##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    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 0-29946
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 QIAO XING UNIVERSAL RESOURCES, INC.
  QIAO XING UNIVERSAL RESOURCES, INC.
  British Virgin Islands
  Qiao Xing Science Industrial Park
Tang Quan
Huizhou City, Guangdong,
 Peoples Republic of China 516023  (Address of principal executive offices)
 Aijun Jiang, CFO
011-86-752-2820-268 (telephone)  jiangaijun@qiaoxing.com.hk (email)  011-86-752-2820-268 (facsimile)
 Qiao Xing Science Industrial Park
Tang Quan
 Huizhou City, Guangdong,
Peoples Republic of China 516023  (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 Title of each
    
    Name of each exchangeclass
    
    on which registeredUS$.001 Par Value Common Stock
(Common Stock)
    
    NASDAQ
  (Title of Class)
  (Title of Class)
    o þ
  o þ
  þ o
  o o
  Large accelerated filer o   
    Accelerated filer þ
    Non-accelerated filer o
  þ   o   o
  o
 o
  o þ




---



TABLE OF CONTENTS  PART IITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLEITEM 3. KEY INFORMATIONITEM 4. INFORMATION ON THE COMPANYITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTSITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSITEM 8. FINANCIAL INFORMATIONITEM 9. THE OFFER AND LISTINGITEM 10. ADDITIONAL INFORMATIONITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESPART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSITEM 15.CONTROLS AND PROCEDURESITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTITEM 16B.CODE OF ETHICSITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANTITEM 16G. CORPORATE GOVERNANCEPART IIIITEM 17.FINANCIAL STATEMENTSITEM 18.FINANCIAL STATEMENTSITEM 19. EXHIBITSSIGNATURESINDEX TO EXHIBITSEX-1.4EX-8.1EX-12.1EX-12.2EX-13.1EX-13.2EX-15.1EX-15.2    Table of Contents  SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
   
    
    Fluctuations in the market price of molybdenum could adversely affect the Companys
financial condition, results of operations and cash flows.
    
    Estimates of proven and probable mineral reserves and other mineralized material may
prove to be inaccurate.
    
    The Companys exploration activities may not result in discoveries of proven and
probable reserves and commercial quantities of molybdenum.
    
    The Companys revenues for its mining operations are primarily dependent on its
production of molybdenum. The Companys ability to sustain current molybdenum production
levels or to increase molybdenum production levels depends on its ability to bring new
mines into production or to expand proven and probable reserves at the existing mine.
    
    Mining operations are subject to conditions or events beyond the Companys control which
could have a material adverse effect on the Companys financial condition, results of
operations and cash flows from operations. The Companys insurance policies may not cover
all these risks and hazards adequately.
    
    The Company may not be able to acquire desirable mining assets in the future.
    
    The development of mining projects is inherently risky and may require more capital than
anticipated which could adversely affect the cash flows of the Company.
    
    Intense competition in the mining industry could reduce the Companys market share or
harm its financial condition, results of operations and cash flows.
    
    The temporary shutdown of the Companys mining operations could expose it to significant
costs and adversely affect its access to skilled labor.
    
    The Companys mining operations give rise to environmental risk.
    
    Mineral ores and mineral products, including molybdenum ore and molybdenum products,
contain naturally occurring impurities and toxic substances.
 1




---



##### Table of Contents




    
    Reclamation and mine closure costs could adversely affect the Companys financial
position, results of operations and cash flows.
    
    Title to some of the Companys exploration and mining rights could be challenged or
defective.
    
    The Company is required to obtain government permits in order to conduct mining
operations.
    
    Increased energy prices or a disruption of energy supply could adversely affect the
Companys operations.
    
    Disruption of transportation services or increased transportation costs could have a
material adverse effect on the Companys financial position, results of operations and cash
flows.
    
    The Companys mining business depends on good relations with its employees.
    2




---



##### Table of Contents



PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 A. SELECTED FINANCIAL DATA.
  2005
    
    2006
    
    2007
    
    2008
    
    2009Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Net sales
    
    
    2,635,184
    
    
    
    3,221,212
    
    
    
    3,141,094
    
    
    
    2,153,873
    
    
    
    1,826,799
    
    
    
    267,628Cost of goods sold
    
    
    (2,156,798
    )
    
    
    (2,651,392
    )
    
    
    (2,255,844
    )
    
    
    (1,287,096
    )
    
    
    (1,474,930
    )
    
    
    (216,078
    )Gross profit
    
    
    478,386
    
    
    
    569,820
    
    
    
    885,250
    
    
    
    866,777
    
    
    
    351,869
    
    
    
    51,550Operating expenses:Selling expenses
    
    
    (24,726
    )
    
    
    (28,401
    )
    
    
    (36,322
    )
    
    
    (146,551
    )
    
    
    (110,444
    )
    
    
    (16,180
    )General and
administrative expenses
Including stock-based
compensation
    
    
    (55,341
    )
    
    
    (126,076
    )
    
    
    (86,479
    )
    
    
    (59,794
    )
    
    
    (114,807
    )
    
    
    (16,819
    )Research and development
    
    
    (20,694
    )
    
    
    (30,747
    )
    
    
    (18,599
    )
    
    
    (29,242
    )
    
    
    (36,404
    )
    
    
    (5,334
    )In process research and
development
    
    
    
    
    
    
    (41,739
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of acquired
intangible assets
    
    
    (11,880
    )
    
    
    (15,178
    )
    
    
    (32,281
    )
    
    
    (11,727
    )
    
    
    (4,733
    )
    
    
    (693
    )Impairment of acquired
intangible asset
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,235
    )
    
    
    (13,600
    )
    
    
    (1,992
    )Impairment of assets
held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,957
    )
    
    
    (873
    )Income from operations
    
    
    365,745
    
    
    
    327,679
    
    
    
    711,569
    
    
    
    593,228
    
    
    
    65,924
    
    
    
    9,659Interest income
    
    
    7,130
    
    
    
    8,108
    
    
    
    28,441
    
    
    
    54,821
    
    
    
    28,641
    
    
    
    4,196
 3




---



##### Table of Contents



2005
    
    2006
    
    2007
    
    2008
    
    2009Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Exchange gain (loss), net
    
    
    (2,659
    )
    
    
    3,225
    
    
    
    15,168
    
    
    
    (16,971
    )
    
    
    406
    
    
    
    60Interest expense
    
    
    (41,752
    )
    
    
    (100,432
    )
    
    
    (240,498
    )
    
    
    (311,710
    )
    
    
    (222,804
    )
    
    
    (32,641
    )(Loss) gain on
re-measurement of
embedded derivatives
    
    
    
    
    
    
    (134,439
    )
    
    
    (129,084
    )
    
    
    160,036
    
    
    
    (8,258
    )
    
    
    (1,210
    )Loss on extinguishment
of convertible debt
    
    
    
    
    
    
    
    
    
    
    (142,090
    )
    
    
    (10,634
    )
    
    
    (15,261
    )
    
    
    (2,236
    )Gain on disposal of
interests in
subsidiaries
    
    
    10,307
    
    
    
    
    
    
    
    482,614
    
    
    
    2,269
    
    
    
    
    
    
    
    Gain on issue/repurchase
of stocks by subsidiary
    
    
    
    
    
    
    
    
    
    
    383,965
    
    
    
    4,351
    
    
    
    
    
    
    
    Provision for litigation
settlement
    
    
    
    
    
    
    
    
    
    
    (15,319
    )
    
    
    
    
    
    
    
    
    
    
    Impairment of investment
at cost
    
    
    (7,348
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,802
    )
    
    
    (411
    )Unrealized (loss) on
derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,673
    )
    
    
    (685
    )Other income (loss), net
    
    
    640
    
    
    
    4,453
    
    
    
    6,462
    
    
    
    (3,700
    )
    
    
    166
    
    
    
    24Income before income tax
    
    
    332,063
    
    
    
    108,594
    
    
    
    1,101,228
    
    
    
    471,690
    
    
    
    (158,661
    )
    
    
    (23,244
    )Provision for income tax
    
    
    (25,486
    )
    
    
    (58,192
    )
    
    
    (113,377
    )
    
    
    (155,717
    )
    
    
    (43,939
    )
    
    
    (6,437
    )Income after income tax
    
    
    306,577
    
    
    
    50,402
    
    
    
    987,851
    
    
    
    315,973
    
    
    
    (202,600
    )
    
    
    (29,681
    )Discontinued operations,
net of tax
    
    
    
    
    
    
    
    
    
    
    63,033
    
    
    
    (290,953
    )
    
    
    (139,782
    )
    
    
    (20,478
    )Extraordinary gain on
acquisition of minority
interests
    
    
    37,592
    
    
    
    14,237
    
    
    
    28,689
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) for
the year
    
    
    344,169
    
    
    
    64,639
    
    
    
    1,079,573
    
    
    
    25,020
    
    
    
    (342,382
    )
    
    
    (50,159
    )Net income (loss)
attributable to
noncontrolling interest
    
    
    (99,270
    )
    
    
    (84,473
    )
    
    
    (175,625
    )
    
    
    (161,814
    )
    
    
    82,486
    
    
    
    12,084Net Income (Loss)
    
    
    244,899
    
    
    
    (19,834
    )
    
    
    903,948
    
    
    
    (136,794
    )
    
    
    (259,896
    )
    
    
    (38,075
    )Translation adjustments
    
    
    1,821
    
    
    
    7,203
    
    
    
    (50,106
    )
    
    
    (33,815
    )
    
    
    (85,883
    )
    
    
    (12,582
    )Comprehensive income
(loss)
    
    
    246,720
    
    
    
    (12,631
    )
    
    
    853,842
    
    
    
    (170,609
    )
    
    
    (345,779
    )
    
    
    (50,657
    )Basic earnings (loss)
per common shareContinuing operations
    
    
    11.32
    
    
    
    (1.44
    )
    
    
    22.73
    
    
    
    4.98
    
    
    
    (1.91
    )
    
    
    (0.28
    )Discontinuing operations
    
    
    
    
    
    
    
    
    
    
    1.73
    
    
    
    (9.40
    )
    
    
    (2.22
    )
    
    
    (0.33
    )Extraordinary gain
    
    
    2.05
    
    
    
    0.60
    
    
    
    0.49
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    13.37
    
    
    
    (0.84
    )
    
    
    24.95
    
    
    
    (4.42
    )
    
    
    (4.13
    )
    
    
    (0.61
    )Diluted earnings (loss)
per common shareContinuing operations
    
    
    11.32
    
    
    
    (2.03
    )
    
    
    22.45
    
    
    
    3.51
    
    
    
    (1.91
    )
    
    
    (0.28
    )Discontinuing operations
    
    
    
    
    
    
    
    
    
    
    1.72
    
    
    
    (9.40
    )
    
    
    (2.22
    )
    
    
    (0.33
    )Extraordinary gain
    
    
    2.05
    
    
    
    0.59
    
    
    
    0.48
    
    
    
    
    
    
    
    
    
    
    
    
 4




---



##### Table of Contents



2005
    
    2006
    
    2007
    
    2008
    
    2009Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000After extraordinary gain
    
    
    13.37
    
    
    
    (1.44
    )
    
    
    24.65
    
    
    
    (5.89
    )
    
    
    (4.13
    )
    
    
    (0.61
    )Weighted average number
of shares outstanding- Basic (2)
    
    
    18,319,000
    
    
    
    23,712,000
    
    
    
    29,836,000
    
    
    
    30,949,000
    
    
    
    62,837,000
    
    
    
    62,837,000- Diluted (2)
    
    
    18,320,000
    
    
    
    24,016,000
    
    
    
    30,200,000
    
    
    
    30,949,000
    
    
    
    62,837,000
    
    
    
    62,837,000
 2005
    
    2006
    
    2007
    
    2008
    
    2009Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    Rmb000
    
    US$000Balance Sheet DataCash and bank deposits
    
    
    391,660
    
    
    
    1,096,477
    
    
    
    3,033,010
    
    
    
    2,908,343
    
    
    
    3,709,503
    
    
    
    543,445Working capital
    
    
    856,839
    
    
    
    1,498,715
    
    
    
    3,946,468
    
    
    
    3,552,070
    
    
    
    3,400,841
    
    
    
    498,226Property, machinery and
equipment, net
    
    
    52,664
    
    
    
    209,542
    
    
    
    192,601
    
    
    
    167,366
    
    
    
    170,485
    
    
    
    24,976Proven and probable reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    712,121
    
    
    
    104,326Construction in progress
    
    
    59,105
    
    
    
    60,295
    
    
    
    
    
    
    
    
    
    
    
    86,591
    
    
    
    12,685Lease prepayments, net
    
    
    173,161
    
    
    
    207,206
    
    
    
    36,106
    
    
    
    35,305
    
    
    
    
    
    
    
    Value beyond proven and
probable reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,295
    
    
    
    9,859Debt issuance cost, net
    
    
    
    
    
    
    31,845
    
    
    
    
    
    
    
    34,689
    
    
    
    
    
    
    
    Total assets
    
    
    2,534,547
    
    
    
    4,177,986
    
    
    
    6,378,841
    
    
    
    7,081,088
    
    
    
    5,910,631
    
    
    
    865,912Short-term-debts
    
    
    754,212
    
    
    
    1,155,290
    
    
    
    1,471,454
    
    
    
    3,086,163
    
    
    
    1,381,807
    
    
    
    202,436Long-term-debts
    
    
    7,959
    
    
    
    229,784
    
    
    
    196,854
    
    
    
    7,049
    
    
    
    330,934
    
    
    
    48,482Total liabilities
    
    
    1,316,418
    
    
    
    2,192,713
    
    
    
    2,260,956
    
    
    
    3,093,212
    
    
    
    1,712,741
    
    
    
    250,918Noncontrolling interests (1)
    
    
    220,832
    
    
    
    115,224
    
    
    
    1,095,917
    
    
    
    1,006,546
    
    
    
    1,156,086
    
    
    
    169,368XINGs equity
    
    
    997,297
    
    
    
    1,870,049
    
    
    
    3,021,968
    
    
    
    2,981,330
    
    
    
    3,041,804
    
    
    
    445,626Cash flows dataCash flows from operating
activities
    
    
    116,682
    
    
    
    (156,840
    )
    
    
    954,654
    
    
    
    (222,888
    )
    
    
    872,578
    
    
    
    127,833Cash flows from investing
activities
    
    
    (3,822
    )
    
    
    (603,009
    )
    
    
    (650,317
    )
    
    
    340,322
    
    
    
    (597,861
    )
    
    
    (87,587
    )Cash flows from financing
activities
    
    
    136,505
    
    
    
    1,465,657
    
    
    
    1,675,920
    
    
    
    (11,557
    )
    
    
    310,058
    
    
    
    45,424
 
 (1)
    
    Mr. Rui Lin Wu and Mr. Zhi Yang Wu own minority equity interests in certain
subsidiaries of our company.(2)
    
    Earnings per share is computed by dividing net income for 2005 by 18,319,000 shares, for 2006
by 23,712,000 shares, for 2007 by 29,836,000 shares, for 2008 by 30,949,000 shares and for
2009 by 62,837,000 shares. Diluted earnings per common share is computed by using the weighted
average number of common shares outstanding adjusted to include the potentially dilutive
effect of outstanding stock options, warrants and convertible debentures, to the extent such
instruments were dilutive during the period.(3)
    
    Translation of amounts from Renminbi (Rmb) into United States dollars (US$) is
for the convenience of readers and has been made at 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 December 31, 2009 of 5




---



##### Table of Contents



US$1.00 = Rmb 6.8259. 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. Exchange Rate Information
   Noon Buying Rate(1)Calendar Year
    
    Average(2)(Rmb per US$)2005
    
    
    8.19362006
    
    
    7.97232007
    
    
    7.60582008
    
    
    6.94772009
    
    
    6.8307
 
 (1)
    
    The noon buying rate in New York for cable transfers payable in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York. Since April 1994, the
noon buying rate has been based on the PBOC Rate. As a result, since April 1994, the noon
buying rate and the PBOC Rate have been substantially similar.(2)
    
    Annual averages are calculated from the month-end rates. Calendar Month
    
    High
    
    Low
    
    AverageJanuary 2010
    
    
    6.8295
    
    
    
    6.8258
    
    
    
    6.8269February 2010
    
    
    6.8330
    
    
    
    6.8258
    
    
    
    6.8285March 2010
    
    
    6.8270
    
    
    
    6.8254
    
    
    
    6.8262April 2010
    
    
    6.8275
    
    
    
    6.8229
    
    
    
    6.8256May 2010
    
    
    6.8310
    
    
    
    6.8245
    
    
    
    6.8275June 2010
    
    
    6.8323
    
    
    
    6.7815
    
    
    
    6.8184
    6




---



##### Table of Contents



B. CAPITALIZATION AND INDEBTEDNESS.
  C. REASONS FOR THE OFFER AND USE OF PROCEEDS.
  D. RISK FACTORS
 The current financial crisis and economic downturn may have a material and adverse effect on our
businesses, results of operations and financial condition.
  Our future revenues and operating results are inherently unpredictable, and as a result, we may
fail to meet the expectations of securities analysts or investors, which could cause our stock
price to decline.
  
    
    the current economic environment and other developments in the telecommunications
industry;
    
    the mix of our products sold, including inventory items with low product costs;
    
    our ability to control expenses;
    
    fluctuations in demand for and sales of our products, the acceptance of our products
in the marketplace, and the general level of spending in the telecommunications
industry;
    
    our ability to maintain appropriate manufacturing capacity, and particularly to
limit excess capacity commensurate with the volatile demand levels for our products;
    
    our ability to successfully complete a transition to an outsourced manufacturing
model;
    
    the ability of our outsourced manufacturers to timely produce and deliver
subcomponents, and possibly complete products in the quantity and of the quality we
require;
    
    competitive factors, including the introduction of new products and product
enhancements by competitors and potential competitors, pricing pressures, and the
competitive environment in the markets into which we sell our products, including
competitors with substantially greater resources than we have;
    
    our ability to effectively develop, introduce, manufacture, and ship new and
enhanced products in a timely manner without defects;
    
    the availability and cost of components for our products;
    
    new product introductions that may result in increased research and development
expenses and sales and marketing expenses that are incurred in one quarter, with
revenues, if any, that are not recognized until a subsequent or later quarter; and
 7




---



##### Table of Contents




    
    the unpredictability of consumer demand and difficulties in meeting such demand.
   Our stock price is highly volatile.
  
    
    quarterly variations in our operating results;
    
    significant developments in the businesses of other telecommunications companies;
    
    changes in financial estimates by securities analysts;
    
    changes in market valuations or financial results of telecommunications-related
companies;
    
    announcements by us or our competitors of technology innovations, new products, or
significant acquisitions, strategic partnerships or joint ventures;
    
    any deviation from projected growth rates in revenues;
    
    any loss of a major customer or a major customer order;
    
    additions or departures of key management or engineering personnel;
    
    any deviations in our net revenue or in losses from levels expected by securities
analysts;
    
    activities of short sellers and risk arbitrageurs;
    
    future sales of our common stock; and
    
    volume fluctuations, which are particularly common among highly volatile securities
of telecommunications-related companies.
  We experience intense competition with respect to our products.
  We are subject to a concentration of credit risk.
  8




---



##### Table of Contents



The economy of China differs from the economies of most countries and creates significant risks.
    Our currency is not freely convertible.
  We may not maintain adequate insurance coverage for damage to our Chinese factories.
  The discontinuation of the preferential tax treatment currently available to our PRC subsidiary,
CEC Telecom Co., Ltd., could materially adversely affect our results of operations.
  9




