<PAGE>
-------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                   FORM 20-F

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

                                       OR

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       OR

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

         For the transition period from __________ to __________

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

                         COMMISSION FILE NUMBER 1-14696

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

                        CHINA MOBILE (HONG KONG) LIMITED
             (Exact Name of Registrant as Specified in Its Charter)

                                      N/A
                (Translation of Registrant's Name into English)

                                HONG KONG, CHINA
                (Jurisdiction of Incorporation or Organization)

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

                             60TH FLOOR, THE CENTER
                            99 QUEEN'S ROAD CENTRAL
                                HONG KONG, CHINA

                    (Address of Principal Executive Offices)

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

          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
             Title of Each Class                        Name of Each Exchange on Which Registered
--------------------------------------------            -----------------------------------------
<S>                                                     <C>
Ordinary shares, par value HK$0.10 per share                    New York Stock Exchange, Inc.*
</TABLE>

*        Not for trading, but only in connection with the listing on the New
         York Stock Exchange, Inc. of American depositary shares representing
         the ordinary shares.

         Securities registered or to be registered pursuant to Section 12(g) of
the Act:

                                      None
                                (Title of Class)

         Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act:

                                      None
                                (Title of Class)

         Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period covered by the
annual report.

         As of December 31, 2001, 18,605,405,241 ordinary shares, par value
HK$0.10 per share, were issued and outstanding.

         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]   No [ ]

         Indicate by check mark which financial statement item the registrant
has elected to follow.  Item 17 [ ]  Item 18 [X]

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


<PAGE>


                               TABLE OF CONTENTS

                        CHINA MOBILE (HONG KONG) LIMITED


<TABLE>
<CAPTION>
                                                                                                                 PAGE

<S>                                                                                                              <C>
Forward-Looking Statements..........................................................................................1

Special Note on our Financial Information and
certain Statistical Information presented in this Annual Report.....................................................2

                                                       PART I

Item 1.  Identity of Directors, Senior Management and Advisers......................................................3

Item 2.  Offer Statistics and Expected Timetable....................................................................3

Item 3.  Key Information............................................................................................3

Item 4.  Information on the Company................................................................................15

Item 5.  Operating and Financial Review and Prospects..............................................................41

Item 6.  Directors, Senior Management and Employees................................................................60

Item 7.  Major Shareholders and Related Party Transactions.........................................................66

Item 8.  Financial Information.....................................................................................74

Item 9.  The Offer and Listing.....................................................................................75

Item 10.  Additional Information...................................................................................76

Item 11.  Quantitative and Qualitative Disclosures about Market Risk...............................................86

Item 12.  Description of Securities Other than Equity Securities...................................................87

                                                       PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies..........................................................88

Item 14.  Material Modifications to the Right of Security Holders and Use of Proceeds..............................88

Item 15.  [Reserved]...............................................................................................88

Item 16.  [Reserved]...............................................................................................88

                                                      PART III

Item 17.  Financial Statements.....................................................................................88

Item 18.  Financial Statements.....................................................................................88

Item 19.  Exhibits.................................................................................................89
</TABLE>


                                      -i-
<PAGE>


                           FORWARD-LOOKING STATEMENTS

         This annual report contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements are, by their nature, subject to significant risks
and uncertainties, and include, without limitation, statements relating to:

         -        our business strategy;

         -        network expansion plans and related capital expenditure
                  plans;

         -        the planned development of new mobile technologies and other
                  technologies and related applications;

         -        the expected impact of tariff changes on our business,
                  financial condition and results of operations;

         -        the expected impact of new services on our business,
                  financial condition and results of operations;

         -        our acquisition of eight regional mobile telecommunications
                  companies in 2002; and

         -        future developments in the telecommunications industry in
                  Mainland China, including the restructuring of the industry
                  and changes in government policies.

         The words "anticipate", "believe", "estimate", "expect", "intend" and
similar expressions, as they relate to us, are intended to identify certain of
such forward-looking statements. We do not intend to update these
forward-looking statements.

         These forward-looking statements reflect our current views with
respect to future events and are not a guarantee of future performance. Actual
results may differ materially from information contained in the forward-looking
statements as a result of a number of factors, including, without limitation:

         -        the continued restructuring of the telecommunications
                  industry in Mainland China;

         -        changes in the regulatory policies of the Ministry of
                  Information Industry of China and other relevant government
                  authorities, which could affect, among other things, the
                  granting of requisite government approvals, licenses and
                  permits, interconnection and transmission line arrangements,
                  tariff policies, capital investment priorities, and spectrum
                  allocation;

         -        the effect of competition on the demand for and price of our
                  services;

         -        changes in mobile telephony and related technologies, which
                  could affect the viability and competitiveness of our mobile
                  telecommunications networks; and

         -        changes in political, economic, legal and social conditions
                  in Mainland China, including, without limitation, the Chinese
                  government's policies with respect to new entrants in the


<PAGE>


                  telecommunications industry, the entry of foreign companies
                  into China's telecommunications market and China's economic
                  growth.

         In addition, our future network expansion and other capital
expenditure and development plans are dependent on numerous factors, including,
among others:

         -        our ability to obtain adequate financing on acceptable terms;

         -        the adequacy of currently available spectrum or the
                  availability of additional spectrum;

         -        the availability of transmission lines and equipment, and the
                  availability of the requisite number of sites for locating
                  network equipment, on reasonable commercial terms;

         -        our ability to develop or obtain new technology and related
                  applications; and

         -        the availability of qualified management and technical
                  personnel.


