for involving employees in our capital.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

As of April 29, 2005, our Parent owned 67.29% of our share capital and is able
to exercise all the rights of a controlling shareholder, including the election
of directors and voting in respect of amendments to our Articles of Association.
Prior to July 1998, our Parent was a state-owned enterprise under the
administrative control of the Jilin Provincial Government. On July 1, 1998, our
Parent became a direct subsidiary of CNPC. CNPC is a state-owned enterprise
which oversees the exploration of oil and natural gas resources and engages in
businesses in the petrochemical industry. CNPC is subject to industrial



                                      -54-
<PAGE>

oversight by certain government entities, including the State Assets Regulatory
and Management Commission, the National Development and Reform Commission and
the Ministry of Commerce. On November 5, 1999, pursuant to the CNPC
Reorganization, PetroChina, a controlled subsidiary of CNPC, became our new
Parent. See ITEM 4. INFORMATION ON THE COMPANY - THE PRC CHEMICAL INDUSTRY AND
RELEVANT MARKETS. Our Articles of Association provide certain protection against
the abuse of a controlling shareholder by stipulating that, in addition to any
obligation imposed by law, a controlling shareholder shall not exercise its
voting rights in a manner prejudicial to the interests of the minority
shareholders with respect to certain enumerated matters of fundamental
importance to shareholders. There has not been, however, any published report of
judicial enforcement in the PRC of such provisions by minority shareholders.

The following table sets forth certain information regarding the ownership of
our capital stock as of April 29, 2005 held by shareholders who are known to us
to own 5% or more of each class of our voting securities. None of those
shareholders have different voting rights.
<TABLE>
<CAPTION>

                             IDENTITY OF                             PERCENT OF     PERCENT OF CAPITAL
TITLE OF CLASS             PERSON OR GROUP           AMOUNT OWNED   CAPITAL STOCK   STOCK IN ITS CLASS
--------------             ---------------           ------------   -------------   ------------------
<S>                      <C>                        <C>                <C>                <C>
Domestic Shares                 Parent              2,396,300,000      67.29%             92.30%
H Shares         HKSCC Nominees Limited               822,142,699      23.09%             85.22%
H Shares         HSBC Nominees (Hong Kong) Limited    135,627,300       3.81%             14.06%
</TABLE>

The following table sets forth change in percentage ownership of 0.01% or more
of our capital stock held by shareholders who are known to us to own 5.0% or
more of each class of our voting securities during the three-year period ended
December 31, 2004:
<TABLE>
<CAPTION>

 IDENTITY OF PERSON OR GROUP       CHANGE OF PERCENT OF    CHANGE OF PERCENT OF    CHANGE OF PERCENT OF
                                   CAPITAL STOCK IN 2002   CAPITAL STOCK IN 2003   CAPITAL STOCK IN 2004
                                   ---------------------   ---------------------   ---------------------
<S>                                       <C>                 <C>                    <C>
Parent                                       -                       -                       -
HKSCC   Nominees Limited                  +0.31%                  +1.18%                  +0.93%
HSBC Nominees (Hong Kong)                 +0.01%                  +0.14%                  +0.25%
Limited
</TABLE>

As of April 29, 2005, a total of 964,778,000 H Shares were outstanding. As of
April 29, 2005, a total of 595,648 ADSs, representing the equivalent of
59,564,800 H Shares, were outstanding, and held by 43 holders of record. A total
of 2,596,300,000 Domestic Shares were also outstanding on April 29, 2005.

RELATIONSHIP WITH OUR PARENT, CNPC AND THE PRC GOVERNMENT

Prior to the Restructuring, the Predecessor, which became our Parent after the
Restructuring, was the owner of the business, operations, assets and liabilities
that we assumed in the Restructuring. In the Restructuring, the Predecessor
assigned its major chemical industrial businesses, operations, assets and
liabilities and all related ancillary units and facilities to us. In return, our
Parent received 100.0% of our equity. Following the Restructuring, our Parent
continues to own the businesses, operations, assets and liabilities of the
Predecessor not assumed by us. Prior to July 1998, our Parent was a State-owned
enterprise under the administration of the Jilin Provincial Government and, on
July 1, 1998, our Parent became a wholly-owned subsidiary of CNPC. Accordingly,



                                      -55-
<PAGE>

since July 1, 1998 we have been controlled by CNPC through its control over our
Parent. Pursuant to the CNPC Reorganization, effective November 5, 1999,
PetroChina became our new Parent. PetroChina is a controlled subsidiary of CNPC.
Both CNPC and our Parent exercise their rights as the controlling shareholders
of our Parent and us, respectively, according to relevant PRC laws, rules and
regulations. See ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS -
RELATED PARTY TRANSACTIONS.

Prior to the Industry Restructuring, the Predecessor was subject to the
supervision and management of the Ministry of Chemical Industries with respect
to its operations, although this supervision and management authority was
administered by the Jilin Provincial Government. The Predecessor was also
required to make tax payments and profit distributions to the Jilin Provincial
Government. In March 1998, pursuant to the Industry Restructuring, SOCIB, as
successor to the Ministry of Chemical Industries, China National Petrochemical
Corporation and China National Oil and Gas Corporation, became the controlling
governmental authority of the chemical and petrochemical industries in China and
our Parent became subject to SOCIB's industrial oversight until SOCIB was
replaced by the State Economic and Trade Commission in February 2001. Prior to
July 1998, we were controlled by the Jilin Provincial Government through that
entity's administrative control over our Parent, our controlling shareholder.

In March 2003, the State Economic and Trade Commission was dissolved by the PRC
government, and its functions in directing the reform and management of
State-owned enterprises were assumed by the State Assets Regulatory and
Management Commission, its functions in industry planning and policy making were
assumed by the National Development and Reform Commission, and its functions in
administering domestic trade, coordinating and implementing import and export
plan of critical industrial products and raw materials were assumed by the
Ministry of Commerce. We are currently subject to the industrial oversight of
these three new government agencies at the national level.

RELATED PARTY TRANSACTIONS

         DIVISION AGREEMENT WITH PARENT

The Restructuring was carried out in preparation for the Combined Offering and
to focus our activities on our primary business as a large-scale diversified
chemical enterprise. Pursuant to the Restructuring, we were established as a
joint stock limited company under the PRC Company Law on December 13, 1994, as
part of the division of the Predecessor. The Predecessor changed its name to
Jilin Chemical Group Corporation following the division and we took over, as of
October 1, 1994, the effective date of the Restructuring, those assets and
liabilities of the Predecessor which related to our principal businesses, as
well as certain ancillary functions including power supply and additional
infrastructure, waste treatment, rail transportation, sales and marketing,
research and development and other business support functions. The Predecessor,
which became Jilin Group in the Restructuring, retained the assets, liabilities
and businesses that were not assumed by us. These assets included certain
production units that are not competitive with our businesses and certain social
services, government functions and other ancillary services.




                                      -56-
<PAGE>


Since the Restructuring, Jilin Group has continued to own and operate certain
production facilities, one construction business and a wide range of other
smaller-scale businesses (none of which poses any material competition to our
businesses), including its non-revenue generating operations (such as schools,
hospitals and residential housing). In the CNPC Reorganization, five of the
Additional Seven Facilities were transferred by Jilin Group to PetroChina. Jilin
Group and PetroChina each remain responsible for the Additional Seven Facilities
that are now under their respective control.

In connection with the Restructuring, we entered into a division agreement with
Jilin Group for the purpose of defining the division of the Predecessor's
business between Jilin Group and us and of giving effect to such division. We
and Jilin Group gave mutual indemnities to each other for all claims against one
of us respectively arising from or in respect of the assets and liabilities
other than those which one of us have respectively assumed pursuant to the
Restructuring. However, any indemnity payments to be made by us to Jilin Group
would not extend to any item or related amount not included in our total
current, long-term and contingent liabilities as of September 30, 1994. The
purpose of the indemnities was to ensure that neither we nor Jilin Group would
bear liabilities which we had not agreed to assume, even in cases where third
parties have not consented to the division of liabilities between us and
continue to make claims on the entity which has not assumed the relevant
liability. In addition, Jilin Group gave an undertaking to us in that division
agreement that it would not compete, or engage in operations which are likely to
compete, with our businesses or operations, subject to the agreements between
the parties relating to the business and operations of the Ethylene Project.

         AGREEMENT WITH JILIN GROUP FOR CROSS-PROVISION OF GOODS AND SERVICES

As was the case prior to the Restructuring, certain transactions between us and
Jilin Group and its subsidiaries continued after the Restructuring in the form
of cross-provision of goods and services on a priority but non-exclusive basis.
The principal goods and services that are provided by Jilin Group and its
subsidiaries to us include the following: gas and steam, as utilities for our
employees; medical and health services; telephone and mass communication
services; feedstock for further processing by us (such feedstock principally
consisting of products produced by the Additional Seven Facilities, including
a-advanced alcohol and acrylonitrile); archives and information services;
computer network maintenance and software development; technical education of
employees; and sea transportation of goods. Additionally, the construction
subsidiary of Jilin Group provided construction services to us for constructing
parts of the Original Four Facilities and provides general repair and
maintenance services in relation to our buildings and properties. The aggregate
cost to us of these goods and services was approximately RMB 515.2 million in
2004. The principal goods and services to be provided by us to Jilin Group and
its subsidiaries include the following: rail transportation of goods; waste
water treatment; and feedstock for further processing by Jilin Group and its
subsidiaries. The aggregate value of these goods and services provided by us was
approximately RMB 1,417.1 million in 2004.

The prices at which the goods and services are supplied are:

     --   state prices, i.e. mandatory prices in accordance with PRC
          regulations;
     --   where there is no applicable state price, market price; or
     --   where there is no applicable state price or market price, at cost
          (provided that the increase in unit cost in any year may not exceed
          the higher of 5.0% and the increase in the consumer price index for
          Jilin City for the immediately preceding year).

We have entered into a 10-year composite services agreement with Jilin Group
which sets out in detail the goods and services to be provided, the basis of
charges and the length of the notice period required before the provision of any
particular goods or services may be terminated. We have entered into a new
composite services agreement with Jilin Group on November 30, 2004 for a term of
three years from January 1, 2005 to December 31, 2007 to govern the continual
cross-provision of products and services according to pricing principles and
terms thereof in the ordinary and usual course of business.

         PROVISION OF FEEDSTOCK TO THE ADDITIONAL SEVEN FACILITIES

We provide feedstock to Jilin Group and PetroChina for use in the Additional
Seven Facilities respectively owned by them. The prices at which the goods and
services are supplied are:

     --   state prices, i.e. mandatory prices in accordance with PRC
          regulations;
     --   where there is no applicable state price, market price; or
     --   where there is no applicable state price or market price, at cost
          (provided that the increase in unit cost in any year may not exceed
          the higher of 5.0% and the increase in the consumer price index for
          Jilin City for the immediately preceding year).

         OUR  IMPORT AND EXPORT AGENT

Jilin Group's subsidiary, Jilin Chemical Import and Export Company, currently
acts as our agent for the import of equipment and technology and raw materials.
In addition, it purchases all of our products for export.

         RELATED PARTY LOANS

During 2004, the largest amount outstanding for loans from Jilin Group was RMB
333 million, all of which were foreign currency denominated loans related to the
Ethylene Project. During 2003, the largest amount outstanding for loans from
Jilin Group was RMB 442 million, all of which were foreign currency denominated
loans related to the Ethylene Project. During 2002, the largest amount
outstanding for loans from Jilin Group was RMB 1,186 million, which were foreign
currency denominated loans related to the Ethylene Project. Further to an
agreement between us and Jilin Group effective September 30, 1998, Jilin Group
assumed the foreign currency loans borrowed by us and agreed to make periodic
loan repayments on our behalf and in turn, we agreed to pay Jilin Group the
Renminbi equivalent of such repayments at an exchange rate determined as at
September 30, 1998. we re-assumed some of these foreign currency loans effective
January 1, 2000. Accordingly, those loans were denominated in Renminbi in our
financial statements until January 1, 2000 when the loans were reconverted to
foreign currency loans. See ITEM 4. INFORMATION ON THE COMPANY - THE ETHYLENE
PROJECT - FINANCING FOR THE ETHYLENE PROJECT.



                                      -57-
<PAGE>


Jilin Group and CP Finance, a subsidiary of CNPC, have available to them from
PRC banks and financial institutions a number of Renminbi and foreign currency
loans and banking facilities which have been lent to us for the construction of
our production facilities and as our working capital. The principal commercial
terms of such on-lending are on the same terms as to interest rate and maturity
as the corresponding loans to Jilin Group and CP Finance, respectively. All
loans made by Jilin Group and CP Finance are unsecured. Jilin Group and CP
Finance have obtained all necessary consents from lenders and the relevant
regulatory authorities for such lending.

The outstanding loans during 2004 from CP Finance were used to finance the
construction of our production facilities and our working capital needs. During
2004, the largest amount outstanding for loans from CP Finance was RMB 2,874
million denominated in Renminbi. For all working capital loans and facilities,
the on-lending has been and will be made by CP Finance for non-specific purposes
at interest rates which represent the cost of funds to CP Finance, provided that
the rates charged by CP Finance are no higher than either the best lending rates
offered by CP Finance to its corporate customers from time to time or the
prevailing rates prescribed by the PRC government or, if none are so prescribed,
the prevailing market rates from time to time. As of December 31, 2004, we had
short-term outstanding loans from CP Finance in an amount of RMB 2,874 million
which were part of a RMB 8 billion facility to finance our working capital needs
with an interest rate of 5% per annum. The facility was granted on February 6,
2004 with a total amount of RMB 8 billion and will expire on December 31, 2005.
See ITEM 18. FINANCIAL STATEMENTS -- CONSOLIDATED FINANCIAL STATEMENTS -- NOTE
21.

         TRANSACTIONS WITH CNPC SUBSIDIARIES

We and certain subsidiaries of CNPC are engaged in various transactions. On a
recurring basis, we buy crude oil from Daqing and Fuyu (Jilin) oilfields, each a
company ultimately controlled by CNPC, and sell gasoline, diesel oil and
petrochemical products to companies controlled by CNPC. The aggregate amount
spent by us for the purchase of crude oil and other raw materials from companies
controlled by CNPC during the period from January 1, 2004 to December 31, 2004
was approximately RMB 19.2 billion. The aggregate revenues we generated from our
sale of diesel oil, gasoline and petrochemical products to companies controlled
by CNPC during the same period were RMB 7.8 billion, RMB 2.9 billion and RMB
11.6 billion, respectively. These transactions were conducted on normal
commercial terms on an arm's length basis in the ordinary and usual course of
our business. The prices of crude oil purchased by us and the prices for
gasoline and diesel oil sold by us in these transactions were based on the
prices set by CNPC in accordance with prevailing government pricing policies.
According to our audited financial statements for the financial year ended
December 31, 2004, the Directors noted that the aggregate value of the purchases
of production materials from PetroChina and the sales of petrochemical products
to PetroChina during the same financial period exceeded the caps set out in the
Waiver granted by the Stock Exchange of Hong Kong Limited in December 2001, the
details of which are set out below:
<TABLE>
<CAPTION>

                                                               TOTAL                     WAIVER CAP
                                                        TURNOVER FOR                    AS APPROVED
                                                      THE YEAR ENDED          ACTUAL    (PERCENTAGE
                                         AGGREGATE       31 DECEMBER      PERCENTAGE      OF ANNUAL
   TRANSACTION                               VALUE              2004     OF TURNOVER       TURNOVER
                                         (RMB'000)         (RMB'000)
<S>                                      <C>              <C>                  <C>              <C>
   Purchase of production materials      7,447,892        31,857,423           23.4%            17%
   Sale of petrochemical products       11,548,928        31,857,423           36.3%            33%
</TABLE>




                                      -58-
<PAGE>

We made an announcement to Shareholders regarding the exceed of caps for two
continuing connected transactions. To avoid repeating the same omission, we will
closely monitor volume of the continuing connected transactions with PetroChina
on a quarterly basis. See ITEM 18. FINANCIAL STATEMENTS - CONSOLIDATED FINANCIAL
STATEMENTS - NOTE 29.

         CNPC INSURANCE PROGRAMS

Beginning November 1, 1999, we began participating in the insurance programs
established by CNPC and approved by the PRC government. Other than automobile
insurance, we did not renew existing insurance policies with third party
insurers when they expired in year 2000 and we replaced them with comparable
policies offered by CNPC. The amount of insurance premiums payable by us to CNPC
through PetroChina under the new insurance programs during the year ended
December 31, 2004 was approximately RMB 33.0 million, and is expected to be
approximately RMB 33.0 million in 2005. We believe that our participation in the
CNPC insurance programs are on normal commercial terms on an arm's length basis
in the ordinary and usual course of our business.

         DIRECTORS AND SUPERVISORS APPOINTED BY PARENT

Several of our directors, supervisors and senior officers hold or have held
positions of responsibility in our Parent. In particular, Yu Li, the chairman of
our Board of Directors, is general manager of PetroChina Jilin Petrochemical
Branch Company; Zou Haifeng, the chairman of our Board of Supervisors, is a
director of our Parent; Lan Yunsheng, one of our directors, is a deputy general
manager of CP Finance, Ni Muhua and Jiang Jixiang, two of our Directors, are
deputy managers of PetroChina Jilin Petrochemical Branch Company; Xu Fengli, one
of our Directors, is a supervisor and chief of the general office of our
Parent's board of supervisors; and Yang Jigang, one of our Supervisors, is
deputy chief manager and chief engineer of our Parent's Chemical Production and
Sales Branch Company.

INTERESTS OF EXPERTS

Not applicable.


ITEM 8.  FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See Item 18.

         LEGAL PROCEEDINGS

Neither we nor any of our subsidiaries are a party to nor is any of our property
the subject of any material pending legal or arbitration proceedings.



                                      -59-
<PAGE>


         DIVIDEND PAYMENTS

Our Articles of Association require that cash dividends in respect of H Shares
be declared in Renminbi and paid by us in HK dollars. Our Articles of
Association further stipulate that such dividends must be converted into HK
dollars at the average of the closing HK dollar exchange rates as announced by
the People's Bank of China for the calendar week preceding the date on which
such dividends are declared.

With respect to the payment of dividends, we may, after taxes have been paid in
accordance with applicable law, make distributions to our foreign shareholders
with funds in our foreign exchange account. Should we not have sufficient
foreign exchange reserves in our foreign exchange account, we may purchase
payments in foreign currency. Although we believe that we can meet our foreign
currency requirements for such dividend payments, no assurance can be given that
foreign currency for such payments will always be available or that the rates
for conversion of Renminbi to foreign currencies will not decline.

The holders of the ADSs receive HK dollar dividend payments in US dollars at
conversion rates related to market rates and subject to fees as set forth in the
corresponding Deposit Agreement. Since October 17, 1983, the HK dollar has been
linked to the US dollar at the rate of HK$7.80 = US$1.00, and the Hong Kong
government has stated its intention to maintain the link at that rate.

Dividend payments may be subject to PRC withholding tax. See ITEM 10. ADDITIONAL
INFORMATION TAXATION - TAX ON DIVIDENDS.

See also, ITEM 3.  KEY INFORMATION - SELECTED FINANCIAL DATA - DIVIDENDS.

SIGNIFICANT CHANGES

Not applicable.


ITEM 9.  THE OFFER AND LISTING


OFFER AND LISTING DETAILS

Not applicable except for Item 9.A.4. and 9.C.

         PRICE HISTORY OF OUR SHARES

Set forth below is certain market information relating to the H Shares and ADSs
in respect of the period from January 1, 2000 to April 29, 2005.



                                      -60-
<PAGE>


                              Price per H Share               Price per ADS
                                    (HK$)                         (US$)
                             High          Low              High          Low

2000                        0.740         0.350             9.437        4.375
2001                        1.210         0.345            15.250        4.750
2002                        0.810         0.480             9.800        5.750
2003                        1.720         0.570            22.300        7.350
2004                        2.950         0.880            37.210       11.200

2003
     First Quarter          0.780         0.570             9.150        7.350
     Second Quarter         1.020         0.560            12.200        7.900
     Third Quarter          1.410         0.890            17.470       11.800
     Fourth Quarter         1.720         1.270            22.300       16.200

2004
     First Quarter          1.850         1.400            24.290       18.200
     Second Quarter         1.830         0.880            23.500       11.200
     Third Quarter          1.660         1.160            20.900       14.950
     Fourth Quarter         2.950         1.620            37.210       20.500


2005
     First Quarter          3.120         2.150            39.300       28.130

     November, 2004         2.830         1.970            35.580       25.420
     December, 2004         2.950         2.470            37.210       31.860
     January, 2005          2.830         2.330            35.400       30.250
     February, 2005         2.920         2.450            36.840       32.010
     March, 2005            3.120         2.150            39.300       28.130
     April, 2005            2.330         1.670            29.970       21.160



MARKETS

The principal trading market for our H Shares is the Hong Kong Stock Exchange.
The ADSs, each representing 100 H Shares, have been issued by The Bank of New
York as depositary and are listed on the New York Stock Exchange under the
symbol "JCC." Prior to the Combined Offering and subsequent listings on the Hong
Kong and New York Stock Exchanges on May 23 and 22, 1995, respectively, there
was no market for the H Shares or ADSs.