---



##### Table of Contents



The dividends that our BVI-incorporated investment holding subsidiaries receive from their
subsidiaries in the PRC and our global income may be subject to PRC tax under the new PRC
Enterprise Income Tax Law, which would have a material adverse effect on our results of operations.
In addition, our foreign corporate holders of ordinary shares may be subject to a PRC withholding
tax upon any dividends payable by us and upon gains realized on the sale of our ordinary shares, if
we are classified as a PRC resident enterprise.
   10




---



##### Table of Contents



We depend upon certain key personnel to manage our company.
  We are controlled by one of our shareholders, whose interests may differ from other shareholders.
  Our holding company structure creates restrictions on the payment of dividends.
  As a foreign private issuer, we are not subject to certain rules promulgated by Nasdaq that other
Nasdaq-listed issuers are required to comply with.
  
    
    our independent directors do not hold regularly scheduled meetings in executive
session;
    
    the compensation of our executive officers is not determined by an independent
committee of the board or by the independent members of the board of directors, and our
CEO may be present and participate in the deliberations concerning his compensation;
    
    related party transactions are not required to be reviewed or approved by our audit
committee or other independent body of the board of directors; and
 11




---



##### Table of Contents




    
    we are not required to solicit shareholder approval of stock plans, including those
in which our officers or directors may participate; stock issuances that will result in
a change in control; the issuance of our stock in related party transactions or other
transactions in which we may issue 20% or more of our outstanding shares; or, below
market issuances of 20% or more of our outstanding shares to any person.
  It may be difficult to serve us with legal process or enforce judgments against us or our
management.
  
    
    judgments of United States courts against us, our directors or our officers based on
the civil liability provisions of the securities laws of the United States or any
state; or
    
    in original actions brought in the British Virgin Islands or China, liabilities
against us or non-residents based upon the securities laws of the United States or any
state.
 Some information about us may be unavailable due to exemptions under the Exchange Act for a foreign
private issuer.
  
    
    the rules under the Exchange Act requiring the filing with the Securities and
Exchange Commission of quarterly reports on Form 10-Q or current reports on Form 8-K;
    
    the provisions of Regulation FD aimed at preventing issuers from making selective
disclosures of material information;
    
    the sections of the Exchange Act regulating the solicitation of proxies, consents or
authorizations in respect of a security registered under the Exchange Act; and
    
    the sections of the Exchange Act requiring insiders to file public reports of their
stock ownership and trading activities and establishing insider liability for profits
realized from any short-swing trading transaction.
  Since we are a British Virgin Islands company, the rights of our shareholders may be more limited
than those of shareholders of a company organized in the United States.
    12




---



##### Table of Contents



Risk Factors Regarding Our Mining Operations in China
 Fluctuations in the market price of molybdenum could adversely affect the Companys financial
condition, results of operations and cash flows from operations
   Estimates of proven and probable mineral reserves and other mineralized material may prove to be
inaccurate
  The Companys exploration activities may not result in discoveries of proven and probable reserves
and commercial quantities of molybdenum
  13




---



##### Table of Contents



The Companys revenues for its mining operations are primarily dependent on its production of molybdenum. The Companys ability to sustain current molybdenum production levels or to increase
molybdenum production levels depends on its ability to bring new mines into production or to expand
proven and probable reserves at the existing mine
  Mining operations are subject to conditions or events beyond the Companys control which could have a material adverse effect on the Companys financial condition, results of operations and cash
flows from operations. The Companys insurance policies may not adequately cover all these risks
and hazards
    The Company may not be able to acquire desirable mining assets in the future
  The development of mining projects is inherently risky and may require more capital than
anticipated, which could adversely affect the cash flows of the Company
 14




---



##### Table of Contents



Intense competition in the mining industry could reduce the Companys market share or harm its
financial condition, results of operations and cash flows
  The temporary shutdown of the Companys mining operations could expose it to significant costs and
adversely affect its access to skilled labor
  The Companys mining operations give rise to environmental risk
  15




---



##### Table of Contents



Mineral ores and mineral products, including molybdenum ore and molybdenum products, contain
naturally occurring impurities and toxic substances
  Reclamation and mine closure costs could adversely affect the Companys financial position, results
of operations and cash flows
  Title to some of the Companys exploration and mining rights could be challenged or defective
  16




---



##### Table of Contents



The Company is required to obtain government permits in order to conduct mining operations
  Increased energy prices or a disruption of energy supply could adversely affect the Companys
operations
  Disruption of transportation services or increased transportation costs could have a material
adverse effect on the Companys financial position, results of operations and cash flows
  The Companys mining business depends on good relations with its employees
  17




---



##### Table of Contents



ITEM 4. INFORMATION ON THE COMPANY
 A. HISTORY AND DEVELOPMENT OF THE COMPANY.
         Initial Public Offering of QX Mobile Shares And Non-Competition Arrangement
   18




---



##### Table of Contents



Acquisition of China Luxuriance Jade Company, Ltd. and commencement of diversification into the
resources industry
         19




---



##### Table of Contents



Purchase of US$30,000,000 of Convertible Notes of QX Mobile
    20




---



##### Table of Contents



Disposal of Qiao Xing Communication Holdings Limited
   Restructured 2006 Unsecured Convertible Notes (2006 Notes)
    Repayment of Outstanding 0% Restated Notes
    21




---



##### Table of Contents



Recent Developments
  B. BUSINESS OVERVIEW.
   2007
    
    2008
    
    2009Rmb000
    
    Rmb000
    
    Rmb000Net sales:Mobile phones
    
    
    3,141,094
    
    
    
    2,153873
    
    
    
    1,632,912Mining business
    
    
    
    
    
    
    
    
    
    
    193,887Indoor phones
    
    
    733,013
    
    
    
    441,075
    
    
    
    3,874,107
    
    
    
    2,594,948
    
    
    
    1,826,799
 QX Mobile and Its Subsidiary CECTs Business Overview
    22




---



##### Table of Contents



23




---



##### Table of Contents



CLJC and Its Subsidiary Haozhous Business Overview
   General description
       24




---



##### Table of Contents



Location, access and traffic, climate, physiography and infrastruture
       25




---



##### Table of Contents



26




---



##### Table of Contents



Uses of molybdenum and other products
 2
  Marketing
     27




---



##### Table of Contents



Period
    
    Low
    
    High
    
    AverageRmb/
    
    Rmb/
    
    Rmb/metric tonne
    
    metric tonne
    
    metric tonneunit
    
    unit
    
    unitJuly, 2009
    
    
    2,000
    
    
    
    2,300
    
    
    
    2,147August, 2009
    
    
    2,580
    
    
    
    2,650
    
    
    
    2,611September, 2009
    
    
    2,350
    
    
    
    2,400
    
    
    
    2,374October, 2009
    
    
    1,950
    
    
    
    2,200
    
    
    
    2,071November, 2009
    
    
    1,920
    
    
    
    1,970
    
    
    
    1,945December, 2009
    
    
    1,950
    
    
    
    1,980
    
    
    
    1,9642009
    
    
    1,950
    
    
    
    2,650
    
    
    
    2,160
  Summary of ore reserves and mineralized material
   28




---



##### Table of Contents



Platts Metals Week.
 Erdaoyingzi Molybdenum Recoverable Ore Reserve Summary at December 31, 2009
 Ore Reserve
    
    Tonnage
    
    
    
    Contained MoCategory
    
    (kt)
    
    Mo Grades (%)
    
    Metals (t))Proved
    
    2,610.4
    
    0.40
    
    10,442Probable
    
    5,083.0
    
    0.38
    
    19,547Total
    
    7,693.4
    
    0.39
    
    29,989
  Other Erdaoyingzi Molybdenum Mineralized Material
   Erdaoyingzi Molybdenum Mineralized Material Summary at December 31, 2009
 Tonnage
    
    Mo Grades(kt)
    
    (%)1,958.6
    
    0.37
 29




---



##### Table of Contents



Mining operation
      Geology
    30




---



##### Table of Contents



Exploration
  Government regulations
    o
    
    China Mineral Resources Law, which requires a mining business to have
exploration and mining licenses from provincial or local land and
resources agencies.o
    
    China Mine Safety Law, which requires a mining business to have a safe
production license and provides for
 31




---



##### Table of Contents



random safety inspections of
mining facilities.o
    
    China Environmental Law, which requires a mining project to obtain an
environmental feasibility study of the project.
   Sustainable development
  Closure and Rehabilitation
    32




---



##### Table of Contents



33




---



##### Table of Contents



C. ORGANIZATIONAL STRUCTURE AS OF JULY 10, 2010:
 
 34




---



##### Table of Contents



D. PROPERTY, PLANT AND EQUIPMENT.
  35




---



##### Table of Contents



ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    -
    
    Net loss for 2009 was Rmb259.9 million
(US$38.1 million), or Rmb4.13 (US$0.61) per
basic and diluted common share, which included a non-cash unrealized loss on common share
purchase warrants of Rmb4.7 million (US$0.7 million), or Rmb0.07 (US$0.01) per basic and
diluted common share. Total net loss from discontinued operations was Rmb139.8 million
(US$20.5 million), or Rmb2.22 (US$0.33) per basic and diluted common share.-
    
    Non-cash unrealized loss on common stock purchase warrants of Rmb4.7 million (US$0.7
million) for 2009 was the result of a requirement under US GAAP to account for the
Companys outstanding common stock purchase warrants as a derivative, with changes in the
fair value recorded in net income (loss).-
    
    Net of tax operating result of QXCH Group amounted to Rmb372.2 million (US$54.5
million). The Company disposed QXCH Group on November 30, 2009 and recorded a gain on the
disposal at amount of Rmb144.2 million (US$21.1 million). The disposal of QXCH resulted in
a realized foreign currency gain related to loans from the Group to QXCH at an amount of
Rmb88.2 million (US$12.9 million). Total net loss from discontinued operations amounted to
Rmb139.8 million (US$20.5 million).-
    
    Consolidated revenues for 2009 were Rmb1,826.8 million (US$267.6 million). Among them,
Rmb1,632.9 million (US$239.2 million) were contributed by the telecommunication business of
QXMC, down approximately 24.2%; Rmb193.9 million (US$28.4 million) were contributed by the
mining business of CLJC.-
    
    Operating cash flows were Rmb872.6 million (US$127.8 million). Total cash and cash
equivalents at December 31, 2009 were Rmb3,709.5 million (US$543.4 million), compared to
Rmb3,117.5 million as of December 31, 2008.-
    
    Highlights of the mining business:
 i)
    
    Commercial production of the Companys molybdenum mine started in July 2009.
Consolidated revenues from the mining business for 2009 were Rmb193.9 million (US$28.4
million); the business generated a gross profit of Rmb100.6 million (US$14.7 million)
and net income of Rmb64.2 million (US$9.4 million).ii)
    
    Molybdenum concentrate production in 2009 was 1,929.6 tonnes, which contained
929.9 tonnes (2.05 million pounds) of molybdenum metal.
 36




---



##### Table of Contents



iii)
    
    Average cost of sales per tonne of molybdenum metal produced for 2009 was
Rmb100,360 (US$14,703), which equals to Rmb45.62(US$6.68) per pound. (The final mining
product of the
Company is molybdenum concentrate, so the cash cost does not include the cost of
smelting since the Company does not engage in smelting operations).iv)
    
    Capital expenditures incurred in the mining business for 2009 were Rmb113.0
million (US$16.6 million), comprised Rmb94.0 million (US$13.8 million) for the mines and
Rmb19.0 million (US$2.8 million) for the mill.
  Telecommunication business of QXMC
 Industry growth
    Competition and market position
    Product offerings and pricing
  37




---



##### Table of Contents



Cost management
  Working capital management
  38




---



##### Table of Contents



Mining business of CJLC
 Molybdenum market
     Operations
   Anticipated productive lives of mineral properties, facilities and equipment
  39




---



##### Table of Contents



1.
    
    Additional exploration and development of the mines could convert some of the existing
mineralized material to proven and probable ore reserves. These new ore reserves would
increase the mine life.2.
    
    Additional exploration may also find additional proven and probable reserves or
mineralized material resources within the exploration license areas. Some of these
additional mineral resources might be converted to ore reserves, which would extend the
mine life.3.
    
    Changes in the production rate would also change the mine life. The mine life would be
shortened if the production rate is increased to a higher level than the anticipated
production level for 2011.4.
    
    Changes in the assumptions in the mining plan such as the long-term molybdenum price,
mining costs, processing costs, fuel, electric power, etc. Changes in these assumptions
could impact the cut-off grade determined in the mining plan.
 Anticipated assets retirement costs
    40




---



##### Table of Contents



Fiscal 2009 compared to Fiscal 2008
  -
    
    Decrease of gross profit by Rmb514.9 million (US$75.4 million) mainly due to the
decreased net sales and increased cost of sales in QXMC;-
    
    Decrease of selling expenses by Rmb36.1 million (US$5.3 million);-
    
    Increase of general and administrative expenses by Rmb55.0 million (US$8.1 million);-
    
    Decrease of gain from remeasurement of embedded derivatives at amount of Rmb168.3
million (US$24.7 million);-
    
    Decrease of interest expense by Rmb88.9 million (US$13.0 million);-
    
    Decrease of net loss from discontinued operations at amount of Rmb139.8 million (US$20.5 million);
      Year ended December 312009
    
    
    2008Rmb000
    
    
    %
    
    
    Rmb000
    
    
    %Mobile telephones of QXMC
    
    
    1,632,912
    
    
    
    89
    
    
    
    2,153,873
    
    
    
    100Mining business of CLJC
    
    
    193,887
    
    
    
    11
    
    
    
    
    
    
    
    Total
    
    
    1,826,799
    
    
    
    100
    
    
    
    2,153,873
    
    
    
    100
   41




---



##### Table of Contents



Year ended December 312009
    
    
    2008Rmb000
    
    
    %
    
    
    Rmb000
    
    
    %Mobile telephones of QXMC
    
    
    1,381,595
    
    
    
    94
    
    
    
    1,287,096
    
    
    
    100Mining business of CLJC
    
    
    93,335
    
    
    
    6
    
    
    
    
    
    
    
    Total
    
    
    1,474,930
    
    
    
    100
    
    
    
    1,287,096
    
    
    
    100
    42




---



##### Table of Contents



Year ended December 312009
    
    
    2008Rmb000
    
    
    %
    
    
    Rmb000
    
    
    %Mobile telephones of QXMC
    
    
    251,317
    
    
    
    71
    
    
    
    866,777
    
    
    
    100Mining business of CLJC
    
    
    100,552
    
    
    
    29
    
    
    
    
    
    
    
    Total
    
    
    351,869
    
    
    
    100
    
    
    
    866,777
    
    
    
    100
          43




---



##### Table of Contents



44




---



##### Table of Contents



45




---



##### Table of Contents



46




---



##### Table of Contents



47




---



##### Table of Contents



48




---



##### Table of Contents



Fiscal 2008 compared to Fiscal 2007
  -
    
    Decrease of gross profit by Rmb99.2 million mainly due to the decreased net sales;-
    
    Increase of provision for doubtful accounts by Rmb229.8 million;-
    
    Increase of interest expense by Rmb93.6 million;-
    
    Decrease of gain from disposal of interests in subsidiaries by Rmb480.3 million;-
    
    Decrease of gain on issue/repurchase of stocks by subsidiary by Rmb379.6 million.
    Year ended December 312008
    
    
    2007Rmb000
    
    
    %
    
    
    Rmb000
    
    
    %Mobile telephones
    
    
    2,342,754
    
    
    
    90
    
    
    
    3,636,431
    
    
    
    94Indoor telephones
    
    
    252,194
    
    
    
    10
    
    
    
    237,676
    
    
    
    6Total
    
    
    2,594,948
    
    
    
    100
    
    
    
    3,874,107
    
    
    
    100
     49




---



##### Table of Contents



Year ended December 312008
    
    
    2007Rmb000
    
    
    %
    
    
    Rmb000
    
    
    %Mobile telephones
    
    
    1,496,080
    
    
    
    87
    
    
    
    2,692,678
    
    
    
    93Indoor telephones
    
    
    222,944
    
    
    
    13
    
    
    
    206,286
    
    
    
    7Total
    
    
    1,719,024
    
    
    
    100
    
    
    
    2,898,964
    
    
    
    100
      50




---



##### Table of Contents



Year ended December 312008
    
    
    2007Rmb000
    
    
    %
    
    
    Rmb000
    
    
    %Mobile telephones
    
    
    846,674
    
    
    
    97
    
    
    
    943,753
    
    
    
    97Indoor telephones
    
    
    29,250
    
    
    
    3
    
    
    
    31,390
    
    
    
    3Total
    
    
    875,924
    
    
    
    100
    
    
    
    975,143
    
    
    
    100
          51




---



##### Table of Contents



52




---



##### Table of Contents



53




---



##### Table of Contents



54




---



##### Table of Contents



.
            55




---



##### Table of Contents




    
    Interest expense relating to the accretion of convertible note discounts of Rmb158.8
million (US$23.3 million) which did not involve any outflow of cash
    
    Stock-based compensation of Rmb60.9 million (US$8.9 million) which did not involve
any outflow of cash
    
    Decrease in accounts and bills receivable of Rmb370.3 million (US$54.3 million)
    
    Decrease in prepaid expenses of Rmb197.6 million (US$28.9 million)
    
    Decrease in inventories of Rmb86.5 million (US$12.7 million)
    
    Decrease in other current assets of Rmb454.5 million (US$66.6 million)
    
    Increase in other payables of Rmb148.9 million (US$21.8 million)
    
    Cash used in operating activities of discontinued operations of QXCH of Rmb436.5
million (US$63.9 million)
       56




---



##### Table of Contents



Critical Accounting Policies and Estimates
  Basis of consolidation
     57




---



##### Table of Contents



Sales recognition
   Trade accounts receivable
  Inventories
   58




---



##### Table of Contents



Exploration
  Product warranties
  Goodwill
  Other acquired intangible assets
   Customer relationships
    
    3  5 yearsCompleted technology
    
    1.8  5  yearsCore technology
    
    4  5 yearsBacklog
    
    4  5 monthsLicenses
    
    5 years
  59




---



##### Table of Contents



Asset Retirement Obligation
   Depreciation, depletion and amortization of long-lived assets
   60




---



##### Table of Contents



Impairment of long-lived assets with determinable useful lives
  Stripping cost
   Stock-based compensation
   Debt issuance costs and borrowing costs
  61




---



##### Table of Contents



Income taxes
     Financial instruments
   Segment information
  62




---



##### Table of Contents



Recent Accounting Pronouncements
     63




---



##### Table of Contents



C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
  Year ended December 31, 2009
    
    Rmb36,404,000Year ended December 31, 2008
    
    Rmb29,242,000Year ended December 31, 2007
    
    Rmb18,599,000
 D. TREND INFORMATION.
    E. OFF-BALANCE SHEET ARRANGEMENTS.
  F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS.
   2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    US$000Capital expenditures authorized and
contracted for:- Construction of mine properties
    
    
    
    
    
    
    50,459
    
    
    
    7,392- Purchase of machinery and equipment
    
    
    130
    
    
    
    3,000
    
    
    
    440130
    
    
    
    53,459
    
    
    
    7,832
 64




---



##### Table of Contents



AmountRMB000
    
    
    US$000For the years ending December 31,- 2010
    
    
    6,448
    
    
    
    944- 2011
    
    
    945
    
    
    
    138Total
    
    
    7,393
    
    
    