                 SPECIAL NOTE ON OUR FINANCIAL INFORMATION AND
        CERTAIN STATISTICAL INFORMATION PRESENTED IN THIS ANNUAL REPORT


         As required under generally accepted accounting principles in Hong
Kong, or Hong Kong GAAP, we adopted the acquisition method to account for our
acquisitions of various regional mobile communications companies, as described
in "Item 4. Information on the Company -- History and Development of the
Company". Accordingly, our consolidated financial statements and, except as
otherwise noted, all other Hong Kong GAAP financial information presented in
this annual report, include the results of these companies only from the
respective dates of acquisition.

         Under generally accepted accounting principles in the United
States, or U.S. GAAP, as a result of our being under common control with each
of these companies prior to the acquisitions, each of the acquisitions was
considered to be a "combination of entities under common control". Under U.S.
GAAP, combinations of entities under common control are accounted for under the
"as if pooling-of-interests" method, whereby assets and liabilities are
accounted for at historical cost and the financial statements of previously
separate companies for periods prior to the combination generally are restated
on a combined basis. See "Item 5. Operating and Financial Review and
Prospects".

         The statistical information set forth in this annual report relating
to Mainland China is taken or derived from various publicly available
government publications that have not been prepared or independently verified
by us. This statistical information may not be consistent with other
statistical information from other sources within or outside Mainland China.


                                      -2-
<PAGE>


                                     PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.

         Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE.

         Not applicable.

ITEM 3.  KEY INFORMATION.

SELECTED FINANCIAL DATA

         The following tables present selected historical financial data of our
company as of and for each of the years in the five-year period ended December
31, 2001. The selected historical income statement data for the years ended
December 31, 1999, 2000 and 2001 and the selected historical balance sheet data
as of December 31, 2000 and 2001 set forth below are derived from, and should
be read in conjunction with, and are qualified in their entirety by reference
to, our audited consolidated financial statements, including the related notes
included elsewhere in this annual report. The selected historical Hong Kong
GAAP income statement data for the years ended December 31, 1997 and 1998 and
the selected historical Hong Kong GAAP balance sheet data as of December 31,
1997, 1998 and 1999 are derived from audited financial statements that are not
included herein.

         Our consolidated financial statements are prepared and presented in
accordance with Hong Kong GAAP. As required under Hong Kong GAAP, we adopted
the acquisition method to account for our acquisitions of the various regional
mobile telecommunications companies, as described in "Item 4. Information on
the Company -- History and Development of the Company". Accordingly, our
consolidated financial statements and, except as otherwise noted, all other
Hong Kong GAAP financial information presented in this annual report, include
the results of these companies only from the respective dates of acquisition.
In contrast, under U.S. GAAP, our acquisitions of these companies are each
considered a combination of entities under common control which would be
accounted for under the "as if pooling-of-interests" method, whereby assets and
liabilities are accounted for at historical cost and the accounts of previously
separate companies for periods prior to the combination generally are restated
on a combined basis. For a discussion of significant differences between Hong
Kong GAAP and U.S. GAAP as they relate to us, and the effects of such
differences on net profit for the years ended December 31, 1999, 2000 and 2001
and shareholders' equity as of December 31, 2000 and 2001, see note 29 to our
consolidated financial statements. In addition, our condensed consolidated
financial statements prepared and presented in accordance with U.S. GAAP for
the relevant periods are set forth in note 29 to our consolidated financial
statements.


                                      -3-
<PAGE>


<TABLE>
<CAPTION>
                                                           AS OF OR FOR THE YEAR ENDED DECEMBER 31,
                                            ----------------------------------------------------------------------------
                                             1997          1998          1999          2000         2001           2001
                                            ------        ------        ------        ------       -------        ------
                                             RMB           RMB           RMB           RMB          RMB            US$
                                              (in millions, except share numbers and per share and per ADS information)

<S>                                         <C>           <C>           <C>           <C>          <C>            <C>
INCOME STATEMENT DATA:
HONG KONG GAAP
Operating revenue                           15,488        26,345        38,623        64,984       100,331        12,122
Operating expenses                          10,074        18,410        24,983        38,158        59,319         7,167
Operating profit                             5,414         7,935        13,640        26,826        41,012         4,955
Write-down and write-off of
      analog network equipment                  --           282         8,242         1,525            --            --
Profit before tax and
      minority  interests                    5,953         9,387         6,444        26,393        41,717         5,041
Income tax                                     991         2,486         1,647         8,366        13,703         1,656
Net profit                                   4,955         6,900         4,797        18,027        28,015         3,385
Basic and diluted net profit
      per share(1)(2)                         0.52          0.59          0.40          1.25          1.51          0.18
Basic and diluted net profit
      per ADS(1)(2)                           2.60          2.93          1.99          6.26          7.53          0.91
Shares utilized in basic calculation
      (in thousands)                     9,534,365    11,780,788    12,069,108    14,394,313    18,605,371    18,605,371
Shares utilized in diluted
    calculation (in thousands)           9,534,365    11,782,521    12,072,383    14,409,503    18,698,023    18,698,023

U.S. GAAP(3)

Operating revenue                           36,830        54,375        70,603        90,980       101,476        12,260
Operating expenses                          23,103        37,473        56,683        56,603        59,280         7,163
Operating profit                            13,727        16,902        13,920        34,377        42,196         5,097
Profit before tax and
      minority interests                    14,222        18,496        14,610        35,378        43,370         5,240
Income tax                                   1,797         3,912         3,617        11,097        14,296         1,727
Net profit                                  12,418        14,583        10,993        24,280        29,075         3,513
Basic and diluted net profit
      per share(1)(2)                         0.85          0.87          0.65          1.37          1.56          0.19
Basic and diluted net profit
      per ADS(1)(2)                           4.26          4.33          3.24          6.87          7.81          0.94
Shares utilized in basic
      calculation (in thousands)        14,586,967    16,833,390    16,943,812    17,666,347    18,605,371    18,605,371
Shares utilized in diluted
    calculation (in thousands)          14,586,967    16,835,123    16,947,086    17,681,538    18,698,023    18,698,023