Pursuant to PRC law, our domestic-listed shares were suspended from trading on
the Shenzhen Stock Exchange on April 30, 2003 as a result of our reporting of
three consecutive years of net losses from January 1, 2000 to December 31, 2002.
Following our report of net profits for the period ended June 30, 2003, our
domestic-listed shares resumed trading on September 25, 2003 on the Shenzhen
Stock Exchange under the "special treatment" category provided under PRC law. As
our net asset per share is higher than the par value of domestic-listed shares,
Shenzhen Stock Exchange cancelled its "special treatment" to our domestic-listed
shares on March 28, 2005. Our domestic-listed shares are no longer endangered of
termination of trading, unless we are recorded for suffering from deficit in
another consecutive 3-year period.


                                      -61-
<PAGE>

ITEM 10.  ADDITIONAL INFORMATION


SHARE CAPITAL

Not applicable.

MEMORANDUM AND ARTICLES OF ASSOCIATION
Set forth below is certain information relating to the H Shares, including a
brief summary of certain provisions of our articles of association and selected
laws and regulations applicable to us. Such summary does not purport to be
complete and reference is made to our articles of association and the texts of
the applicable laws and regulations.

         SOURCES OF SHAREHOLDERS' RIGHTS

Currently, the primary sources of shareholder rights are our articles of
association, the PRC Company Law and the Listing Rules, which, among other
things, impose certain standards of conduct, fairness and disclosure on us, our
directors and our controlling shareholder. To facilitate the offer and listing
of shares of PRC companies overseas, and to regulate the behavior of companies
whose shares are listed overseas, the then PRC State Council Securities
Commission and the State Commission for Restructuring the Economic System issued
on August 27, 1994 the Mandatory Provisions. These Mandatory Provisions become
entrenched in that, once they are incorporated into the articles of association
of a PRC company, they can only be amended with the approval of China Securities
Regulatory Commission and the relevant examination and approval authorities of
the PRC State Council. The Listing Rules require that a number of provisions, in
addition to the Mandatory Provisions, be included in the articles of association
of PRC companies listing H Shares on the Hong Kong Stock Exchange. The Mandatory
Provisions and these additional provisions have been incorporated into our
articles of association.

In addition, for so long as the H Shares are listed on the Hong Kong Stock
Exchange, we will be subject to the Listing Rules, the Securities and Futures
Ordinance of Hong Kong and the Hong Kong Codes on Takeovers and Mergers and
Share Repurchases.

Unless otherwise specified, all rights, obligations and protections discussed
below derive from our articles of association and/or the PRC Company Law.

         OUR OBJECTIVES AND PURPOSES

The Company was registered with the PRC State Administration for Industry and
Commerce in Jilin Province on December 13, 1994. The business registration
number of the Company is: 2200001000906.

Pursuant to Article 10 of our articles of association, our business objective is
to establish a high technology chemical company which will be able to conduct
its own operations and development as well as to have sole responsibility for
its profits and losses. As stated in our articles of association, on the basis
of our infrastructure, we aim to improve our technology and product development,
to utilize our capital resources productively and to fully exploit domestic and
overseas markets for our products so as to enable us to become an international
conglomerate. We also seek to protect our legitimate rights and benefits as well
as those of our shareholders and to conduct a profitable operation.



                                      -62-
<PAGE>


         BOARD OF DIRECTORS

Where a director is materially interested in an actual or proposed contract,
transaction or arrangement with the Company, other than his service contract as
a director, he shall disclose such interest to the board of directors for its
approval. The contract, transaction or arrangement in which a director is
materially interested shall be voidable unless approved by the board of
directors at a meeting in which the interested director is not counted in the
quorum and has refrained from voting.

Under our articles of association, we shall not directly or indirectly make a
loan to any of our directors, provide any guarantee in connection with a loan
made by any person to any of our directors or make a loan or provide any
guarantee in connection with any loan made by any person connected to any of our
directors.

Our articles of association provide that each of our directors shall enter into
a written contract with us regarding his emoluments, which shall be approved by
the shareholders in a general meeting prior to the contract being entered into.

Our articles of association do not set any age limit requirement for the
retirement of our directors. Our directors are not required to hold our shares
to be qualified.

         RIGHTS, PREFERENCES AND RESTRICTIONS ATTACHED TO OUR SHARES

                  SIGNIFICANT DIFFERENCES IN THE H SHARES AND DOMESTIC SHARES

Holders of our H Shares and Domestic Shares, with minor exceptions, are entitled
to the same economic and voting rights. However, our articles of association
provide that holders of H Shares will receive dividends in Hong Kong Dollars
while holders of Domestic Shares will receive dividends in Renminbi. In
addition, our H Shares can be traded only by investors from foreign countries
and investors from Taiwan, Hong Kong and Macau, all of whom are considered
foreign investors for such purposes, while our Domestic Shares may be traded
only by investors in the PRC. Other differences between our H Shares and
Domestic Shares relate primarily to restrictions placed on Domestic Shares and
holders of Domestic Shares that are not applicable to H Shares or holders of H
Shares.

                  DIVIDENDS AND LIQUIDATION RIGHTS

Dividend distributions may be proposed at any time by our Board of Directors and
approved by an ordinary resolution of the shareholders at a general meeting. We
may distribute dividends or bonuses no more than once a year unless approved by
an ordinary resolution of our shareholders. Our articles of association allow
for distributions of cash dividends or shares. A distribution of shares,
however, must be approved by special resolution of our shareholders.

We may distribute dividends only after allowance has been made for:

     --   making up losses, if any;
     --   allocations to the statutory common reserve; and
     --   allocations to the statutory public welfare fund.



                                      -63-
<PAGE>


Our articles of association require us to appoint a receiving agent registered
as a trust company under the Trustee Ordinance of Hong Kong to receive dividends
declared by us in respect of the H Shares. If a shareholder does not, within six
years after the date of declaration, claim the dividends distributed, that
shareholder shall be deemed to have forfeited his claim to such dividend.

In the event of our liquidation, our H Shares will rank pari passu with our
Domestic Shares, and payment of debts out of our remaining assets shall be made
in the order of priority prescribed by applicable laws and regulations or, if no
such laws exists, as the liquidation committee appointed either by us or the
courts of China consider fair and proper.

                  VOTING

Each of our shares is entitled to one vote on all matters submitted to a vote of
our shareholders at all shareholder meetings, except for meetings of a special
class of shareholders where only holders of shares of the affected class are
entitled to vote on the basis of one vote per share of the affected class. We
have adopted a cumulative voting rights system for the election of our
directors. We decide election based on the votes each candidate receives until
all directors have been elected.

Our articles of association provide that all differences or claims between the
following persons and arising from any provision of our articles of association
or any right or obligation conferred or imposed by the Company Law or any
subsequently promulgated laws or regulations replacing the Company Law,
concerning our affairs must, with certain exceptions, be referred to arbitration
at either the China International Economic and Trade Arbitration Commission in
China or the Hong Kong International Arbitration Centre:

     --   a holder of H Shares and us,
     --   a holder of H Shares and any of our directors, supervisors, general
          managers or other senior officers, or
     --   a holder of H Shares and a holder of Domestic Shares.

                  RESTRICTIONS ON LARGE OR CONTROLLING SHAREHOLDERS

Our articles of association provide that, in addition to any obligation imposed
by law or required by any stock exchange on which our shares are listed, a
controlling shareholder must not exercise his voting rights in a manner
prejudicial to the interests of our shareholders generally or of some of our
shareholders which has the effect of:

     --   relieving our directors or supervisors from their duty to act honestly
          in our best interest,
     --   approving the expropriation by a director or supervisor of any of our
          assets, including any of our corporate opportunities, or
     --   approving the expropriation by a director or supervisor of the
          individual rights of other shareholders, including rights to
          distributions and voting rights (except in the case of a restructuring
          approved by our shareholders).


                                      -64-
<PAGE>


A controlling shareholder is defined by our articles of association as any
person who, on his own or acting in concert with others, has the power to elect
more than half of our directors, exercises or controls the exercise of 30% or
more voting rights, holds 30% or more of issued and outstanding shares or in any
other manner controls us in fact.

         MODIFICATIONS OF SHAREHOLDER RIGHTS

No rights of any class of our shareholders (holders of Domestic Shares and H
Shares being separate classes for this purpose) may be modified or abrogated,
unless approved by a special resolution of all our shareholders at a general
meeting and by a special resolution of our shareholders holding that class of
shares at a separate meeting. Our articles of association enumerate, without
limitation, certain amendments which would be deemed to be a modification or
abrogation of the rights of a class of shareholders, including increasing or
decreasing the number of shares of a class disproportionate to increases or
decreases of other classes of shares, removing or reducing rights to receive
dividends in a particular currency or creating shares with voting or equity
rights superior to shares of such class.

In addition, the Listing Agreement between us and the Hong Kong Stock Exchange
provides that we may not permit amendments to certain sections of our articles
of association which have been mandated by the Hong Kong Stock Exchange. These
sections include provisions relating to varying the rights of existing classes
of shares, voting rights, the power to purchase our own shares, the rights of
minority shareholders and liquidation procedures. In addition, certain
amendments to our articles of association require the approval and consent of
relevant PRC authorities.

         SHAREHOLDERS' MEETINGS

Our board of directors must convene an annual general shareholders' meeting
within six months after the end of each financial year. Our board of directors
must convene an extraordinary general shareholders' meeting within two months of
the following events:

     --   the number of our directors falls below the minimum required by the
          Company Law or more than one-third of the seats on our board become
          vacant;
     --   our accrued losses reach one-third of our total share capital;
     --   our board of directors considers it necessary or our board of
          supervisors requests such a meeting; or
     --   shareholders holding shares representing not less than one-tenth of
          the total number of shares entitled to vote at such a meeting make a
          written demand to convene such a meeting.

Meetings of a special class of shareholders must be called in certain enumerated
situations when the rights of the holders of such class of shares may be
modified or adversely affected, as discussed below. Motions proposed by
shareholders (including proxies) who hold five (5%) percent or more of the total
number of our shares must be included on the notice of meeting given and
submitted to the meeting if the motions falls within the scope of a
shareholder's meeting.



                                      -65-
<PAGE>


Our shareholder meetings must be convened by our board of directors by written
notice given to shareholders not less than 45 days before the meeting (or, in
the case of holders of Domestic Shares, by way of public notice issued 45-50
days prior to the meeting). Based on the written replies received by us 20 days
before a shareholders' meeting, we shall calculate the number of shares
represented by shareholders who have indicated their intention to attend the
meeting. Where the number of voting shares represented by those shareholders
reaches half of the total number of such shares, we may convene the
shareholders' general meeting. Otherwise, we will, within 5 days, inform our
shareholders again of the motions to be considered and the date and venue of the
meeting by way of public announcement. After the announcement is made, the
shareholders' meeting may be convened. The accidental omission by us to give
notice of a meeting to, or the non-receipt of notice of a meeting by, a
shareholder will not invalidate the meeting and the resolutions adopted at that
shareholders' meeting.

         RESTRICTIONS ON SHARE OWNERSHIP

Our H Shares may be traded only among foreign investors, and may not be sold to
PRC investors. Our articles of association provide that PRC investors are not
entitled to be registered as holders of our H Shares. Other consequences under
PRC law of a purported transfer of H Shares to PRC investors are unclear.

         RESTRICTIONS RELATING TO CHANGE OF CONTROL

Our articles of association state that a proposal for the merger or division of
our company shall be proposed by the board of directors, and after it has been
approved in accordance with the provisions of the Articles, it shall be
submitted for review and approval according to law. Shareholders who oppose the
proposal shall have the right to require us or shareholders who are in favor of
such proposal to purchase their shares at a fair price.

If we are involved in a merger or division, the parties to the merger shall
enter into a merger agreement, and prepare balance sheets and lists of property.
We are required to notify our creditors within a period of 10 days from the date
of the resolution approving the merger and make at least three newspaper
announcements of the merger within 30 days of that date. Where there is a
company division, the parties to the division shall enter into a division
agreement, and prepare balance sheets and lists of property.

         DISCLOSURE RELATING TO OWNERSHIP THRESHOLD

Although our articles of association do not set out any threshold above which
shareholder ownership must be disclosed, the PRC Securities Law requires that
any investor who acquires, whether cumulatively or at a single time, 5% or more
of our shares through any stock exchange in the PRC shall report such fact to
the China Securities Regulatory Commission and such stock exchange in the PRC
within 3 days after such acquisition.



                                      -66-
<PAGE>


         EFFECT OF THE DIFFERENCES BETWEEN PRC COMPANY AND LAWS IN OTHER
         COUNTRIES

The PRC Company Law promulgated by the PRC National People's Congress and made
effective on July 1, 1994 and the Special Regulations, in general, and the
provisions for the protection of shareholders' rights and access to information,
in particular, are less developed than those applicable to companies
incorporated in Hong Kong, the United Kingdom, the United States and other
developed countries or regions.

The PRC Company Law is different in certain important aspects from company laws
in Hong Kong, the United States and other common law countries or regions,
particularly with regard to investor protection, including in such areas as
derivative actions by minority shareholders and other minority protections,
restrictions on directors, financial disclosure, variations of class rights,
procedures at general meetings and payments of dividends.

The limited nature of investor protection under the PRC Company Law is
compensated for, to a certain extent, by the introduction of the Mandatory
Provisions and certain additional requirements that are imposed by the Listing
Rules of The Stock Exchange of Hong Kong Limited, or the Listing Rules, with a
view to reducing the scope of differences between Hong Kong company law and the
PRC Company Law. The Mandatory Provisions and those additional requirements must
be included in the articles of association of all PRC companies applying to be
listed in Hong Kong. Our articles of association have incorporated the
provisions required by the Mandatory Provisions and the Listing Rules. Despite
the incorporation of those provisions, our shareholders may not enjoy the full
extent of protections that they may be entitled to in other jurisdictions.

         CHANGES IN CAPITAL

                  INCREASES IN SHARE CAPITAL AND PRE-EMPTIVE RIGHTS

Our articles of association require that approval by a special resolution of our
shareholders and by special resolutions of holders of Domestic Shares and H
Shares at separate shareholder class meetings be obtained prior to authorizing,
allotting, issuing or granting shares, options, warrants or similar rights to
subscribe for any shares or such convertible securities. No such approval is
required if, but only to the extent that, we issue Domestic Shares and H Shares,
either separately or concurrently, in numbers not exceeding 20% of the number of
Domestic Shares and H Shares then in issue, respectively in any 12-month period,
as approved by a special resolution of the shareholders.

New issues of shares must also be approved by the relevant PRC authorities.

                  REDUCTION OF SHARE CAPITAL AND PURCHASE OF SHARES

We may reduce our registered share capital only upon obtaining the approval of
our shareholders and, in certain circumstances, of relevant PRC authorities. Our
registered share capital following the reduction of capital shall not fall below
the minimum statutory requirement. The number of H Shares which may be purchased
is subject to the Hong Kong Takeovers and Repurchase Codes. Our ability to
repurchase any of our own shares is subject to approval by the relevant PRC
authorities.


                                      -67-
<PAGE>


MATERIAL CONTRACTS

We have not entered into any material contracts other than in the ordinary
course of business and other than those described in ITEM 4. INFORMATION ON THE
COMPANY, ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS -- RELATED
PARTY TRANSACTIONS or elsewhere in this Form 20-F.

EXCHANGE CONTROLS

The Renminbi currently is not a freely convertible currency. The PRC government
imposes control over its foreign currency reserves in part through direct
regulation of the conversion of Renminbi into foreign exchange and through
restrictions on foreign imports. The State Administration of Foreign Exchange,
or SAFE, under supervision of the People's Bank of China, is responsible for
matters relating to foreign exchange administration.

Foreign exchange transactions involving Renminbi must take place either through
financial institutions authorized to undertake foreign exchange conversion
transactions, such as the PRC domestic banks and branches of foreign banks in
China. Official foreign exchange adjustment centres, which previously handled
foreign exchange conversion transactions on a transitional basis, were phased
out in December 1998. Access to foreign exchange and the ability to remit
foreign exchange abroad are regulated by the PRC government policies
administered by the SAFE.

Effective January 1, 1994, a new unitary, managed floating-rate system was
introduced in China to replace the dual-track foreign exchange system consisting
of two exchange rates. Under this system, the People's Bank of China sets and
publishes daily the PBOC Rate, with reference to the prior day's Renminbi-US
dollar trading price on the national inter-bank foreign exchange market, called
the China Foreign Exchange Trading System, or CFETS, established in April 1994.
At present, certain State-designated banks, foreign banks and Chinese funded
non-banking financial institutions, connected through a computer network, are
the principal parties participating in the CFETS. The main function of the CFETS
is to provide foreign exchange trading and settlement services among the
participating members. Based on the PBOC Rate, each participating member sets
its own exchange rate for the purpose of buying and selling foreign exchange
from its customers. The CFETS is supervised and managed by the SAFE in
accordance with policy set by the People's Bank of China.

As a result of the adoption of the new system, on January 1, 1994, the official
exchange rate for Renminbi against the US dollar was revalued from approximately
RMB 5.80 to US$1.00 to RMB 8.70 to US$1.00. As part of the system, the People's
Bank of China also publishes the Renminbi rate of exchange against other major
currencies by reference to the price of the US dollar in international foreign
exchange markets.

The PRC government announced a policy in late December 1993 that, under the new
managed floating rate system, the People's Bank of China would try to balance
the demand for and supply of foreign currencies in China and stabilize the
Renminbi exchange rate mainly through macroeconomic measures, such as monetary
policy and interest rates. Nonetheless, if necessary, government intervention is
expected to be used to stabilize the PBOC Rate.



                                      -68-
<PAGE>


Domestic enterprises, which prior to 1994 had been permitted to retain a portion
of their foreign currency earnings, are now required to sell all of their
foreign currency earnings to State-designated banks at the rate used by the
relevant CFETS member, which is based on the PBOC Rate, except for the proceeds
of foreign currency loans or the issuance of foreign currency-denominated bonds
or shares. Domestic enterprises and institutions are permitted under the new
system to buy foreign exchange from State-designated banks at designated times
upon presentation of appropriate documentation establishing the existence of
import contracts or payment notes of overseas financial institutions. Such
enterprises and institutions also are permitted under the new system to purchase
foreign exchange for the import of certain products subject to quotas, import
permits and registration controls. Domestic enterprises are permitted to apply
to purchase foreign exchange for the payment of dividends that have been
authorized as payable in foreign currency. Conversion and payment must be
effected through certain documentation, including a written resolution on profit
distribution passed by the enterprise's board of directors and evidence that the
enterprise has paid all required PRC taxes.

TAXATION

The following is a summary of those taxes, including withholding provisions, to
which United States security holders are subject under existing laws and
regulations of the PRC. The summary is subject to changes in PRC law, including
changes that could have retroactive effect. The summary does not take into
account or discuss the tax laws of any country other than the PRC, nor does it
take into account the individual circumstances of a security holder. This
summary does not purport to be a complete technical analysis or an examination
of all potential tax effects under such laws and regulations.

         U.S. TAXATION

                  UNITED STATES

                  FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of United States federal income tax considerations
that are anticipated to be material for U.S. Holders, as defined below. This
summary is based upon existing United States federal income tax law, which is
subject to change, possibly with retroactive effect. This summary does not
discuss all aspects of United States federal income taxation which may be
important to particular investors in light of their individual investment
circumstances, such as investors subject to special tax rules including:
partnerships, financial institutions, insurance companies, broker-dealers,
tax-exempt organizations, and, except as described below, non-U.S. Holders, or
to persons that will hold our shares or ADSs as part of a straddle, hedge,
conversion, or constructive sale transaction for United States federal income
tax purposes or that have a functional currency other than the United States
dollar, all of whom may be subject to tax rules that differ significantly from
those summarized below. In addition, this summary does not discuss any foreign,
state, or local tax considerations. This summary assumes that investors will
hold our shares or ADSs as "capital assets" generally, property held for
investment) under the United States Internal Revenue Code. Each prospective
investor is urged to consult its tax advisor regarding the United States
federal, state, local, and foreign income and other tax considerations of the
purchase, ownership, and disposition of our shares or ADSs.