    1,082
            65




---



##### Table of Contents



AmountRmb000
    
    
    US$000For the years ending December 31,- 2011
    
    
    109,214
    
    
    
    16,000Total
    
    
    109,214
    
    
    
    16,000
    RMB000
    
    
    US$000Accrued liabilities payable for sewage
    
    
    3,688
    
    
    
    540Accrued liabilities payable for land restoration
    
    
    325
    
    
    
    48Balance at December 31, 2009
    
    
    4,013
    
    
    
    588
 66




---



##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. DIRECTORS AND SENIOR MANAGEMENT.
  Name
    
    Age
    
    PositionRui Lin Wu
    
    
    58
    
    
    Chairman and Chief Executive OfficerZhi Yang Wu
    
    
    37
    
    
    Vice ChairmanAijun Jiang
    
    
    38
    
    
    Chief Financial OfficerRick Wenjun Xiao
    
    
    39
    
    
    Vice President and SecretaryZe Yun Mu
    
    
    44
    
    
    Non-Executive DirectorEdward Tsai
    
    
    53
    
    
    Non-Executive DirectorYi Hong Zhang
    
    
    68
    
    
    Non-Executive DirectorZhi Min Guo
    
    
    46
    
    
    Non-Executive Director
  Mr. Rui Lin Wu
 Mr. Zhi Yang Wu
 Mr. Aijun Jiang
 Mr. Rick Wenjun Xiao
 Mr. Ze Yun Mu
 Dr. Edward Tsai
 67




---



##### Table of Contents



Mr. Yi Hong Zhang
 Mr. Zhi Min Guo
 B. COMPENSATION.
   C. BOARD PRACTICES.
    68




---



##### Table of Contents



Audit Committee
  
    
    recommend annually to our board of directors the appointment of our independent
public accountants;
    
    discuss and review the scope and the fees of the prospective annual audit and review
the results with the independent public accountants;
    
    review and approve non-audit services of the independent public accountants;
    
    review compliance with our existing accounting and financial policies;
    
    review the adequacy of our financial organization; and
    
    review our managements procedures and policies relative to the adequacy of our
internal accounting controls and compliance with U.S. federal and state laws relating
to financial reporting.
 Nominating Committee
  
    
    assess the size and composition of the board of directors in light of our operating
requirements and existing social attitudes and trends;
    
    develop membership qualifications for the board of directors and all board
committees;
    
    monitor compliance with board of director and board committee membership criteria;
    
    review and recommend directors for continued service as required based on our
evolving needs;
    
    coordinate and assist management and the board of directors in recruiting new
members to the board of directors; and
    
    investigate suggestions for candidates for membership on the board of directors and
recommend prospective directors, as required, to provide an appropriate balance of
knowledge, experience and capability on the board of directors, including stockholder
nominations for the board of directors.
 Compensation Committee
  
    
    review and approve corporate goals and objectives relevant to the compensation of
the chief executive officer and other executive officers;
    
    evaluate the chief executive officers performance in light of such goals and
objectives at least annually and communicate the results to the chief executive officer
and the board of directors;
    
    set the chief executive officers compensation levels based on the foregoing
evaluation (including annual salary, bonus, stock options and other direct and indirect
benefits), with ratification by the independent directors of the full board of
directors; and
    
    set the other executive officers compensation levels (including annual salary,
bonus, stock options and other direct and indirect benefits).
 Nasdaq Requirements
  69




---



##### Table of Contents




    
    our independent directors do not hold regularly scheduled meetings in executive
session (Rule 5605(b)(2));
    
    the compensation of our executive officers is not determined by an independent
committee of the board or by the independent members of the board of directors, and our
CEO may be present and participate in the deliberations concerning his compensation
(Rule 5605(d));
    
    related party transactions are not required to be reviewed or approved by our audit
committee or other independent body of the board of directors (Rule 5630); and
    
    we are not required to solicit shareholder approval of stock plans, including those
in which our officers or directors may participate; stock issuances that will result in
a change in control; the issuance of our stock in related party transactions or other
transactions in which we may issue 20% or more of our outstanding shares; or, below
market issuances of 20% or more of our outstanding shares to any person (Rule 5635).
  D. EMPLOYEES
  E. SHARE OWNERSHIP.
  
    
    each person who is known by us to own beneficially more than 5% of our outstanding
common stock;
    
    each of our current executive officers and directors; and
    
    all current directors and executive officers as a group.
   Number
    
    PercentName of Beneficial Holder
    
    Shares Beneficially OwnedWu Holdings Limited
    
    
    6,819,000
    (1)
    
    
    7.4Rui Lin Wu
    
    
    39,819,000
    (1)
    
    
    43.2Zhi Yang Wu
    
    
    0
    
    
    
    0Aijun Jiang
    
    
    0
    
    
    
    0Rick Wenjun Xiao
    
    
    0
    
    
    
    0
 70




---



##### Table of Contents



Number
    
    PercentName of Beneficial Holder
    
    Shares Beneficially OwnedZe Yun Mu
    
    
    0
    
    
    
    0Edward Tsai
    
    
    0
    
    
    
    0Yi Hong Zhang
    
    
    0
    
    
    
    0Zhi Min Guo
    
    
    0
    
    
    
    0All directors and executive officers as a group (8 persons)
    
    
    39,819,000
    
    
    
    43.2
 
 (1)
    
    Wu Holdings Limited is a British Virgin Islands corporation which is wholly owned by the Qiao
Xing Trust. The Qiao Xing Trust is a Cook Islands trust which was formed for the primary
benefit of Zhi Jian Wu Li, the youngest son of Rui Lin Wu, our chairman. The 6,819,000 shares
of common stock owned of record and beneficially by Wu Holdings Limited may be deemed to also
be beneficially owned by Rui Lin Wu (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) since he may be deemed to have and/or share the power to
direct the voting and disposition of such shares. Other Options and Warrants Outstanding
  
    
    warrants to purchase an aggregate of 514,822 shares of common stock at US$14.30 per
share at any time until October 31, 2010 which we granted to two accredited investors
and the placement agent in October 2006 in connection with the sale of 2,000,000 shares
of our common stock at US$12.00 per share (October 2006 SPA Warrants)
    
    warrants to purchase an aggregate of 545,455 shares of common stock at US$14.30 per
share at any time until October 31, 2011 which we granted to two accredited investors
and the placement agent in October 2006 in connection with the sale of US$26,000,000 of
our senior convertible notes (October 2006 CB Warrants)
    
    warrants to purchase an aggregate of 736,016 shares of common stock at US$10.19 per
share at any time until August 17, 2012 which we granted to two accredited investors
and the placement agent in August 2007 in connection with the sale of US$25,000,000 of
our senior convertible notes (August 2007 CB Warrants)
   1.
    
    October 2006 SPA Warrants  4,243,202 warrants at US$1.735 per warrant
 2.
    
    October 2006 CB Warrants  4,495,681 warrants at US$1.735 per warrant
 3.
    
    August 2007 CB Warrants  4,322,768 warrants at US$1.735 per warrant
 71




---



##### Table of Contents



ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. MAJOR SHAREHOLDERS.
      B. RELATED PARTY TRANSACTIONS.
  Name of related parties
    
    Existing relationship with the CompanyMr. Zhi Jian Wu Li
    
    Major shareholderMr. Rui Lin Wu
    
    Director and father of Mr. Zhi Jian Wu LiWu Holdings Limited
    
    Intermediate holding companyExquisite Jewel Limited
    
    Minority shareholderMetrolink Holdings Limited
    
    Minority shareholderSpecialist Consultants Limited
    
    Minority shareholderQiao Xing Group Limited (QXGL)
    

Common
director and minority shareholder of CECT, QXCI and QXPLHuizhou Qiaoxing Famous Science & Technology Co., Ltd. (QFST)
    
    A company 80% owned by QXGL
  2007
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    US$000Property management fee
paid and payable to:- QXGL
    
    
    100
    
    
    
    119
    
    
    
    55
    
    
    
    8Sales to:- QFST
    
    
    95,514
    
    
    
    133,611
    
    
    
    63,616
    
    
    
    9,315
  72




---



##### Table of Contents



2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    US$000Pledged of:- Bank deposits of the Group
    
    
    136,299
    
    
    
    251,720
    
    
    
    36,877- Bills receivable of the Group
    
    
    40,000
    
    
    
    
    
    
    
    Guarantees provided by:- QXGL
    
    
    160,000
    
    
    
    50,000
    
    
    
    7,321- QXGL and directors
    
    
    360,000
    
    
    
    290,000
    
    
    
    42,463- Directors
    
    
    218,500
    
    
    
    68,500
    
    
    
    10,030
  C. INTERESTS OF EXPERTS AND COUNSEL.
  73




---



##### Table of Contents



ITEM 8. FINANCIAL INFORMATION
 A.
    
    CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.
       B. SIGNIFICANT CHANGES.
  74




---



##### Table of Contents



ITEM 9. THE OFFER AND LISTING
 A. OFFER AND LISTING DETAILS.
  Period
    
    High
    
    LowYear ended December 31, 2005
    
    US$
    8.50
    
    
    US$
    5.04Year ended December 31, 2006
    
    US$
    17.09
    
    
    US$
    6.49Year ended December 31, 2007
    
    US$
    19.56
    
    
    US$
    7.16Year ended December 31, 2008
    
    US$
    8.11
    
    
    US$
    1.44Year ended December 31, 2009
    
    US$
    2.46
    
    
    US$
    0.93Quarter ended March 31, 2008
    
    US$
    8.11
    
    
    US$
    5.18Quarter ended June 30, 2008
    
    US$
    7.52
    
    
    US$
    4.39Quarter ended September 30, 2008
    
    US$
    5.44
    
    
    US$
    2.35Quarter ended December 31, 2008
    
    US$
    2.63
    
    
    US$
    1.44Quarter ended March 31, 2009
    
    US$
    2.12
    
    
    US$
    0.93Quarter ended June 30, 2009
    
    US$
    2.46
    
    
    US$
    1.18Quarter ended September 30, 2009
    
    US$
    2.35
    
    
    US$
    1.61Quarter ended December 31, 2009
    
    US$
    2.42
    
    
    US$
    1.81Quarter ended March 31, 2010
    
    US$
    2.73
    
    
    US$
    1.73Quarter ended June 30, 2010
    
    US$
    1.93
    
    
    US$
    1.40Month ended December 31, 2009
    
    US$
    2.42
    
    
    US$
    1.97Month ended January 31, 2010
    
    US$
    2.73
    
    
    US$
    2.05Month ended February 28, 2010
    
    US$
    2.03
    
    
    US$
    1.73Month ended March 31, 2010
    
    US$
    2.00
    
    
    US$
    1.86Month ended April 30, 2010
    
    US$
    1.93
    
    
    US$
    1.70Month ended May 31, 2010
    
    US$
    1.72
    
    
    US$
    1.45Month ended June 30, 2010
    
    US$
    1.73
    
    
    US$
    1.40
 B. PLAN OF DISTRIBUTION.
  C. MARKETS.
  D. SELLING SHAREHOLDERS.
  75




---



##### Table of Contents



E.
    
    DILUTION.Not applicable.F.
    
    EXPENSES OF THE ISSUE.Not applicable.
 
 ITEM 10. ADDITIONAL INFORMATION
 A.
    
    SHARE CAPITAL.Not applicable.B.
    
    MEMORANDUM AND ARTICLES OF ASSOCIATION.
 Corporate Powers
 Directors
 Share Rights, Preferences and Restrictions
 Changing Share Rights
 Shareholder Meetings
 Restrictions on Rights to Own Securities
 Change in Control Provisions
 Disclosure of Share Ownership
 76




---



##### Table of Contents



Applicable Law
      Changes in Capital
 77




---



##### Table of Contents



C. MATERIAL CONTRACTS.
  D. EXCHANGE CONTROLS.
  E. TAXATION.
  United States Federal Income Taxation
  
    
    a court within the United States is able to exercise primary supervision over its
administration; and
    
    one or more United States persons have the authority to control all of its
substantial decisions.
    78




---



##### Table of Contents




    
    is a corporation or comes within other exempt categories; or
    
    provides a correct taxpayer identification number, certifies that such holder is not
subject to backup withholding and otherwise complies with the backup withholding rules.
   British Virgin Islands Taxation
    F. DIVIDENDS AND PAYING AGENTS.
  G. STATEMENT BY EXPERTS.
  H. DOCUMENTS ON DISPLAY.
  79




---



##### Table of Contents



I. SUBSIDIARY INFORMATION.
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   80




---



##### Table of Contents



Managements Report on Internal Control over Financial Reporting
       Changes in Internal Control over Financial Reporting
  
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  81




---



##### Table of Contents



(a) Audit Fees.
 (b) Audit  Related Fees.
 (c) Tax Fees.
 (d) All Other Fees.
 (e) Audit Committee Pre-Approval Policies and Procedures.
   (f).
 
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
 
 ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT.
  
 ITEM 16G. CORPORATE GOVERNANCE.
  82




---



##### Table of Contents




    
    our independent directors do not hold regularly scheduled meetings in executive
session (Rule 5605(b)(2));
    
    the compensation of our executive officers is not determined by an independent
committee of the board or by the independent members of the board of directors, and our
CEO may be present and participate in the deliberations concerning his compensation
(Rule 5605(d));
    
    related party transactions are not required to be reviewed or approved by our audit
committee or other independent body of the board of directors (Rule 5630); and
    
    we are not required to solicit shareholder approval of stock plans, including those
in which our officers or directors may participate; stock issuances that will result in
a change in control; the issuance of our stock in related party transactions or other
transactions in which we may issue 20% or more of our outstanding shares; or, below
market issuances of 20% or more of our outstanding shares to any person (Rule 5635).
  83




---



##### Table of Contents



PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
 F-1




---



##### Table of Contents



F-2




---



##### Table of Contents



F-3




---



##### Table of Contents



F-4




---



##### Table of Contents



Note
    

2008
    

2009RMB000
    
    RMB000
    
    US$000(Note 2(y))ASSETSCurrent assets:Cash and cash equivalents
    
    
    
    
    
    
    2,908,343
    
    
    
    3,709,503
    
    
    
    543,445Restricted cash
    
    13
    
    
    136,299
    
    
    
    251,720
    
    
    
    36,877Accounts receivable, net
    
    4
    
    
    462,282
    
    
    
    123,082
    
    
    
    18,032Bills receivable
    
    
    
    
    
    
    43,516
    
    
    
    
    
    
    
    Inventories
    
    5
    
    
    183,169
    
    
    
    98,012
    
    
    
    14,359Prepaid expenses
    
    7
    
    
    390,490
    
    
    
    184,339
    
    
    
    27,006Other current assets
    
    8
    
    
    595,717
    
    
    
    37,025
    
    
    
    5,424Due from related parties
    
    27
    
    
    25
    
    
    
    25
    
    
    
    4Deferred income taxes
    
    20
    
    
    6,994
    
    
    
    15,942
    
    
    
    2,335Deferred debt issuance costs, net
    
    15
    
    
    34,689
    
    
    
    
    
    
    
    Assets held for sale
    
    6
    
    
    
    
    
    
    163,000
    
    
    
    23,880Due from discontinued operations
    
    3(d)
    
    
    730,610
    
    
    
    200,000
    
    
    
    29,300Current assets of discontinued operations
    
    3(d)
    
    
    1,146,099
    
    
    
    
    
    
    
    Total current assets
    
    
    
    
    
    
    6,638,233
    
    
    
    4,782,648
    
    
    
    700,662Property, machinery and equipment, net
    
    9
    
    
    167,366
    
    
    
    170,485
    
    
    
    24,976Proven and probable reserves
    
    10
    
    
    
    
    
    
    712,121
    
    
    
    104,326Construction in progress
    
    
    
    
    
    
    
    
    
    
    86,591
    
    
    
    12,685Land use rights, net
    
    
    
    
    
    
    35,305
    
    
    
    
    
    
    
    Investment at cost
    
    
    
    
    
    
    7,802
    
    
    
    5,000
    
    
    
    733Goodwill
    
    11
    
    
    82,058
    
    
    
    82,058
    
    
    
    12,022Value beyond proven and probable reserves
    
    10
    
    
    
    
    
    
    67,295
    
    
    
    9,859Other acquired intangible assets, net
    
    12
    
    
    22,766
    
    
    
    4,433
    
    
    
    649Non-current assets of discontinued operations
    
    3(d)
    
    
    127,558
    
    
    
    
    
    
    
    Total assets
    
    
    
    
    
    
    7,081,088
    
    
    
    5,910,631
    
    
    
    865,912LIABILITIESCurrent liabilities:Short-term bank borrowings
    
    13
    
    
    983,950
    
    
    
    884,708
    
    
    
    129,610Accounts payable
    
    
    
    
    
    
    52,047
    
    
    
    60,750
    
    
    
    8,900Other payables
    
    
    
    
    
    
    5,917
    
    
    
    57,238
    
    
    
    8,385Accrued liabilities
    
    14
    
    
    62,017
    
    
    
    40,472
    
    
    
    5,929Deposits received
    
    
    
    
    
    
    1,310
    
    
    
    1,310
    
    
    
    192Deferred revenues
    
    
    
    
    
    
    42,551
    
    
    
    16,370
    
    
    
    2,398Due to related parties
    
    27
    
    
    8,941
    
    
    
    5,118
    
    
    
    750Taxation payable
    
    20
    
    
    38,462
    
    
    
    15,016
    
    
    
    2,200Embedded derivative liability
    
    15
    
    
    127,080
    
    
    
    63,096
    
    
    
    9,244Convertible notes
    
    15
    
    
    383,596
    
    
    
    233,716
    
    
    
    34,240Assets retirement obligation
    
    16
    
    
    
    
    
    
    4,013
    
    
    
    588Current liabilities of discontinued operations
    
    
    
    
    
    
    1,380,292
    
    
    
    
    
    
    
    Total current liabilities
    
    
    
    
    
    
    3,086,163
    
    
    
    1,381,807
    
    
    
    202,436Shareholders loans
    
    17
    
    
    6,729
    
    
    
    6,732
    
    
    
    986Warrants liabilities
    
    19
    
    
    
    
    
    
    148,921
    
    
    
    21,817Deferred income taxes
    
    20
    
    
    320
    
    
    
    175,281
    
    
    
    25,679Total liabilities
    
    
    
    
    
    
    3,093,212
    
    
    
    1,712,741
    
    
    
    250,918Commitments and contingencies
    
    24SHAREHOLDERS EQUITYXING equity:Common stock, par value RMB0.008 (equivalent
of US$0.001); authorized 50,000,000 shares as of December 31, 2008
and 200,000,000
shares as of December 31, 2009; outstanding and fully paid - 30,948,836
as of December 31, 2008 and 82,327,993 as of
December 31,2009
    
    18
    
    
    251
    
    
    
    602
    
    
    
    88Additional paid-in capital
    
    
    
    
    
    
    1,867,512
    
    
    
    2,404,998
    
    
    
    352,334Retained earnings
    
    
    
    
    
    
    1,189,190
    
    
    
    796,736
    
    
    
    116,722Cumulative translation adjustments
    
    
    
    
    
    
    (75,623
    )
    
    
    (160,532
    )
    
    
    (23,518
    )Total XING equity
    
    
    
    
    
    
    2,981,330
    
    
    
    3,041,804
    
    
    
    445,626Noncontrolling interest
    
    
    
    
    
    
    1,006,546
    
    
    
    1,156,086
    
    
    
    169,368Total equity
    
    
    
    
    
    
    3,987,876
    
    
    
    4,197,890
    
    
    