BALANCE SHEET DATA:

HONG KONG GAAP
Current assets
   Cash and cash equivalents                40,071        17,481        19,349        27,702        21,821         2,636
   Deposits with banks                          --         1,311         8,227        12,204        14,970         1,809
   Accounts receivable                       1,592         2,482         4,957         7,252         5,728           692
Fixed assets                                18,634        33,986        42,699        87,465       105,208        12,711
Total assets                                64,950        64,541        87,435       156,438       173,749        20,992
Total short-term debt (4)                    2,148         5,337         4,419        12,095         5,439           658
Total long-term debt (5)                     2,870           991         2,332        13,708         6,739           814
Fixed rate notes                                --            --         4,952         4,953         4,956           599
</TABLE>


                                      -4-
<PAGE>


<TABLE>
<CAPTION>
                                                           AS OF OR FOR THE YEAR ENDED DECEMBER 31,
                                            ----------------------------------------------------------------------------
                                             1997          1998          1999          2000         2001           2001
                                            ------        ------        ------        ------       -------        ------
                                             RMB           RMB           RMB           RMB          RMB            US$
                                              (in millions, except share numbers and per share and per ADS information)

<S>                                         <C>           <C>           <C>           <C>          <C>            <C>
Convertible notes                               --            --            --         5,708         5,708           690
Bonds                                           --            --            --            --         5,000           603
Total liabilities (6)                       10,386        18,699        30,343        72,661        61,938         7,483
Shareholders' equity                        54,550        45,827        57,092        83,760       111,779        13,505
U.S. GAAP(3)

Fixed assets                                41,692        64,084        71,791        82,223       101,063        12,211
Total assets                               102,103       111,588       134,603       156,538       173,954        21,018
Total long-term debt (5)                     5,750        10,382        13,332        13,708         6,739           814
Fixed rate notes                                --            --         4,952         4,953         4,956           599
Convertible notes                               --            --            --         5,708         5,708           690
Bonds                                           --            --            --            --         5,000           603
Shareholders' equity                        81,798        70,127        77,073        79,660       109,016        13,172

OTHER FINANCIAL DATA:

HONG KONG GAAP
Capital expenditures(7)                      5,807        11,040        11,708        21,964        39,500         4,772
Net cash inflow from
      operating activities                   8,825        13,567        21,662        41,401        63,890         7,719
Net cash outflow from
      investing activities                 (5,327)      (36,357)      (36,117)      (92,880)      (46,198)       (5,581)
Net cash inflow / (outflow) from
      financing activities                  34,218           325        18,337        65,653       (9,581)       (1,158)
Adjusted cash flow(8)                        8,203        13,444        19,673        35,580        49,898         6,029
Adjusted EBITDA(9)                           8,180        12,869        21,603        37,500        60,270         7,282
Dividend declared                               --            --            --            --            --            --
U.S. GAAP(3)
Net cash flow from
      operating activities                  18,517        23,840        35,137        49,341        49,898         6,029
Dividend declared                               --            --            --            --            --            --
</TABLE>

---------
(1)      The basic and diluted net profit per share and per ADS amounts under
         Hong Kong GAAP for the years ended December 31, 1997 have been
         computed by dividing net profit under Hong Kong GAAP by the weighted
         average number of shares and the weighted average number of ADSs,
         respectively, outstanding as if 9,010,000,000 ordinary shares and
         1,802,000,000 ADSs (based on a ratio of five shares to one ADS),
         respectively, issued in the restructuring for our initial public
         offering were outstanding during that period (in addition to shares
         actually issued, if any).

         The basic and diluted net profit per share and per ADS amounts under
         U.S. GAAP for the years ended December 31, 1997 have been computed by
         dividing net profit under U.S. GAAP by the weighted average number of
         shares and the weighted average number of ADSs, respectively,
         outstanding as if (i) 9,010,000,000 ordinary shares and 1,802,000,000
         ADSs (based on a ratio of five shares to one ADS), respectively,
         issued in the restructuring for our initial public offering; (ii)
         1,273,195,021 ordinary shares and 254,639,004 ADSs, respectively,
         issued to China Mobile Hong Kong (BVI) Limited as part of the
         consideration in the acquisition of Fujian Mobile, Henan Mobile and
         Hainan Mobile and (iii) 3,779,407,375 ordinary shares and 755,881,475
         ADSs, respectively, issued to China Mobile Hong Kong (BVI) Limited as
         part of the consideration in the acquisition of Beijing Mobile,
         Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile,
         Shandong Mobile and Guangxi Mobile were outstanding during that period
         (in addition to shares actually issued, if any).


                                      -5-
<PAGE>


(2)      The basic net profit per share and per ADS amounts under Hong Kong
         GAAP for the years ended December 31, 1998, 1999, 2000 and 2001 have
         been computed by dividing net profit by the weighted average number of
         shares and the weighted average number of ADSs, respectively,
         outstanding during 1998, 1999, 2000 and 2001. The calculation of
         diluted net profit per share under Hong Kong GAAP for the years ended
         December 31, 1998, 1999, 2000 and 2001 have been compiled after
         adjusting for the effects of all dilutive potential ordinary shares,
         respectively.