                                      -69-
<PAGE>


For purposes of this summary, an U.S. Holder is a beneficial owner of shares or
ADSs that is for United States federal income tax purposes:

     o    an individual who is a citizen or resident of the United States;

     o    a corporation, or other entity that is taxable as a corporation
          created in or organized under the laws of the United States or any
          State or political subdivision thereof;

     o    an estate the income of which is includible in gross income for United
          States federal income tax purposes regardless of its source;

     o    a trust the administration of which is subject to the primary
          supervision of a United States court and which has one or more United
          States persons who have the authority to control all substantial
          decisions of the trust; or

     o    a trust that was in existence on August 20, 1996, was treated as a
          United States person, for United States federal income tax purposes,
          on the previous day, and elected to continue to be so treated.

A beneficial owner of our shares or ADSs that is not a U.S. Holder is referred
to herein as a "Non-U.S. Holder."

A foreign corporation will be treated as a "passive foreign investment company"
(a "PFIC"), for United States federal income tax purposes, if 75% or more of its
gross income consists of certain types of "passive" income or 50% or more of its
assets are passive. Based on our current and projected income, assets, and
activities, we presently believe that we are not a PFIC and do not anticipate
becoming a PFIC. This is, however, a factual determination made on an annual
basis. Because the classification of certain of our interests for United States
federal income tax purposes is uncertain and the PFIC rules are subject to
administrative interpretation, however, no assurance can be given that we are
not or will not be treated as a PFIC. The discussion below under "U.S. Holders
Dividends" and "U.S. Holders Sale or Other Disposition of Shares or ADSs",
assumes that we will not be subject to treatment as a PFIC for United States
federal income tax purposes.

                  U.S. HOLDERS

For United States federal income tax purposes, a U.S. Holder of an ADS will be
treated as the owner of the proportionate interest of the shares held by the
depositary that is represented by an ADS and evidenced by such ADS. Accordingly,
no gain or loss will be recognized upon the exchange of an ADS for the holders'
proportionate interest in the shares. A U.S. Holder's tax basis in the withdrawn
shares will be the same as the tax basis in the ADS surrendered therefore, and
the holding period in the withdrawn shares will include the period during which
the holder held the surrendered ADS.



                                      -70-
<PAGE>


Dividends. Any cash distributions paid by us out of our earnings and profits, as
determined under United States federal income tax principles, will be subject to
tax as ordinary dividend income and will be includible in the gross income of a
U.S. Holder upon receipt. Cash distributions paid by us in excess of our
earnings and profits will be treated as a tax-free return of capital to the
extent of the U.S. Holder's adjusted tax basis in our shares or ADSs, and after
that as gain from the sale or exchange of a capital asset. Dividends paid in
Hong Kong dollars will be includible in income in a United States dollar amount
based on the United States dollar to Hong Kong dollar exchange rate prevailing
at the time of receipt of such dividends by the depositary, in the case of ADSs,
or by the U.S. Holder, in the case of shares held directly by such U.S. Holder.
U.S. Holders should consult their tax advisors regarding the United States
federal income tax treatment of any foreign currency gain or loss recognized on
the subsequent conversion of Hong Kong dollars received as dividends to United
States dollars. Dividends received on shares or ADSs will not be eligible for
the dividends received deduction allowed to corporations.

Dividends received on shares or ADSs will be treated, for United States federal
income tax purposes, as foreign source income. A U.S. Holder may be eligible,
subject to a number of complex limitations, to claim a foreign tax credit in
respect of any foreign withholding taxes imposed on dividends received on shares
or ADSs. U.S. Holders who do not elect to claim a foreign tax credit for federal
income tax withheld may instead claim a deduction, for United States federal
income tax purposes, in respect of such withholdings, but only for a year in
which the U.S. Holder elects to do so for all creditable foreign income taxes.

In addition, the United States Treasury has expressed concerns that parties to
whom depositary shares are pre-released may be taking actions that are
inconsistent with the claiming of foreign tax credits by the holders of ADSs.
Accordingly, the analysis of the creditability of foreign withholding taxes
could be affected by future actions that may be taken by the United States
Treasury.

Sale or Other Disposition of Shares or ADSs. A U.S. Holder will recognize
capital gain or loss upon the sale or other disposition of shares or ADSs in an
amount equal to the difference between the amount realized upon the disposition
and the U.S. Holder's adjusted tax basis in such shares or ADSs, as each is
determined in U.S. dollars. Any such capital gain or loss will be long-term if
the shares or ADSs have been held for more than one year and will generally be
United States source gain or loss. The claim of a deduction in respect of a
capital loss, for United States federal income tax purposes, may be subject to
limitations. If a U.S. Holder receives Hong Kong dollars for any such
disposition, such U.S. Holder should consult its tax advisor regarding the
United States federal income tax treatment of any foreign currency gain or loss
recognized on the subsequent conversion of the Hong Kong dollars to United
States dollars.

                  PFIC CONSIDERATIONS

If we were to be classified as a PFIC in any taxable year, a U.S. Holder would
be subject to special rules generally intended to reduce or eliminate any
benefits from the deferral of United States federal income tax that a U.S.
Holder could derive from investing in a foreign company that does not distribute
all of its earnings on a current basis. In such event, a U.S. Holder of the
shares or ADSs may be subject to tax at ordinary income tax rates on (i) any
gain recognized on the sales of the shares or ADSs and (ii) any "excess
distribution" paid on the shares or ADSs (generally, a distribution in excess of
125% of the average annual distributions paid by us in the three preceding
taxable years). In addition, a U.S. Holder may be subject to an interest charge
on such gain or excess distribution. Prospective investors are urged to consult
their tax advisors regarding the potential tax consequences to them if we are or
do become a PFIC, as well as certain elections that may be available to them to
mitigate such consequences.



                                      -71-
<PAGE>


                  NON-U.S. HOLDERS

An investment in shares or ADSs by a Non-U.S. Holder will not give rise to any
United States federal income tax consequences unless:

     o    the dividends received or gain recognized on the sale of the shares or
          ADSs by such person is treated as effectively connected with the
          conduct of a trade or business by such person in the United States as
          determined under United States federal income tax law, or

     o    in the case of gains recognized on a sale of shares or ADSs by an
          individual, such individual is present in the United States for 183
          days or more and certain other conditions are met.

In order to avoid back-up withholding on dividend payments made in the United
States, a Non-U.S. Holder of the shares or ADSs may be required to complete, and
provide the payer with, an Internal Revenue Service Form W-8BEN, or other
documentary evidence, certifying that such holder is an exempt foreign person.

         PRC TAXATION


                  TAX ON DIVIDENDS

                  FOR AN INDIVIDUAL

The provisions of the PRC Individual Income Tax Law, as amended pursuant to a
decision passed by the fourth plenary session of the Standing Committee of the
Eighth National People's Congress on October 31, 1993, provide that income tax
of 20.0% shall be withheld in accordance with the PRC Individual Income Tax Law
on dividend payments from PRC companies received by an individual. Accordingly,
for a foreign individual not a resident of the PRC, the receipt of dividends
from a PRC company would normally be subject to a PRC withholding tax of 20.0%
unless reduced by an applicable double-taxation treaty or PRC domestic tax
regulations. However, on July 21, 1993, the PRC State Tax Bureau (now the State
Administration of Taxation) issued a Notice Concerning the Taxation of Gains on
Transfer and Dividends from Shares (Equities) Received by Foreign Investment
Enterprises, Foreign Enterprises and Foreign Individuals, referred to as the Tax
Notice, which provides that dividends received from a PRC company on shares
listed on an overseas stock exchange, such as H Shares (including H Shares
represented by ADSs), or on domestically-listed foreign invested shares, would
not for the time being be subject to PRC withholding tax. The relevant tax
authority has thus far not collected withholding tax on dividend payments on
either shares listed on an overseas stock exchange or domestically-listed
foreign invested shares.



                                      -72-
<PAGE>


On May 13, 1994, the Ministry of Finance and the State Administration of
Taxation jointly issued a Notice on the Relevant Policies Concerning the
Individual Income Tax, which notice stipulated that a foreign individual
receiving dividends from a PRC company with foreign investment interest would
temporarily not be subject to the individual income tax. The State
Administration of Taxation also stated, in a circular addressed to the State
Commission for Economic System Reform, the then State Council Securities
Commission and the China Securities Regulation Commission issued in July 1994,
referred to as the Tax Circular, that the Tax Notice would continue to be valid
and effective. As of December 31, 2003, the Tax Circular and the Tax Notice
remained in effect. In the event that they are withdrawn, a 20.0% tax may be
withheld on dividends in accordance with the PRC Individual Income Tax Law, the
amount of which withholding tax may be reduced pursuant to any applicable income
tax treaty.

                  FOR AN ENTERPRISE

According to the Tax Notice, a foreign enterprise without an establishment in
the PRC receiving a dividend payment on overseas shares, such as H Shares or
ADSs, would not for the time being be subject to withholding tax of 20.0% on
such dividend payment.

                  CAPITAL GAINS TAX

Although the Regulations for the Implementation of the PRC Individual Income Tax
Law issued on January 29, 1994 stipulated that gains realized on the sale of
equity shares by an individual would be subject to income tax at a rate of 20.0%
and empowered the Ministry of Finance to draft detailed tax rules on the
mechanism of collecting such tax, the Tax Notice which was confirmed by the Tax
Circular provided that gains realized by holders (whether an individual or an
enterprise) of H Shares, including H shares represented by ADSs, would not for
the time being be subject to PRC income tax. Moreover, between June 1994 and
December 1996, the Ministry of Finance and the State Administration of Taxation
issued several notices providing that individual income tax would not be imposed
on gains from the sale of shares for 1994, 1995 and 1996. This tax exemption was
subsequently extended indefinitely by the Ministry of Finance and the State
Administration of Taxation pursuant to their joint Notice Concerning the
Temporary Exemption from Income Tax on Gains Realized by Individuals from
Disposition of Shares issued on March 30, 1998 and effective retroactively from
January 1, 1997. Therefore, gains realized on the sale of H Shares by an
individual would not be subject to PRC capital gains tax unless both the Tax
Notice and the indefinite tax exemption granted by the Ministry of Finance and
the State Administration of Taxation are withdrawn.

                  TAX TREATIES

Foreign enterprises with no permanent establishment in the PRC and individuals
not resident in the PRC who are resident in countries which have entered into
double-taxation treaties with the PRC may be entitled to a reduction of any
withholding tax imposed on the payment of dividends received from us (although
dividend payments made by us to such foreign investors are for the time being
exempt from PRC withholding tax). The PRC currently has a double-taxation treaty
with the United States.



                                      -73-
<PAGE>


The US-PRC Tax Treaty, also known as the Agreement between the Government of the
United States of America and the Government of the People's Republic of China
for the Avoidance of Double Taxation and the Prevention of Tax Evasion with
Respect to Taxes on Income, together with the related Protocols, currently would
limit the rate of PRC withholding tax upon dividends paid by us to a holder of
our H Shares or ADSs who is a United States resident for purposes of the US-PRC
Tax Treaty to 10.0%, were the PRC to impose such withholding tax. However, it is
uncertain if the US-PRC Tax Treaty would exempt from PRC tax the capital gains
of a US resident holding our H Shares or ADSs arising from the sale or
disposition of H Shares or ADSs, were the PRC to impose capital gains tax. US
Holders are advised to consult their tax advisors with respect to these matters.

                  STAMP TAX

The PRC stamp tax imposed on the transfer of shares of PRC publicly-traded
companies under the Share System Tax Regulations should not apply to the
acquisition or disposition outside the PRC by holders of H Shares or ADSs who
are foreign enterprises with no permanent establishment in the PRC or
individuals not resident in the PRC, by virtue of the Provisional Regulations of
the People's Republic of China Concerning Stamp Tax effective on July 1, 1989,
which provide that PRC stamp tax is imposed only on documents executed or
received within the PRC or which will be used within the PRC.

                  ESTATE OR GIFT TAX

The PRC does not currently impose any estate or gift tax.

DIVIDENDS AND PAYING AGENTS

Not Applicable.

STATEMENTS BY EXPERTS

Not applicable.

DOCUMENTS ON DISPLAY

You may inspect and copy our registration statements, including their exhibits
and schedules, and the reports and other information we file with the Securities
and Exchange Commission in accordance with the Securities Exchange Act of 1934
at the public reference facilities maintained by the Securities and Exchange
Commission at Judiciary Plaza, 450 Fifth Street, Room 1024, N.W., Washington,
D.C. 20549 and at the regional office of the Securities and Exchange Commission
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You may also inspect the registration statements, including
their exhibits and schedules, at the office of the New York Stock Exchange, Wall
Street, New York, New York 10005. Copies of such material may also be obtained
from the Public Reference Section of the Securities and Exchange Commission at
450 First Street, N.W., Washington, D.C. 20549, at prescribed rates. You may
obtain information regarding the Washington D.C. Public Reference Room by
calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities
and Exchange Commission also maintains a website at http://www.sec.gov that
contains registration statements, reports and other information regarding
registrants that make electronic filings with the Securities and Futures
Commission using its EDGAR system.



                                      -74-
<PAGE>


SUBSIDIARY INFORMATION

Not Applicable.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The financial instruments we hold are exposed to fluctuations in relevant market
rates. We generally do not use derivative financial instruments to mitigate such
exposure and do not enter into any derivative financial instruments for trading
purposes.

         INTEREST RATE RISK

We are exposed to interest rate risk primarily associated with our debt
obligations. We did not engage in any interest rate hedging activities in 2004.

The following table provides information about our interest rate-sensitive
financial instruments, consisting of our debt obligations denominated in local
and foreign currencies, by their expected maturity dates and applicable average
interest rates, as of December 31, 2004:
<TABLE>
<CAPTION>

                                                                               THERE-                    FAIR
(AMOUNTS IN           2005        2006       2007        2008        2009       AFTER       TOTAL       VALUE
THOUSANDS OF
RMB)

SHORT-TERM LOANS

BANK AND OTHER LOANS - DENOMINATED IN RMB
<S>                 <C>         <C>        <C>            <C>         <C>      <C>       <C>         <C>
Fixed rate          44,640        -           -           -           -           -        44.640      44,640
Average
interest rate         5.84%       -           -           -           -           -          -           -

LOANS FROM A FELLOW SUBSIDIARY - DENOMINATED IN RMB
Fixed rate       2,874,330        -           -           -           -           -     2,874,330   2,874,330
Average
interest rate         4.98%       -           -           -           -           -          -           -

TOTAL            2,918,970        -           -           -           -           -     2,918,970   2,918,970

LONG-TERM LOANS

LOANS FROM JILIN GROUP -  DENOMINATED IN UNITED STATES DOLLARS
Fixed rate          46,283      46,283     30,352      14,422         -           -       137,340     144,017
Average
interest rate        7.217%      7.217%     7.059%      6.550%        -           -          -           -

LOANS FROM JILIN GROUP - DENOMINATED IN JAPANESE YEN
Fixed rate          54,349      54,348     34,466      14,583         -           -       157,746     170,546
Average
interest rate        4.978%      4.978%     4.792%      4.100%        -           -          -           -

LOANS FROM JILIN GROUP-DENOMINATED IN EURO DOLLAR
Fixed rate          19,061      19,062        -           -           -           -        38,123      41,233
Average
interest rate        8.300%      8.300%       -           -           -           -          -           -

BANK AND OTHER LOANS - DENOMINATED IN UNITED STATES DOLLARS
Fixed rate          47,412      47,412     47,412      47,412      47,412      79,026     316,086     305,062
Average
interest rate        8.009%      8.009%     8.009%      8.009%      8.009%      1.852%       -           -
Variable rate         -           -       413,825        -           -           -        413,825     413,825
Average
interest rate         -           -         6.241%       -           -           -          -           -

TOTAL              167,105     167,105    526,055      76,417      47,412      79,026   1,063,120   1,074,683
</TABLE>


                                      -75-
<PAGE>


         FOREIGN EXCHANGE RISK

We operate largely in one geographical area, the PRC. We acquire the major raw
materials such as crude oil and coal locally and sell most of our products in
the PRC market. Therefore, most of the trading transactions are denominated in
our functional currency, Renminbi, and are generally not exposed to risks
associated with changes in the foreign currency exchange rates. Our foreign
exchange rate risk exposure is primarily associated with our debt obligations
denominated in foreign currencies. Further to an agreement between us and Jilin
Group effective as of September 30, 1998, Jilin Group assumed the foreign
currency loans borrowed by us and agreed to make periodic loan repayments on our
behalf and in turn, we agreed to pay Jilin Group the Renminbi equivalent of such
repayments at an exchange rate determined as at September 30, 1998. We
re-assumed some of these foreign currency loans effective as of January 1, 2000.
All the exchange risks were borne by Jilin Group during the period from October
1, 1998 through December 31, 1999. The relevant exchange risks subsequent to
December 31, 1999 were borne by us. For a discussion of the foreign exchange
risk associated with the above agreement, see ITEM 5. OPERATING AND FINANCIAL
REVIEW AND PROSPECTS - LIQUIDITY AND CAPITAL RESOURCES.

The following table provides information about our foreign currency sensitive
financial instruments, consisting of debt obligations denominated in foreign
currencies, by their expected maturity dates and applicable average interest
rates, as of December 31, 2004:
<TABLE>
<CAPTION>
                                                                                     THERE-                    FAIR
(AMOUNTS IN THOUSANDS       2005       2006        2007        2008        2009       AFTER      TOTAL        VALUE
OF RMB)

LOANS FROM JILIN GROUP -  DENOMINATED IN UNITED STATES DOLLARS
<S>                       <C>        <C>         <C>         <C>                               <C>          <C>
Fixed rate                46,283     46,283      30,352      14,422           -           -    137,340      144,017
Average interest rate      7.217%     7.217%      7.059%      6.550%          -           -          -            -

LOANS FROM JILIN GROUP - DENOMINATED IN JAPANESE YEN
Fixed rate                54,349     54,348      34,466      14,583           -           -    157,746      170,546
Average interest rate      4.978%     4.978%      4.792%      4.100%          -           -          -            -

LOANS FROM JILIN GROUP-DENOMINATED IN EURO DOLLAR
Fixed rate                19,061     19,062           -           -           -           -     38,123       41,233
Average interest rate      8.300%     8.300%          -           -           -           -          -            -

BANK AND OTHER LOANS - DENOMINATED IN UNITED STATES DOLLARS
Fixed rate                47,412     47,412      47,412      47,412      47,412      79,026    316,086      305,062
Average interest rate      8.009%     8.009%      8.009%      8.009%      8.009%      1.852%         -            -
Variable rate                  -          -     413,825           -           -           -    413,825      413,825
Average interest rate          -          -      6.241%           -           -           -          -            -
</TABLE>


ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

                                     PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.


ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
          PROCEEDS

Not applicable.

ITEM 15.  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with participation of our management, including our
general manager and our chief financial officer, we have performed an evaluation
of the effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended, within 90 days of the filing date of this
report, or the Evaluation Date. Based on this evaluation, our general manager
and chief financial officer concluded as of the Evaluation Date that our
disclosure controls and procedures were effective such that the material
information required to be included in our Securities and Exchange Commission
reports is recorded, processed, summarized and reported during the time period
when this report was being prepared, except as disclosed in the following
paragraphs.



                                      -76-
<PAGE>


INTERNAL CONTROLS


We are aware of the importance of maintaining controls and procedures and are
working towards improving our controls and procedures. Beginning with the fiscal
year ending December 31, 2006, Section 404 of the Sarbanes-Oxley Act of 2002, or
Section 404, will require us to include an internal control report of management
with our annual report on Form 20-F. The internal control report must contain
(1) a statement of management's responsibility for establishing and maintaining
adequate internal control over financial reporting, (2) a statement identifying
the framework used by management to conduct the required evaluation of the
effectiveness of our internal control over financial reporting, (3) management's
assessment of the effectiveness of our internal control over financial reporting
as of the end of our most recent fiscal year, including a statement as to
whether or not our internal control over financial reporting is effective and
(4) a statement that our independent auditors have issued an attestation report
on management's assessment of our internal control over financial reporting.

In connection with the required Section 404 evaluation described above, we are
currently preparing the documentation of internal controls, performing the
system and process evaluation and testing required (and any necessary
remediation) in an effort to comply with such requirements by the effective date
for compliance. Our efforts to implement standardized internal control
procedures and develop the internal tests necessary to verify the proper
application of the internal control procedures and their effectiveness will be a
key area of focus for our Board of Directors, our Audit Committee and our senior
management. This evaluation is expected to underlie the internal control report
of management and auditor attestation requirements of Section 404.


ITEM 16A      AUDIT COMMITTEE FINANCIAL EXPERT

We currently have an audit committee financial expert, Fanny Li, serving on our
audit committee and she is an independent director as defined in 17 CFR
240.10A-3.

ITEM 16B      CODE OF ETHICS

We have not adopted a code of ethics as defined by the applicable U.S.
securities regulations that applies to our principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions since it is not a customary practice for a
PRC company to adopt such code of ethics.

ITEM 16C      PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The following table summarizes the fees charged by
PricewaterhouseCoopers, our principal accountant, for certain services rendered
to us during 2002, 2003 and 2004.