    614,994Total liabilities and shareholders
equity
    
    
    
    
    
    
    7,081,088
    
    
    
    5,910,631
    
    
    
    865,912
  F-5




---



##### Table of Contents



Note
    
    
    2007
    
    
    2008
    
    
    2009RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    US$000(Note 2(y))Net sales
    
    
    
    
    
    
    3,141,094
    
    
    
    2,153,873
    
    
    
    1,826,799
    
    
    
    267,628Cost of goods sold
    
    
    
    
    
    
    (2,255,844
    )
    
    
    (1,287,096
    )
    
    
    (1,474,930
    )
    
    
    (216,078
    )Gross profit
    
    
    
    
    
    
    885,250
    
    
    
    866,777
    
    
    
    351,869
    
    
    
    51,550Operating expenses:Selling expenses
    
    
    
    
    
    
    (36,322
    )
    
    
    (146,551
    )
    
    
    (110,444
    )
    
    
    (16,180
    )General and administrative expenses
    
    
    
    
    
    
    (86,479
    )
    
    
    (59,794
    )
    
    
    (114,807
    )
    
    
    (16,819
    )Research and development
    
    
    
    
    
    
    (18,599
    )
    
    
    (29,242
    )
    
    
    (36,404
    )
    
    
    (5,334
    )Amortization of acquired intangible assets
    
    12
    
    
    (32,281
    )
    
    
    (11,727
    )
    
    
    (4,733
    )
    
    
    (693
    )Impairment of assets held for sale
    
    6
    
    
    
    
    
    
    
    
    
    
    (5,957
    )
    
    
    (873
    )Impairment of acquired intangible assets
    
    12
    
    
    
    
    
    
    (26,235
    )
    
    
    (13,600
    )
    
    
    (1,992
    )Income from operations
    
    
    
    
    
    
    711,569
    
    
    
    593,228
    
    
    
    65,924
    
    
    
    9,659Interest income
    
    
    
    
    
    
    28,441
    
    
    
    54,821
    
    
    
    28,641
    
    
    
    4,196Exchange (loss) gain, net
    
    
    
    
    
    
    15,168
    
    
    
    (16,971
    )
    
    
    406
    
    
    
    60Interest expense
    
    29
    
    
    (240,498
    )
    
    
    (311,710
    )
    
    
    (222,804
    )
    
    
    (32,641
    )(Loss) gain on remeasurement of embedded
derivatives
    
    15
    
    
    (129,084
    )
    
    
    160,036
    
    
    
    (8,258
    )
    
    
    (1,210
    )Gain on disposal of interests
in subsidiaries
    
    3
    
    
    482,614
    
    
    
    2,269
    
    
    
    
    
    
    
    Gain (loss) on issue/repurchase of stocks
by subsidiaries
    
    3
    
    
    383,965
    
    
    
    4,351
    
    
    
    
    
    
    
    (Loss) on extinguishment of convertible
notes
    
    15
    
    
    (142,090
    )
    
    
    (10,634
    )
    
    
    (15,261
    )
    
    
    (2,236
    )Provision for litigation settlement
    
    
    
    
    
    
    (15,319
    )
    
    
    
    
    
    
    
    
    
    
    Impairment of investment at cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,802
    )
    
    
    (411
    )Unrealized gain (loss) on derivatives
    
    19
    
    
    
    
    
    
    
    
    
    
    (4,673
    )
    
    
    (685
    )Other income (loss), net
    
    
    
    
    
    
    6,462
    
    
    
    (3,700
    )
    
    
    166
    
    
    
    24Income (loss) from continuing
operations before income tax
    
    
    
    
    
    
    1,101,228
    
    
    
    471,690
    
    
    
    (158,661
    )
    
    
    (23,244
    )Provision for income tax
    
    20
    
    
    (113,377
    )
    
    
    (155,717
    )
    
    
    (43,939
    )
    
    
    (6,437
    )Income (loss) from continuing
operations, net of tax
    
    
    
    
    
    
    987,851
    
    
    
    315,973
    
    
    
    (202,600
    )
    
    
    (29,681
    )Discontinued operations, net of tax
    
    3(d)
    
    
    63,033
    
    
    
    (290,953
    )
    
    
    (139,782
    )
    
    
    (20,478
    )Extraordinary items:Gains on acquisitions of minority
interests, net of nil tax
    
    3(a)
    
    
    28,689
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) for the year
    
    
    
    
    
    
    1,079,573
    
    
    
    25,020
    
    
    
    (342,382
    )
    
    
    (50,159
    )Net (income) loss attributable to the
noncontrolling interest
    
    
    
    
    
    
    (175,625
    )
    
    
    (161,814
    )
    
    
    82,486
    
    
    
    12,084Net income (loss)
    
    
    
    
    
    
    903,948
    
    
    
    (136,794
    )
    
    
    (259,896
    )
    
    
    (38,075
    )Other comprehensive income (loss) -
Translation adjustments
    
    
    
    
    
    
    (50,106
    )
    
    
    (33,815
    )
    
    
    (85,883
    )
    
    
    (12,582
    )Comprehensive income (loss)
    
    
    
    
    
    
    853,842
    
    
    
    (170,609
    )
    
    
    (345,779
    )
    
    
    (50,657
    )Basic earnings (loss) per common share:Continuing operations
    
    22
    
    RMB
    22.73
    
    
    RMB
    4.98
    
    
    RMB
    (1.91
    )
    
    US$
    (0.28
    )Discontinued operations
    
    
    
    
    
    RMB
    1.73
    
    
    RMB
    (9.40
    )
    
    RMB
    (2.22
    )
    
    US$
    (0.33
    )Extraordinary gain
    
    22
    
    RMB
    0.49
    
    
    RMB
    
    
    
    RMB
    
    
    
    US$
    Total
    
    22
    
    RMB
    24.95
    
    
    RMB
    (4.42
    )
    
    RMB
    (4.13
    )
    
    US$
    (0.61
    )Diluted earnings (loss) per common share:Continuing operations
    
    22    
    RMB
    22.45
        
    RMB
    3.51
        
    RMB
    (1.91
    )    
    US$
    (0.28
    )Discontinued operations
    
    
    
    
    
    RMB
    1.72
        
    RMB
    (9.40
    )    
    RMB
    (2.22
    )    
    US$
    (0.33
    )Extraordinary gain
    
    22    
    RMB
    0.48
        
    RMB
    
        
    RMB
    
        
    US$
    Total
    
    22    
    RMB
    24.65
        
    RMB
    (5.89
    )    
    RMB
    (4.13
    )    
    US$
    (0.61
    )Weighted average number of shares
outstandingBasic
    
    22    
    
    29,836,000
    
    
    
    30,949,000
    
    
    
    62,837,000
    
    
    
    62,837,000Diluted
    
    22    
    
    30,200,000
    
    
    
    30,949,000
    
    
    
    62,837,000
    
    
    
    62,837,000Amounts attributable to shareholders
    
    
    
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    US$000Income (loss) from continuing
operations, net of taxes
    
    
    
    
    
    
    678,026
    
    
    
    154,159
    
    
    
    (120,114
    )
    
    
    (17,597
    )Discontinued operations, net of taxes
    
    
    
    
    
    
    51,909
    
    
    
    (290,953
    )
    
    
    (139,782
    )
    
    
    (20,478
    )Extraordinary gain, net of taxes
    
    
    
    
    
    
    14,491
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    
    
    
    
    744,426
    
    
    
    (136,794
    )
    
    
    (259,896
    )
    
    
    (38,075
    )
  F-6




---



##### Table of Contents



2007
    
    2008
    

2009RMB000
    
    RMB000
    
    RMB000
    
    US$000(Note 2(y))Cash flows from operating activities:Net income (loss) from continuing operations
    
    
    987,851
    
    
    
    315,973
    
    
    
    (202,600
    )
    
    
    (29,681
    )Adjustments to reconcile net income (loss) to net cash
flows from operating activities -Depreciation of property, machinery and equipment
    
    
    15,381
    
    
    
    15,488
    
    
    
    14,077
    
    
    
    2,062Depletion of proven and probable reserves
    
    
    
    
    
    
    
    
    
    
    22,034
    
    
    
    3,228Amortization of land use right
    
    
    4,539
    
    
    
    803
    
    
    
    
    
    
    
    Bad debt expense
    
    
    2,961
    
    
    
    232,841
    
    
    
    12,400
    
    
    
    1,817Amortization of other acquired intangible assets
    
    
    32,280
    
    
    
    11,727
    
    
    
    4,733
    
    
    
    693Stock-based compensation
    
    
    38,626
    
    
    
    14,669
    
    
    
    60,935
    
    
    
    8,927Foreign exchange loss (gain)
    
    
    (27,447
    )
    
    
    5,355
    
    
    
    (406
    )
    
    
    (60
    )Interest expense on shareholders loans
    
    
    487
    
    
    
    437
    
    
    
    437
    
    
    
    64Amortization of deferred debt issuance costs
    
    
    37,321
    
    
    
    24,738
    
    
    
    21,031
    
    
    
    3,081Accretion of convertible note discounts
    
    
    140,251
    
    
    
    188,201
    
    
    
    137,782
    
    
    
    20,185Loss (gain) on remeasurement of embedded derivatives
    
    
    129,084
    
    
    
    (160,036
    )
    
    
    8,258
    
    
    
    1,210Loss on extinguishment of convertible debts
    
    
    142,090
    
    
    
    10,634
    
    
    
    15,261
    
    
    
    2,236(Gain) on disposal of interests in subsidiaries
    
    
    (482,614
    )
    
    
    (2,269
    )
    
    
    
    
    
    
    Loss (gain) on issue/repurchse of stocks by subsidiary
    
    
    (383,965
    )
    
    
    (4,351
    )
    
    
    
    
    
    
    Provision for litigation settlement
    
    
    15,319
    
    
    
    
    
    
    
    
    
    
    
    Net loss (gain) on disposal of property, machinery and
equipment
    
    
    99
    
    
    
    (11
    )
    
    
    
    
    
    
    Net gain on disposal of land use rights and
construction-in-progress
    
    
    (4,279
    )
    
    
    
    
    
    
    
    
    
    
    Deferred income tax
    
    
    (6,237
    )
    
    
    (6,550
    )
    
    
    (6,843
    )
    
    
    (1,003
    )Extraordinary gains on acquisitions of noncontrolling
interests
    
    
    (28,689
    )
    
    
    
    
    
    
    
    
    
    
    Impairment of assets
    
    
    
    
    
    
    26,235
    
    
    
    19,557
    
    
    
    2,865Impairment of investment at cost
    
    
    
    
    
    
    
    
    
    
    2,802
    
    
    
    410Unrealized gain (loss) on derivatives
    
    
    
    
    
    
    
    
    
    
    4,673
    
    
    
    685Changes in operating assets and liabilities -Accounts receivable
    
    
    125,369
    
    
    
    (276,560
    )
    
    
    326,800
    
    
    
    47,876Bills receivable
    
    
    27,635
    
    
    
    (43,516
    )
    
    
    43,516
    
    
    
    6,375Inventories
    
    
    (12,944
    )
    
    
    (5,891
    )
    
    
    86,461
    
    
    
    12,667Prepaid expenses
    
    
    86,977
    
    
    
    (217,443
    )
    
    
    197,586
    
    
    
    28,947Other current assets
    
    
    561,806
    
    
    
    55,874
    
    
    
    454,481
    
    
    
    66,582Accounts payable
    
    
    (166,240
    )
    
    
    (55,944
    )
    
    
    8,703
    
    
    
    1,275Other payables
    
    
    (274,335
    )
    
    
    (304,530
    )
    
    
    148,864
    
    
    
    21,809Accrued liabilities
    
    
    19,440
    
    
    
    (8,101
    )
    
    
    (21,849
    )
    
    
    (3,201
    )Deposits received
    
    
    
    
    
    
    (200
    )
    
    
    
    
    
    
    Deferred revenues
    
    
    (10,803
    )
    
    
    37,965
    
    
    
    (26,180
    )
    
    
    (3,835
    )Taxation payable
    
    
    25,509
    
    
    
    (20,378
    )
    
    
    (23,447
    )
    
    
    (3,435
    )Cash
provided (used) by operating activities- continuing
operations
    
    
    995,472
    
    
    
    (164,840
    )
    
    
    1,309,066
    
    
    
    191,779Cash
provided (used) by operating activities- discontinued
operations
    
    
    (40,818
    )
    
    
    (58,048
    )
    
    
    (436,488
    )
    
    
    (63,946
    )Cash
provided (used) by  operating activities
    
    
    954,654
    
    
    
    (222,888
    )
    
    
    872,578
    
    
    
    127,833
 F-7




---



##### Table of Contents



2007
    
    2008
    

2009RMB000
    
    RMB000
    
    RMB000
    
    US$000(Note 2(y))Cash flows from investing activities:Acquisitions of property, machinery and equipment
    
    
    (8,017
    )
    
    
    (14,225
    )
    
    
    (19,914
    )
    
    
    (2,917
    )Expenditures on construction-in-progress
    
    
    
    
    
    
    
    
    
    
    (94,347
    )
    
    
    (13,822
    )Net cash flow on disposal of subsidiaries by QXMC
    
    
    
    
    
    
    (1,162
    )
    
    
    8,764
    
    
    
    1,284Deposit received on disposal of land and building
    
    
    
    
    
    
    
    
    
    
    49,000
    
    
    
    7,179Net cash outflow on acquisition of subsidiary
    
    
    
    
    
    
    
    
    
    
    (203,404
    )
    
    
    (29,799
    )Net cash outflow from disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (60,180
    )
    
    
    (8,817
    )Proceeds from disposal of property, machinery and
equipment
    
    
    209
    
    
    
    12,900
    
    
    
    
    
    
    
    Proceeds from disposal of land use rights and
construction-in-progress
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest-bearing advances to a third party
    
    
    (998,331
    )
    
    
    
    
    
    
    
    
    
    
    Refund of interest-bearing advances
    
    
    
    
    
    
    408,658
    
    
    
    
    
    
    
    (Increase) decrease in restricted cash
    
    
    (11,580
    )
    
    
    (5,418
    )
    
    
    (115,421
    )
    
    
    (16,909
    )Cash
provided (used) by investing activities-continuing
operations
    
    
    (1,017,719
    )
    
    
    400,753
    
    
    
    (435,502
    )
    
    
    (63,801
    )Cash
provided (used) by investing activities-discontinued
operations
    
    
    367,402
    
    
    
    (60,431
    )
    
    
    (162,359
    )
    
    
    (23,786
    )Cash
provided (used) by investing activities
    
    
    (650,317
    )
    
    
    340,322
    
    
    
    (597,861
    )
    
    
    (87,587
    )Cash flows from financing activities:Increase in short-term borrowings
    
    
    388,132
    
    
    
    2,582,231
    
    
    
    (99,243
    )
    
    
    (14,539
    )Repayment of short-term borrowings
    
    
    
    
    
    
    (2,577,399
    )
    
    
    
    
    
    
    Net proceeds from issuance of convertible notes (Note 15
(b))
    
    
    175,088
    
    
    
    125,722
    
    
    
    
    
    
    
    Net proceeds from exercise of options and warrants
    
    
    30,911
    
    
    
    
    
    
    
    42,058
    
    
    
    6,162Repayment of convertible notes
    
    
    
    
    
    
    (171,763
    )
    
    
    (163,990
    )
    
    
    (24,025
    )Net proceeds from issuance of common stock by the Company
    
    
    114,534
    
    
    
    
    
    
    
    
    
    
    
    Net proceeds from IPO of common stock by a subsidiary
    
    
    1,026,610
    
    
    
    
    
    
    
    
    
    
    
    Capital contributed by noncontrolling shareholders of a
subsidiary
    
    
    2,100
    
    
    
    
    
    
    
    
    
    
    
    Net advances from related parties
    
    
    3,495
    
    
    
    297
    
    
    
    
    
    
    
    Cash
provided (used) by financing activities-continuing
operations
    
    
    1,740,870
    
    
    
    (40,912
    )
    
    
    (221,175
    )
    
    
    (32,402
    )Cash
provided (used) by financing activities-discontinued
operations
    
    
    (64,950
    )
    
    
    29,355
    
    
    
    531,233
    
    
    
    77,826Cash
provided by (used) financing activities
    
    
    1,675,920
    
    
    
    (11,557
    )
    
    
    310,058
    
    
    
    45,424Effect of translation adjustments on cash
    
    
    (43,724
    )
    
    
    (21,360
    )
    
    
    7,201
    
    
    
    1,055Net increase in cash and cash equivalents
    
    
    1,936,533
    
    
    
    84,517
    
    
    
    591,976
    
    
    
    86,725Cash and cash equivalents, beginning of year
    
    
    1,096,477
    
    
    
    3,033,010
    
    
    
    3,117,527
    
    
    
    456,720Cash and cash equivalents, end of year
    
    
    3,033,010
    
    
    
    3,117,527
    
    
    
    3,709,503
    
    
    
    543,445Less: cash and cash equivalents of discontinued operations
    
    
    (298,309
    )
    
    
    (209,184
    )
    
    
    
    
    
    
    Cash and cash equivalents of continuing operations at end
of year
    
    
    2,734,701
    
    
    
    2,908,343
    
    
    
    3,709,503
    
    
    
    543,445Supplemental disclosure of cash flow information:Interest paid
    
    
    60,459
    
    
    
    115,696
    
    
    
    75,665
    
    
    
    11,085Income tax paid
    
    
    103,834
    
    
    
    162,527
    
    
    
    105,433
    
    
    
    15,446Non-cash investing and financing activities:- Consideration for acquisition of subsidiary paid in
the form of common stock
    
    
    
    
    
    
    
    
    
    
    472,982
    
    
    
    69,200- Consideration for extinguishment of convertible notes
liability paid in the form of common stock of a
subsidiary
    
    
    721,188
    
    
    
    
    
    
    
    
    
    
    
    - Stock issuance costs paid in the form of share-based
payment
    
    
    8,183
    
    
    
    
    
    
    
    
    
    
    
    - Subsidiary repurchased ordinary shares through the
issuance of convertible notes
    
    
    
    
    
    
    338,165
    
    
    
    
    
    
    
    - Consideration for extinguishment of convertible notes
liability paid in the form of common stock
    
    
    
    
    
    
    
    
    
    
    45,967
    
    
    
    6,734- Subsidiary issued ordinary shares on partial conversion
of convertible notes
    
    
    
    
    
    
    55,054
    
    
    
    126,650
    
    
    
    18,555- Warrant issuance costs paid in the form of share-based
payment
    
    
    769
    
    
    
    2,500
    
    
    
    
    
    
    
    - Convertible note issuance costs paid in the form of
share-based payment
    
    
    9,891
    
    
    
    31,451
    
    
    
    
    
    
    
    
   F-8




---



##### Table of Contents



Accumulatedothercomprehensiveincome (loss) -Common stock
    
    
    Additional
    
    
    
    
    
    
    cumulative
    
    
    Noncontrol-Number
    
    
    
    
    
    
    paid-in
    
    
    Retained
    
    
    translation
    
    
    lingNote
    
    
    of shares
    
    
    Amount
    
    
    capital
    
    
    earnings
    
    
    adjustments
    
    
    interest
    
    
    Total000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Balance as
of January 1, 2007
    
    
    
    
    
    
    29,605
    
    
    
    242
    
    
    
    1,439,473
    
    
    
    422,036
    
    
    
    8,298
    
    
    
    99,793
    
    
    
    1,969,842Issuance of common stock
    
    18
    
    
    1,344
    
    
    