         The basic net profit per share and per ADS amounts under U.S. GAAP for
         the years ended December 31, 1998, 1999, and 2000 have been computed
         by dividing net profit by the weighted average number of shares and
         the weighted average number of ADSs, respectively, as if 1,273,195,021
         ordinary shares representing 254,639,004 ADSs issued to China Mobile
         Hong Kong (BVI) Limited as part of the consideration in the
         acquisition of Fujian Mobile, Henan Mobile and Hainan Mobile and
         3,779,407,375 ordinary shares representing 755,881,475 ADSs issued to
         China Mobile Hong Kong (BVI) Limited as part of the consideration in
         the acquisition of Beijing Mobile, Shanghai Mobile, Tianjin Mobile,
         Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile were
         outstanding during these periods (in addition to shares actually
         issued during these years). The basic net profit per share and per ADS
         amount under U.S. GAAP for the year ended December 2001 has been
         computed by dividing net profit by the weighted average number of
         shares and weighted average number of ADSs outstanding during 2001.
         The calculation of diluted net profit per share under U.S. GAAP for
         the years ended December 31, 1998, 1999, 2000 and 2001 have been
         compiled after adjusting for the effects of all dilutive potential
         ordinary shares, respectively. For the years ended December 31, 1998,
         1999 and 2000, all dilutive potential ordinary shares resulting from
         the share options granted to the directors and employees under the
         share option scheme would decrease profit attributable to shareholders
         per share. In 2000, since all potential ordinary shares resulting from
         the convertible notes would increase profit attributable to
         shareholders per share as a result of savings on interest payable on
         the convertible notes, the anti-dilutive effects of potential ordinary
         shares were not taken into account in calculating diluted earnings per
         share. For the year ended December 31, 2001, all dilutive potential
         ordinary shares resulting from the share options granted to the
         directors and employees under the share option scheme and convertible
         notes would decrease profit attributable to shareholders per share.

(3)      The amounts for the years ended December 31, 1997, 1998, 1999, 2000
         and 2001 are presented to reflect our acquisitions of the various
         regional mobile telecommunications companies under the "as if
         pooling-of-interest" method, as well as the effects of other
         differences between Hong Kong GAAP and U.S. GAAP.

(4)      Includes short-term bank and other loans, current portion of long-term
         bank and other loans and current portion of obligations under capital
         leases.

(5)      Includes long-term bank and other loans and obligations under capital
         leases, net of current portion.

(6)      Excludes minority interest.

(7)      Represents payments made for capital expenditures during the year.

(8)      Represents net cash inflows from operating activities less net cash
         outflows / (inflows) from returns on investments and servicing of
         finance and taxation.

(9)      Adjusted EBITDA represents earnings before interest income, interest
         expense, income taxes, depreciation, amortization, non-operating
         income (expense) and write-down and write-off of fixed assets. While
         EBITDA is commonly used in the telecommunications industry to analyze
         companies on the basis of operating performance, leverage and
         liquidity, it is not presented as a measure of performance in
         accordance with generally accepted accounting principles and should
         not be considered as representing net cash flow from operating
         activities. The items of net profit excluded from EBITDA are
         significant components in understanding and assessing our financial
         performance, and our computation of EBITDA may not be comparable to
         other similarly titled measures of other companies. See "Item 5.
         Operating and Financial Review and Prospects" and the consolidated
         statements of our cash flows contained elsewhere in this annual
         report.

EXCHANGE RATE INFORMATION

         We publish our consolidated financial statements in Renminbi. Solely
for the convenience of the reader, this annual report contains translations of
certain Renminbi and Hong Kong dollar amounts into U.S. dollars and vice versa
at RMB 8.2766 = US$ 1.00 and HK$ 7.7980= US$ 1.00, the prevailing rates on


                                      -6-
<PAGE>


December 31, 2001. These translations should not be construed as
representations that the Renminbi or Hong Kong dollar amounts could actually be
converted into U.S. dollars at such rates or at all.

         The noon buying rates in New York City for cable transfers as
certified for customs purposes by the Federal Reserve Bank of New York were US$
1.00 = RMB 8.2770 and US$ 1.00 = HK$ 7.8000, respectively, on June 10, 2002. The
following table sets forth the high and low noon buying rates between Renminbi
and U.S. dollars and between Hong Kong dollars and U.S. dollars for each month
during the previous six months:


<TABLE>
<CAPTION>
                                                  NOON BUYING RATE
----------------------------------------------------------------------------------------------------------------------------
                                     RMB PER US$1.00                                                       HK$ PER US$1.00
                                    ------------------                                                  --------------------
                                     HIGH        LOW                                                     HIGH           LOW
                                    ------      ------                                                  ------        ------

<S>                                 <C>         <C>            <C>                                      <C>           <C>
December 2001..............         8.2773      8.2676         December 2001..............              7.7999        7.7970
January 2002...............         8.2800      8.2765         January 2002...............              7.8000        7.7970
February 2002..............         8.2770      8.2765         February 2002..............              7.7999        7.7991
March 2002.................         8.2800      8.2766         March 2002.................              7.8000        7.7993
April 2002.................         8.2780      8.2769         April 2002.................              7.8095        7.7992
May 2002...................         8.2775      8.2765         May 2002...................              7.8001        7.7990
</TABLE>

         The following table sets forth the average noon buying rates between
Renminbi and U.S. dollars and between Hong Kong dollars and U.S. dollars for
each of 1997, 1998, 1999, 2000 and 2001, calculated by averaging the noon
buying rates on the last day of each month during the relevant year.

<TABLE>
<CAPTION>
                          AVERAGE NOON BUYING RATE
------------------------------------------------------------------------------------
                                                RMB PER US$1.00      HK$ PER US$1.00
                                                ---------------      ---------------

<S>                                             <C>                  <C>
1997.................................               8.3193               7.7440
1998.................................               8.2991               7.7465
1999.................................               8.2785               7.7599
2000.................................               8.2784               7.7936
2001.................................               8.2772               7.7997
</TABLE>

RISK FACTORS

         EXTENSIVE GOVERNMENT REGULATION MAY LIMIT OUR FLEXIBILITY TO RESPOND
         TO MARKET CONDITIONS, COMPETITION OR CHANGES IN OUR COST STRUCTURE.