                                      -77-
<PAGE>

                                                FOR THE YEAR ENDED
                                                     DECEMBER 31,
                                                 (IN MILLIONS OF RMB)
                                            2002       2003           2004
                                            ----       ----           ----
Audit fees (1).......................       3.00         4.25         3.50
Audit-related fees (2)...............          -            -            -
-
Tax fees (3).........................          -            -            -
All other fees (4)...................          -            -            -
Total................................       3.00         4.25         3.50

------------
(1)  "Audit fees" means the aggregate fees billed in each of the fiscal
     years listed for professional services rendered by our principal auditors
     for the audit of our interim and annual financial statements.
(2)  "Audit-related fees" means the aggregate fees billed in each of the fiscal
     years listed for assurance and related services rendered by our principal
     auditors for the audit of our financial information.
(3)  "Tax fees" means the aggregate fees billed in each of the fiscal years
     listed for professional services rendered by our principal auditors for tax
     compliance, tax advice and tax planning.
(4)  "All other fees" means the aggregate fees billed in each of the fiscal
     years listed for products and services provided by the our principal
     auditor, other than the services reported under audit fees, audit-related
     fees and tax fees.

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

         Our audit committee has adopted procedures which set forth the manner
in which the committee will review and approve the engagement of external
auditor for audit services before such services are rendered. The pre-approval
procedures are as follows:

     o    Our audit committee shall review the engagement of external auditor
          and its audit fees.

     o    Our audit committee in its sole discretion then approves or
          disapproves the proposed engagement and fees and documents such
          approval, if given, through written resolutions or in the minutes of
          meetings, as the case may be.

ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None.





                                      -78-
<PAGE>



                                    PART III

ITEM 17.      FINANCIAL STATEMENTS

We have elected to provide the financial statements and related information
specified in Item 18 in lieu of the information called for by this Item 17.

ITEM 18.      FINANCIAL STATEMENTS











                          INDEX OF FINANCIAL STATEMENTS

                                                                            PAGE

JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED
   CONSOLIDATED FINANCIAL STATEMENTS
   Report of Independent Registered Public Accounting Firm                    1
   Consolidated Income Statements for each of the three years
        in the period ended December 31, 2004                                 2
   Consolidated Balance Sheets as of December 31, 2003 and 2004               3
   Consolidated Cash Flow Statements for each of the three
        years in the period ended December 31, 2004                           4
   Consolidated Statements of Changes in Shareholders' Equity
        for each of the three years in the period ended December 31, 2004     6
   Notes to the Consolidated Financial Statements                             7













<PAGE>






             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Jilin Chemical Industrial Company Limited:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of changes in shareholders'
equity present fairly, in all material respects, the consolidated financial
position of Jilin Chemical Industrial Company Limited (the "Company") and its
subsidiaries (the "Group") at December 31, 2003 and 2004, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2004 in conformity with International Financial Reporting
Standards. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

International Financial Reporting Standards vary in certain significant respects
from accounting principles generally accepted in the United States of America.
The application of the latter would have affected the determination of
consolidated net (loss) / profit for each of the three years in the period ended
December 31, 2004 and the determination of consolidated shareholders' equity at
December 31, 2003 and 2004 to the extent summarized in Note 31 to the
consolidated financial statements.







PricewaterhouseCoopers
Certified Public Accountants

Hong Kong,
May 18, 2005








                                      -1-
<PAGE>


<TABLE>
<CAPTION>


                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

                         CONSOLIDATED INCOME STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004
                (AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)


                                                                           YEAR ENDED DECEMBER 31,
                                                       ----------------------------------------------------------------

                                            NOTES              2002             2003             2004             2004
                                           --------    -------------   ---------------   -------------    -------------
                                                                RMB              RMB              RMB              US$

<S>                                         <C>          <C>              <C>              <C>               <C>
SALES                                       3, 30        13,138,387       20,652,809       31,857,423        3,849,142
Cost of sales                                           (12,518,955)     (19,125,842)     (28,821,880)     (3,482,375)
                                                       -------------   ---------------   -------------    -------------
GROSS PROFIT                                                619,432        1,526,967        3,035,543          366,767
Distribution costs                                          (34,933)         (29,338)         (24,586)         (2,971)
Administrative expenses                                    (797,434)        (574,051)        (440,660)        (53,242)
Shut down of manufacturing assets             6            (283,418)               -                -                -
Other operating (expenses) / income                          (9,683)         (28,260)          22,731            2,746
                                                        -------------   ---------------   -------------    -------------
(LOSS) / PROFIT FROM OPERATIONS               4            (506,036)         895,318        2,593,028          313,300
Interest expense                              7            (474,370)        (429,782)        (270,071)        (32,631)
Interest income                                               1,364            1,531            1,753              212
Exchange loss                                               (48,725)         (37,153)         (19,337)         (2,336)
Exchange gain                                                 7,675              546           10,685            1,291
Share of (loss) / profit of jointly
  controlled entities                                        (7,671)           9,664           36,113            4,363
Share of profit / (loss) of an
   associated company                                           125          (14,001)           4,397              531
                                                       -------------   ---------------   -------------    -------------
(LOSS) / PROFIT BEFORE INCOME TAXES                      (1,027,638)         426,123        2,356,568          284,730
Income taxes                                  9              (1,116)            (270)         171,418           20,711
                                                       -------------   ---------------   -------------    -------------
(LOSS) / PROFIT BEFORE MINORITY                          (1,028,754)         425,853        2,527,986          305,441
  INTERESTS
Minority interests                                            5,655            1,756           16,524            1,997
                                                       -------------   ---------------   -------------    -------------
NET (LOSS) / PROFIT                                      (1,023,099)         427,609        2,544,510          307,438
                                                       =============   ===============   =============    =============

BASIC AND DILUTED (LOSS) / PROFIT PER
  SHARE                                      10           RMB (0.29)          RMB 0.12       RMB 0.71             0.09
                                                        =============   ===============   =============    =============

NUMBER OF SHARES                             10           3,561,078        3,561,078        3,561,078        3,561,078
                                                       =============   ===============   =============    =============

   The accompanying notes are an integral part of these financial statements.
</TABLE>






                                      -2-
<PAGE>


<TABLE>
<CAPTION>



                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

                           CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 2003 AND 2004
                             (AMOUNTS IN THOUSANDS)


                                                                                    AT DECEMBER 31,
                                                                     ----------------------------------------------

                                                          NOTES             2003              2004            2004
                                                         --------    ------------    --------------   -------------
                                                                             RMB               RMB             US$

ASSETS
Current assets
<S>                                                        <C>            <C>               <C>              <C>
  Cash and cash equivalents                                12             35,499            14,629           1,768
  Accounts receivable                                      13            184,756           265,245          32,048
  Inventories                                              14          1,568,093         2,606,053         314,874
  Prepaid expenses and other current assets                15            267,542           441,891          53,391
                                                                     ------------    --------------   -------------
Total current assets                                                   2,055,890         3,327,818         402,081
Property, plant and equipment                              16          9,929,535         9,368,990       1,131,999
Interests in a jointly controlled entity                   17             53,722            89,835          10,854
Investment in an associated company                        18              4,908             9,305           1,124
Intangible assets                                          19            621,534           515,047          62,230
Deferred income tax assets                                 22                  -           283,202          34,218
                                                                     ------------    --------------   -------------
TOTAL ASSETS                                                          12,665,589        13,594,197       1,642,506
                                                                    ============    ==============   =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable and accrued liabilities                 20          3,613,041         4,429,686         535,212
  Current income tax liabilities                                           1,295           113,079          13,663
  Short-term debt                                          21          4,101,999         3,086,075         372,872
                                                                     ------------    --------------   -------------
Total current liabilities                                              7,716,335         7,628,840         921,747
Long-term debt                                             21          2,407,898           896,015         108,260
                                                                     ------------    --------------   -------------
TOTAL LIABILITIES                                                     10,124,233         8,524,855       1,030,007
                                                                     ------------    --------------   -------------
MINORITY INTERESTS                                                        30,800            14,276           1,726
                                                                     ------------    --------------   -------------
SHAREHOLDERS' EQUITY                                                          ii                ii
State-owned shares                                         23          2,396,300         2,396,300         289,531
A shares                                                   23            200,000           200,000          24,165
H shares and ADSs (each representing 100 H shares)         23            964,778           964,778         116,568
                                                                     ------------    --------------   -------------
Share capital, issued and outstanding, RMB 1.00 par                    3,561,078         3,561,078         430,264
  value
Capital reserve                                            24          1,391,114         1,391,114         168,080
Revaluation reserve                                        24              8,274             7,301             882
Statutory common reserve fund                              24            160,155           160,155          19,351
Statutory common welfare fund                              24            140,997           140,997          17,036
Discretionary common reserve fund                          24            400,291           400,291          48,364
Accumulated losses                                                    (3,151,353)         (605,870)       (73,204)
                                                                      ------------    --------------   -------------
Shareholders' equity                                                   2,510,556         5,055,066         610,773
                                                                    ------------    --------------   -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                            12,665,589        13,594,197       1,642,506
                                                                     ============    ==============   =============


   The accompanying notes are an integral part of these financial statements.
</TABLE>






                                      -3-
<PAGE>

<TABLE>
<CAPTION>



                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

                        CONSOLIDATED CASH FLOW STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004
                             (AMOUNTS IN THOUSANDS)


                                                                             YEAR ENDED DECEMBER 31,
                                                             ---------------------------------------------------------

                                                      NOTES         2002            2003           2004          2004
                                                             -----------    ------------    -----------    -----------
                                                                     RMB             RMB            RMB           US$

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                           <C>                <C>          <C>             <C>
  Net (loss) / profit                                         (1,023,099)        427,609      2,544,510       307,438
  Adjustments for:
    Minority interests                                            (5,655)         (1,756)       (16,524)      (1,996)
     Deferred income tax assets                         22             -               -       (283,202)     (34,218)
     Depreciation and amortization                      4      1,108,522       1,032,007      1,147,278       138,619
     Provision for impairment of receivables            4              -         100,713         11,050         1,335
     Provision for impairment of prepaid expenses
      and other current assets                          4         51,484               -          1,372           166
   Writedown of carrying value of property, plant
      and equipment                                     4        323,844               -              -             -
   Provision for impairment of property, plant
      and equipment                                     4              -               -          7,220           872
   Provision for impairment of intangible assets        4              -               -          6,698           809
   Inventory writedowns                                 4        139,985          12,856         77,544         9,369
   Shut down of manufacturing assets                    4        283,418               -              -
   Net (profit) / loss on disposal of property,                         )                              )
      plant and equipment                               4         (3,876          26,379        (26,412       (3,191)
     Share of loss / (profit) of jointly                                                )              )
      controlled entities                               17         7,671          (9,664        (36,113       (4,363)
     Share of (profit) / loss of an associated                          )                              )
      company                                                       (125          14,001         (4,397         (531)
     Interest income                                              (1,364)         (1,531)        (1,753)        (212)
     Interest expense                                   7        474,370         429,782        270,071        32,631
  Changes in working capital:
     Accounts and other receivables (net)                        379,056         330,044       (256,510)     (30,993)
      Inventories                                               (197,137)       (186,721)    (1,115,504)    (134,780)
     Payables and accrued liabilities (net)                      321,488       1,830,961      1,045,447       126,316
                                                             -----------    ------------    -----------    -----------
CASH GENERATED FROM OPERATIONS                                 1,858,582       4,004,680      3,370,775       407,271
  Interest received                                                1,364           1,531          1,753           212
  Interest paid                                                 (530,943)       (427,887)      (297,749)     (35,976)
                                                             -----------    ------------    -----------    -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES                      1,329,003       3,578,324      3,074,779       371,507
                                                             -----------    ------------    -----------    -----------

   The accompanying notes are an integral part of these financial statements.
</TABLE>






                                      -4-
<PAGE>
<TABLE>
<CAPTION>



                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

                        CONSOLIDATED CASH FLOW STATEMENTS
        FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004 (CONTINUED)
                             (AMOUNTS IN THOUSANDS)


                                                                          YEAR ENDED DECEMBER 31,
                                                       --------------------------------------------------------------

                                                               2002             2003            2004            2004
                                                       -------------    -------------   -------------    ------------
                                                                RMB              RMB             RMB             US$

CASH FLOWS FROM INVESTING ACTIVITIES
<S>                                                        <C>              <C>             <C>              <C>
  Capital expenditures                                     (791,725)        (675,078)       (642,091)        (77,580)
  Acquisition of Jilian (Jilin) Petrochemical
    Limited (Note 25)                                       (73,086)         (54,000)              -               -
  Purchase of intangible assets (Note 19)                    (7,542)          (6,394)            (40)             (5)
  Proceeds from disposal of property, plant and
    equipment                                                 7,141           13,335          74,289           8,976
  Dividends received                                          1,860                -               -               -
                                                       -------------    -------------   -------------    ------------
NET CASH USED IN INVESTING ACTIVITIES                      (863,352)        (722,137)       (567,842)        (68,609)
                                                       -------------    -------------   -------------    ------------
                                                                        -------------   -------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Capital investment by minority interests                        -              100               -               -
  Proceeds from new debt                                  4,867,375        5,440,491       9,004,241       1,087,929
  Repayments of debt                                     (5,335,405)      (8,294,084)    (11,532,048)     (1,393,348)
  Dividends paid to minority interests                       (1,733)               -               -               -
                                                       -------------    -------------   -------------    ------------
NET CASH USED IN FINANCING ACTIVITIES                      (469,763)      (2,853,493)     (2,527,807)       (305,419)
                                                       -------------    -------------   -------------    ------------
  (Decrease) / increase in cash and cash equivalents         (4,112)           2,694         (20,870)         (2,521)
  Cash and cash equivalents at beginning of year             36,917           32,805          35,499           4,289
                                                       -------------    -------------   -------------    ------------
  Cash and cash equivalents at end of year                   32,805           35,499          14,629           1,768
                                                       =============    =============   =============    ============

NON-CASH TRANSACTIONS
  Purchase of property, plant and equipment (Note
    29(j))                                                        -          159,500               -               -
                                                       =============    =============   =============    ============

   The accompanying notes are an integral part of these financial statements.
</TABLE>






                                      -5-
<PAGE>
<TABLE>
<CAPTION>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004
                             (AMOUNTS IN THOUSANDS)


                                                         SHARE                        RESERVES
                                                       CAPITAL    ACCUMULATED
                                                      (NOTE 23)          LOSSES       (NOTE 24)            TOTAL
                                                 -------------    --------------   -------------   --------------
                                                           RMB              RMB            RMB               RMB

<S>                <C>                               <C>             <C>             <C>               <C>
Balance at January 1, 2002                           3,561,078       (2,558,558)     2,103,526         3,106,046
Net loss for the year                                        -       (1,023,099)             -        (1,023,099)
Transfer to retained earnings on realization
  of revaluation reserve                                     -            2,100         (2,100)                -
Transfer from retained earnings to reserves                  -             (378)           378                 -
                                                 -------------    --------------   -------------   --------------
Balance at December 31, 2002                         3,561,078       (3,579,935)     2,101,804         2,082,947
Net profit for the year                                      -          427,609              -           427,609
Transfer to retained earnings on realization
  of revaluation reserve                                     -              973           (973)                -
                                                 -------------    --------------   -------------   --------------
Balance at December 31, 2003                         3,561,078       (3,151,353)     2,100,831         2,510,556
Net profit for the year                                      -        2,544,510              -         2,544,510
Transfer to retained earnings on realization
  of revaluation reserve                                     -              973           (973)                -
                                                 -------------    --------------   -------------   --------------
Balance at December 31, 2004                         3,561,078         (605,870)     2,099,858         5,055,066
                                                 =============    ==============   =============   ==============
Balance at December 31, 2004 in US$                   430,264           (73,204)        253,713          610,773
                                                 =============    ==============   =============   ==============

   The accompanying notes are an integral part of these financial statements.

</TABLE>



                                      -6-
<PAGE>






                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

1        CORPORATE INFORMATION

Jilin Chemical Industrial Company Limited (the "Company") was established in the
People's Republic of China (the "PRC") on December 13, 1994 as a joint stock
limited company to hold the assets and liabilities of the principal production
units, certain ancillary functions and a subsidiary ("Contributed Net Assets")
of Jilin Chemical Industrial Corporation (the "Predecessor"), which was then a
state-owned enterprise controlled by and under the administration of the Jilin
Provincial Government.

In connection with the aforesaid restructuring ("Restructuring"), the
Contributed Net Assets of the Predecessor as at September 30, 1994 were taken
over by the Company from the Predecessor at a valuation which reflected their
then current fair values on October 1, 1994 in consideration for which
2,396,300,000 shares in the form of state-owned shares, with a par value of RMB
1.00 each, were issued by the Company to the Predecessor. The Predecessor was
then renamed Jilin Chemical Group Corporation ("JCGC") and became the Company's
then ultimate holding company.

Effective from July 1, 1998, pursuant to a directive issued by the PRC State
Council on May 12, 1998, the oil and petrochemical industry in the PRC was
restructured and JCGC became a wholly-owned subsidiary of China National
Petroleum Corporation ("CNPC"), a state-owned enterprise established in the PRC.
Following the aforesaid restructuring, CNPC became the ultimate holding company
of the Company through its control of JCGC.

According to an announcement relating to the corporate restructuring of the CNPC
Group in November 1999, JCGC transferred all of the state-owned shares held in
the Company together with certain assets and businesses of JCGC to PetroChina
Company Limited ("PetroChina"), a wholly-owned subsidiary of CNPC which was
established on November 5, 1999. Accordingly, PetroChina replaced JCGC to become
the immediate holding company of the Company.

2        SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

(A)      BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). This basis of accounting
differs from the accounting principles generally accepted in the United States
of America ("US GAAP") in certain significant respects (see Note 31).



                                      -7-
<PAGE>



                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


2        SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(A)      BASIS OF PREPARATION (CONTINUED)

The consolidated financial statements are prepared on the historical cost
convention except as disclosed in the accounting policies below.

The consolidated financial statements are expressed in Renminbi ("RMB"), the
national currency of the PRC. Solely for the convenience of the reader, the
December 31, 2004 primary financial statements and the US GAAP reconciliation
shown in Note 31 have been translated into United States dollars at the noon
buying rate in New York City on December 31, 2004 for cable transfers in
Renminbi as certified for customs purposes by the Federal Reserve Bank of New
York of US$1.00 = RMB 8.2765. No representation is made that the Renminbi
amounts could have been, or could be, converted into United States dollars at
that rate or at any other rate on December 31, 2004, or at any other date.

The preparation of financial statements in conformity with IFRS requires the use
of estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Although these estimates are based on management's
best knowledge of current events and actions, actual results ultimately may
differ from those estimates. It also requires management to exercise its
judgement in the process of applying the Company's accounting policies.

(B)      BASIS OF CONSOLIDATION


The consolidated financial statements include the financial statements of the
Company and the subsidiaries in which the Group has the power to govern the
financial and operating policies and generally accompanying an interest of more
than 50 percent of the voting rights. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries are
consolidated from the date on which control is transferred to the Group and are
no longer consolidated from the date that control ceases. The results of
operations of subsidiaries are included in the consolidated income statements,
and the share attributable to minority interests is excluded from the results
attributable to shareholders. Intercompany balances, transactions and unrealized
gains on transactions between group companies are eliminated; unrealized losses
are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred. Where necessary, accounting policies of subsidiaries have
been changed to ensure consistency with the policies adopted by the Group.

A listing of the Group's principal subsidiaries is set out in Note 32.




                                      -8-
<PAGE>



                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


2        SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(C)      INVESTMENTS IN ASSOCIATED COMPANIES

Associated companies are entities in which the Group holds, or over which the
Group has significant influence, but which it does not control and generally
accompanying a shareholding between 20% and 50% of the voting rights.
Investments in associated companies are accounted for using the equity method.
Such equity interests are initially recognized at cost and their carrying amount
is increased or decreased to recognize the Group's share of the profits or
losses of the associate after the date of acquisition and changes in equity that
have not been included in the income statements. Unrealized gains on
transactions between the Group and its associated companies are eliminated to
the extent of the Group's interest in the associated companies; unrealized
losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. When the Group's share of losses in an
associated company equals or exceeds its interest in the associated company
including any other unsecured receivables, the Group does not recognize further
losses, unless the Group has incurred obligations or made payments on behalf of
the associated company.

Details of the Group's associated company are shown in Note 18.

(D)      INTERESTS IN JOINTLY CONTROLLED ENTITIES

A jointly controlled entity is a joint venture between two or more venturers
whose rights and obligations with respect to the venture are specified in a
contractual joint venture agreement which gives the venturers joint control over
the venture and in which no single venturer is in a position to control,
unilaterally, the activities of the venture.