    9
    
    
    
    115,375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,384Stock issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,032
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,032
    )Issue of stock purchase
warrants to investors and
external consultants
    
    19
    
    
    
    
    
    
    
    
    
    
    32,546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,546Warrant issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,838
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,838
    )Share-based compensation
expense
    
    19
    
    
    
    
    
    
    
    
    
    
    39,209
    
    
    
    
    
    
    
    
    
    
    
    12,276
    
    
    
    51,485Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    903,948
    
    
    
    
    
    
    
    175,625
    
    
    
    1,079,573Reclassification of
embedded derivative
relating to 4.5% Notes
    
    15(a)
    
    
    
    
    
    
    
    
    
    
    89,531
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,531Beneficial conversion
amount relating to 5.5%
Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,790
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,790Acquisition and disposal of
equity interest in
subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    797,498
    
    
    
    797,498Shareholders contribution
    
    17
    
    
    
    
    
    
    
    
    
    
    487
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    487Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,106
    )
    
    
    (8,924
    )
    
    
    (59,030
    )Balance as of December 31,
2007
    
    
    
    
    
    
    30,949
    
    
    
    251
    
    
    
    1,737,541
    
    
    
    1,325,984
    
    
    
    (41,808
    )
    
    
    1,076,268
    
    
    
    4,098,236Issue of stock purchase
warrants to investors and
external consultants
    
    19
    
    
    
    
    
    
    
    
    
    
    48,904
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,904Warrant issuance costs
    
    19
    
    
    
    
    
    
    
    
    
    
    (2,907
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,907
    )Share-based compensation
expense
    
    19
    
    
    
    
    
    
    
    
    
    
    9,604
    
    
    
    
    
    
    
    
    
    
    
    5,065
    
    
    
    14,669Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (136,794
    )
    
    
    
    
    
    
    161,814
    
    
    
    25,020Beneficial conversion
amount relating to 5.5%
Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,933
    
    
    
    
    
    
    
    
    
    
    
    19,853
    
    
    
    93,786Acquisition and disposal of
equity interest in
subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (253,261
    )
    
    
    (253,261
    )Shareholders contribution
    
    17
    
    
    
    
    
    
    
    
    
    
    437
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    437Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,815
    )
    
    
    (3,193
    )
    
    
    (37,008
    )Balance as of December 31, 2008
    
    
    
    
    
    
    30,949
    
    
    
    251
    
    
    
    1,867,512
    
    
    
    1,189,190
    
    
    
    (75,623
    )
    
    
    1,006,546
    
    
    
    3,987,876Cumulative effect of change
of accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (142,393
    )
    
    
    (34,455
    )
    
    
    974
    
    
    
    (4,989
    )
    
    
    (180,863
    )Balance as of January 1, 2009
    
    
    
    
    
    
    30,949
    
    
    
    251
    
    
    
    1,725,119
    
    
    
    1,154,735
    
    
    
    (74,649
    )
    
    
    1,001,557
    
    
    
    3,807,013Issuance of common stocks
    
    18
    
    
    51,379
    
    
    
    351
    
    
    
    656,823
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    657,174Share-based compensation
expense
    
    19
    
    
    
    
    
    
    
    
    
    
    22,618
    
    
    
    
    
    
    
    
    
    
    
    12,303
    
    
    
    34,921Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (259,896
    )
    
    
    
    
    
    
    (82,486
    )
    
    
    (342,382
    )Acquisition and disposal of 
equity interest in
subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98,103
    )
    
    
    
    
    
    
    224,753
    
    
    
    126,650Shareholders contribution
    
    17
    
    
    
    
    
    
    
    
    
    
    438
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    438Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85,883
    )
    
    
    (41
    )
    
    
    (85,924
    )Balance as of December 31, 2009
    
    
    
    
    
    
    82,328
    
    
    
    602
    
    
    
    2,404,998
    
    
    
    796,736
    
    
    
    (160,532
    )
    
    
    1,156,086
    
    
    
    4,197,890Balance as of December 31,
2009 (in US$000)
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    352,334
    
    
    
    116,722
    
    
    
    (23,518
    )
    
    
    169,368
    
    
    
    614,994
  F-9




---



##### Table of Contents



Percentage of equityinterest attributablePlace of
    
    to the Group as ofName
    
    Note
    
    incorporation
    
    December 31,
    
    Principal activities2008
    
    2009Qiao Xing Mobile Communication Co., Ltd. (QXMC)
    
    (a)
    
    BVI
    
    
    67.6
    %
    
    
    61.1
    %
    
    Investment holdingQiao Xing Communication Holdings Limited (QXCH)
    
    (b)
    
    BVI
    
    
    100.0
    %
    
    
    
    
    
    Investment holdingChina Luxuriance Jade Company Ltd (CLJC)
    
    (c)
    
    BVI
    
    
    
    
    
    
    100
    %
    
    Investment holdingCEC Telecom Co., Ltd. (CECT)
    
    (d)
    
    PRC
    
    
    65.3
    %
    
    
    59.0
    %
    
    Manufacture and sales of mobile phones and accessoriesHui Zhou Qiao Xing Communication Industry Limited (QXCI)
    
    (e)
    
    PRC
    
    
    90.0
    %
    
    
    
    
    
    Manufacture and sales of mobile phones and indoor phonesHui Zhou Qiao Xing Property Limited (QXPL)
    
    (f)
    
    PRC
    
    
    90.0
    %
    
    
    
    
    
    Property and investment holding
 F-10




---



##### Table of Contents



Percentage of equityinterest attributablePlace of
    
    to the Group as ofName
    
    Note
    
    incorporation
    
    December 31,
    
    Principal activities2008
    
    2009Chifeng Sanchuan Mining Co., Ltd. (CSMC)
    
    (g)
    
    PRC
    
    
    90.0
    %
    
    
    
    
    
    Investment holdingHuizhou Taiherui Information Technology Co., Ltd (Taiherui)
    
    (h)
    
    PRC
    
    
    
    
    
    
    100
    %
    
    Investment holdingChifeng Zhongtai Mining Company Ltd (Zhongtai)
    
    (i)
    
    PRC
    
    
    
    
    
    
    100
    %
    
    Investment holdingChifeng Haozhou Mining Company Ltd (Haozhou)
    
    (j)
    
    PRC
    
    
    
    
    
    
    100
    %
    
    Producing and sales of molybdenum concentratesBeijing VEVA Technology Co., Ltd
    
    (k)
    
    PRC
    
    
    
    
    
    
    59.0
    %
    
    sales of mobile phone and accessories
      F-11




---



##### Table of Contents



F-12




---



##### Table of Contents



Concentration of credit risk
  Commodity price risk
  F-13




---



##### Table of Contents



F-14




---



##### Table of Contents



F-15




---



##### Table of Contents



F-16




---



##### Table of Contents



Customer relationships
    
    3  5 yearsCompleted technology
    
    1.8  5 yearsCore technology
    
    4  5 yearsBacklog
    
    4  5 monthsLicenses
    
    5 years
   F-17




---



##### Table of Contents



F-18




---



##### Table of Contents



2008
    
    2009RMB000
    
    RMB000
    
    US$000Balance at beginning of year
    
    
    11,123
    
    
    
    7,973
    
    
    
    1,168Adjust: disposal of QXCH
    
    
    
    
    
    
    (2,944
    )
    
    
    (431
    )Provision
    
    
    23,101
    
    
    
    2,831
    
    
    
    415Utilized
    
    
    (26,251
    )
    
    
    (5,936
    )
    
    
    (870
    )Balance at end of year
    
    
    7,973
    
    
    
    1,924
    
    
    
    282
              F-19




---



##### Table of Contents



F-20




---



##### Table of Contents



F-21




---



##### Table of Contents



Level one  Quoted market prices in active markets for identical assets or liabilities;Level two  Inputs other than level one inputs that are either directly or indirectly
observable; andLevel three  Unobservable inputs developed using estimates and assumptions, which
are developed by the reporting entity and reflect those assumptions that a market
participant would use.
         F-22




---



##### Table of Contents



F-23




---



##### Table of Contents



RMB000Cost of extinguishment (7,800,000 shares @ US$12.00 per share)
    
    
    721,188(Less) add: Carrying value of:- Convertible notes
    
    
    (238,325
    )- Embedded derivatives
    
    
    (365,476
    )- Deferred debt issuance costs
    
    
    24,703Loss on extinguishment
    
    
    142,090
  RMB000Deemed proceeds from disposal (7,800,000 shares @ US$12.00 per share)
    
    
    721,188Less: Share of net assets relating to minority interest disposed of
    
    
    (221,659
    )Less: Goodwill relating to minority interest disposed of
    
    
    (16,915
    )Gain on disposal
    
    
    482,614
 F-24




---



##### Table of Contents



RMB000Share of net assets of QXMC after IPO
    
    
    1,315,647Less: Share of net assets of QXMC before IPO
    
    
    (915,057
    )Increase in share of net assets after IPO
    
    
    400,590Less: Goodwill relating to equity interest deemed disposed of
    
    
    (16,625
    )Gain on deemed disposal
    
    
    383,965
     Exercise of
    
    Repurchase
    
    Conversionshare options
    
    of shares
    
    of notes
    
    TotalRMB000
    
    RMB000
    
    RMB000
    
    RMB000Share of net assets
of QXMC after
transaction
    
    
    1,584,925
    
    
    
    1,706,718
    
    
    
    1,838,425
    
    
    
    5,130,068Less: Share of net
assets of QXMC
before transaction
    
    
    (1,583,087
    )
    
    
    (1,687,850
    )
    
    
    (1,860,245
    )
    
    
    (5,131,182
    )Increase of net
assets after
transaction
    
    
    1,838
    
    
    
    18,868
    
    
    
    (21,820
    )
    
    
    (1,114
    )Less: Goodwill
relating to equity
interest deemed
disposed/acquired
(Note 11)
    
    
    (566
    )
    
    
    7,954
    
    
    
    (1,923
    )
    
    
    5,465Gain (loss) on
deemed
disposal/acquisition
    
    
    1,272
    
    
    
    26,822
    
    
    
    (23,743
    )
    
    
    4,351
  F-25




---



##### Table of Contents



Conversion
    
    Exchange
    
    Conversionof notes
    
    Stock option
    
    of notes
    
    TotalRMB000
    
    RMB000
    
    RMB000
    
    RMB000Share of net assets of
QXMC after transaction
    
    
    1,729,877
    
    
    
    1,692,779
    
    
    
    1,676,529
    
    
    
    5,099,185Less: Share of net
assets of QXMC before
transaction
    
    
    (1,760,885
    )
    
    
    (1,725,504
    )
    
    
    (1,705,248
    )
    
    
    (5,191,637
    )Increase (decrease) of
net assets after
transaction
    
    
    (31,008
    )
    
    
    (32,725
    )
    
    
    (28,719
    )
    
    
    (92,452
    )Less:
Amount attributable to noncontrolling interest
relating to equity
interest deemed
disposed
    
    
    (2,472
    )
    
    
    (1,066
    )
    
    
    (2,113
    )
    
    
    (5,651
    )Debit to
retain earnings on deemed disposal
    
    
    (33,480
    )
    
    
    (33,791
    )
    
    
    (30,832
    )
    
    
    (98,103
    )
      F-26




---



##### Table of Contents



Fair value of
    
    
    Fair value ofconsideration
    
    
    considerationShares issued
    
    
    RMB000
    
    
    US$000Shares issued as the consideration of the
acquisition
    
    
    40,000,000Multiplied by XINGs share price as of the
acquisition date
    
    $
    1.73
    
    
    
    472,982
    
    
    
    69,200Fair value of the shares issued
    
    
    
    
    
    
    472,982
    
    
    
    69,200Cash paid as the consideration of the acquisition
    
    
    
    
    
    
    205,050
    
    
    
    30,000Total fair value of consideration transferred
    
    
    
    
    
    
    678,032
    
    
    
    99,200
  RMB000Net current (liabilities)
    
    
    (75,254
    )Property, machinery and equipment
    
    
    65,743Construction in progress
    
    
    59,690Proven and probable reserves and other mineralized material*
    
    
    801,450Net deferred income tax liabilities
    
    
    (173,597
    )Fair value of net assets acquired
    
    
    678,032Total purchase consideration
    
    
    678,032
 
 *
    
    Include value beyond proven and probable mineral reserves (VBPP).  RMB000Net sales
    
    
    193,887Net income attributable to XING common shareholders
    
    
    64,207
    F-27




---



##### Table of Contents



November 30, 2009
    
    November 30, 2009RMB000
    
    US$000Net sale proceeds
    
    
    75,000
    
    
    
    10,988Less:Cash
    
    
    135,180
    
    
    
    19,804Other current assets
    
    
    1,127,894
    
    
    
    165,237Property, machinery and equipment
    
    
    13,694
    
    
    
    2,006Other non-current assets
    
    
    118,741
    
    
    
    17,396Current liabilities*
    
    
    (1,461,889
    )
    
    
    (214,167
    )Noncontrolling interests
    
    
    (2,806
    )
    
    
    (411
    )Net (liabilities) disposed
    
    
    (69,186
    )
    
    
    (10,135
    )Foreign currency realignment
    
    
    49
    
    
    
    7Net gain on disposals
    
    
    144,235
    
    
    
    21,130
 
 *
    
    Current liabilities include borrowings by QXCH from the Company totaling RMB236,102,000 as of
the date of the sale.  RMB000
    
    US$000Sales, net
    
    
    165,265
    
    
    
    24,211Loss from discontinued
operations of QXCH
before income tax and
noncontrolling interest
    
    
    (369,708
    )
    
    
    (54,162
    )Income tax expense
    
    
    (1,902
    )
    
    
    (279
    )Net income attributable
to the noncontrolling
interest
    
    
    (566
    )
    
    
    (83
    )Loss from discontinued
operations of QXCH
before disposal
    
    
    (372,176
    )
    
    
    (54,524
    )Gain on disposal of QXCH
    
    
    144,235
    
    
    
    21,130Realization of foreign
currency translation
gain relating to QXCH
    
    
    88,159
    
    
    
    12,916Total loss for the
financial year 
discontinued operations
of QXCH
    
    
    (139,782
    )
    
    
    (20,478
    )
  RMB000
    
    US$000Consideration
    
    
    75,000
    
    
    
    10,988Cash disposed of
    
    
    (135,180
    )
    
    
    (19,805
    )Unpaid
consideration as at December 31, 2009
    
    
    0
    
    
    
    0Net cash outflow
    
    
    (60,180
    )
    
    
    (8,817
    )
   F-28




---



##### Table of Contents



2008
    
    2007RMB000
    
    RMB000Sales, net
    
    
    441,075
    
    
    
    733,013Gain (loss) from
discontinued
operations of
QXCH before
income tax and
noncontrolling
interest
    
    
    (299,892
    )
    
    
    77,798Income tax expense
    
    
    (8,471
    )
    
    
    (10,743
    )Net (income) loss
attributable to
the
noncontrolling
interest
    
    
    17,410
    
    
    
    (4,022
    )Loss from
discontinued
operations of
QXCH, net of tax
    
    
    (290,953
    )
    
    
    63,033
  2008RMB000ASSETSCurrent assets:Cash and cash equivalents
    
    
    209,183Restricted cash
    
    
    127,501Accounts receivable, net
    
    
    471,825Bills receivable
    
    
    158,658Inventories
    
    
    58,140Prepaid expenses
    
    
    107,276Other current assets
    
    
    13,516Total current assets
    
    
    1,146,099Property, machinery and equipment, net
    
    
    15,772Other non-current assets
    
    
    111,786Total non-current assets
    
    
    127,558LIABILITIESCurrent liabilities:Short-term bank borrowings
    
    
    516,905Accounts payable
    
    
    60,910Other payables
    
    
    8,207Accrued liabilities
    
    
    25,747Deposits received
    
    
    1,925Deferred revenues
    
    
    16,009Due to (from) related parties
    
    
    (8,036
    )Due to holding company
    
    
    730,610Taxation payable
    
    
    25,775Noncontrolling interest
    
    
    2,240Total current liabilities
    
    
    1,380,292
 F-29




---



##### Table of Contents



4.
    
    ACCOUNTS RECEIVABLE
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Trade receivables- third parties
    
    
    468,325
    
    
    
    141,524
    
    
    
    20,733468,325
    
    
    
    141,524
    
    
    
    20,733Less: Allowance for doubtful accounts
    
    
    (6,043
    )
    
    
    (18,442
    )
    
    
    (2,701
    )Accounts receivable, net
    
    
    462,282
    
    
    
    123,082
    
    
    
    18,032
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Beginning of year
    
    
    5,428
    
    
    
    6,043
    
    
    
    885Bad debt expense
    
    
    1,277
    
    
    
    12,938
    
    
    
    1,895Bad debt recovery
    
    
    (662
    )
    
    
    (539
    )
    
    
    (79
    )End of year
    
    
    6,043
    
    
    
    18,442
    
    
    
    2,701
 F-30




---



##### Table of Contents



5.
    
    INVENTORIES
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Raw materials
    
    
    130,477
    
    
    
    94,459
    
    
    
    13,838Finished goods
    
    
    78,817
    
    
    
    42,917
    
    
    
    6,287209,294
    
    
    
    137,376
    
    
    
    20,125Less: Reserve for obsolescence
    
    
    (26,125
    )
    
    
    (39,364
    )
    
    
    (5,766
    )Total Inventories
    
    
    183,169
    
    
    
    98,012
    
    
    
    14,359
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Beginning of year
    
    
    24,010
    
    
    
    26,125
    
    
    
    3,827Provision for obsolescence for the year
    
    
    2,115
    
    
    
    13,239
    
    
    
    1,939End of year
    
    
    26,125
    
    
    
    39,364
    
    
    
    5,766
 6.
    
    ASSETS HELD FOR SALE
  F-31




---



##### Table of Contents



7.
    
    PREPAID EXPENSES
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Advances to suppliers
    
    
    363,907
    
    
    
    181,550
    
    
    
    26,597Prepaid design, licensing and tooling fees
    
    
    25,364
    
    
    
    2,458
    
    
    
    360Current portion of land use rights
    
    
    829
    
    
    
    
    
    
    
    Other
    
    
    390
    
    
    
    331
    
    
    
    49390,490
    
    
    
    184,339
    
    
    
    27,006
 8.
    
    OTHER CURRENT ASSETS
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Advances to staff
    
    
    42
    
    
    
    
    
    
    
    Advances to a third party (Note (a))
    
    
    547,412
    
    
    
    
    
    
    
    Interest receivable on advances to a
third party (Note (a))
    
    
    35,501
    
    
    
    
    
    
    
    Short-term investment
    
    
    734
    
    
    
    1,044
    
    
    
    153Other
    
    
    12,028
    
    
    
    35,981
    
    
    
    5,271595,717
    
    
    
    37,025
    
    
    
    5,424
   F-32




---



##### Table of Contents



9.
    