         The Ministry of Information Industry of China regulates, among other
things, the following areas of the telecommunications industry under the
leadership of the State Council of China:

         -        formulating and enforcing industry policy, standards and
                  regulations;


                                      -7-
<PAGE>


         -        granting telecommunications licenses;

         -        formulating interconnection and settlement standards for
                  implementation between telecommunications networks;

         -        together with other relevant regulatory authorities,
                  formulating tariff and service charge standards for certain
                  telecommunications services;

         -        supervising the operations of telecommunications service
                  providers;

         -        promoting fair and orderly market competition among operators;
                  and

         -        allocating and administering public telecommunications
                  resources, such as radio frequencies, number resources,
                  domain names and addresses of telecommunications networks.

         Other Chinese government authorities also take part in regulating
tariff policies and foreign investment in the telecommunications industry. The
regulatory framework within which we operate may limit our flexibility to
respond to market conditions, competition or changes in our cost structure.
Moreover, we cannot predict when or if changes in tariff policies or rates may
occur, including, for example, the possible implementation of a
calling-party-pays tariff scheme. Future adverse changes in tariff policies and
rates could decrease our revenues and reduce our profitability.

         We operate our businesses with approvals granted by the State Council
and under licenses granted by the Ministry of Information Industry. If these
approvals or licenses are revoked or suspended, our business and operations
will be materially and adversely affected.

         WE MAY BE AFFECTED BY FUTURE REGULATORY CHANGES.

         To provide a uniform regulatory framework for the orderly development
of the telecommunications industry, the Ministry of Information Industry, under
the direction of the State Council, is preparing a draft telecommunications
law. If and when the telecommunications law is adopted by the National People's
Congress, it is expected to become the fundamental telecommunications statute
and the legal basis for telecommunications regulations in Mainland China. The
State Council has recently promulgated a set of new telecommunications
regulations. These regulations are substantially consistent with the existing
rules and guidelines for the telecommunications industry, and are primarily
intended to streamline and clarify the existing rules and guidelines. They
apply in the interim period prior to the adoption of the telecommunications
law. Although we expect that the telecommunications law will positively affect
the overall development of the telecommunications industry in Mainland China,
we do not fully know what the nature and scope of the telecommunications law
will be. The telecommunications law and other new telecommunications
regulations or rules may contain provisions that could materially and adversely
affect our business, financial condition and results of operations.


                                      -8-
<PAGE>


         COMPETITION FROM OTHER TELECOMMUNICATIONS SERVICE PROVIDERS MAY AFFECT
         OUR SUBSCRIBER GROWTH AND PROFITABILITY BY CAUSING THE RATE OF OUR
         SUBSCRIBER GROWTH TO DECLINE AND BRINGING ABOUT DECREASES IN TARIFF
         RATES AND INCREASES IN SELLING AND PROMOTIONAL EXPENSES.

         We compete with other telecommunications service providers in all of
the provinces, municipalities and autonomous regions in which we operate. The
Chinese government encourages orderly competition in the telecommunications
industry in Mainland China. In particular, the Chinese government has extended
favorable regulatory policies to some of our competitors, such as China United
Telecommunications Corporation, in order to help them become more viable
competitors. For example, the Chinese government has permitted China United
Telecommunications Corporation to lower its mobile phone service tariffs by up
to 10% below the government guidance rates. We believe this policy has helped
China United Telecommunications Corporation capture a significant number of
price-sensitive and low-usage mobile phone subscribers. As a result, China
United Telecommunications Corporation's market share has increased over the
past few years.

          In addition, the former China Telecommunications Corporation Group
provides Xiaolingtong services to its customers. Xiaolingtong is a local area
wireless telephone service with limited mobility and limited coverage.
Xiaolingtong offers lower-priced services. As a result, Xiaolingtong's services
have, to a certain extent, attracted customers in the low-end markets in some
geographical areas that we serve. Increased competition from Xiaolingtong or
other wireless telecommunications services could materially affect our business
and prospects.

         Increased competition from other telecommunications service providers,
including China United Telecommunications Corporation and the former China
Telecommunications Corporation, and any introduction of new competitors through
the issuance of additional mobile telecommunications service licenses could
adversely affect our business by, among other factors, causing the rate of our
subscriber growth to decline and bringing about decreases in tariff rates and
increases in selling and promotional expenses. This could in turn have a
material adverse effect on our financial condition and results of operations.

         NEW ENTRANTS IN THE TELECOMMUNICATIONS INDUSTRY IN CHINA MAY FURTHER
         INTENSIFY COMPETITION AND ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

         Current Chinese government policy concerning the telecommunications
sector is to encourage orderly competition. Recently, the State Council
formally approved the restructuring of the former China Telecommunications
Corporation, China Netcom Corporation Limited and Jitong Network Communications
Company Limited. After the restructuring, China Netcom Group will consist of
ten provincial telecommunications companies originally owned by the former
China Telecommunications Corporation in Beijing, nine other provinces, one
directly-administered municipality, China Netcom Corporation Limited and Jitong
Network Communications Company Limited. China Telecommunications Corporation
will retain the telecommunications companies originally owned by the former
China Telecommunications Corporation in the remaining provinces,
directly-administered municipalities and autonomous regions. See "Item 4.
Information on the Company -- History and Development of the Company --
Industry Restructuring and Changes in Our Shareholding Structure". We cannot
assure you that the State Council will not approve additional
telecommunications service providers in the future, including providers of
mobile telecommunications services, that may compete against us. Increased
competition from new entrants in China's telecommunications industry could
adversely affect our financial condition and results of operations as a result
of, among others, decreases in the rate of subscriber growth or tariff rates or
increases in selling and promotional expenses.


                                      -9-
<PAGE>


         In addition, we may also be subject to competition from new providers
of telecommunication services as a result of technological developments and the
convergence of various telecommunications services.