The Group's interests in jointly controlled entities are accounted for using the
equity method. Such equity interests are initially recognized at cost and their
carrying amount is increased or decreased to recognize the Group's share of the
profits or losses of the joint venture after the date of acquisition and changes
in equity that have not been included in the income statements. Unrealized gains
on transactions between the Group and its jointly controlled entities are
eliminated to the extent of the Group's interest in the jointly controlled
entities; unrealized losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred.

Details of the Group's jointly controlled entities are shown in Note 17.

(E)      FOREIGN CURRENCY TRANSLATIONS

Items included in the financial statements of each entity in the Group are
measured using the currency that best reflects the economic substance of the
underlying events and circumstances relevant to that entity ("the functional
currency"). The consolidated financial statements are presented in Renminbi,
which is the functional and presentation currency of all companies in the Group.

Foreign currency transactions of the Group are accounted for at the exchange
rates prevailing at the date of the transactions; gains and losses resulting
from the settlement of such transactions and from the translation of monetary
assets and liabilities denominated in foreign currencies are recognized in the
consolidated income statements. Monetary assets and liabilities are translated
at balance sheet date exchange rates.




                                      -9-
<PAGE>


                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


2        SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(F)      PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are initially recorded at cost less accumulated
depreciation. Cost represents the purchase price of the asset and other costs
directly incurred to bring the asset to working condition for its intended use.
Subsequent to their initial recognition, property, plant and equipment are
carried at revalued amounts less accumulated depreciation and accumulated
impairment losses, if any. Revaluations are performed by independent qualified
valuers on a regular basis. Revaluations are made with sufficient regularity to
ensure that the carrying amount does not differ materially from that which would
be determined using fair value at the balance sheet date. Increases in the
carrying amount arising on revaluation of property, plant and equipment are
credited to revaluation reserve in shareholders' equity. Decreases that offset
previous increases of the same asset are charged against that reserve; all other
decreases are charged to the consolidated income statements. The difference
between depreciation based on the revalued carrying amount of the asset (the
depreciation charged to the consolidated income statements) and depreciation
based on the asset's original cost is transferred from revaluation reserve to
retained earnings.

Depreciation to write off the cost or valuation of each asset to their residual
values over their estimated useful lives is calculated using the straight-line
method.

The Group uses the following useful lives for depreciation purposes:

Buildings                                                  10-45 years
Plant and machinery                                         8-28 years

Assets under construction represent capital assets under construction or
installation and are stated at cost. No depreciation is provided for
construction in progress until they are completed and available for use.

Property, plant and equipment are reviewed for impairment whenever there is an
indication that they may be impaired. If such an indication exists, the carrying
amount of an individual asset is compared with its recoverable amount which is
the higher of its net selling price and its value in use, which is the estimated
net present value of future cash flows to be derived from the continuing use of
the asset and from its ultimate disposal. When the carrying amount of an asset
is greater than its estimated recoverable amount, it is written down immediately
to its recoverable amount.

Gains and losses on disposal of property, plant and equipment are determined by
reference to their carrying amount and procedures, and are taken into account in
determining net profit. On disposal of revalued assets, amounts in revaluation
reserve relating to these assets are transferred to retained earnings.

Interest costs on debt to finance the construction of property, plant and
equipment, together with exchange differences arising from foreign currency debt
to the extent that they are adjustments to interest costs, are capitalized
during the period of time that is required to complete and prepare the property
for its intended use. All other debt costs are expensed.

Costs for planned major maintenance activities are expensed as incurred except
for costs of components that result in improvements and betterments which are
capitalized as part of property, plant and equipment and depreciated over their
useful lives, which is generally the period until the next scheduled major
maintenance.





                                      -10-
<PAGE>



                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


2        SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(G)      INTANGIBLE ASSETS

(i) Technical know-how

      The purchase costs of technical know-how relate to certain production
      facilities and are included as part of the total contract price of the
      construction contract and are distinguishable. They are capitalized as
      intangible assets at cost, unless they are acquired in a business
      combination that is an acquisition in which case they are recorded at fair
      value. They are amortised using the straight-line method over the
      estimated useful life of 10 years, starting from the date when the
      underlying facilities are completed and ready for their intended use.

      Technical know-how is not revalued and its carrying amount is reviewed
      annually and adjusted for impairment where it is considered necessary. An
      impairment loss is recognized in the consolidated income statements
      whenever the carrying amount of an asset exceeds its recoverable amount.

 (ii) Land use rights

      Land use rights acquired as part of a business combination that is an
      acquisition are recorded at fair value less subsequent accumulated
      amortization. Fair value is determined based on valuation performed by
      independent valuers.

      Land use rights are amortised using the straight-line method over their
      lease terms of 50 years.

      Land use rights are not revalued and their carrying amount is reviewed for
      impairment whenever there is an indication that they may be impaired. If
      such an indication exists, the carrying amount of a land use right is
      compared with its recoverable amount which is the higher of its net
      selling price and its value in use, which is the estimated net present
      value of future cash flows to be derived from the continuing use of the
      land use right and from its ultimate disposal. When the carrying amount of
      a land use right is greater than its estimated recoverable amount, it is
      written down immediately to its recoverable amount.

(H)      INVENTORIES

Inventories are stated at the lower of cost and net realisable value. Cost is
determined by the weighted average cost method. The cost of finished goods and
work in progress comprises raw materials, direct labor, other direct costs and
related production overheads, but excludes borrowing costs. Net realisable value
is the estimated selling price in the ordinary course of business, less the
costs of completion and selling expenses.

(I)      TRADE RECEIVABLES

Trade receivables are carried at original invoice amount less provision made for
impairment of these receivables. A provision for impairment of trade receivables
is established where there is objective evidence that the Group will not be able
to collect all amounts due according to the original terms of receivables. The
amount of the provision is the difference between the carrying amount and the
recoverable amount, being the present value of expected cash flows, discounted
at the market rate of interest for similar borrowers. The amount of the
provision is recognized in the consolidated income statements.






                                      -11-
<PAGE>



                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


2        SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 (J)     CASH AND CASH EQUIVALENTS

Cash and cash equivalents are carried on the balance sheet at cost and comprise
cash on hand and bank deposits with maturities of three months or less from the
time of purchase.

(K)      DEFERRED INCOME TAX

Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying values in the financial statements. Currently enacted tax
rates are used in determination of deferred income tax.

Deferred tax assets are recognized to the extent that it is probable that future
taxable income will be available against which the temporary differences can be
utilized.

Deferred income tax is provided on temporary differences arising on investments
in subsidiaries, associated companies and jointly controlled entities, except
where the timing of the reversal of the temporary difference can be controlled
and it is probable that the temporary difference will not reverse in the
foreseeable future.

(L)      DEBT

Debt is recognized initially at the proceeds received, net of transaction costs
incurred. Debt is subsequently stated at amortized cost using the effective
yield method; any difference between proceeds (net of transaction costs) and the
redemption value is recognized in the consolidated income statements over the
period of the debt.

(M)      REVENUE RECOGNITION

Revenue comprises the sale of petroleum products, petrochemical and organic
chemical products, chemical fertilisers and inorganic chemicals, synthetic
rubber products and other products and services. Sales are recognized upon
delivery of products and customer acceptance, if any, or performance of
services, net of sales taxes and discounts. Revenues are recognized only when
the Group has transferred to the buyer the significant risks and rewards of
ownership of the goods, and when the amount of revenue and the costs incurred or
to be incurred in respect of the transaction can be measured reliably.

(N)      RESEARCH AND DEVELOPMENT EXPENSES

Research expenditure is recognised as an expense as incurred. Costs incurred on
development projects (relating to the design and testing of new or improved
products) are recognized as intangible assets when it is probable that the
project will be a success considering its commercial and technological
feasibility, and only if the cost can be measured reliably. Other development
expenditures are recognized as an expense as incurred. Development costs
previously recognized as an expense are not recognized as an asset in a
subsequent period.

(O) GOVERNMENT GRANT RELATED TO INCOME AND SUBSIDIES

Government grant related to income and subsidies are recognized as income upon
approval by the relevant government authorities, at which stage the eventual
collectibility is assured.

(P)      RETIREMENT BENEFIT PLANS

The Group contributes to the employee retirement benefit plan organized by the
provincial government under which it is required to make monthly contributions
to the plan. The provincial government undertakes to assume the retirement
benefit obligations of all existing and future retired employees of the Group.
Contributions to the plan are charged to the consolidated income statements as
incurred.





                                      -12-
<PAGE>



                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



2        SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(Q)      PROVISIONS

Provisions are recognized when the Group has a present legal or constructive
obligation as a result of past events, it is more likely than not that an
outflow of resources will be required to settle the obligation, and a reliable
estimate of the amount can be made. Where the Group expects a provision to be
reimbursed, the reimbursement is recognized as a separate asset but only when
the reimbursement is virtually certain.

(R)      RELATED PARTIES

Related parties are corporations in which CNPC is a major beneficial shareholder
and is able to exercise control or significant influence.

(S)      FINANCIAL INSTRUMENTS

Financial instruments carried on the consolidated balance sheet include cash and
bank balances, receivables, payables, and debt. The particular recognition
methods adopted are disclosed in the individual policy statements associated
with each item and in Note 26.

The Group had no derivative financial instruments in any of the years presented.

(T)      OPERATING LEASES

Leases where a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor) are charged to
the consolidated income statements on a straight-line basis over the period of
the lease.

(U)      SEGMENT REPORTING

A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that are
subject to risks and returns that are different from those of segments operating
in other economic environments.


3        SALES

Sales represents revenues from the sale of petroleum, petrochemical and chemical
products. Analysis of sales by segment is shown in Note 30.





                                      -13-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

4         PROFIT/(LOSS) FROM OPERATIONS

         Profit/(loss) from operations is arrived at after crediting and
charging the following items:
<TABLE>
<CAPTION>

                                                                     YEAR ENDED DECEMBER 31,
                                                          -----------------------------------------------

                                                                 2002            2003              2004
                                                          -------------   --------------    -------------
                                                                  RMB             RMB               RMB


 Crediting
<S>                                                        <C>              <C>             <C>
   Government grants and subsidies                                   -             502                -
 Charging
  Amortization of intangible assets                             79,980         101,642          110,086
   Auditors' remuneration                                        3,000           4,250            3,500
   Cost of inventories (approximates cost of sales)
      recognized as expense                                 12,518,955      19,125,842       28,708,451
   Depreciation on property, plant and equipment             1,028,542         930,365        1,037,192
   Writedown of carrying value of property, plant and
      equipment (included in "administrative expenses")
      (Note 16(a))                                             323,844               -                -
   Employee compensation costs (including directors'
      and supervisors' emoluments) (Note 5)                    517,360         625,700          747,770
   Shut down of manufacturing assets (Note 6)                  283,418               -                -
   Net loss/(profit) on disposal of property, plant and
      equipment                                                 (3,876)         26,379          (26,412)
   Operating lease rentals on land and buildings                 9,453          10,501            7,680
   Operating lease rentals on plant and machinery                    -           2,463           27,733
   Provision for impairment of property, plant and
      equipment (included in "cost of sales") (Note 16)              -               -            7,220
   Provision for impairment of intangible assets
      (included in "cost of sales") (Note 19)                        -               -            6,698
   Provision for impairment of receivables (included in
      "administrative expenses") (Note 13)                           -         100,713           11,050
   Provision for impairment of prepaid expenses and
      other current assets (included in "other
      operating expenses") (Note 15)                            51,484               -            1,372
   Inventory writedowns (included in "cost of sales")
      (Note 14)                                                139,985          12,856           77,544
   Repair and maintenance                                      560,010         264,613          351,938
   Research and development expenditure                         3,927            1,764            2,726

</TABLE>





                                      -14-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


5        EMPLOYEE COMPENSATION COSTS

                                             YEAR ENDED DECEMBER 31,
                                   ---------------------------------------------

                                         2002             2003            2004
                                   -----------   --------------    -------------
                                          RMB              RMB             RMB

 Wages and salaries                   344,130          434,880         520,160
 Retirement benefit cost               84,150           89,230         106,290
 Staff welfare                         89,080          101,590         121,320
                                   -----------   --------------    -------------
                                      517,360          625,700         747,770
                                   ===========   ==============    =============

The Group participates in the retirement benefit plan organized by the
provincial government under which it is required to make monthly contributions
to the plan at 25% of the basic salaries as set by the government for the
relevant periods. The Group currently has no other obligations for the payment
of retirement and other post-retirement benefits of employees other than the
monthly contributions described above.

6        SHUT DOWN OF MANUFACTURING ASSETS

During the year ended December 31, 2002 the Group recorded direct charges
totaling RMB 283,418 representing property, plant and equipment permanently
withdrawn from use (Note 16) as a result of management decisions to shut down
certain less efficient manufacturing facilities. The cost to dismantle or to
remove related shutdown facilities were minimal and have been included in the
consolidated income statements.

7        INTEREST EXPENSE

                                         YEAR ENDED DECEMBER 31,
                                --------------------------------------------

                                     2002              2003           2004
                                -----------    -------------   -------------
                                      RMB               RMB            RMB
Interest on
     Bank loans                    65,028            96,480         33,510
     Other loans                  459,364           356,737        236,561
Less: Amounts capitalized         (50,022)          (23,435)             -
                                -----------    -------------   -------------
                                  474,370           429,782        270,071
                                ===========    =============   =============


Amounts capitalized were debt costs related to funds borrowed specifically for
the purpose of constructing qualifying assets. Interest rates on such
capitalized debt ranged from 5.50% to 5.86% and 5.50% per annum for the years
ended December 31, 2002 and 2003, respectively.





                                      -15-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



8        EMOLUMENTS OF DIRECTORS AND SUPERVISORS

Details of the directors' and supervisors' emoluments are as follows:
<TABLE>
<CAPTION>

                                                              YEAR ENDED DECEMBER 31,
                                               ---------------------------------------------

                                                     2002              2003            2004
                                               ------------   -------------- -- ------------
                                                      RMB               RMB             RMB

<S>                                                    <C>               <C>             <C>
 Fees                                                  60                80              80
 Salaries, allowances and other benefits              374               472             675
 Contribution to retirement benefit scheme             10                 7               9
                                               ------------   --------------    ------------
                                                      444               559             764
                                               ============   ==============    ============
</TABLE>


The emoluments of the directors and supervisors fell within the following band:
<TABLE>
<CAPTION>

                                                            YEAR ENDED DECEMBER 31,
                                               --------------------------------------------

                                                    2002               2003           2004
                                               -----------    -------------    ------------
                                                  NUMBER             NUMBER         NUMBER

<S>                                                <C>                <C>            <C>
 Nil - RMB 1,064                                      16                 16             16
                                               ===========    =============    ============
</TABLE>


Fees for directors and supervisors disclosed above included RMB 45, RMB 80 and
RMB 80 paid to independent non-executive directors for the years ended December
31, 2002, 2003 and 2004, respectively.

None of the directors and supervisors has waived their remuneration during the
three years ended December 31, 2004.

The five highest paid individuals in the Group for each of the three years in
the period ended December 31, 2004 were also directors or supervisors and their
emoluments are reflected in the analysis presented above.





                                      -16-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



9        INCOME TAXES

                                           YEAR ENDED DECEMBER 31,
                                   -------------------------------------------

                                        2002             2003            2004
                                   ----------    -------------   -------------
                                         RMB              RMB             RMB

PRC income tax                           352              270         111,784
Share of tax of jointly
  controlled entities                    764                -               -
Deferred tax                               -                -        (283,202)
                                   ----------    -------------   -------------
                                       1,116              270        (171,418)
                                   ==========    =============   =============

In accordance with the relevant PRC income tax rules and regulations, the
enacted PRC income tax rate applicable to the Group during the three years ended
December 31, 2004 is 33%. Certain subsidiaries and jointly controlled entities
are Sino-foreign joint ventures and are entitled to certain tax concessions
available to foreign investment production enterprises operating in the PRC.
These tax concessions include a five-year tax holiday under which these
enterprises are exempt from income tax for the first two years commencing from
the first profitable year of operation followed by a 50% reduction in the income
tax rate for three years thereafter.

The tax on the Group's income before income taxes differs from the theoretical
amount that would arise using the basic tax rate in the PRC applicable to the
Group as follows:
<TABLE>
<CAPTION>

                                                                        YEAR ENDED DECEMBER 31,
                                                             ----------------------------------------------

                                                                     2002             2003            2004
                                                             -------------    -------------   -------------
                                                                      RMB              RMB             RMB

<S>                                                            <C>                 <C>           <C>
Profit/(Loss) before income taxes                              (1,027,638)         426,123       2,356,568
                                                             -------------    -------------   -------------

Tax calculated at a rate of 33%                                  (339,121)         140,621         777,667
(Utilization and recognition of previously unrecognized
    deferred tax assets)/unrecognized deferred tax assets         345,141         (133,827)       (899,719)
Approved income tax deduction relating to capital
    expenditures (Note(a))                                              -                -         (65,561)
Other                                                              (4,904)          (6,524)         16,195
                                                             -------------    -------------   -------------
Tax expense                                                         1,116              270        (171,418)
                                                             =============    =============   =============
</TABLE>


(a)  In accordance with a PRC income tax regulation, upon the approval of
     provincial tax authorities, 40% of certain capital expenditures relating to
     technology upgrade of property, plant and equipment can be used to offset
     the income tax provision. In 2004, such capital expenditures approved by
     the provincial tax authorities amounted to Rmb 65,561 (2003 and 2002: nil)
     and were recorded as a deduction of income tax expense for the year.

10       BASIC AND DILUTED (LOSS)/ PROFIT PER SHARE

Basic and diluted (loss)/profit per share have been computed by dividing net
(loss)/profit for the year by the weighted average number of shares issued and
outstanding for the year (2002: 3,561,078,000 shares, 2003: 3,561,078,000
shares, 2004: 3,561,078,000 shares).

There are no dilutive potential ordinary shares.





                                      -17-
<PAGE>





                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



11       DIVIDEND

No dividend was declared in respect of 2002, 2003 and 2004.

12       CASH AND CASH EQUIVALENTS

                                                     AT DECEMBER 31,
                                               ----------------------------

                                                      2003            2004
                                               ------------   -------------
                                                       RMB             RMB

Cash at bank and on hand                            35,499          14,629
                                               ============   =============

The weighted average effective interest rate on bank deposits was 0.72% (2003:
0.72%) for the year ended December 31, 2004.

13        ACCOUNTS RECEIVABLE

                                                      AT DECEMBER 31,
                                               ----------------------------

                                                     2003             2004
                                               ------------   -------------
                                                      RMB              RMB

Due from third parties                            815,487          502,942
Due from related parties
- PetroChina Group Companies                       41,663          211,530
- CNPC Group Companies                                191                -
- JCGC Group Companies                            171,927          169,077
- An associated company                            23,759           23,138
                                               ------------   -------------
                                                 1,053,027          906,687
Less: Provision for impairment loss              (868,271)        (641,442)
                                               ------------   -------------
                                                  184,756          265,245
                                               ============   =============

Amounts due from related parties are interest free and unsecured. Related
parties are offered credit terms of no more than 30 days. Most of the sales to
third parties are realized on cash basis.

Movements in provision for impairment loss are as follows:

                                                 YEAR ENDED DECEMBER 31,
                                        ---------------------------------------

                                              2002          2003          2004
                                        -----------  ------------   -----------
                                               RMB           RMB           RMB

Balance at beginning of year               840,378       865,215       868,271
Provision                                        -       100,713        11,050
Amount written off against provision             -       (97,657)     (237,879)
Acquisition of Jilian                       24,837             -             -
                                        -----------  ------------   -----------
Balance at end of year                     865,215       868,271       641,442
                                        ===========  ============   ===========







                                      -18-
<PAGE>





                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


14       INVENTORIES

                                                      AT DECEMBER 31,
                                               ---------------------------------

                                                       2003               2004
                                               --------------   ----------------
                                                        RMB                RMB

Raw materials
 - at cost                                          538,646          1,076,914
 - at net realizable value                          151,975            147,142
Work in progress
 - at cost                                          252,213            686,171
 - at net realizable value                            9,559                505
Finished goods
 - at cost                                          101,036            265,152
 - at net realizable value                          186,843            179,325
Spare parts
 - at cost                                            1,735                  -
 - at net realizable value                          320,257            243,641
Low value consumables and packing materials
 - at cost                                            2,738              6,852
 - at net realizable value                            3,091                351
                                               --------------   ----------------
                                                  1,568,093          2,606,053
                                               ==============   ================

Movements in provision for inventory writedowns are as follows:

                                                 YEAR ENDED DECEMBER 31,
                                        ----------------------------------------

                                              2002          2003          2004
                                        -----------   -----------   ------------
                                               RMB           RMB           RMB

Balance at beginning of year               236,631       178,764       178,753
Provision                                    8,701        12,856        77,544
Amount written off against provision       (74,529)      (12,867)            -
Acquisition of Jilian                        7,961             -             -
                                        -----------   -----------   ------------
Balance at end of year                     178,764       178,753       256,297
                                        ===========   ===========   ============







                                      -19-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



15       PREPAID EXPENSES AND OTHER CURRENT ASSETS

                                                        AT DECEMBER 31,
                                               -----------------------------

                                                     2003             2004
                                               -----------    --------------
                                                     RMB              RMB

 Other receivables                                 99,108          109,824
 Amounts due from related parties
 - CNPC Group Companies                                 -            7,172
 - JCGC Group Companies                            33,250          138,347
 - A jointly controlled entity                        455                -
 - An associated company                                -              239
 Down payments to suppliers                       194,477          239,834
 Prepaid expenses                                  12,395           19,856
                                               -----------    --------------
                                                  339,685          515,272
 Less: Provision for impairment loss              (72,143)         (73,381)
                                               -----------    --------------
                                                  267,542          441,891
                                               ===========    ==============

Amounts due from related parties are interest free, unsecured and repayable in
accordance with normal commercial terms.