    PROPERTY, MACHINERY AND EQUIPMENT
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Buildings and improvements
    
    
    149,037
    
    
    
    130,223
    
    
    
    19,077Machinery, equipment and software
    
    
    32,554
    
    
    
    54,659
    
    
    
    8,008Furniture and office equipment
    
    
    2,501
    
    
    
    3,845
    
    
    
    563Motor vehicles
    
    
    3,483
    
    
    
    4,878
    
    
    
    715187,575
    
    
    
    193,605
    
    
    
    28,363Less: Accumulated depreciation
    
    
    (20,209
    )
    
    
    (23,120
    )
    
    
    (3,387
    )Property, machinery and equipment, net
    
    
    167,366
    
    
    
    170,485
    
    
    
    24,976
   Year ended December 31,2007
    
    2008
    
    2009RMB000
    
    RMB000
    
    RMB000
    
    US$000Cost of goods sold
    
    
    9,192
    
    
    
    10,134
    
    
    
    13,576
    
    
    
    1,989Selling and distribution expenses
    
    
    6
    
    
    
    4
    
    
    
    7
    
    
    
    1General and administrative
expenses
    
    
    1,590
    
    
    
    1,849
    
    
    
    2,572
    
    
    
    377Total
    
    
    10,788
    
    
    
    11,987
    
    
    
    16,155
    
    
    
    2,367
 F-33




---



##### Table of Contents



10.
    
    PROVEN AND PROBABLE RESERVES
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Cost:Proven and probable reserves
    
    
    
    
    
    
    734,155
    
    
    
    107,554Value beyond proven and probable reserves
    
    
    
    
    
    
    67,295
    
    
    
    9,859
    
    
    
    801,450
    
    
    
    117,413Less: Accumulated depletion- Proven and probable reserves
    
    
    
    
    
    
    (22,034
    )
    
    
    (3,228
    )Proven and probable reserves
    
    
    
    
    
    
    712,121
    
    
    
    104,326Value beyond proven and probable reserves
    
    
    
    
    
    
    67,295
    
    
    
    9,859
 11.
    
    GOODWILL
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Beginning of year
    
    
    76,593
    
    
    
    82,058
    
    
    
    12,022Amount deemed disposed of due to the
conversion of Notes by QXMC (Note 3
(b))
    
    
    (1,923
    )
    
    
    
    
    
    
    Amount increased due to repurchase
of stock by QXMC (Note 3 (b)
    
    
    7,954
    
    
    
    
    
    
    
    Amount disposed of due to the
exchange of options to stock in QXMC
(Note 3 (b))
    
    
    
    
    
    
    
    
    
    
    Amount deemed disposed of due to the
sale of stock by QXMC (Note 3 (b))
    
    
    (566
    )
    
    
    
    
    
    
    End of year
    
    
    82,058
    
    
    
    82,058
    
    
    
    12,022
  F-34




---



##### Table of Contents



12.
    
    OTHER ACQUIRED INTANGIBLE ASSETS, NET
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Cost:- CECT brand
    
    
    39,835
    
    
    
    39,835
    
    
    
    5,836- Customer relationship
    
    
    5,418
    
    
    
    5,418
    
    
    
    794- Completed technology
    
    
    16,950
    
    
    
    16,950
    
    
    
    2,483- Core technology
    
    
    24,193
    
    
    
    24,193
    
    
    
    3,544- Backlog
    
    
    9,175
    
    
    
    9,175
    
    
    
    1,344- License
    
    
    1,725
    
    
    
    1,725
    
    
    
    25397,296
    
    
    
    97,296
    
    
    
    14,254Less: Accumulated impairment-CECT brand
    
    
    26,235
    
    
    
    39,835
    
    
    
    5,836Less: Accumulated amortization- Customer relationship
    
    
    5,118
    
    
    
    5,418
    
    
    
    794- Completed technology
    
    
    16,950
    
    
    
    16,950
    
    
    
    2,483- Core technology
    
    
    15,327
    
    
    
    19,760
    
    
    
    2,895- Backlog
    
    
    9,175
    
    
    
    9,175
    
    
    
    1,344- License
    
    
    1,725
    
    
    
    1,725
    
    
    
    25374,530
    
    
    
    92,863
    
    
    
    13,605Other acquired intangible assets, net
    
    
    22,766
    
    
    
    4,433
    
    
    
    649
   F-35




---



##### Table of Contents



AmountRMB000
    
    US$000Year ending December 31, 2010
    
    
    4,433
    
    
    
    649
 13.
    
    SHORT-TERM BANK BORROWINGS
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Bills payable
    
    
    39,850
    
    
    
    191,200
    
    
    
    28,011Bank loans
    
    
    944,100
    
    
    
    693,508
    
    
    
    101,599983,950
    
    
    
    884,708
    
    
    
    129,610
    2008
    
    2009RMB000
    
    RMB000
    
    US$000Pledged of:- Bank deposits of the Group
    
    
    136,299
    
    
    
    251,720
    
    
    
    36,877- Bills receivable of the Group
    
    
    40,000
    
    
    
    
    
    
    
    Guarantees provided by:- QXGL
    
    
    160,000
    
    
    
    50,000
    
    
    
    7,321- QXGL and directors
    
    
    360,000
    
    
    
    290,000
    
    
    
    42,463- Directors
    
    
    218,500
    
    
    
    68,500
    
    
    
    10,030
 F-36




---



##### Table of Contents



14.
    
    ACCRUED LIABILITIES
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Accruals for:- Design, licensing and tooling fees
    
    
    23,653
    
    
    
    102
    
    
    
    15- Salaries
    
    
    2,780
    
    
    
    3,932
    
    
    
    576- Staff benefits
    
    
    2,035
    
    
    
    1,774
    
    
    
    260- Advertising
    
    
    35
    
    
    
    18,296
    
    
    
    2,680- Warranty
    
    
    5,029
    
    
    
    1,923
    
    
    
    282- Interest
    
    
    14,254
    
    
    
    5,966
    
    
    
    874- Professional service fees
    
    
    11,114
    
    
    
    6,329
    
    
    
    927- Others
    
    
    3,117
    
    
    
    2,150
    
    
    
    31562,017
    
    
    
    40,472
    
    
    
    5,929
 F-37




---



##### Table of Contents



15.
    
    CONVERTIBLE NOTES
  2008
    
    2009RMB000
    
    RMB000
    
    US$0004.5% unsecured senior convertible notes (Note (a))
    
    
    177,385
    
    
    
    
    
    
    
    QXMC 4.0% unsecured senior convertible notes
(Note (b))
    
    
    206,211
    
    
    
    112,162
    
    
    
    16,4320% new unsecured senior convertible notes (Note
(c))
    
    
    
    
    
    
    121,554
    
    
    
    17,808Total debts
    
    
    383,596
    
    
    
    233,716
    
    
    
    34,240Less: Amount classified as current liabilities
    
    
    (383,596
    )
    
    
    (233,716
    )
    
    
    (34,240
    )Amount classified as non-current liabilities
    
    
    
    
    
    
    
    
    
    
    
     
    
    the notes bear interest at the rate of 4.5% per annum, payable in cash in arrears on
a calendar quarterly basis beginning December 31, 2006;
    
    the notes mature on April 30, 2009;
    
    the notes are convertible, at the investors option, into common stock of the
Company at an initial conversion price of US$14.30 per share. The conversion price for
the Companys common stock is subject to reset when the volume weighted average price
(VWAP) of the Companys common stock for the five trading days ending on each
six-month anniversary from October 31, 2006 until maturity of the Notes (each a Reset
Date) is less than US$13.00 (or such previously reset price). In the event of a
reset, the conversion price will be set equal to the greater of US$7.80 or 100% of the
VWAP of the Companys common stock for the five trading days ending on the applicable
Reset Date. As of December 31, 2008, the conversion price of the 4.5% Notes had been
reset to US$5.56 per share due to dilutive issuance adjustments related to the issuance
and price reset of the 5.5% unsecured senior convertible notes issued on August 17,
2007;
    
    the notes will not be convertible to the extent that after giving effect to such
conversion, the investors (together with their affiliates) would beneficially own in
excess of 9.99% of the Companys common stock outstanding immediately after giving
effect to the conversion; and
    
    the holders of the notes have the right to require the Company to redeem the notes
after one year in an amount equal to the sum of (a) the outstanding principal of the
Notes, (b) the accrued and unpaid interest thereon, and (c) 3% on the sum of (a) and
(b).
 
 F-38




---



##### Table of Contents




    
    the warrants have an initial exercise price of US$14.30 per share and may be
exercised at any time during a 5-year period commencing from October 31, 2006;
    
    the warrants will not be exercisable to the extent that after giving effect to such
exercise, the holder (together with its affiliates) would beneficially own in excess of
9.99% of the Companys common stock outstanding immediately after giving effect to such
exercise; and
    
    the warrants require an automatic repricing of the exercise price if the Company
makes certain sales of its common stock or common stock equivalents in a
capital-raising transaction at a price below the warrant exercise price.
   2008RMB000Gross proceeds from 4.5% Notes
    
    
    202,475Discount on notes:- Equity-classified October
Investor Warrants (Note (i))
    
    
    (14,534
    )- Liability-classified embedded
derivatives (Note (ii))
    
    
    (111,341
    )Value of debt component at date of issue
    
    
    76,600Foreign currency realignment
    
    
    (22,517
    )Accretion of discount (Note (iii))
    
    
    123,302Value of debt component at end of year
    
    
    177,385
    F-39




---



##### Table of Contents



RMB000
    
    US$000Balance at December 31, 2006
    
    
    82,698
    
    
    
    12,122Foreign currency realignment
    
    
    (3,318
    )
    
    
    (487
    )Gain on remeasurement included in earnings
    
    
    18,865
    
    
    
    2,765*Reclassification
    
    
    (89,531
    )
    
    
    (13,123
    )Balance at December 31, 2007
    
    
    8,714
    
    
    
    1,277Foreign currency realignment
    
    
    (468
    )
    
    
    (69
    )Gain on remeasurement included in earnings
    
    
    (5,296
    )
    
    
    (776
    )Balance at December 31, 2008
    
    
    2,950
    
    
    
    432Foreign currency realignment
    
    
    3
    
    
    
    Gain on remeasurement included in earnings
    
    
    (2,953
    )
    
    
    (432
    )Balance at December 31, 2009
    
    
    
    
    
    
    
 
 *
    
    Due to the expiration of the early redemption premium put in October 2007, the Company
reassessed the classification of the embedded conversion option of the 4.5% Notes and concluded
that the fair value of the embedded conversion option as of the date of expiration of the early
redemption premium put option, which amounted to approximately RMB89,531,000, was reclassified to
additional paid-in capital.   F-40




---



##### Table of Contents



2008RMB000Amount attributed to June Agent Warrants (Note (i))
    
    
    10,529Other cash costs
    
    
    14,385Total deferred debt issuance costs on initial
recognition
    
    
    24,914Foreign currency realignment
    
    
    (510
    )Accumulated amortization (Note (ii))
    
    
    (24,404
    )Net value at end of year
    
    
    
     RMB000
    
    US$000Fair value of 4.5% Notes extinguishedFair value of 4.5% Notes as of November 3, 2009
    
    
    177,486
    
    
    
    26,002Interest accrued in year 2009
    
    
    2,626
    
    
    
    385Total fair value of 4.5% Notes extinguished
    
    
    180,112
    
    
    
    26,387Less:Fair value of 0% Restated Notes issued (Note 15 (c))Fair value of straight bonds
    
    
    (161,405
    )
    
    
    (23,646
    )Fair value of embedded derivatives on November
3, 2009
    
    
    (34,462
    )
    
    
    (5,049
    )Fair value of common shares issued (Note 18)
    
    
    (33,422
    )
    
    
    (4,896
    )Loss on extinguishment of 4.5% Notes
    
    
    (49,177
    )
    
    
    (7,204
    )
 F-41




---



##### Table of Contents




 
 
 
 
 
 
 
 
  F-42




---



##### Table of Contents




 
 
 
 
  2008
    
    2009RMB000
    
    RMB000
    
    US$000Gross proceeds from QXMC 4.0% Notes
    
    
    489,601
    
    
    
    489,601
    
    
    
    71,727Discount on notes:- Equity-classified October QXMC Investor Warrants
(Note (i))
    
    
    (36,062
    )
    
    
    (36,062
    )
    
    
    (5,283
    )- Liability-classified embedded derivatives (Note (ii))
    
    
    (304,037
    )
    
    
    (304,037
    )
    
    
    (44,542
    )Value of debt component at date of issue
    
    
    149,502
    
    
    
    149,502
    
    
    
    21,902Foreign currency realignment
    
    
    7,484
    
    
    
    6,612
    
    
    
    969Accretion of discount (Note (iii))
    
    
    70,512
    
    
    
    207,611
    
    
    
    30,415Partial conversion of Notes into ordinary shares
    
    
    (21,287
    )
    
    
    (131,047
    )
    
    
    (19,198
    )Purchase of Notes
    
    
    
    
    
    
    (120,516
    )
    
    
    (17,656
    )Value of debt component at end of year
    
    
    206,211
    
    
    
    112,162
    
    
    
    16,432
     F-43




---



##### Table of Contents



RMB000
    
    US$000Value on initial recognition
    
    
    304,037
    
    
    
    44,542Foreign currency realignment
    
    
    (6,551
    )
    
    
    (960
    )Gain on remeasurement included in earnings
    
    
    (144,939
    )
    
    
    (21,234
    )Settled on conversion of Notes
    
    
    (28,417
    )
    
    
    (4,163
    )Balance at December 31, 2008
    
    
    124,130
    
    
    
    18,185Foreign currency realignment
    
    
    87
    
    
    
    13Loss on remeasurement included in earnings
    
    
    14,808
    
    
    
    2,169Settled on conversion of Notes
    
    
    (59,158
    )
    
    
    (8,667
    )Settled on Purchase of Notes
    
    
    (39,889
    )
    
    
    (5,844
    )Balance at December 31, 2009
    
    
    39,978
    
    
    
    5,856
     2008
    
    2009RMB000
    
    RMB000
    
    US$000Amount attributed to Agent Warrants (Note (i))
    
    
    31,451
    
    
    
    31,451
    
    
    
    4,608Other cash costs
    
    
    20,887
    
    
    
    20,887
    
    
    
    3,060Total deferred debt issuance costs on initial
recognition
    
    
    52,338
    
    
    
    52,338
    
    
    
    7,668Foreign currency realignment
    
    
    (1,198
    )
    
    
    (1,180
    )
    
    
    (173
    )Accumulated amortization (Note (ii))
    
    
    (10,851
    )
    
    
    (31,866
    )
    
    
    (4,668
    )Written-off on conversion of QXMC 4% Notes
    
    
    (5,600
    )
    
    
    (5,600
    )
    
    
    (820
    )Purchase of Notes
    
    
    
    
    
    
    (13,692
    )
    
    
    (2,007
    )Net value at end of year
    
    
    34,689
    
    
    
    
    
    
    
    
   F-44




---



##### Table of Contents



2008
    
    2009RMB000
    
    RMB000
    
    US$000Fair value of ordinary shares issued
    
    
    55,054
    
    
    
    126,650
    
    
    
    18,555(Less) add: Carrying amount of:- Notes
    
    
    (21,287
    )
    
    
    (109,760
    )
    
    
    (16,080
    )- Accrued interest
    
    
    (316
    )
    
    
    (4,028
    )
    
    
    (590
    )- Embedded derivatives
    
    
    (28,417
    )
    
    
    (59,158
    )
    
    
    (8,667
    )- Deferred debt issuance costs
    
    
    5,600
    
    
    
    
    
    
    
    - Foreign currency realignment
    
    
    
    
    
    
    (55
    )
    
    
    (8
    )Loss (gain) on extinguishment of
convertible debts
    
    
    10,634
    
    
    
    (46,351
    )
    
    
    (6,790
    )
   RMB000
    
    US$000Aggregate purchase price
    
    
    163,822
    
    
    
    24,000Less: Carrying amount of:- Notes
    
    
    (120,516
    )
    
    
    (17,656
    )- Accrued interest
    
    
    (1,963
    )
    
    
    (288
    )- Embedded derivatives
    
    
    (39,889
    )
    
    
    (5,844
    )- Deferred debt issuance costs
    
    
    13,692
    
    
    
    2,007Loss on extinguishment of convertible debts
    
    
    15,146
    
    
    
    2,219
 F-45




---



##### Table of Contents




    
    the notes is noninterest bearing;
    
    the notes mature on July 3, 2010, with monthly installment at amount of the lesser
of US$ 3 million or the remaining principal. The installment payment starts on November
18, 2009 and continues first day of each month thereafter to maturity. For each
installment payments, the Company can elect to pay in common shares or cash;
    
    the notes are convertible, at the investors option, into common stock of the
Company at an initial conversion price of US$2.00 per share. The conversion price for
the Companys common stock is subject to reset when the Company issues new shares below
conversion price, then the conversion price will be reduced to an amount equal to the
new issuance price. As of December 31, 2009, there was no conversion price reset.
    
    If the Company elects to pay in common shares of the Company, it will be based on
the Company conversion price which is the lesser of (i) the then applicable conversion
price (calculated and adjusted as set forth above) and (ii) that price which is 91% of
the arithmetic average of the volume weighted average price (VWAP) of the Companys
common stock on each of the five consecutive trading day period;
    
    the notes will not be convertible to the extent that after giving effect to such
conversion, the investors (together with their affiliates) would beneficially own in
excess of 9.99% of the Companys common stock outstanding immediately after giving
effect to the conversion; and
    
    the holders of the notes have the right to require the Company to redeem the notes
in an amount equal to the sum of the outstanding principal of the notes upon an
acquisition made by the Company that is greater than 20% of the value of the Company.
In the event of default or there is a change of control of the Company, the holders of
the notes have the right to require the Company to redeem the noted in an amount equal
to 125% of the sum of the outstanding principal of the notes.
 F-46




---



##### Table of Contents



2009RMB000
    
    US$000Par value of 0% Restated Notes
    
    
    163,834
    
    
    
    24,002Discount on notes:
    
    
    (2,429
    )
    
    
    (356
    )Value of debt component at date of issue
    
    
    161,405
    
    
    
    23,646Foreign currency realignment
    
    
    (9
    )
    
    
    (1
    )Extinguishment of notes
    
    
    (40,959
    )
    
    
    (6,001
    )Accretion of discount (Note (iii))
    
    
    1,117
    
    
    
    164Value of debt component at end of year
    
    
    121,554
    
    
    
    17,808
     F-47




---



##### Table of Contents



RMB000
    
    US$000Value on initial recognition
    
    
    34,462
    
    
    
    5,049Gain on remeasurement included in earnings
    
    
    (3,637
    )
    
    
    (533
    )Foreign currency realignment
    
    
    3
    
    
    
    Extinguishment of notes
    
    
    (7,710
    )
    
    
    (1,130
    )Balance at December 31, 2009
    
    
    23,118
    
    
    
    3,386
     2009RMB000
    
    US$000Fair value of ordinary shares issued
    
    
    45,967
    
    
    
    6,734(Less) add: Carrying amount of:- Notes
    
    
    (40,968
    )
    
    
    (6,002
    )- Accrued interest
    
    
    
    
    
    
    - Embedded derivatives
    
    
    (7,710
    )
    
    
    (1,130
    )- Deferred debt issuance costs
    
    
    
    
    
    
    Gain on extinguishment of convertible
debts
    
    
    (2,711
    )
    
    
    (398
    )
 F-48




---



##### Table of Contents



16.
    
    ASSETS RETIREMENT OBLIGATION
   RMB000
    
    US$000Accrued liabilities payable for sewage
    
    
    3,688
    
    
    
    540Accrued liabilities payable for land restoration
    
    
    325
    
    
    
    48Balance at December 31, 2009
    
    
    4,013
    
    
    
    588
 17.
    
    SHAREHOLDERS LOANS
  18.
    