         CHINA'S ACCESSION INTO THE WORLD TRADE ORGANIZATION WILL EASE CURRENT
         RESTRICTIONS ON FOREIGN OWNERSHIP IN THE TELECOMMUNICATIONS INDUSTRY
         AND MAY INCREASE COMPETITION IN THE MOBILE COMMUNICATIONS SERVICE
         SECTOR.

         On December 11, 2001, China officially joined the World Trade
Organization, or WTO. On January 1, 2002, the Administration of Foreign-Funded
Telecommunications Enterprises Provisions was also adopted, thereby
implementing China's commitments to the WTO. Those commitments include the
gradual reduction of foreign ownership restrictions in the telecommunications
industry and the opening of the telecommunications market in Mainland China to
foreign investors. See "Item 4. Information on the Company -- Business Overview
-- Competition". This could lead to increased foreign investment in the
telecommunications market in Mainland China, thereby increasing competition and
foreign participation in the mobile telecommunications service sector in
Mainland China. Increased competition and foreign participation may have a
material adverse effect on our financial conditions and results of operation.

         WE ARE CONTROLLED BY CHINA MOBILE COMMUNICATIONS CORPORATION, WHICH
         MAY NOT ALWAYS ACT IN YOUR BEST INTEREST.

         As of May 31, 2002 China Mobile Communications Corporation indirectly
owned an aggregate of approximately 75.6% of our shares. Accordingly, China
Mobile Communications Corporation is, and will be, able to:

         -        nominate our entire board of directors and, in turn,
                  indirectly influence the selection of our senior management;

         -        determine the timing and amount of our dividend payments; and

         -        otherwise control or influence actions that require the
                  approval of our shareholders.

         The interests of China Mobile Communications Corporation as our
ultimate controlling person could conflict with the interests of our minority
shareholders.

         In addition, China Mobile Communications Corporation also provides our
operating subsidiaries with services that are necessary for our business
activities, including:

         -        interconnection arrangements with its other subsidiaries'
                  mobile telecommunications networks and roaming arrangements;

         -        the coordination of the provision of inter-provincial
                  transmission leased lines from the former China
                  Telecommunications Corporation to us; and

         -        settlement and bill processing for domestic inter-provincial
                  and international roaming services.


                                     -10-
<PAGE>


         The interests of China Mobile Communications Corporation as the
provider of these services to our operating subsidiaries may conflict with our
interests.

         THE LIMITED SPECTRUM ALLOCATED TO US MAY CONSTRAIN OUR FUTURE NETWORK
         CAPACITY GROWTH.

         A mobile telecommunications network's capacity is to a certain extent
limited by the amount of frequency spectrum available for its use. Since the
Ministry of Information Industry allocates frequency spectrum to mobile
telecommunications operators in Mainland China, the capacity of our mobile
telecommunications network is limited by the amount of spectrum that the
Ministry of Information Industry allocates to us. The Ministry of Information
Industry allocated a total of 34 MHz in the 900 MHz frequency band and the 1800
MHz frequency band to our parent company, China Mobile Communications
Corporation. Under the existing agreement between China Mobile Communications
Corporation and us, we have the exclusive rights to use those frequency
spectrum in our service regions.

         We believe that our current spectrum allocation is sufficient for
anticipated subscriber growth in the near term, but we may need additional
spectrum to accommodate future subscriber growth or to develop mobile
telecommunications services using new wireless telecommunications technologies.
However, the Ministry of Information Industry may determine not to allocate
additional spectrum to us. Our network expansion plans may be affected if we
are unable to obtain additional spectrum. This could in turn constrain our
future network capacity growth and materially and adversely affect our
business, financial condition and results of operations.

         CHANGES TO OUR INTERCONNECTION AND LEASED LINE ARRANGEMENTS MAY
         INCREASE OUR OPERATING EXPENSES AND ADVERSELY AFFECT OUR
         PROFITABILITY.

         Our mobile telecommunications services depend, in large part, upon our
interconnection arrangements and access to the fixed line network. Currently,
interconnection is necessary in the case of all local calls between our
subscribers and subscribers of fixed line or other mobile telecommunications
networks. Interconnection and leased line arrangements are also necessary for
domestic long distance calls and international calls. We have entered into
interconnection and transmission line leasing agreements with the relevant
fixed line operators and with China Mobile Communications Corporation and its
other subsidiaries. We cannot assure you that increasing usage of the fixed
line network would not result in additional strain on its switching capacity,
or that the existing quality of the fixed line network will remain adequate.

         In addition, the terms of our interconnection arrangements and leased
line arrangements have a material effect on our operating revenue and expenses.
A material increase in the interconnection or leased line expenses we pay could
have a material adverse effect on our financial condition and results of
operations. In addition, our business and operations may be materially and
adversely affected if we cannot enter into future interconnection and leased
line agreements on commercially acceptable terms or on a timely basis.

         WE MAY BE UNABLE TO OBTAIN SUFFICIENT FINANCING TO FUND OUR
         SUBSTANTIAL CAPITAL REQUIREMENTS, WHICH COULD LIMIT OUR GROWTH
         POTENTIAL AND FUTURE PROSPECTS.

         We estimate that we will require approximately RMB 102.9 billion (US$
12.4 billion) for capital expenditures from 2002 through the end of 2004 for a
range of projects.


                                     -11-
<PAGE>


         We believe that cash from operations, together with any necessary
borrowings, will provide sufficient financial resources to meet our projected
capital and other expenditure requirements. We may require additional funds to
the extent we have underestimated our capital requirements or overestimated our
future cash flows. In addition, a significant feature of our business strategy
is to continue exploring opportunities for strategic investments in the
telecommunications industry in Mainland China, which may require additional
capital resources. The cost of implementing new technologies, upgrading our
networks or expanding capacity may also be significant. In particular, in order
for us to effectively respond to technological changes, we may be required to
make substantial capital expenditures in the near future.