Movements in provision for impairment loss are as follows:

                                                  YEAR ENDED DECEMBER 31,
                                          -------------------------------------

                                               2002         2003          2004
                                          ----------  -----------   -----------
                                                RMB          RMB           RMB

 Balance at beginning of year                23,465       76,238        72,143
 Provision                                   51,484            -         1,372
 Amount written off against provision             -       (4,095)         (134)
 Acquisition of Jilian                        1,289            -             -
                                          ----------  -----------   -----------
 Balance at end of year                      76,238       72,143        73,381
                                          ==========  ===========   ===========





                                      -20-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

16       PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>

                                    BUILDINGS        PLANT AND        CONSTRUCTION    TOTAL

                                                      MACHINERY        IN PROGRESS
                                   ---------------- ---------------- --------------- ----------------
                                    RMB              RMB             RMB             RMB

COST OR VALUATION
<S>         <C> <C>                <C>           <C>                <C>        <C>
At December 31, 2003               1,753,083     14,558,398         35,492     16,346,973
Additions                             31,615         70,251        440,135        542,001
Transfer to fixed assets              11,984        400,774       (412,758)          --
Transfer to intangible assets           --             --          (10,257)       (10,257)
Disposals                            (24,008)      (196,628)          --         (220,636)
                                 -----------    -----------    -----------    -----------
At December 31, 2004               1,772,674     14,832,795         52,612     16,658,081
                                 -----------    -----------    -----------    -----------
ACCUMULATED DEPRECIATION             711,749      5,705,689           --        6,417,438
At December 31, 2003
Charge for the year                   82,846        954,346           --        1,037,192
Disposals                            (12,660)      (160,099)          --         (172,759)
                                 -----------    -----------    -----------    -----------
At December 31, 2004                 781,935      6,499,936           --        7,281,871
                                 -----------    -----------    -----------    -----------
PROVISION FOR IMPAIRMENT                --             --             --             --
At December 31, 2003
Impairment charge (Note(i))             --             --            7,220          7,220
                                 -----------    -----------    -----------    -----------
At December 31, 2004                    --             --            7,220          7,220
                                 -----------    -----------    -----------    -----------

NET BOOK VALUE
At December 31, 2004                 990,739      8,332,859         45,392      9,368,990
                                 ===========    ===========    ===========    ===========
At December 31, 2003               1,041,334      8,852,709         35,492      9,929,535
                                 ===========    ===========    ===========    ===========

Carrying value of fixed assets
 had they been stated at cost
 less accumulated depreciation     1,022,633      8,451,931         45,392      9,519,956
                                 ===========    ===========    ===========    ===========
</TABLE>


(i)  Certain construction in progress have been discontinued since 2004 and are
     not expected to restart in the foreseeable future. Accordingly, an
     impairment provision was made against the construction in progress based on
     the excess of the carrying amount over the recoverable amount.






                                      -21-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


16       PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

(a) As part of the Restructuring described in Note 1 and as required by the
relevant PRC regulations, a valuation of all of the contributed fixed assets and
land use rights was carried out as of September 30, 1994 by China Assets
Appraisal Co., Ltd., a firm of independent valuers registered in the PRC. The
valuation was performed in order to determine the fair value of such contributed
fixed assets and land use rights and establish amounts for share capital and
capital reserve. The valuation of fixed assets was based on market value where
available or depreciated replacement cost where market value was not available.
The valuation of land use rights was based on standard land prices determined by
the Jilin Province Land Administration Bureau. The value at which the above
contributed fixed assets and land use rights were assumed by the Company was
determined at Rmb 2,834,034 and Rmb 1,088,843, respectively. These contributed
fixed assets and land use rights were initially accounted for by the Company at
their predecessor values and are subsequently carried at revalued amounts less
accumulated depreciation.

In connection with the application for listing of the Company's shares on The
Stock Exchange of Hong Kong Limited, the Company engaged American Appraisal Hong
Kong Limited, independent valuers in Hong Kong, to perform a valuation of all of
the Group's fixed assets as of February 28, 1995. The valuation, which was based
on the market value where available or depreciated replacement costs where
market value was not available, resulted in an additional surplus of Rmb 29,033.
The surplus arising from the valuation was credited to the revaluation reserve.

Revaluations of property, plant and equipment are to be performed periodically,
normally by professionally qualified valuers. As at December 31, 2003, a
revaluation of the Company's property, plant and equipment was undertaken by
China United Assets Appraiser Co., Ltd, a firm of independent valuers registered
in the PRC. Because of the specialized nature of the assets under valuation,
they were valued on a depreciated replacement cost basis. Following adjustments
for the impairment provisions made in prior periods as noted below, the results
of revaluation were substantially in line with the carrying amounts of property,
plant and equipment.

At December 31, 2002, the directors of the Company compared the carrying amount
of the Group's property, plant and equipment to their estimate of the fair
value, and on the basis of their review, made an adjustment to reduce the
carrying amount of certain assets by Rmb 323,844.

17       INTERESTS IN A JOINTLY CONTROLLED ENTITY

                                                  AT DECEMBER 31,
                                      --------------------------------------

                                               2003                   2004
                                      --------------    --------------------
                                                RMB                    RMB

Share of net assets                          53,722                 89,835
                                      ==============    ====================

Movements of the share of net assets is set out as follows:

                                  AT DECEMBER       SHARE OF      AT DECEMBER
                                     31, 2003         PROFIT         31, 2004
                                 ------------    -----------    -------------
                                          RMB            RMB              RMB

Jilin Province BASF JCIC
   NPG Co., Ltd. ("BASF")            53,722         36,113           89,835
                                 ============    ===========    =============

The jointly controlled entity is an unlisted company with limited liability
established and operating in the PRC.






                                      -22-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


17       INTERESTS IN A JOINTLY CONTROLLED ENTITY (CONTINUED)

Particulars of the jointly controlled entity at December 31, 2004 are set out as
follows:

                      PAID-UP       ATTRIBUTABLE
                      CAPITAL      EQUITY INTEREST (%)
 COMPANY NAME         RMB         2004     2003      PRINCIPAL ACTIVITIES
-----------------  ----------  ---------------------  --------------------------
                                                        Manufacture of
  BASF               150,000          40      40        petrochemical products


There was no change in the interests held in BASF during 2003 and 2004.

There were no material contingencies or commitments relating to BASF at December
31, 2004 and 2003.

A summary of the financial position and operating results of the jointly
controlled entities is as follows:
<TABLE>
<CAPTION>

                            CERTAIN FINANCIAL INFORMATION OF
                                JOINTLY CONTROLLED ENTITIES              GROUP'S SHARE
                         ----------------------------------------------------------------------
                            2002        2003         2004       2002         2003      2004
                         ----------   ----------  ----------  ----------  ---------  ----------
                            RMB           RMB        RMB         RMB         RMB         RMB

<S>                        <C>          <C>         <C>         <C>         <C>         <C>
Non-current assets         103,446      89,506      77,750      41,378      35,802      31,100
Current assets              51,458      63,021     148,989      20,583      25,209      59,597
Current liabilities         29,028      18,222       2,151      11,611       7,289         862
Non-current liabilities     15,731        --          --         6,292        --          --
Turnover                   613,439     148,694     232,113     370,319      59,478      92,845
Gross profit                81,130      44,918     114,077      46,335      17,967      45,631
Other expense              (94,388)    (20,758)    (23,794)    (54,006)     (8,303)     (9,518)
Income/(loss) before
   income taxes            (13,258)     24,160      90,283      (7,671)      9,664      36,113
Income taxes                (1,175)       --          --          (764)       --          --
Net income/(loss)          (14,433)     24,160      90,283      (8,435)      9,664      36,113
                          ========    ========    ========    ========    ========    ========
</TABLE>

Certain 2002 financial information presented above included the financial
information of Jilian (Jilin) Petrochemicals Limited ("Jilian"), which became a
part of the Company in December 2002 (Note 25). Its financial information is
therefore not shown as a jointly controlled entity of the Group in the 2003 and
2004 financial information presented above.



                                      -23-
<PAGE>





                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



18       INVESTMENT IN AN ASSOCIATED COMPANY

                                                      AT DECEMBER 31,
                                          -------------------------------------

                                                     2003                 2004
                                          ----------------     ----------------
                                                      RMB                  RMB

Share of net assets                                 4,908                9,305
                                          ================     ================

The associated company is an unlisted company with limited liability established
and operating in the PRC.

Particulars of the associated company are set out as follows:

                                             ATTRIBUTABLE
 COMPANY NAME               PAID-UP CAPITAL    EQUITY
                                  RMB        INTEREST (%)   PRINCIPAL ACTIVITIES
-------------------------  ----------------  -----------------------------------

 Jilin Lianli Industrial        42,214           47          Wholesaling and
 Co.,  Ltd.                                                  retailing of
                                                             petrochemical
                                                             products

There was no change in the interest held in the associated company during 2003
and 2004.

19       INTANGIBLE ASSETS
<TABLE>
<CAPTION>

                                               TECHNICAL          LAND USE
                                                KNOW-HOW            RIGHTS          OTHERS             TOTAL
                                       ------------------ ---------------------------------- ----------------
                                                     RMB   RMB                         RMB               RMB

   COST
<S>            <C> <C>                           <C>                <C>             <C>            <C>
   At December 31, 2003                          914,208            61,843          84,089         1,060,140
   Transfer from construction in
      progress                                    10,257                 -               -            10,257
   Additions                                          40                 -               -                40
                                       ------------------ ---------------------------------- ----------------
   At December 31, 2004                          924,505            61,843          84,089         1,070,437
                                      ------------------ ---------------------------------- ----------------
   ACCUMULATED AMORTIZATION                      386,758            11,279          40,569           438,606
   At December 31, 2003
   Charge for the year                            99,510             1,257           9,319           110,086
                                       ------------------ ---------------------------------- ----------------
   At December 31, 2004                          486,268            12,536          49,888           548,692
                                       ------------------ ---------------------------------- ----------------
   PROVISION FOR IMPAIRMENT                            -                 -               -                 -
   At December 31, 2003
   Impairment charge (Note (i))                    6,698                 -               -             6,698
                                       ------------------ ---------------------------------- ----------------
   At December 31, 2004                            6,698                 -               -             6,698
                                       ------------------ ---------------------------------- ----------------
                                                 431,539            49,307          34,201           515,047
   NET BOOK VALUE
   At December 31, 2004
                                       ================== ================================== ================
   At December 31, 2003                          527,450            50,564          43,520           621,534
                                       ================== ================================== ================
</TABLE>

(i)  Certain technical know-how was replaced by new techniques in 2004 and the
     carrying amounts of the technical know-how were therefore fully provided.







                                      -24-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



20       ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

                                                       AT DECEMBER 31,
                                              -----------------------------

                                                     2003             2004
                                              ------------    -------------
                                                      RMB              RMB

Trade payables                                  1,765,178        1,709,398
Advances from customers                           457,114          639,698
Salaries and welfare payable                      158,468          197,094
Other payables and accrued liabilities            122,018          121,461
Amounts due to related parties
- PetroChina Group Companies                      957,305        1,667,303
- CNPC Group Companies                              3,764                -
- JCGC Group Companies                            140,565           85,623
- An associated company                             8,629            9,109
                                              ------------    -------------
                                                3,613,041        4,429,686
                                              ============    =============

Amounts due to related parties are interest free, unsecured and with no fixed
term of repayment.

21       DEBT

(A)      SHORT-TERM DEBT

                                                    AT DECEMBER 31,
                                              -----------------------------

                                                      2003             2004
                                              ------------    -------------
                                                       RMB              RMB

  Bank loans - unsecured (Note (i))                49,600            44,640
             - secured                                  -                 -
                                              ------------    -------------
                                                   49,600            44,640
  Loans from a fellow subsidiary (Note (ii))    3,155,000         2,874,330
                                              ------------    -------------
                                                3,204,600         2,918,970
  Current portion of long-term debt               897,399           167,105
                                              ------------    -------------
                                                4,101,999         3,086,075
                                              ============    =============

(i)    At December 31, 2004, bank loans bear interest at the rate ranging from
       5.84% to 7.25% (2003: 5.55%) per annum and are guaranteed by Jilin
       Merchandise Group, a third-party to the Group.

(ii)   The outstanding loans are the drawn down part of the debt facilities
       provided by China Petroleum Finance Company Limited ("CP Finance"), a
       subsidiary of CNPC and a non-bank financial institution approved by the
       People's Bank of China, totaling Rmb 8 billion. The loans are unsecured
       and bear interest at the rate ranging from 4.776% to 5.019% (2003:
       5.019%) per annum. On February 6, 2004, CP Finance agreed to extend the
       debt facilities period to December 31, 2005.

(iii)  The carrying amounts of short-term debt approximate their fair value.





                                      -25-
<PAGE>

                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



21       DEBT (CONTINUED)

(B) LONG-TERM DEBT
<TABLE>
<CAPTION>

                                                                                     AT DECEMBER 31,
                                                                             -------------------------
                              INTEREST RATE AND FINAL MATURITY                     2003        2004
                             ---------------------------------------------   -------------------------
                                                                                    RMB         RMB
Renminbi-
denominated loans
---------------------------

<S>                                                                             <C>         <C>
Industrial and Commercial    Fixed interest rate of 6.03% per annum as of
  Bank of China              December 31, 2003, with maturities through
                             2004, repaid in 2004                                  9,500         --

CP Finance                   Majority variable interest rates ranging
                             from 5.18% to 5.42% per annum as of December
                             31, 2003, with maturities through 2007,
                             repaid in 2004                                    1,636,900          --

US dollar -
denominated loans
---------------------------

Construction Bank of         Fixed interest rates ranging from 8.42% to
  China                      8.66% per annum as of December 31, 2004,
                             with maturities through 2010                        283,415     239,035

China Development            Fixed interest rate of 5.50% as of December
  Bank                       31, 2003, and floating interest rate set by
                             government in the following years, with
                             maturities through 2012, repaid in 2004             856,705          --

JCGC Group                   Fixed interest rates ranging from 6.55% to
Companies                    7.86% per annum as of December 31, 2004,
                             with maturities through 2008                        183,627     137,340

Bank of China                Interest free as of December 31, 2004, with
                             maturities through 2029                              77,052      77,051

Bank of China                Variable interest rates of Libor + 0.6% as of
                             December 31, 2004, with maturities through
                             2007                                                    --      413,825

Japanese Yen -
denominated loans
---------------------------

JCGC Group                   Fixed interest rates ranging from 4.10% to
Companies                    5.30% per annum as of December 31, 2004,
                             with maturities through 2008                        205,607     157,746

</TABLE>




                                      -26-
<PAGE>

                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


21       DEBT (CONTINUED)

(B)      LONG-TERM DEBT (CONTINUED)

<TABLE>
<CAPTION>
                                                                                        AT DECEMBER 31,
                                                                                 ----------------------------
                                    INTEREST RATE AND FINAL MATURITY                    2003        2004
                            --------------------------------------------------   -------------  -------------
                                                                                         RMB         RMB
Euro -
denominated loans
---------------------------
<S>                      <C>                                                   <C>           <C>

JCGC Group Companies        Fixed interest rate of  8.30% per annum as of
                            December 31, 2004, with maturities through 2006            52,491       38,123
                                                                                 -------------  -------------
Total long-term debt                                                                3,305,297     1,063,120
Less: Current portion of
       long-term debt                                                                (897,399)     (167,105)
                                                                                 -------------  -------------
                                                                                    2,407,898       896,015
                                                                                 =============  =============
</TABLE>


  At December 31, 2004, all long-term debt are unsecured (2003: Same).

  At December 31, 2004, long-term debt of Rmb 333,209 (2003: Rmb 441,725) from
  JCGC Group Companies were borrowed from certain banks through JCGC Group
  Companies.

  The periods in which the short-term and long-term debt reprice and the
  exposure of the debt of the Group to interest rate changes are as follows:

                                              AT DECEMBER 31,
                                        -----------------------------

                                               2003             2004
                                        ------------   --------------
                                                RMB              RMB

6 months or less                            112,500           83,553
6 - 12 months                             4,989,499        3,416,348
1 - 5 years                                 926,350          403,163
Over 5 years                                481,548           79,026
                                        ------------   --------------
                                           6,509,897        3,982,090
                                        ============   ==============

                                              AT DECEMBER 31,
                                        -----------------------------

                                               2003             2004
                                        ------------   --------------
                                                RMB              RMB

Total debt:
- at fixed rates                          4,872,997        3,568,265
- at variable rates                       1,636,900          413,825
                                        ------------   --------------
                                          6,509,897        3,982,090
                                        ============   ==============








                                      -27-
<PAGE>

                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


21       DEBT (CONTINUED)

(B)      LONG-TERM DEBT (CONTINUED)

The weighted average effective interest rates at the balance sheet date are as
follows:

Weighted average effective interest rates:
- bank loans                                               5.85%           5.15%
- loans from related parties                               5.18%           5.11%

The carrying amounts and fair values of long-term debt are as follows:
<TABLE>
<CAPTION>

                                      CARRYING VALUES                  FAIR VALUES
                                 ---------------------------   ----------------------------
                                      AT DECEMBER 31,                AT DECEMBER 31,
                                 ---------------------------   ----------------------------
                                      2003            2004            2003            2004
                                 -----------    ------------   ------------    ------------
                                       RMB             RMB             RMB             RMB

<S>                               <C>               <C>          <C>               <C>
Bank loans                        1,226,672         729,911      1,191,836         718,887
Loans from related parties        2,078,625         333,209      2,121,108         355,796
                                 -----------    ------------   ------------    ------------
                                  3,305,297       1,063,120      3,312,944       1,074,683
                                 ===========    ============   ============    ============
</TABLE>


The fair values are based on discounted cash flows using applicable discount
rates based upon the prevailing market rates of interest available to the Group
for financial instruments with substantially the same terms and characteristics
at the balance sheet date. Such discount rates ranged from 0.86% to 5.92% as of
December 31, 2004 depending on the type of the debt. The carrying amounts of
current portion of long term debt approximate their fair value.






                                      -28-
<PAGE>

                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


21       DEBT (CONTINUED)

(B)      LONG-TERM DEBT (CONTINUED)

Maturities of long-term debt at the balance sheet date are as follows:

                                                     AT DECEMBER 31,
                                               -------------------------------

                                                     2003               2004
                                               ------------   ----------------
                                                      RMB                RMB

Bank loans
- within one year                                 149,032             47,412
- between one to two years                        181,532             47,412
- between two to three years                      160,530            461,237
- between three to four years                     127,015             47,412
- between four to five years                      127,015             47,412
- after five years                                481,548             79,026
                                               ------------   ----------------
                                                1,226,672            729,911
                                               ============   ================

                                                     AT DECEMBER 31,
                                               -------------------------------

                                                     2003               2004
                                               ------------   ----------------
                                                      RMB                RMB

Loans from related parties
- within one year                                 748,367            119,693
- between one to two years                        121,468            119,693
- between two to three years                      116,468             64,818
- between three to four years                   1,063,764             29,005
- between four to five years                       28,558                  -
- after five years                                      -                  -
                                               ------------   ----------------
                                                2,078,625            333,209
                                               ============   ================







                                      -29-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


22       DEFERRED INCOME TAX

Deferred income tax is calculated in full on temporary differences under the
liability method using a principal tax rate of 33% for the three years ended
December 31, 2004.