    COMMON STOCK TRANSACTIONS
  WeightedNumber of
    
    average issueshares
    
    priceUS$Balance of December 31, 2006
    
    
    29,605,003Issuance of shares to private investors
    
    
    1,300,000
    
    
    
    11.80Issuance of shares to warrant holders (Note 19(c))
    
    
    43,833
    
    
    
    4.54Balance of December 31, 2007
    
    
    30,948,836Balance of December 31, 2008
    
    
    30,948,836Issuance of shares for the acquisition of CJLC (Note 3 (c))
    
    
    40,000,000
    
    
    
    1.73Issuance of shares to consultants for the acquisition (Note 3 (c))
    
    
    2,200,000
    
    
    
    1.73Issuance of shares for the CB exchange (Note 15(a))
    
    
    2,400,000
    
    
    
    2.04Issuance of shares on conversion of CB (Note 15(c))
    
    
    3,319,171
    
    
    
    2.03Issuance of shares on warrants exercise (Note 19)
    
    
    3,459,986
    
    
    
    1.78Balance of December 31, 2009
    
    
    82,327,993
  F-49




---



##### Table of Contents



19.
    
    STOCK OPTIONS AND WARRANTS
    Weighted
    
    Weightedaverage
    
    averageShares
    
    exercise
    
    remaining
    
    AggregateUnderlying
    
    price
    
    contractual
    
    intrinsicOptions
    
    per share
    
    term
    
    ValueUS$
    
    
    
    
    
    US$000Balance as of January 1, 2007
    
    
    
    
    
    
    Granted on March 19, 2007:- To a director and employees
(Note (i))
    
    
    2,716,520
    
    
    
    7.50
    
    
    
    
    
    
    
    - To a consultant (Note (ii))
    
    
    1,200,000
    
    
    
    18.00
    
    
    
    
    
    
    
    Balance as of December 31, 2007
    
    
    3,916,520
    
    
    
    10.72Exercised
    
    
    (565,000
    )
    
    
    7.5
    
    
    
    
    
    
    
    Forfeited
    
    
    (140,000
    )
    
    
    7.5
    
    
    
    
    
    
    
    Balance as of December 31, 2008
    
    
    3,211,520
    
    
    
    11.42
    
    
    
    
    
    
    
    Expired
    
    
    (266,720
    )
    
    
    7.5Cancelled
    
    
    (1,744,800
    )
    
    
    7.5Balance as of December 31, 2009
    
    
    1,200,000
    
    
    
    18
    
    
    
    1.2 years
    
    
    
    Exercisable as of December 31, 2009
    
    
    1,200,000
    
    
    
    18
    
    
    
    1.2 years
    
    
    
    
    Fair value of underlying ordinary shares on grant date
    
    US$
    10.43Expected share price volatility
    
    
    47.50
    %Expected dividend yield
    
    
    0.0
    %Expected term (in years)
    
    
    3.5Risk-free interest rate
    
    
    5.0
    %
  F-50




---



##### Table of Contents



Fair value of QXMCs underlying ordinary share on grant date
    
    US$
    10.43Risk-free interest rate
    
    
    5.10
    %Expected dividend yield
    
    
    0.00
    %Expected term
    
    
    2.0
    yearsExpected stock price volatility
    
    
    48.90
    %
  F-51




---



##### Table of Contents



Weightedaveragegrant dateNumber of
    
    fairshares
    
    valueUS$Balance as of January 1, 2009
    
    
    
    
    
    
    Granted
    
    
    1,955,057
    
    
    
    4.60Vested
    
    
    (960,884
    )
    
    
    4.60Balance as of December 31, 2009
    
    
    994,173
    
    
    
    4.60Expected to vest after December 31, 2009
    
    
    994,173
    
    
    
    4.60
    WeightedaverageNumber of stock
    
    
    exercisewarrants
    
    
    priceUS$Outstanding as of December 31, 2006
    
    
    2,158,134
    
    
    
    11.385Issued:- To share investors and placement agents (Note (i))
    
    
    473,814
    
    
    
    13.000- To 5.5% Notes investors and placement agent
    
    
    736,016
    
    
    
    10.190Repricing adjustment (Note (ii))
    
    
    1,555,191
    
    
    
    Exercised (Note (iii))
    
    
    (56,877
    )
    
    
    7.983Outstanding as of December 31, 2007
    
    
    4,866,278
    
    
    
    7.763Repricing adjustment (Note (iv))
    
    
    333,793
    
    
    
    Outstanding as of December 31, 2008
    
    
    5,200,071
    
    
    
    7.265Repricing adjustment (Note (v))
    
    
    12,800,930Exercised
    
    
    (3,459,979
    )Outstanding as of December 31, 2009
    
    
    14,541,022
    
    
    
    2.174Exercisable as of December 31, 2009
    
    
    14,541,022
    
    
    
    2.174Exercisable as of December 31, 2008
    
    
    5,200,071
    
    
    
    7.265
    F-52




---



##### Table of Contents



Weighted-averageremainingExercise price
    
    Number of
    
    contractual lifeWarrants
    
    (US$)
    

outstanding warrants
    
    (years)2006 Oct Placement Warrants
    
    
    1.77
    
    
    
    4,847,450
    
    
    
    0.832006 Oct CB Warrants
    
    
    1.77
    
    
    
    4,406,783
    
    
    
    1.832007 Aug CB Warrants
    
    
    1.77
    
    
    
    4,237,290
    
    
    
    2.632006 Feb Placement Warrants
    
    
    6.301
    
    
    
    20,835
    
    
    
    0.152006 Feb Montauk Warrants
    
    
    6.864
    
    
    
    42,020
    
    
    
    0.052006 Jan Placement Warrants
    
    
    6.684
    
    
    
    473,462
    
    
    
    0.052005 Apr Placement Warrants
    
    
    7.925
    
    
    
    46,646
    
    
    
    0.282005 Feb Placement Warrants
    
    
    7.925
    
    
    
    466,536
    
    
    
    0.1314,541,022
    
    
    
    1.61
   F-53




---



##### Table of Contents



Weighted-averageremainingExercise price
    
    Number of
    
    contractual lifeWarrants
    
    (US$)
    
    outstanding warrants
    
    (years)2006 Oct Placement Warrants
    
    
    5.56
    
    
    
    1,543,165
    
    
    
    1.832006 Oct CB Warrants
    
    
    5.56
    
    
    
    1,402,879
    
    
    
    2.832007 Aug CB Warrants
    
    
    10.19
    
    
    
    736,016
    
    
    
    3.632007 Nov SPA Warrants
    
    
    13.00
    
    
    
    473,814
    
    
    
    2.842006 Feb Placement Warrants
    
    
    6.333
    
    
    
    20,730
    
    
    
    1.152006 Feb Montauk Warrants
    
    
    6.899
    
    
    
    41,808
    
    
    
    1.052006 Jan Placement Warrants
    
    
    6.899
    
    
    
    471,070
    
    
    
    1.052005 Apr Placement Warrants
    
    
    7.966
    
    
    
    46,410
    
    
    
    1.282005 Feb Placement Warrants
    
    
    7.966
    
    
    
    464,179
    
    
    
    1.135,200,071
    
    
    
    2.30
   F-54




---



##### Table of Contents



Exercise
    
    Remaining
    
    Dividend
    
    Expected
    
    Risk-free
    
    Estimated fairprice
    
    contractual
    
    yield
    
    volatility
    
    interest
    
    valueWarrants
    
    (US$)
    
    life (years)
    
    (%)
    
    (%)
    
    rate (%)
    
    (US$/warrant)2006 Oct Placement WarrantsOct 31, 2006 (date of issuance)
    
    
    14.30
    
    
    
    4.00
    
    
    
    
    
    
    
    67.52
    %
    
    
    4.62
    %
    
    
    7.302January 1, 2009
    
    
    5.560
    
    
    
    1.83
    
    
    
    0.0
    %
    
    
    82.51
    %
    
    
    0.80
    %
    
    
    3.738December 31, 2009
    
    
    1.770
    
    
    
    0.83
    
    
    
    0.0
    %
    
    
    80.50
    %
    
    
    0.38
    %
    
    
    0.9012006 Oct CB WarrantsOct 31, 2006 (date of issuance)
    
    
    14.30
    
    
    
    5.00
    
    
    
    
    
    
    
    67.52
    %
    
    
    4.62
    %
    
    
    8.011January 1, 2009
    
    
    5.560
    
    
    
    2.83
    
    
    
    0.0
    %
    
    
    77.50
    %
    
    
    1.10
    %
    
    
    4.650December 31, 2009
    
    
    1.770
    
    
    
    1.83
    
    
    
    0.0
    %
    
    
    88.11
    %
    
    
    1.03
    %
    
    
    1.5362007 Aug CB WarrantsAug 14, 2007 (date of issuance)
    
    
    10.19
    
    
    
    5.00
    
    
    
    
    
    
    
    62.07
    %
    
    
    4.00
    %
    
    
    5.72January 1, 2009
    
    
    10.190
    
    
    
    3.62
    
    
    
    0.0
    %
    
    
    73.20
    %
    
    
    1.32
    %
    
    
    9.048December 31, 2009
    
    
    1.770
    
    
    
    2.63
    
    
    
    0.0
    %
    
    
    83.49
    %
    
    
    1.49
    %
    
    
    1.7382007 Nov SPA WarrantsAug 14, 2007 (date of issuance)
    
    
    13.00
    
    
    
    4.0
    
    
    
    
    
    
    
    62.07
    %
    
    
    4.00
    %
    
    
    2.696January 1, 2009
    
    
    13.000
    
    
    
    2.83
    
    
    
    0.0
    %
    
    
    77.46
    %
    
    
    1.10
    %
    
    
    10.945Nov 20, 2009 (date of exercise)
    
    
    1.847
    
    
    
    1.95
    
    
    
    0.0
    %
    
    
    87.29
    %
    
    
    0.73
    %
    
    
    1.548Dec 28, 2009 (date of exercise)
    
    
    1.770
    
    
    
    1.85
    
    
    
    0.0
    %
    
    
    87.94
    %
    
    
    0.99
    %
    
    
    1.5552006 Feb Placement WarrantsFeb 22, 2006 (date of issuance)
    
    
    7.00
    
    
    
    4.0
    
    
    
    
    
    
    
    49.57
    %
    
    
    4.67
    %
    
    
    2.42January 1, 2009
    
    
    6.633
    
    
    
    1.14
    
    
    
    0.0
    %
    
    
    90.55
    %
    
    
    0.47
    %
    
    
    0.154December 31, 2009
    
    
    6.301
    
    
    
    0.15
    
    
    
    0.0
    %
    
    
    52.54
    %
    
    
    0.05
    %
    
    
    0.0002006 Feb Montauk WarrantsFeb 3, 2006 (date of issuance)
    
    
    8.125
    
    
    
    3.95
    
    
    
    
    
    
    
    56.36
    %
    
    
    4.52
    %
    
    
    3.038January 1, 2009
    
    
    6.899
    
    
    
    1.04
    
    
    
    0.0
    %
    
    
    92.25
    %
    
    
    0.42
    %
    
    
    0.118December 31, 2009
    
    
    6.864
    
    
    
    0.05
    
    
    
    0.0
    %
    
    
    46.79
    %
    
    
    0.02
    %
    
    
    0.0002006 Jan Placement WarrantsJan 17, 2006 (date of issuance)
    
    
    8.125
    
    
    
    4.0
    
    
    
    
    
    
    
    47.17
    %
    
    
    4.30
    %
    
    
    2.27January 1, 2009
    
    
    6.899
    
    
    
    1.04
    
    
    
    0.0
    %
    
    
    92.25
    %
    
    
    0.42
    %
    
    
    0.118December 31, 2009
    
    
    6.864
    
    
    
    0.05
    
    
    
    0.0
    %
    
    
    46.79
    %
    
    
    0.02
    %
    
    
    0.0002005 Apr Placement WarrantsApr 12, 2005 (date of issuance)
    
    
    9.86
    
    
    
    5.0
    
    
    
    
    
    
    
    62.74
    %
    
    
    3.95
    %
    
    
    1.537January 1, 2009
    
    
    7.966
    
    
    
    1.28
    
    
    
    0.0
    %
    
    
    87.76
    %
    
    
    0.53
    %
    
    
    0.112December 31, 2009
    
    
    7.925
    
    
    
    0.28
    
    
    
    0.0
    %
    
    
    49.82
    %
    
    
    0.08
    %
    
    
    0.0002005 Feb Placement WarrantsFeb 16, 2005 (date of issuance)
    
    
    9.86
    
    
    
    5.0
    
    
    
    
    
    
    
    67.49
    %
    
    
    3.67
    %
    
    
    2.677January 1, 2009
    
    
    7.966
    
    
    
    1.13
    
    
    
    0.0
    %
    
    
    90.18
    %
    
    
    0.46
    %
    
    
    0.096December 31, 2009
    
    
    7.925
    
    
    
    0.13
    
    
    
    0.0
    %
    
    
    54.70
    %
    
    
    0.05
    %
    
    
    0.000
   F-55




---



##### Table of Contents



Net value asof January 1,
    
    (Gain)/loss onWarrants
    
    2009
    
    remeasurement
    
    Exercised
    
    Net value at December 31, 2009(RMB000)
    
    (RMB000)
    
    (RMB000)
    
    (RMB000)
    
    (US$000)2006 Oct Placement
Warrants
    
    
    39,374
    
    
    
    (9,562
    )
    
    
    
    
    
    
    29,812
    
    
    
    4,3682006 Oct CB
Warrants
    
    
    44,528
    
    
    
    1,675
    
    
    
    
    
    
    
    46,203
    
    
    
    6,7692007 Aug CB
Warrants
    
    
    45,457
    
    
    
    4,812
    
    
    
    
    
    
    
    50,269
    
    
    
    7,3642007 Nov SPA
Warrants
    
    
    35,398
    
    
    
    1,305
    
    
    
    (36,703
    )
    
    
    
    
    
    
    2006 Feb Placement
Warrants
    
    
    22
    
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    2006 Feb Montauk
Warrants
    
    
    34
    
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    2006 Jan Placement
Warrants
    
    
    380
    
    
    
    (380
    )
    
    
    
    
    
    
    
    
    
    
    2005 Apr Placement
Warrants
    
    
    35
    
    
    
    (35
    )
    
    
    
    
    
    
    
    
    
    
    2005 Feb Placement
Warrants
    
    
    304
    
    
    
    (304
    )
    
    
    
    
    
    
    
    
    
    
    165,532
    
    
    
    2,545
    
    
    
    (36,703
    )
    
    
    126,284
    
    
    
    18,501
 F-56




---



##### Table of Contents



Weighted
    
    Weightedaverage
    
    averageexercise
    
    remainingNumber of
    
    price
    
    contractualwarrants
    
    per share
    
    termUS$Investor Warrants
    
    
    1,648,721
    
    
    
    8.91
    
    
    3.4
    yearsAgent Warrants
    
    
    942,127
    
    
    
    8.91
    
    
    
    3.4
    yearsTotal
    
    
    2,590,848
    
    
    
    8.91
    
    
    
    3.4
    yearsExercisable as of December 31, 2009
    
    
    2,590,848
    
    
    
    8.91
    
    
    
    3.4
    years
  Stock price of underlying ordinary share on grant date
    
    US$
    7.45Risk-free interest rate
    
    
    4.3
    %Expected dividend yield
    
    
    0
    %Expected term
    
    
    5
    yearsExpected stock price volatility
    
    
    65.38
    %
   F-57




---



##### Table of Contents



December 31, 2009RMB000
    
    US$000Recognized on January 1, 2009
    
    
    15,414
    
    
    
    2,258Foreign currency realignment
    
    
    4
    
    
    
    1Loss on remeasurement
    
    
    7,219
    
    
    
    1,057Net value at end of year
    
    
    22,637
    
    
    
    3,316Loss on remeasurement for the
period included in earnings
attributable to the change in
unrealized gain of liabilities
still outstanding at end of year
    
    
    7,219
    
    
    
    1,057
   January 1,
    
    December2009
    
    31, 2009Stock price of underlying ordinary share on grant date
    
    US$
    2.54
    
    
    US$
    3.66Risk-free interest rate
    
    
    1.54
    %
    
    
    1.88
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected term
    
    
    4.37
    years
    
    
    3.37
    yearsExpected stock price volatility
    
    
    79.21
    %
    
    
    80.55
    %
 F-58




---



##### Table of Contents



2007
    
    2008
    
    2009RMB000
    
    RMB000
    
    RMB000
    
    US$000PRC income tax on current years profit- current
    
    
    119,614
    
    
    
    162,267
    
    
    
    50,782
    
    
    
    7,440- deferred
    
    
    (6,237
    )
    
    
    (6,550
    )
    
    
    (6,843
    )
    
    
    (1,003
    )Total income tax expense
    
    
    113,377
    
    
    
    155,717
    
    
    
    43,939
    
    
    
    6,437
 F-59




---



##### Table of Contents



2007
    
    2008
    
    2009PRC statutory income tax rate
    
    
    33.0
    %
    
    
    25.0
    %
    
    
    25.0
    %Tax effect of preferential tax rates
    
    
    (12.2
    %)
    
    
    0.8
    %
    
    
    Losses (gains) of BVI companies not subject
to tax
    
    
    (11.3
    %)
    
    
    4.9
    %
    
    
    (36.6
    %)Non-deductible activities
    
    
    0.8
    %
    
    
    2.3
    %
    
    
    (11.4
    %)Deferred tax
not recognized
    
    
    
    
    
    
    
    
    
    
    (5.8
    %)Effect of changes in expected future tax rates
    
    
    
    
    
    
    
    
    
    
    1.1
    %Effective income tax rate
    
    
    10.3
    %
    
    
    33
    %
    
    
    (27.7
    %)
  Deferred tax assets  current portion
 2008
    
    2009RMB000
    
    RMB000
    
    US$000Allowance for doubtful accounts
    
    
    1,033
    
    
    
    3,233
    
    
    
    474Write-off of obsolete and
slow-moving inventories
    
    
    3,919
    
    
    
    9,841
    
    
    
    1,441Provision for product warranties
    
    
    754
    
    
    
    481
    
    
    
    70Tax losses carried forward
    
    
    1,288
    
    
    
    
    
    
    
    Assets held for sale
    
    
    
    
    
    
    2,831
    
    
    
    415Provision for maintenance & safe
production
    
    
    
    
    
    
    (444
    )
    
    
    (65
    )Deferred income tax assets
    
    
    6,994
    
    
    
    15,942
    
    
    
    2,335
 F-60




---



##### Table of Contents



2008
    
    2009RMB000
    
    RMB000
    
    US$000Property, machinery and equipment
    
    
    3,110
    
    
    
    1,302
    
    
    
    191Land use rights
    
    
    275
    
    
    
    
    
    
    
    Proven and probable reserves and
value beyond proven and probable
reserves
    
    
    
    
    
    
    (175,909
    )
    
    
    (25,771
    )Investment at cost
    
    
    
    
    
    
    702
    
    
    
    103Other acquired intangible assets
    
    
    (3,705
    )
    
    
    (1,376
    )
    
    
    (202
    )Deferred income tax liabilities
    
    
    (320
    )
    
    
    (175,281
    )
    
    
    (25,679
    )
  2008
    
    2009RMB000
    
    RMB000
    
    US$000PRC enterprise income tax
    
    
    39,548
    
    
    
    12,965
    
    
    
    1,900PRC value-added tax
    
    
    (1,339
    )
    
    
    1,386
    
    
    
    203PRC other taxes
    
    
    253
    
    
    
    665
    
    
    
    9738,462
    
    
    
    15,016
    
    
    
    2,200
     F-61




---



##### Table of Contents



2007
    
    2008
    
    2009RMB
    
    RMB
    
    RMB
    
    US$Net income (loss) from continuing operations
    
    
    987,851,000
    
    
    