         Financing may not be available to us on acceptable terms. In addition,
any future issuance of equity securities, including securities convertible or
exchangeable into or that represent the right to receive equity securities, to
foreign investors will require approval from the China Securities Regulatory
Commission, the State Council and other relevant government authorities. If
adequate capital is not available, our growth potential and future prospects
could be adversely affected.

         CHANGES IN TECHNOLOGY MAY RENDER OUR CURRENT TECHNOLOGIES OBSOLETE AND
         THUS AFFECT OUR BUSINESS AND MARKET POSITION.

         The telecommunications industry is subject to rapid and significant
changes in technology. Accordingly, although we strive to keep our technology
up to international standards, the mobile telecommunications technologies that
we currently employ may become obsolete or subject to competition from new
technologies in the future, including new wireless TELECOMMUNICATIONS
technologies. In addition, the new technologies we implement, such as wireless
data applications, may not generate an acceptable rate of return.

         FAILURE TO CAPITALIZE ON NEW BUSINESS OPPORTUNITIES MAY HAVE AN
         ADVERSE EFFECT ON OUR GROWTH POTENTIAL.

         We intend to pursue a number of new growth opportunities in the
broader telecommunications industry, including wireless data. Our success will
depend in large part on our ability to offer services that address the market
demand arising from these opportunities. In addition, our ability to deploy and
deliver these services depends, in many instances, on new and unproven
technologies. Our wireless telecommunications technologies may not perform as
expected, we may not be able to successfully develop or obtain new technologies
to effectively and economically deliver these services and we may not be able
to compete successfully in the delivery of telecommunications services based on
new technologies. Any failure to capitalize on new business opportunities may
adversely affect our competitive position and future profitability.

         ACTUAL OR PERCEIVED HEALTH RISKS ASSOCIATED WITH THE USE OF MOBILE
         DEVICES COULD IMPAIR OUR ABILITY TO RETAIN AND ATTRACT CUSTOMERS,
         REDUCE WIRELESS TELECOMMUNICATIONS USAGE OR RESULT IN LITIGATION.

         Concerns have been expressed in some countries that the
electromagnetic signals emitted by wireless telephone handsets and base
stations may pose health risks at exposure levels below existing guideline
levels, and interfere with the operation of electronic equipment. In addition,
several wireless industry participants have had lawsuits filed against them
alleging various health consequences as a result of wireless phone usage or
seeking protective measures. While we are not aware that such health risks have
been substantiated, there


                                     -12-
<PAGE>


can be no assurance that the actual, or perceived, risks associated with
radiowave transmission will not impair our ability to retain customers and
attract new customers, reduce wireless telecommunications usage or result in
litigation.

         ADVERSE CHANGES IN THE ECONOMIC POLICIES OF THE CHINESE GOVERNMENT
         COULD HAVE A MATERIAL ADVERSE EFFECT ON THE OVERALL ECONOMIC GROWTH OF
         MAINLAND CHINA, WHICH COULD REDUCE THE DEMAND FOR OUR SERVICES AND
         ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
         OPERATIONS.

         Since the late 1970s, the Chinese government has been reforming the
Chinese economic system. These reforms have resulted in significant economic
growth and social progress. Although we believe that economic reform and
macroeconomic policies and measures adopted by the Chinese government will
continue to have a positive effect on the economic development in Mainland
China and that we will continue to benefit from such policies and measures,
these policies and measures may from time to time be modified or revised.
Adverse changes in economic and social conditions in Mainland China, in the
policies of the Chinese government or in the laws and regulations in Mainland
China, if any, could have a material adverse effect on the overall economic
growth of Mainland China and investment in the telecommunications industry in
Mainland China. These developments could adversely affect our business, such as
reducing the demand for our services, as well as our financial condition and
results of operations.

         THE RENMINBI IS NOT A FREELY CONVERTIBLE CURRENCY, WHICH COULD LIMIT
         THE ABILITY OF OUR SUBSIDIARIES IN MAINLAND CHINA TO OBTAIN SUFFICIENT
         FOREIGN CURRENCY TO SATISFY THEIR FOREIGN CURRENCY REQUIREMENTS OR PAY
         DIVIDENDS TO US.

         Substantially all of our revenues and operating expenses are
denominated in Renminbi, while a portion of our capital expenditures and
indebtedness is denominated in U.S. dollars and other foreign currencies. The
Renminbi is currently freely convertible under the "current account", which
includes dividends, trade and service-related foreign currency transactions,
but not under the "capital account", which includes foreign direct investment,
unless the prior approval of the State Administration for Foreign Exchange is
obtained.

         Our operating subsidiaries are foreign investment enterprises.
Currently, they may purchase foreign currency without the approval of the State
Administration for Foreign Exchange for settlement of "current account
transactions", including payment of dividends, by providing commercial
documents evidencing these transactions. They may also retain foreign exchange
in their current accounts (subject to a cap approved by the State
Administration for Foreign Exchange) to satisfy foreign currency liabilities or
to pay dividends. However, the relevant Chinese government authorities may
limit or eliminate our ability to purchase and retain foreign currencies in the
future. Also, our subsidiaries incorporated in Mainland China may not be able
to obtain sufficient foreign currency to satisfy their foreign currency
requirements or pay dividends to us for our use in making any future dividend
payments or to satisfy other foreign currency payment requirements. Foreign
currency transactions under the capital account are still subject to
limitations and require approvals from the State Administration for Foreign
Exchange. This could affect our subsidiaries' ability to obtain foreign
currency through debt or equity financing, including by means of loans or
capital contributions from us.


                                     -13-
<PAGE>


         FLUCTUATIONS IN EXCHANGE RATES COULD ADVERSELY AFFECT OUR FINANCIAL
         RESULTS.