Deferred tax balances are attributable to the following items:
<TABLE>
<CAPTION>

                                                         AT DECEMBER           INCOME         AT DECEMBER
                                                             31, 2003      STATEMENTS            31, 2004
                                                     ----------------   --------------    -----------------
                                                                  RMB             RMB                  RMB
 Deferred tax liabilities:
 Non-current:
<S>                                                           <C>              <C>                 <C>
   Revaluation of fixed assets (Note 16)                        3,266            (479)               2,787
   Exchange gain in respect of loans borrowed for
   fixed assets                                                20,717          (2,413)              18,304
   Deferred tax effect on housing subsidy cost                 14,363          (3,075)              11,288
   Deferred tax effect on accelerated depreciation
   and amortization                                                 -         119,622              119,622
                                                      ----------------   --------------    -----------------
 Total deferred tax liabilities                                38,346         113,655              152,001
                                                     ----------------   --------------    -----------------

 Deferred tax assets:
 Non-current:
   Deferred tax effect on tax losses                           38,346         (38,346)                   -
   Deferred tax effect on deductible temporary
   differences                                                      -         435,203              435,203
                                                    ----------------   --------------    -----------------
 Total deferred tax assets                                     38,346         396,857              435,203
                                                     ----------------   --------------    -----------------

 Net deferred tax balance                                           -         283,202              283,202
                                                     ================   ==============    =================

                                                          AT DECEMBER          INCOME          AT DECEMBER
                                                             31, 2002       STATEMENT             31, 2003
                                                     ----------------   --------------    -----------------
                                                                  RMB             RMB                  RMB
 Deferred tax liabilities:
 Non-current:
    Revaluation of fixed assets (Note 16)                       3,745            (479)               3,266
    Exchange gain in respect of loans borrowed for
    fixed assets                                               23,130          (2,413)              20,717
    Deferred tax effect on housing subsidy cost                17,438          (3,075)              14,363
                                                     ----------------   --------------    -----------------
 Total deferred tax liabilities                                44,313          (5,967)              38,346
                                                     ----------------   --------------    -----------------

 Deferred tax assets:
 Non-current:
    Deferred tax effect on tax losses                          44,313          (5,967)              38,346
                                                    ----------------   --------------    -----------------
 Total deferred tax assets                                     44,313          (5,967)              38,346
                                                     ----------------   --------------    -----------------

 Net deferred tax balance                                           -               -                    -
                                                     ================   ==============    =================

</TABLE>





                                      -30-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



22       DEFERRED INCOME TAX (CONTINUED)

In 2004, the changes in commercial environment caused significant increase in
market demand for petrochemical, organic chemical and synthetic rubber products
which resulted the increase in sales prices and therefore gross margins. The
improvement in profitability enabled management to revise its business plan for
future 5 years. The revised business plan proved recoverability of the deferred
tax asset recognized in full amount as at 31 December 2004.

The deferred tax assets were arising from tax losses available to be offset
against future taxable income. Deferred income tax assets for tax losses carried
forward and deductible temporary differences (mainly impairment provisions for
receivables, inventories and write-down of carrying value of property, plant and
equipment) are recognized to the extent that realization of the related tax
benefit through future taxable income is probable.

On September 20, 2004, the Chinese Ministry of Finance and State Administration
of Taxation issued an income tax regulation which allows companies in northeast
China to shorten the depreciation and amortization periods of property, plant
and equipment and intangible assets on tax basis effective July 1, 2004.
Therefore, at December 31, 2004, deferred tax liabilities of Rmb 119,622 is
recognized on the temporary difference arising from accelerated depreciation and
amortization.

23       SHARE CAPITAL

                                                        AT DECEMBER 31,
                                                    ----------------------------

                                                           2003            2004
                                                    ------------   -------------
                                                            RMB              RMB

Registered, issued and fully paid:

2,396,300,000 state-owned shares of RMB 1.00 each     2,396,300        2,396,300
200,000,000 A shares of RMB 1.00 each                   200,000          200,000
964,778,000 H shares and ADSs of RMB 1.00 each          964,778          964,778
                                                    ------------   -------------
                                                      3,561,078        3,561,078
                                                    ============   =============

The state-owned shares, H shares, A shares and ADS rank para passu in all
respects.

Following the announcement of the Company's audited results for 2002, the
Company's A shares (which are available only to the PRC nationals) were
suspended from trading on the Shenzhen Stock Exchange (the "Exchange") of the
PRC on April 30, 2003 pursuant to the relevant provisions of the China
Securities Regulatory Commission and the Exchange, following the recording of
losses, computed in accordance with the PRC accounting standards and
regulations, for three consecutive years from 2000 to 2002. Following the
announcement of the Company's audited profitable interim results, computed in
accordance with the PRC accounting standards and regulations, for the six months
ended June 30, 2003, the Company's A shares resumed trading on the Exchange on
September 25, 2003.






                                      -31-
<PAGE>





                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


24       RESERVES
<TABLE>
<CAPTION>

                                                            STATUTORY    STATUTORY DISCRETIONARY
                                  CAPITAL   REVALUATION      COMMON       COMMON      COMMON
                                  RESERVE     RESERVE      RESERVE FUND WELFARE FUND RESERVE FUND    TOTAL
                                 ----------   ----------    ----------   ----------   ----------   ----------
                                   RMB            RMB           RMB           RMB        RMB          RMB
                                                             (Note (a))    (Note (b)) (Note (c))

<S>                              <C>             <C>          <C>          <C>          <C>        <C>
Balance at January 1, 2002       1,391,114       11,347       159,777      140,997      400,291    2,103,526
Transfer to accumulated
  loss on realization of
  revaluation reserve                 --         (2,100)         --           --           --         (2,100)
Transfer from accumulated
  loss to reserves (Note (d))         --           --             378         --           --            378
                                ----------   ----------    ----------   ----------   ----------   ----------
Balance at December 31, 2002     1,391,114        9,247       160,155      140,997      400,291    2,101,804
Transfer to accumulated loss
  on realization of
  revaluation reserve                 --           (973)         --           --           --           (973)
                                ----------   ----------    ----------   ----------   ----------   ----------
Balance at December 31, 2003     1,391,114        8,274       160,155      140,997      400,291    2,100,831
Transfer to accumulated loss
  on realization of
  revaluation reserve                 --           (973)         --           --           --           (973)
                                ----------   ----------    ----------   ----------   ----------   ----------
Balance at December 31, 2004     1,391,114        7,301       160,155      140,997      400,291    2,099,858
                                ==========   ==========    ==========   ==========   ==========   ==========
</TABLE>






                                      -32-
<PAGE>


                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


24       RESERVES (CONTINUED)

(a) Pursuant to PRC regulations and the Company's Articles of Association, the
Company is required to transfer 10% of its net income, as determined under the
PRC accounting regulations, to the statutory common reserve fund until the fund
aggregates to 50% of the Company's registered capital. The transfer to this
reserve must be made before distribution of dividend to shareholders.

The statutory common reserve fund shall only be used to make good previous
years' losses, to expand the Company's production operations, or to increase the
capital of the Company. Upon approval by a resolution of shareholders' general
meeting, the Company may convert its statutory common reserve fund into share
capital and issue bonus shares to existing shareholders in proportion to their
original shareholdings or to increase the nominal value of each share currently
held by them, provided that the balance of the reserve fund after such issue is
not less than 25% of the registered capital.

Since the Company had an accumulated loss for the years ended December 31, 2002,
2003 and 2004, no appropriation to the statutory common reserve fund was made in
these three years.

(b) Pursuant to the PRC regulations and the Company's Articles of Association,
the Company is required to transfer 5% to 10% of its net income, as determined
under the PRC accounting regulations, to the statutory common welfare fund. This
fund can only be used to provide staff welfare facilities and other collective
benefits to the Company's employees. This fund is non-distributable other than
in liquidation.

Since the Company had an accumulated loss for the years ended December 31, 2002,
2003 and 2004, no appropriation to the statutory common welfare fund was made in
these three years.

(c) Transfer to the discretionary common reserve fund is subject to approval by
the shareholders at general meeting. Its usage is similar to that of the
statutory common reserve fund.

No transfer to the discretionary common reserve fund has been proposed by the
Board of Directors for the years ended December 31, 2002, 2003 and 2004.

(d) In 2002, the Company's subsidiaries, Jilin City Songmei Acetic Co., Ltd., a
Sino-foreign co-operative joint venture, made an appropriation to the statutory
common reserve fund of which RMB 378 was attributable to the Group. No such
appropriation by the subsidiary was made in 2003 and 2004.

(e) The Company's distributable reserve at December 31, 2004 under the PRC
accounting regulations is nil (2003 and 2002: nil).






                                      -33-
<PAGE>





                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


25       ACQUISITION

In December 2002, the Company acquired the remaining 35% equity interest in
Jilian, a jointly controlled entity, for a cash consideration of RMB 135,000 and
integrated its business into the Company's. Jilian was subsequently dissolved in
2002(Note 17). The acquisition of Jilian is accounted for using the purchase
method. The identifiable assets and liabilities acquired were restated to fair
values at the time of the successive share purchases. The acquired business did
not contribute significant revenues and operating income to the Company for the
year ended December 31, 2002.

Details of net assets acquired and goodwill are as follows:
                                                                           RMB

Cash and cash equivalents                                                7,914
Property, plant and equipment                                          816,638
Intangible assets                                                       52,599
Inventories                                                            157,260
Receivables                                                             53,351
Payables                                                              (397,576)
Debt                                                                  (304,471)
                                                                 --------------
Fair value of net assets                                               385,715
                                                                 ==============

Equity interest acquired                                                  35%
                                                                 ==============

Total purchase consideration (which is equal to 35% of the
      fair value of net assets)                                       135,000

Less: Cash and cash equivalents of Jilian acquired                     (7,914)
      Cash outflow on acquisition during 2002                         (73,086)
                                                                 --------------
Cash outflow on acquisition during 2003                                54,000
                                                                 ==============

26       FINANCIAL INSTRUMENTS

(A)      FINANCIAL RISK FACTORS

The Group's operations expose it to various financial risks, including credit
risk, foreign exchange risk and interest rate risk and liquidity risk. While the
Group has not used derivative financial instruments for hedging or trading
purposes, it focuses on the unpredictability of financial markets and seeks to
minimize potential adverse effects on its financial performance of the Group.
The Group's senior management has written policies covering specific financial
risks indicated above.

(i) Credit risk

     The carrying amounts of receivables included in the consolidated balance
     sheet represent the Group's maximum exposure to credit risk in relation to
     its financial assets. No other financial assets carry a significant
     exposure to credit risk. Cash is placed with state-owned banks and
     financial institutions.

(ii) Foreign exchange risk

     The Group operates in the PRC and transactions are primarily denominated in
     Renminbi, the national currency. The Group is exposed to foreign exchange
     risk arising from various currency exposures with respect to debt
     denominated in foreign currencies (Note 21).






                                      -34-
<PAGE>





                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


26       FINANCIAL INSTRUMENTS (CONTINUED)

(iii) Interest rate risk

     The Group has no significant interest-bearing assets, as such its income
     and operating cash flows are substantially independent of changes in market
     interest rates. The Group sometimes borrows at variable rates and these
     represent the Group's maximum exposure to interest rate risk in relation to
     its financial liabilities.

(iv)     Liquidity risk

     The Group depends upon cash flows from operations, loans from banks and
     related parties, and equity financing to satisfy its liquidity and capital
     needs. Management reviews the Group's working capital and liquidity
     position on a regular basis to ensure it has sufficient resources to meet
     its working capital needs and to continue its operations for the
     foreseeable future. In addition, management also aims at maintaining
     flexibility in funding by keeping committed credit lines available. The
     Company expects to receive continuing support from CNPC for its working
     capital requirements in the foreseeable future. In this regard, CP Finance,
     a subsidiary of CNPC, has agreed to extend the period of debt facilities,
     totaling Rmb 8 billion, available to the Company to December 31, 2005 (Note
     21 (a)).

(B)  FAIR VALUES

The carrying amounts of the following financial assets and financial
liabilities, net of impairment provisions, approximate their fair values: cash,
trade receivables and payables, other receivables and payables and short-term
debt. The fair value of long-term debt is disclosed in Note 21.

27       CAPITAL COMMITMENTS

                                                    AT DECEMBER 31,
                                                 --------------------------

                                                    2003              2004
                                                 ---------    -------------
                                                     RMB               RMB

Contracted but not provided for in
   respect of plant and equipment                    8,680        153,564
                                                 =========    =============

28       MAJOR CUSTOMERS

The Group's major customers are as follows:
<TABLE>
<CAPTION>

                                                          YEAR ENDED DECEMBER 31,
                                 ---------------------------------------------------------------------------

                                         2002                       2003                      2004
                                 ----------------------    -----------------------   -----------------------

                                                  % TO                       % TO                      % TO
                                                 TOTAL                      TOTAL                     TOTAL
                                   REVENUE     REVENUE        REVENUE     REVENUE        REVENUE    REVENUE
                                 ----------    --------    -----------   ---------   -----------   ---------
                                       RMB           %            RMB           %            RMB          %

<S>                              <C>                <C>    <C>                 <C>    <C>                <C>
PetroChina Group Companies       6,931,492          53     12,354,945          60     22,261,103         70
JCGC Group Companies               658,700           5        908,009           4      1,417,140          4
                                 ----------    --------    -----------   ---------   -----------   ---------
                                 7,590,192          58     13,262,954          64     23,678,243         74
                                 ==========    ========    ===========   =========   ===========   =========
</TABLE>







                                      -35-
<PAGE>





                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


29      RELATED PARTY TRANSACTIONS

The Company is a subsidiary of PetroChina, which is part of a larger group of
companies under CNPC. The Group has extensive transactions with members of the
CNPC group. In addition to the related party information shown elsewhere in the
financial statements, the following is a summary of the significant transactions
entered into in the normal course of business between the Group and entities
controlled by CNPC during the year:
<TABLE>
<CAPTION>

                                                                     YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------------------

                                                 NOTES             2002              2003            2004
                                                        ----------------    --------------   --------------
                                                                    RMB               RMB             RMB

PETROCHINA GROUP COMPANIES

<S>                                              <C>          <C>            <C>                 <C>
Purchase of crude oil                             (a)         5,883,507         8,067,989      11,789,022
Purchase of materials                             (a)           694,206         1,266,922       7,447,892
Sale of gasoline                                  (b)         1,759,816         2,656,296       2,917,651
Sale of diesel oil                                (b)         2,981,184         5,615,331       7,794,524
Sale of petrochemical goods                       (b)         2,190,492         4,083,318      11,548,928
Operating lease rentals on property, plant and
equipment                                         (c)                 -             2,463          27,733
Property safety and insurance fund                (d)            35,985            35,278          32,958

JCGC GROUP COMPANIES

Sale of goods                                     (e)           658,700           908,009       1,417,140
Sub-contracting services                          (f)            23,880            16,694          19,665
Construction of property, plant and equipment     (g)           165,560            65,653          76,342
Purchase of raw materials and spare parts         (h)           269,780           290,002         148,587
Purchase of utilities and supporting services     (i)           114,750           228,828         262,961
Purchase of property, plant and equipment         (j)                 -           159,500               -
Operating lease rentals on land and property      (k)             9,453            10,501           7,680

CNPC GROUP COMPANIES

Interest expense                                  (l)           373,665           305,319         212,814
Loans drawn                                       (m)         4,579,050         5,308,460       8,531,610
Purchase of raw materials and spare parts         (n)            30,641            66,789          52,830
</TABLE>


(a) Represents purchase of crude oil, naphtha, benzene, etc. on normal
commercial terms at market prices.

(b) Represents sale of diesel oil, gasoline, ethylene, etc. on normal commercial
terms at market prices.

(c) Represents rentals for operating lease on property, plant and equipment at
market prices.

(d) The Group participates in the property safety and insurance fund plan
established and organized by PetroChina under which it is required to make
annual contribution to the plan at 0.4% of the average cost of fixed assets and
inventory. The fund is mainly used to compensate for the accidental property
loss.





                                      -36-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


 29      RELATED PARTY TRANSACTIONS (CONTINUED)

(e) Represents sale of refinery products, chemical products, etc. on normal
commercial terms at market prices.

(f) Represents processing services for semi-finished products on normal
commercial terms at market prices.

(g) Represents construction fee of property, plant and equipment of the Group at
regulated prices, market prices or cost as provided in the service agreement
between the Group and JCGC Group Companies.

(h) Represents purchase of spare parts, low value consumables etc. on normal
commercial terms at market prices.

(i) Purchase of utilities and supporting services are based on state regulated
prices, market prices or cost as provided in the service agreement between the
Group and JCGC Group Companies.

(j) In December 2003, the Company purchased certain property, plant and
equipment from JCGC for a consideration of Rmb 159,500 based on a revaluation
conducted by a professional valuer. The consideration was settled by offsetting
against the Company's accounts receivable due from JCGC of Rmb 159,500.

(k) Represents rentals for operating lease on land at market prices.

(l) Represents interest expense for debt from CP Finance.

(m) Represents debt from CP Finance drawn during the year.

(n) Represents purchase of materials and spare parts on normal commercial terms
at market prices.

30       SEGMENT INFORMATION

(a) Primary reporting format - business segments

The Group is principally engaged in the following four business segments in the
PRC, petroleum products, petrochemical and organic chemical products, chemical
fertilizers and inorganic chemicals, and synthetic rubber products.

 (i)  The petroleum products segment is engaged in the production of gasoline,
      diesel oil, solvent oil and other by-products such as lubricants. While
      certain of the products produced by the Group are used as raw materials in
      the production of petrochemicals, a major portion is sold to outside
      customers.

 (ii) The petrochemical and organic chemical products segment primarily produces
      ethanol, acetic acid and acetic anhydride.

 (iii)The chemical fertilizers and inorganic chemicals segment principally
      produces ammonium nitrate, urea, ammonium chloride, sulphuric acid and
      slag.

 (iv) The synthetic rubber products segment primarily produces
styrene-butadiene-rubber.

The other products and services segment includes sales of raw materials
purchased from third parties to related parties at cost to receive favorable
discounts and provision of utilities, maintenance and other related services.

The accounting policies of the operating segments are the same as those
described in Note 2 - "Summary of principal accounting policies".

Inter-segment sales are conducted principally at market price.

Operating segment information for the years ended December 31, 2002, 2003 and
2004 is presented below.