    315,973,000
    
    
    
    (202,600,000
    )
    
    
    (29,681,000
    )Less: Amount attributable to noncontrolling interest
    
    
    (164,532,000
    )
    
    
    (161,814,000
    )
    
    
    82,486,000
    
    
    
    12,084,000Amount allocated to participating convertible notes
    
    
    (145,293,000
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss) from continuing operations
attributable to common stockholders
    
    
    678,026,000
    
    
    
    154,159,000
    
    
    
    (120,114,000
    )
    
    
    (17,597,000
    )Net income (loss) from discontinued operations
    
    
    63,033,000
    
    
    
    (290,953,000
    )
    
    
    (139,782,000
    )
    
    
    (20,478,000
    )Amount allocated to participating convertible notes
    
    
    (11,124,000
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss) from discontinued operations
attributable to common stockholders
    
    
    51,909,000
    
    
    
    (290,953,000
    )
    
    
    (139,782,000
    )
    
    
    (20,478,000
    )Extraordinary items
    
    
    28,689,000
    
    
    
    
    
    
    
    
    
    
    
    Less: Amount attributable to noncontrolling interest
    
    
    (11,093,000
    )
    
    
    
    
    
    
    
    
    
    
    Amount allocated to participating convertible notes
    
    
    (3,105,000
    )
    
    
    
    
    
    
    
    
    
    
    Extraordinary items attributable to common stockholders
    
    
    14,491,000
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) attributable to common stockholders
    
    
    744,426,000
    
    
    
    (136,794,000
    )
    
    
    (259,896,000
    )
    
    
    (38,075,000
    )Net income (loss) from continuing operations
    
    
    678,026,000
    
    
    
    154,159,000
    
    
    
    (120,114,000
    )
    
    
    (17,597,000
    )Less: Amount attributable to convertible notes holders
of QXMC
    
    
    
    
    
    
    (45,528,000
    )
    
    
    
    
    
    
    Diluted net income (loss) from continuing operations
    
    
    678,026,000
    
    
    
    108,631,000
    
    
    
    (120,114,000
    )
    
    
    (17,597,000
    )Net income (loss) from discontinued operations
    
    
    51,909,000
    
    
    
    (290,953,000
    )
    
    
    (139,782,000
    )
    
    
    (20,478,000
    )Extraordinary items attributable to common stockholders
    
    
    14,491,000
    
    
    
    
    
    
    
    
    
    
    
    Fully diluted net income (loss) after extraordinary
items attributable to common stockholders
    
    
    744,426,000
    
    
    
    (182,322,000
    )
    
    
    (259,896,000
    )
    
    
    (38,075,000
    )Weighted average common shares basic
    
    
    29,836,000
    
    
    
    30,949,000
    
    
    
    62,837,000
    
    
    
    62,837,000Effect of dilutive stock options, warrants and
convertible notes
    
    
    364,000
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares diluted
    
    
    30,200,000
    
    
    
    30,949,000
    
    
    
    62,837,000
    
    
    
    62,837,000Basic earnings (loss) per common share:Continuing operations
    
    
    22.73
    
    
    
    4.98
    
    
    
    (1.91
    )
    
    
    (0.28
    )Discontinued operations
    
    
    1.73
    
    
    
    (9.40
    )
    
    
    (2.22
    )
    
    
    (0.33
    )Extraordinary items
    
    
    0.49
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    24.95
    
    
    
    (4.42
    )
    
    
    (4.13
    )
    
    
    (0.61
    )Diluted earnings(loss) per common share:Continuing operations
    
    
    22.45
    
    
    
    3.51
    
    
    
    (1.91
    )
    
    
    (0.28
    )Discontinued operations
    
    
    1.72
    
    
    
    (9.40
    )
    
    
    (2.22
    )
    
    
    (0.33
    )Extraordinary items
    
    
    0.48
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    24.65
    
    
    
    (5.89
    )
    
    
    (4.13
    )
    
    
    (0.61
    )
 F-62




---



##### Table of Contents



F-63




---



##### Table of Contents



2008
    
    2009RMB000
    
    RMB000
    
    US$000Capital expenditures authorized and
contracted for:- Construction of mine properties
    
    
    
    
    
    
    50,459
    
    
    
    7,392- Purchase of machinery and equipment
    
    
    130
    
    
    
    3,000
    
    
    
    440130
    
    
    
    53,459
    
    
    
    7,832
   AmountRMB000
    
    US$000For the years ending December 31,- 2010
    
    
    6,448
    
    
    
    944- 2011
    
    
    945
    
    
    
    138Total
    
    
    7,393
    
    
    
    1,082
  F-64




---



##### Table of Contents



2010RMB000
    
    US$000Fair value of ordinary shares issued
    
    
    130,545
    
    
    
    19,125Plus: Cash paid
    
    
    5,324
    
    
    
    780(Less) add: Carrying amount of:- Notes
    
    
    (121,554
    )
    
    
    (17,808
    )- Embedded derivatives
    
    
    (23,118
    )
    
    
    (3,387
    )- Gain on extinguishment of convertible
debts
    
    
    (8,803
    )
    
    
    (1,290
    )
     F-65




---



##### Table of Contents



F-66




---



##### Table of Contents



Name of related parties
    
    Existing relationship with the CompanyMr. Zhi Jian Wu Li
    
    Major shareholderMr. Rui Lin Wu
    
    Director and father of Mr. Zhi Jian Wu LiWu Holdings Limited
    
    Intermediate holding companyExquisite Jewel Limited
    
    Minority shareholderMetrolink Holdings Limited
    
    Minority shareholderSpecialist Consultants Limited
    
    Minority shareholderQiao Xing Group Limited (QXGL)
    
    Common director and minority shareholder
of CECT, QXCI and QXPLHuizhou Qiaoxing Famous Science
& Technology Co., Ltd. (QFST)
    
    A company 80% owned by QXGL
  2007
    
    2008
    
    2009RMB000
    
    RMB000
    
    RMB000
    
    US$000Property management fee paid or payable to:- QXGL
    
    
    100
    
    
    
    119
    
    
    
    55
    
    
    
    8Sales to:- QFST
    
    
    95,514
    
    
    
    133,611
    
    
    
    63,616
    
    
    
    9,315
   2008
    
    2009RMB000
    
    RMB000
    
    US$000Due from:- Exquisite Jewel Limited
    
    
    5
    
    
    
    5
    
    
    
    1- Wu Holdings Limited
    
    
    20
    
    
    
    20
    
    
    
    325
    
    
    
    25
    
    
    
    4Due to:- Mr. Rui Lin Wu
    
    
    8,941
    
    
    
    5,118
    
    
    
    750Accounts receivable from:- QFST*
    
    
    179,935
    
    
    
    
    
    
    
    
 
 *
    
    Accounts receivable from QFST was included in current assets of discontinued operations for
the year ended December 31, 2008.  F-67




---



##### Table of Contents



Mobile
    
    
    
    
    
    
    
    
    
    ConsolidationPhones
    
    Mining
    
    Corporate
    
    adjustment
    
    TotalRMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB0002009Revenues
    
    
    1,632,912
    
    
    
    193,887
    
    
    
    
    
    
    
    
    
    
    
    1,826,799Gross profits
    
    
    251,449
    
    
    
    100,552
    
    
    
    
    
    
    
    (132
    )
    
    
    351,869Interest revenue
    
    
    18,850
    
    
    
    455
    
    
    
    9,336
    
    
    
    
    
    
    
    28,641Interest expense
    
    
    (326,512
    )
    
    
    
    
    
    
    (4,149
    )
    
    
    107,857
    
    
    
    (222,804
    )Income tax expenses
    
    
    (13,667
    )
    
    
    (32,306
    )
    
    
    
    
    
    
    2,034
    
    
    
    (43,939
    )Profit (loss) for the year
    
    
    (235,512
    )
    
    
    64,207
    
    
    
    (68,608
    )
    
    
    (102,469
    )
    
    
    (342,382
    )Cash
    
    
    3,129,070
    
    
    
    579,268
    
    
    
    1,165
    
    
    
    
    
    
    
    3,709,503Inventories
    
    
    97,146
    
    
    
    866
    
    
    
    
    
    
    
    
    
    
    
    98,012Property, machinery and equipment
    
    
    23,183
    
    
    
    146,679
    
    
    
    97
    
    
    
    526
    
    
    
    170,485Expenditures for long-lived assets
    
    
    912
    
    
    
    113,349
    
    
    
    
    
    
    
    
    
    
    
    114,261
 F-68




---



##### Table of Contents



Mobile
    
    
    
    
    
    
    
    
    
    ConsolidationPhones
    
    Mining
    
    Corporate
    
    adjustment
    
    TotalRMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB0002008Revenues
    
    
    2,153,873
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,153,873Gross profits
    
    
    866,909
    
    
    
    
    
    
    
    
    
    
    
    (132
    )
    
    
    866,777Interest revenue
    
    
    24,405
    
    
    
    
    
    
    
    30,416
    
    
    
    
    
    
    
    54,821Interest expense
    
    
    (165,506
    )
    
    
    
    
    
    
    (146,204
    )
    
    
    
    
    
    
    (311,710
    )Income tax expenses
    
    
    (157,359
    )
    
    
    
    
    
    
    
    
    
    
    1,642
    
    
    
    (155,717
    )Profit (loss) for the year
    
    
    448,930
    
    
    
    
    
    
    
    (116,466
    )
    
    
    (16,491
    )
    
    
    315,973Cash
    
    
    2,907,147
    
    
    
    
    
    
    
    1,196
    
    
    
    
    
    
    
    2,908,343Inventories
    
    
    183,169
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183,169Property, machinery and equipment
    
    
    166,028
    
    
    
    
    
    
    
    132
    
    
    
    1,206
    
    
    
    167,366Expenditures for long-lived assets
    
    
    14,907
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    14,9562007Revenue
    
    
    3,141,094
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,141,094Gross profits
    
    
    885,382
    
    
    
    
    
    
    
    
    
    
    
    (132
    )
    
    
    885,250Interest revenue
    
    
    16,373
    
    
    
    
    
    
    
    12,068
    
    
    
    
    
    
    
    28,441Interest expense
    
    
    (47,034
    )
    
    
    
    
    
    
    (193,464
    )
    
    
    
    
    
    
    (240,498
    )Income tax expenses
    
    
    (116,469
    )
    
    
    
    
    
    
    
    
    
    
    3,092
    
    
    
    (113,377
    )Profit (loss) for the year
    
    
    615,314
    
    
    
    
    
    
    
    127,320
    
    
    
    245,217
    
    
    
    987,851Expenditures for long-lived assets
    
    
    1,944
    
    
    
    
    
    
    
    645
    
    
    
    
    
    
    
    2,589
 
 *
    
    For 2008 and 2009, indoor  phones business was a separate segment. However, due to the disposal
 of QXCH group on November 30, 2009, indoor phones business was accounted for as a discontinued operation.
 Therefore, there is only mobile phones segment in 2008 and 2007. F-69




---



##### Table of Contents



2007
    
    2008
    
    2009Beijing U-life International
Technology Co., Ltd.
    
    
    
    
    
    
    53
    %
    
    
    17
    %Beijing Jiasheng Ruitong Electronics
Co., Ltd
    
    
    
    
    
    
    12
    %
    
    
    18
    %Beijing Beidou Communication &
Equipment Co., Ltd.
    
    
    11
    %
    
    
    
    
    
    
    Shenzhen Laidi Technical Co., Ltd.
    
    
    10
    %
    
    
    
    
    
    
    16
    %Shenzhen Siecom Communication
Technology Development Co., Ltd.
    
    
    10
    %
    
    
    
    
    
    
    20
    %Beijing Jiusheng Technology Co., Ltd.
    
    
    
    
    
    
    
    
    
    
    15
    %
   2007
    
    2008
    
    2009Zhonggang LuLiao Co., Ltd
    
    
    
    
    
    
    
    
    
    
    100
    %
 F-70




---



##### Table of Contents



2007
    
    2008
    
    2009RMB000
    
    RMB000
    
    RMB000
    
    US$000Interest expense:- bank loans
    
    
    43,314
    
    
    
    70,452
    
    
    
    50,368
    
    
    
    7,379- other bank borrowings
    
    
    3,720
    
    
    
    2,110
    
    
    
    
    
    
    
    - convertible notes
    
    
    15,405
    
    
    
    25,772
    
    
    
    13,185
    
    
    
    1,932- accretion of discounts on
convertible notes (Note 15)
    
    
    140,251
    
    
    
    188,201
    
    
    
    137,782
    
    
    
    20,185- amortization of deferred
debt issuance costs (Note
15)
    
    
    37,321
    
    
    
    24,738
    
    
    
    21,031
    
    
    
    3,081- shareholders loans
(imputed interest) (Note 18)
    
    
    487
    
    
    
    437
    
    
    
    438
    
    
    
    64Total interest expense
    
    
    240,498
    
    
    
    311,710
    
    
    
    222,804
    
    
    
    32,641Advertising expenses
    
    
    26,445
    
    
    
    137,166
    
    
    
    92,263
    
    
    
    13,517Shipping and handling costs
    
    
    9,923
    
    
    
    7,054
    
    
    
    5,467
    
    
    
    801
 F-71




---



##### Table of Contents



ITEM 19. EXHIBITS
         Exhibit 1.1
    
    Memorandum of Association of the Company  incorporated by reference to the Exhibits to our Registration Statement
on Form F-1, SEC File No. 333-9274, declared effective on February 16, 1999.Exhibit 1.2
    
    Articles of Association of the Company  incorporated by reference to the Exhibits to our Registration Statement
on Form F-1, SEC File No. 333-9274, declared effective on February 16, 1999.Exhibit 1.3
    
    Memorandum of Association of the Company, as amended on January 9, 2009*Exhibit 1.4
    
    Memorandum of Association of the Company, as amended on January 28, 2010Exhibit 4.1
    
    Securities Purchase Agreement dated as of August 17, 2007 covering the sale of US$25,000,000 of our 5.5% senior
convertible notes and common stock purchase warrants**Exhibit 4.2
    
    Form of 5.5% Senior Convertible Note issued pursuant to the Securities Purchase Agreement dated as of August 17,
2007**Exhibit 4.3
    
    Form of Warrant issued pursuant to the Securities Purchase Agreement dated as of August 17, 2007**Exhibit 4.4
    
    Non-competition Agreement, dated April 12, 2007, among Qiao Xing Universal Telephone, Inc., Huizhou Qiao Xing
Communication Industry, Ltd., Mr. Rui Lin Wu and Qiao Xing Mobile Communication Co., Ltd.***Exhibit 4.5
    
    Share Purchase Agreement By and Among the Company, China Luxuriance Jade Company, Ltd. and The China Luxuriance
Jade Company, Ltd. Sole Shareholder dated March 24, 2009  incorporated by reference to Exhibit 4.5 to our amended
report on Form 20-F/A for fiscal year ended December 31, 2008.Exhibit 4.6
    
    Sale and Purchase Agreement By and Among the Company, DKR SoundShore Oasis Holding Fund Ltd., CEDAR DKR Holding
Fund Ltd. and Chestnut Fund Ltd. dated March 31, 2009  incorporated by reference to Exhibit 99.2 to the Report on
Form 6-K dated April 6, 2009, SEC File No. 0-29946.Exhibit 8.1
    
    List of Significant Subsidiaries of the CompanyExhibit 11.1
    
    Code of Ethics****Exhibit 12.1
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)Exhibit 12.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
 84




---



##### Table of Contents



Exhibit 13.1
    
    Certification of Chief Executive
Officer Pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350Exhibit 13.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350Exhibit 15.1
    
    Consent of Grobstein, Horwath & Company LLPExhibit 15.2
    
    Consent of Crowe Horwath LLP
 
 *
    
    - incorporated by reference to the Exhibits to our annual report on Form 20-F for the
fiscal year ended December 31, 2008.**
    
    - incorporated by reference to the Exhibits to our Report on Form 6-K filed with the SEC on
August 21, 2007, SEC File No. 000-29946.***
    
    - incorporated by reference to the Exhibits to our annual report on Form 20-F for the fiscal
year ended December 31, 2006.****
    
    - incorporated by reference to the Exhibits to our annual report on Form 20-F for the fiscal
year ended December 31, 2003. 85




---



##### Table of Contents



SIGNATURES
  QIAO XING UNIVERSAL RESOURCES, INC.
(Registrant)Date: July 15, 2010
    By:
    /s/ RUI LIN WURui Lin WuChairman 86




---



##### Table of Contents



INDEX TO EXHIBITS
 DESCRIPTION
 Exhibit 1.1
    
    Memorandum of Association of the Company  incorporated by reference to the Exhibits to our Registration Statement
on Form F-1, SEC File No. 333-9274, declared effective on February 16, 1999.Exhibit 1.2
    
    Articles of Association of the Company  incorporated by reference to the Exhibits to our Registration Statement
on Form F-1, SEC File No. 333-9274, declared effective on February 16, 1999.Exhibit 1.3
    
    Memorandum of Association of the Company, as amended on January 9, 2009*Exhibit 1.4
    
    Memorandum of Association of the Company, as amended on January 28, 2010Exhibit 4.1
    
    Securities Purchase Agreement dated as of August 17, 2007 covering the sale of US$25,000,000 of our 5.5% senior
convertible notes and common stock purchase warrants**Exhibit 4.2
    
    Form of 5.5% Senior Convertible Note issued pursuant to the Securities Purchase Agreement dated as of August 17,
2007**Exhibit 4.3
    
    Form of Warrant issued pursuant to the Securities Purchase Agreement dated as of August 17, 2007**Exhibit 4.4
    
    Non-competition Agreement, dated April 12, 2007, among Qiao Xing Universal Telephone, Inc., Huizhou Qiao Xing
Communication Industry, Ltd., Mr. Rui Lin Wu and Qiao Xing Mobile Communication Co., Ltd.***Exhibit 4.5
    
    Share Purchase Agreement By and Among the Company, China Luxuriance Jade Company, Ltd. and The China Luxuriance
Jade Company, Ltd. Sole Shareholder dated March 24, 2009  incorporated by reference to Exhibit 4.5 to our amended
report on Form 20-F/A for the fiscal year ended December 31, 2008.Exhibit 4.6
    
    Sale and Purchase Agreement By and Among the Company, DKR SoundShore Oasis Holding Fund Ltd., CEDAR DKR Holding
Fund Ltd. and Chestnut Fund Ltd. dated March 31, 2009  incorporated by reference to Exhibit 99.2 to the Report on
Form 6-K dated April 6, 2009, SEC File No. 0-29946.Exhibit 8.1
    
    List of Significant Subsidiaries of the CompanyExhibit 11.1
    
    Code of Ethics****Exhibit 12.1
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)Exhibit 12.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)Exhibit 13.1
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350Exhibit 13.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350Exhibit 15.1
    
    Consent of Grobstein, Horwath & Company LLPExhibit 15.2
    
    Consent of Crowe Horwath LLP




---



##### Table of Contents



*
    
    - incorporated by reference to the Exhibits to our annual report on Form 20-F for the fiscal
year ended December 31, 2008.**
    
    - incorporated by reference to the Exhibits to our Report on Form 6-K filed with the SEC on
August 21, 2007, SEC File No. 000-29946.***
    
    - incorporated by reference to the Exhibits to our annual report on Form 20-F for the fiscal
year ended December 31, 2006****
    
    - incorporated by reference to the Exhibits to our annual report on Form 20-F for the fiscal
year ended December 31, 2003