                                      -37-
<PAGE>



                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)


30     SEGMENT INFORMATION (CONTINUED)

(a) Primary reporting format - business segments (continued)
<TABLE>
<CAPTION>



                                                   PETROCHEMICAL     CHEMICAL
                                                    AND ORGANIC     FERTILIZERS     SYNTHETIC
                                      PETROLEUM      CHEMICAL      AND INORGANIC     RUBBER   OTHER PRODUCTS
 YEAR ENDED DECEMBER 31, 2002         PRODUCTS       PRODUCTS         CHEMICALS     PRODUCTS   AND SERVICES      TOTAL
--------------------------------    ------------   -------------   -------------  -----------  -------------  -----------
                                       RMB             RMB              RMB            RMB         RMB            RMB
PROFIT AND LOSS
<S>                                   <C>            <C>              <C>            <C>         <C>           <C>
Sales (including inter-segment)       7,971,951      6,180,161        123,325        782,559     1,559,678     16,617,674
Less: Inter-segment sales            (2,805,763)      (430,086)          --             --        (243,438)    (3,479,287)
                                    -----------    -----------    -----------    -----------   -----------    -----------
Total sales to external customers     5,166,188      5,750,075        123,325        782,559     1,316,240     13,138,387
                                    ===========    ===========    ===========    ===========   ===========    ===========

Segment results                        (210,741)      (156,705)      (153,268)       119,724      (105,046)      (506,036)
Finance costs - net                                                                                              (514,056)
Share of loss of jointly
  controlled  entities                     --           (7,671)          --             --            --           (7,671)
Share of income of an
  associated company                       --             --             --             --             125            125
                                                                                                              -----------
Loss before income taxes                                                                                       (1,027,638)
Income taxes                                                                                                       (1,116)
Minority interests                                                                                                  5,655
                                                                                                              -----------
Net loss                                                                                                       (1,023,099)
                                                                                                              ===========

Shut down of manufacturing
  assets                                160,617         43,241         51,972           --          27,588        283,418
Writedown of carrying value
  of property, plant and
  equipment                              60,749        203,651         26,412          5,797        27,235        323,844
Depreciation and amortization           438,367        481,247         16,853         55,867       116,188      1,108,522
Impairment charge of current
  assets (receivables
  and inventories)                                                                                                191,469
ASSETS AND LIABILITIES
Segment assets                        2,652,543      8,160,438      1,057,622        616,960     1,114,611     13,602,174
Interests in jointly
  controlled entities                      --           44,058           --             --            --           44,058
Investment in an associated
  company                                  --             --             --             --          18,909         18,909
                                                                                                              -----------
Total assets                          2,652,543      8,204,496      1,057,622        616,960     1,133,520     13,665,141
                                                                                                              ===========

Segment liabilities                     303,790      1,445,169        274,780         57,613       104,896      2,186,248
Debt                                                                                                            9,363,490
                                                                                                              -----------
Total liabilities                                                                                              11,549,738
                                                                                                              ===========

Segment capital expenditure on
  property, plant and
  equipment and on
  intangible assets                      35,146        234,033        733,064         11,171        77,366      1,090,780
</TABLE>



                                      -38-
<PAGE>

                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)

30     SEGMENT INFORMATION (CONTINUED)

(a) Primary reporting format - business segments (continued)


<TABLE>
<CAPTION>


                                                   PETROCHEMICAL     CHEMICAL
                                                    AND ORGANIC     FERTILIZERS     SYNTHETIC
                                      PETROLEUM      CHEMICAL      AND INORGANIC     RUBBER   OTHER PRODUCTS
 YEAR ENDED DECEMBER 31, 2002         PRODUCTS       PRODUCTS         CHEMICALS     PRODUCTS   AND SERVICES      TOTAL
--------------------------------    ------------   -------------   -------------  -----------  -------------  -----------
                                       RMB             RMB              RMB            RMB         RMB            RMB



PROFIT AND LOSS
<S>                                  <C>             <C>              <C>          <C>           <C>           <C>
Sales (including inter-segment)      12,906,594      8,595,891        164,861      1,133,031     2,560,499     25,360,876
Less: Inter-segment sales            (3,586,528)      (812,800)          --             --        (308,739)    (4,708,067)
                                    -----------    -----------    -----------    -----------   -----------    -----------
Total sales to external customers     9,320,066      7,783,091        164,861      1,133,031     2,251,760     20,652,809
                                    ===========    ===========    ===========    ===========   ===========    ===========

Segment results                          37,344        721,791       (121,754)       356,048       (98,111)       895,318
Finance costs - net                                                                                              (464,858)
Share of profit of a jointly
  controlled entity                        --            9,664           --             --            --            9,664
Share of loss of an associated
  company                                  --             --             --             --         (14,001)       (14,001)
                                                                                                              -----------
Profit before taxation                                                                                            426,123
Taxation                                                                                                             (270)
Minority interests                                                                                                  1,756
                                                                                                              -----------
Net profit                                                                                                        427,609
                                                                                                              ===========

Depreciation and amortization           494,535        362,532          9,671         40,855       124,414      1,032,007
Impairment charge of current
  assets (receivables
  and inventories)                                                                                                113,569
ASSETS AND LIABILITIES
Segment assets                        2,503,467      7,700,372        848,240        755,820       799,060     12,606,959
Interests in jointly
  controlled entities                      --           53,722           --             --            --           53,722
Investment in an associated
  company                                  --             --             --             --           4,908          4,908
                                                                                                              -----------
Total assets                          2,503,467      7,754,094        848,240        755,820       803,968     12,665,589
                                                                                                              ===========

Segment liabilities                     501,931      2,387,753        454,000         95,190       175,462      3,614,336
Debt                                                                                                            6,509,897
                                                                                                              -----------
Total liabilities                                                                                              10,124,233
                                                                                                              ===========

Segment capital expenditure
  on property, plant and
  equipment and on intangible
  assets                                 35,042        179,145        179,071         75,241        18,355        486,854
</TABLE>





                                      -39-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



30     SEGMENT INFORMATION (CONTINUED)

(a) Primary reporting format - business segments (continued)



<PAGE>
<TABLE>
<CAPTION>


                                                   PETROCHEMICAL     CHEMICAL
                                                    AND ORGANIC     FERTILIZERS     SYNTHETIC
                                      PETROLEUM      CHEMICAL      AND INORGANIC     RUBBER   OTHER PRODUCTS
 YEAR ENDED DECEMBER 31, 2002         PRODUCTS       PRODUCTS         CHEMICALS     PRODUCTS   AND SERVICES      TOTAL
--------------------------------    ------------   -------------   -------------  -----------  -------------  -----------
                                       RMB             RMB              RMB            RMB         RMB            RMB


PROFIT AND LOSS
<S>                                    <C>            <C>               <C>          <C>           <C>           <C>
Sales (including inter-segment)        18,079,875     13,550,409        664,246      1,793,689     3,666,195     37,754,414
Less: Inter-segment sales              (4,702,040)      (782,150)          --             --        (412,801)    (5,896,991)
                                      -----------    -----------    -----------    -----------   -----------    -----------
Total sales to external customers      13,377,835     12,768,259        664,246      1,793,689     3,253,394     31,857,423
                                      ===========    ===========    ===========    ===========   ===========    ===========

Segment results                          (475,328)     2,939,339        (80,353)       317,016      (107,646)     2,593,028
Finance costs - net                                                                                                (276,970)
Share of profit of a jointly
  controlled entity                          --           36,113           --             --            --           36,113
Share of profit of an
  associated company                         --             --             --             --           4,397          4,397
                                                                                                                -----------
Profit before taxation                                                                                           2,356,568
Taxation                                                                                                           171,418
Minority interests                                                                                                  16,524
                                                                                                                -----------
Net profit                                                                                                       2,544,510
                                                                                                                ===========

Depreciation and amortisation             549,867        377,907         29,290         58,087       132,127      1,147,278
Impairment of property, plant
  and equipment                              --             --            4,680           --           2,540          7,220
Impairment of intangible assets              --            6,698           --             --            --            6,698
Impairment of current assets
   (receivables and inventories)                                                                                     89,966
ASSETS AND LIABILITIES
Segment assets                          1,844,441      9,175,528        561,825        991,418       638,643     13,211,855
Interests in a jointly
  controlled entity                          --           89,835           --             --            --           89,835
Investment in an associated company          --             --             --             --           9,305          9,305
Deferred income tax assets                                                                                          283,202
                                                                                                                -----------
Total assets                                                                                                     13,594,197
                                                                                                                ===========

Segment current liabilities               594,431      3,054,582        552,913        130,489       210,350      4,542,765
Borrowings                                                                                                        3,982,090
                                                                                                                -----------
Total liabilities                                                                                                 8,524,855
                                                                                                                ===========

Segment capital expenditure
  on property, plant and
  equipment and on intangible
  assets                                  263,201        189,023         11,462         65,136        13,219        542,041
</TABLE>




                                      -40-
<PAGE>



                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



30       SEGMENT INFORMATION (CONTINUED)

(b) Secondary reporting format - geographical segments

All assets and operations of the Group are located in the PRC, which is
considered as one geographic location in an economic environment with similar
risks and returns.

31       SIGNIFICANT DIFFERENCES BETWEEN IFRS AND US GAAP

The consolidated financial statements have been prepared in accordance with IFRS
which may differ in certain material respects from US GAAP. Such differences
involve methods for measuring the amounts shown in the consolidated financial
statements, as well as additional disclosures required by US GAAP.

Effect on net profit/(loss) of significant differences between IFRS and US GAAP
is as follows:
<TABLE>
<CAPTION>

                                                                         YEAR ENDED DECEMBER 31,
                                                       -----------------------------------------------------------
                                                           2002             2003            2004           2004
                                                       -------------     ------------    ------------    ---------
                                                            RMB              RMB             RMB            US$
                                                      -------------     ------------    ------------    ----------

<S>                                                     <C>                <C>           <C>             <C>
 Net (loss)/profit under IFRS                           (1,023,099)        427,609       2,544,510       307,438

 US GAAP adjustments:
 - Depreciation charge on fixed asset
     revaluation surplus on Restructuring and at
     February 28, 1995                               (a)     3,593          11,223          11,223         1,356
 - Reduction in loss on write-off of fixed
     assets                                          (a)     2,526             --             --             -
 - (Impairment of fixed assets) / reversal of
     write-down in carrying amount (net of
     minority interests) of fixed assets             (a)   322,240         (42,700)           --             -
 - Depreciation charge on write-down in carrying
     amount (net of minority interests) of fixed
     assets, net of impairment                       (a)       --          (27,954)        (25,445)       (3,074)
 - Difference in loss on write-off of fixed
     assets due to write-down in carrying amount
     of fixed assets                                 (a)       --              --          (25,094)       (3,032)
 - Depreciation charge on foreign currency
     translation difference on interest
     components capitalized in fixed assets          (b)     1,531           1,531           1,531           185
 - Depreciation charge on fixed asset
     revaluation surplus of a jointly controlled
     entity                                          (c)     7,630             --              --             -
 - Tax adjustment                                    (d)         -             --          (20,317)       (2,455)
                                                        -------------     ------------  ------------    ----------
 Net (loss)/profit under US GAAP                          (685,579)        369,709       2,486,408       300,418
                                                       =============     ============    ============    =========
Basic and diluted net (loss)/profit per share
     under US GAAP                                        Rmb(0.19)       Rmb 0.10        Rmb 0.70        USD 0.08
                                                       =============     ============    ============    =========

</TABLE>



                                      -41-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



31       SIGNIFICANT DIFFERENCES BETWEEN IFRS AND US GAAP (CONTINUED)

Effect on shareholders' equity of significant differences between IFRS and US
GAAP is as follows:
<TABLE>
<CAPTION>

                                                                                  AT DECEMBER 31,
                                                                    ---------------------------------------------

                                                                            2003            2004            2004
                                                                    -------------    ------------    ------------
                                                                             RMB            RMB              US$

<S>                                                                   <C>              <C>               <C>
Shareholders' equity under IFRS                                       2,510,556        5,055,066         610,773

US GAAP adjustments:
- Fixed asset revaluation on Restructuring and at February
     28, 1995                                                    (a)   (744,007)        (744,007)        (89,894)
- Depreciation charge on fixed assets due to revaluation on
     Restructuring and at February 28, 1995                      (a)    665,461          676,684          81,760
- Reduction in loss on write-off of fixed assets                 (a)     11,532           11,532           1,393
- Reversal of writedown in carrying amount (net of minority
     interests) of fixed assets, net of impairment of fixed (a)
     assets                                                             279,540          254,446          30,743

- Depreciation charge on writedown in carrying amount (net of
     minority interests) of fixed assets, net of impairment      (a)    (27,954)         (53,399)         (6,452)
- Foreign currency translation difference on interest
     components capitalized in fixed assets                      (b)    (30,616)         (30,616)         (3,699)
- Depreciation charge on foreign currency translation
     difference on interest components capitalized in fixed
     assets                                                      (b)     10,717           12,248           1,480
- Gain on transfer of fixed assets to Jilian                     (c)    (65,320)         (65,320)         (7,892)
- Tax adjustment                                                 (d)          -          (20,317)         (2,455)
                                                                    -------------    ------------    ------------
Shareholders' equity under US GAAP                                    2,609,909        5,096,317         615,757
                                                                    =============    ============    ============
</TABLE>


In preparing the summary of differences between IFRS and US GAAP, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the estimates of revenues and expenses. Accounting estimates have been employed
in these financial statements to determine reported amounts, including
realizability, useful lives of tangible and intangible assets, income taxes and
other areas. Actual results could differ from those estimates.






                                      -42-
<PAGE>

                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



31       SIGNIFICANT DIFFERENCES BETWEEN IFRS AND US GAAP (CONTINUED)

Changes in shareholders' equity under US GAAP for each of the year ended
December 31, 2003 and 2004 are as follows:

SHAREHOLDERS' EQUITY

                                           YEAR ENDED DECEMBER 31,
                                  --------------------------------------------
                                          2003            2004            2004
                                  -------------  -------------   -------------
                                          RMB            RMB               US$
                                  ------------  -------------   -------------

 Balances at beginning of year       2,240,200       2,609,909         315,339
 Net profit for the year               369,709       2,486,408         300,418
                                  -------------  -------------   -------------
 Balance at end of year              2,609,909       5,096,317         615,757
                                  =============  =============   =============

A summary of the principal differences and additional disclosures applicable to
the Group is set out below:

(a) Revaluation of fixed assets

On September 30, 1994, the fixed assets transferred to the Company by Jilin
Chemical Industrial Corporation as part of the Restructuring were appraised, as
required by the relevant PRC regulations, by a firm of independent valuers
registered in the PRC. The revaluation of the fixed assets transferred resulted
in Rmb 714,974 in excess of the prior carrying value and was recorded in share
capital and capital reserve and not as a revaluation reserve. The depreciation
charge on the revaluation surplus for the year ended December 31, 2004 was Rmb
9,771 (2003: Rmb 9,771; 2002: Rmb 2,141), including the depreciation charge of
Rmb 7,630 on the revaluation surplus of Jilian (previously a jointly controlled
entity of the Company) reclassified since 2003 as a result of the Company's
acquisition of the remaining 35% equity interest in Jilian in December 2002. For
purposes of reconciling to the US GAAP financial data, the effect of the
revaluation and the related depreciation charge is reversed.

On February 28, 1995, the Group's fixed assets were further revalued by a firm
of independent valuers registered in Hong Kong to satisfy the Hong Kong Stock
Exchange listing requirements. This revaluation, which resulted in an additional
revaluation surplus of Rmb 29,033, was not recognized by the PRC authorities and
was therefore not recorded in the statutory accounting books. The depreciation
charge on the revaluation surplus for the year ended December 31, 2004 was Rmb
1,452 (2003: Rmb 1,452; 2002: Rmb 1,452). For purposes of reconciling to the US
GAAP financial data, the revaluation surplus, the related depreciation charge
are reversed.

In prior years, certain fixed assets with a net book value of Rmb 11,532 related
to revaluation surplus recorded in share capital and capital reserve were
written off as a charge to the income statement in connection with the shut down
of manufacturing assets. For purposes of reconciling to the US GAAP financial
data, the effect of the revaluation relating to the write-off of fixed assets is
reversed.







                                      -43-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



31       SIGNIFICANT DIFFERENCES BETWEEN IFRS AND US GAAP (CONTINUED)

(a) Revaluation of fixed assets(continued)

As at December 31, 2002, the directors of the Company compared the carrying
amount of the Group's property, plant and equipment to their estimate of its
fair value, and on the basis of this review, made an adjustment to reduce the
carrying amount by Rmb 323,844. Under IFRS, the adjustment arising from the
comparison, net of minority interests of Rmb 1,604, amounting to Rmb 322,240 was
charged to the income statement. For purposes of reconciling to the US GAAP
financial data, the write-down adjustment is reversed since the related
undiscounted cash flows adequately recover the carrying value of these assets
despite a decrease in fair value. As at December 31, 2003, the discounted cash
flows of certain fixed assets among the above write-down fixed assets were lower
than their carrying value by Rmb 42,700 and was charged to the income statement
for the reconciliation to US GAAP.

In 2004, certain fixed assets of which the carrying amount under IFRS is lower
than that under US GAAP by Rmb 25,094 due to the above write-down adjustment of
Rmb 322,240 at December 31, 2002 were written off. For purposes of reconciling
to the US GAAP financial data, the additional loss on fixed assets write-down,
amounting to Rmb 25,094 is charged to the income statement.

The net impact of the above write-down adjustment of Rmb 254,446 (2003: Rmb
279,540) is reversed as at December 31, 2004. The related depreciation of above
write-down adjustment in 2004 of Rmb 25,445 (2003: Rmb 27,954; 2002: nil) is
charged to the income statement.

(b) Foreign exchange losses

Under US GAAP, foreign exchange losses are expensed in the period in which they
occur.

Under IFRS, the Group capitalized foreign currency translation difference
relating to borrowings to the extent that these are adjustments to the interest
costs of funds used to finance the construction of fixed assets during the
period of construction. For purposes of reconciling to the US GAAP financial
data, the effect of the capitalized foreign currency translation difference and
the related depreciation charge is reversed.

(c) Fixed assets transferred to Jilian

During the period ended December 31, 1994, certain fixed assets of the Company
were appraised and transferred to Jilian, which was 65% owned and jointly
controlled by the Company prior to December 2002 when the Company acquired the
35% minority interest. At the time of the 1994 transfer, the Company retained
65% of revaluation surplus arising from the appraisal of these assets which
amounted to Rmb 121,309 within the revaluation reserve and recognized a gain of
Rmb 65,320, representing 35% of revaluation surplus, from the transfer to the
other joint venture partner of a 35% interest in the fixed assets. The
depreciation charge on the revaluation surplus related to these assets for the
year ended December 31, 2004 was Rmb 7,630 (2003: Rmb 7,630; 2002: Rmb 7,630).
For purposes of reconciling to the US GAAP financial data, the effect of the
revaluation, the related depreciation charge and the gain on the transfer is
reversed. In addition, as the Company acquired the remaining 35% equity interest
in Jilian in December 2002, Jilian has become a branch of the Company.
Therefore, since 2003, the reversed depreciation charge on the revaluation
surplus for Jilian's fixed assets has been included in the Company's
depreciation charge on fixed assets due to revaluation on Restructuring and at
February 28, 1995 for the reconciliation to US GAAP.







                                      -44-
<PAGE>



                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



31       SIGNIFICANT DIFFERENCES BETWEEN IFRS AND US GAAP (CONTINUED)

(d) Tax adjustment

Adjustment to reflect deferred tax effect of U.S. GAAP reconciliation items (a)
through (c) above. In prior years, a full valuation allowance was established
under U.S. GAAP to reduce net deferred tax assets to zero. In current year, no
valuation allowance is needed as it is more likely than not that such deferred
tax assets would be realized.

(e) Additional US GAAP information - recent accounting pronouncements

On November 24, 2004, the FASB issued Statement No. 151, Inventory Costs, an
amendment of ARB No. 43, Chapter 4 (FAS 151). FAS 151 requires that abnormal
amounts of idle capacity and spoilage costs be excluded from the cost of
inventory and expensed when incurred. The provisions of FAS 151 are applicable
to inventory costs incurred during fiscal years beginning after June 15, 2005.

On December 15, 2004, the FASB issued Statement No. 153, Exchanges of
Nonmonetary Assets, an amendment of APB Opinion No. 29 (FAS 153). FAS 153
requires exchanges of productive assets to be accounted for at fair value,
rather than at carryover basis, unless (1) neither the asset received nor the
asset surrendered has a fair value that is determinable within reasonable limits
or (2) the transactions lack commercial substance. FAS 153 is effective for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005.

The Group does not expect the adoption of above accounting pronouncements will
have a material impact on its financial position or results of operations.

32       PRINCIPAL SUBSIDIARIES
<TABLE>
<CAPTION>

    Company name              Paid-up                            Attributable
                                                                 equity
                              capital      Type of legal          interest
                              RMB          entity                     %           Principal activities
 --------------------------   ----------   ------------------   --------------    -------------------------

<S>                            <C>         <C>                        <C>          <C>
  Jilin Jihua Jianxiu          45,200     Limited liability          99          Machinery repair and
   Company Limited                         company                                  installation

  Jilin Xinhua                 25,668     Limited liability          75          Manufacture and sale of
   Nitrochloro-benezene                    company                                  nitrochloro-benzene
   Company Limited

  Jilin Winsway Chemical      51,454      Sino-foreign               70          Provision of
   Industrial Store and                    equity joint                             transportation
   Transport Limited                       venture                                  services for
                                                                                    chemical materials
                                                                                    and products

  Jilin City Songmei            72,000    Sino-foreign               66          Manufacture of acetic
   Acetic Co., Ltd.                        co-operative                             acid
                                           joint venture

  Jilin Jihua Jinxiang            2,000   Limited liability          94          Inspection, research
   Pressure Vessel                         company                                  and consultation of
   Inspection Co., Ltd.                                                             pressure vessels


</TABLE>




                                      -45-
<PAGE>




                    JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                 (AMOUNTS IN THOUSANDS UNLESS OTHERWISE STATED)



32       PRINCIPAL SUBSIDIARIES (CONTINUED)

Except for Jinxiang, which was established by Jianxiu and Jilin Lianli
Industrial Co., Ltd. ("Lianli"), an associated company of the Company, on March
6, 2003, there were no changes in the interests held in other subsidiaries in
2003 and 2004.

33       ULTIMATE HOLDING COMPANY

The directors regard CNPC, a state-owned enterprise established in the PRC, as
being the ultimate holding company.

34       APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the board of directors on May 18, 2005
and will be submitted to the shareholders for approval at the annual general
meeting to be held May 20, 2005.
















                                      -46-





<PAGE>



ITEM 19.      EXHIBITS


12.1     Certification of Chairman Required by Rule 13a-14(a)

12.2     Certification of Deputy Chief Financial Officer Required by
         Rule 13a-14(a)

13.1     Certification of Chairman Required by Rule 13a-14(b) and Section 1350
         of Chapter 63 of Title 18 of the United States Code

13.2     Certification of Deputy Chief Financial Officer Required by
         Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
         United States Code















                                      -79-
<PAGE>



                                   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
undersigned to sign this annual report on its behalf.

                                 JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED



                                 By:       /S/ YU LI
                                          ------------------
                                 Name:    Yu Li
                                 Title:   Chairman


Dated:  May 19, 2005

















                                      -80-
<PAGE>

                                INDEX TO EXHIBITS


12.1     Certification of Chairman Required by Rule 13a-14(a)

12.2     Certification of Deputy Chief Financial Officer Required by
         Rule 13a-14(a)

13.1     Certification of Chairman Required by Rule 13a-14(b) and Section 1350
         of Chapter 63 of Title 18 of the United States Code

13.2     Certification of Deputy Chief Financial Officer Required by
         Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
         United States Code







                                      -81-
<PAGE>