         Substantially all of our operating revenue is denominated in Renminbi,
while a portion of our capital expenditures and some of our financing expenses
are denominated in foreign currencies, such as U.S. dollars and Hong Kong
dollars. Since we may not be able to hedge effectively against Renminbi
devaluations, future movements in the exchange rate of Renminbi and other
currencies could have an adverse effect on our financial condition and results
of operations.

         THE CHINESE LEGAL SYSTEM EMBODIES UNCERTAINTIES WHICH COULD LIMIT THE
         LEGAL PROTECTIONS AVAILABLE TO YOU.

         The Chinese legal system is a civil law system based on written
statutes. Unlike common law systems, it is a system in which decided legal
cases have little precedential value. In 1979, the Chinese government began to
promulgate a comprehensive system of laws and regulations governing economic
matters in general. Legislation over the past 20 years has significantly
enhanced the protection afforded to foreign investment in Mainland China. Our
existing subsidiaries are "wholly foreign-owned enterprises" which are
enterprises incorporated in Mainland China and wholly-owned by Hong Kong,
Macau, Taiwan or foreign investors, and subject to the laws and regulations
applicable to foreign investment in Mainland China. However, the interpretation
and enforcement of some of these laws, regulations and other legal requirements
involve uncertainties that could limit the legal protection available to you.
Moreover, China's entry into the WTO may result in the abolition or substantial
amendment of the existing laws, regulations and other legal requirements. See
"Item 4. Information on the Company -- Business Overview -- World Trade
Organization".

ITEM 4.  INFORMATION ON THE COMPANY.

         We provide a full range of mobile telecommunications services in 13
service regions in Mainland China, consisting of nine provinces (Guangdong,
Zhejiang, Jiangsu, Fujian, Henan, Hainan, Hebei, Liaoning and Shandong), three
municipalities (Beijing, Shanghai and Tianjin) and one autonomous region
(Guangxi Zhuang Nationality Autonomous Region). Our service regions cover a
geographically contiguous market consisting of the entire coastal region of
Mainland China, which incorporates the country's most prosperous and
economically developed areas. Based on publicly available information, we are
the leading provider of mobile telecommunications services in each of these
regions and the second largest provider of mobile telecommunications services
in the world as measured by total number of subscribers as of December 31,
2001. Based on information compiled by the Ministry of Information Industry,
our subscribers represented approximately 72.4% of all mobile phone subscribers
in our service regions and approximately 48% of all mobile phone subscribers in
Mainland China as of that date. As of December 31, 2001, our total number of
subscribers was approximately 69.64 million. As of April 20, 2002, our total
number of subscribers reached 76.40 million.

HISTORY AND DEVELOPMENT OF THE COMPANY

         We were incorporated under the laws of Hong Kong on September 3, 1997
as a limited liability company under the name "China Telecom (Hong Kong)
Limited". We changed our name to "China Mobile (Hong Kong) Limited" on June 28,
2000 after obtaining the approval of our shareholders.

         We completed our initial public offering in October 1997. Our ordinary
shares are listed on the Hong Kong Stock Exchange, and our American Depositary
Shares, or ADSs, each currently representing the right to receive five ordinary
shares, are listed on the New York Stock Exchange. Our agent for service of


                                     -14-
<PAGE>


process in the United States is CT Corporation System, and their address is 111
Eighth Avenue, 13th Floor, New York, NY 10011.

         EXPANSION OF BUSINESS COVERAGE THROUGH ACQUISITIONS

         Our initial mobile telecommunications operations included those in
Guangdong province conducted by Guangdong Mobile Communication Company Limited
and in Zhejiang province conducted by Zhejiang Mobile Communication Company
Limited. As part of the restructuring in preparing for our initial public
offering, the former Ministry of Posts and Telecommunications transferred to us
a 100% equity interest in Guangdong Mobile and a 99.63% equity interest in
Zhejiang Mobile. Since then, we have significantly expanded the geographical
coverage of our operations through a series of acquisitions from China Mobile
Communications Corporation, our indirect controlling shareholder, of mobile
communications operations conducted by its regional subsidiaries. In
particular:

         -        We acquired the entire equity interest in Jiangsu Mobile
                  Communication Company Limited on June 4, 1998 for a cash
                  consideration of HK$22.5 billion.

         -        We acquired the entire equity interest in each of Fujian
                  Mobile Communication Company Limited, Henan Mobile
                  Communication Company Limited and Hainan Mobile Communication
                  Company Limited on November 12, 1999 for a total purchase
                  price of HK$49.7 billion, consisting of HK$19.0 billion in
                  cash and the remaining HK$30.7 billion in the form of
                  1,273,195,021 new shares. In addition, we acquired the
                  remaining 0.37% equity interest in Zhejiang Mobile in June
                  1999.

         -        We acquired the entire equity interest in each of Beijing
                  Mobile Communication Company Limited, Shanghai Mobile
                  Communication Company Limited, Tianjin Mobile Communication
                  Company Limited, Hebei Mobile Communication Company Limited,
                  Liaoning Mobile Communication Company Limited, Shandong
                  Mobile Communication Company Limited and Guangxi Mobile
                  Communication Company Limited on November 13, 2000 for a
                  total purchase price of HK$256.0 billion, consisting of
                  HK$74.6 billion in cash and the remaining HK$181.4 billion in
                  the form of 3,779,407,375 new shares.

         These acquisitions have significantly enlarged our subscriber base,
expanded the geographical coverage of our business and enhanced the economy of
scale of our operations. In addition, the integration of these acquired
operations enables us to realize potential synergies. A discussion of the
financial impact of these acquisitions is set forth in "Item 5. Operating and
Financial Review and Prospects".

         In accordance with our long-standing strategy of actively identifying
opportunities to acquire mobile telecommunications assets in Mainland China, we
have agreed to acquire the entire equity interest in each of the eight regional
mobile telecommunications services providers located in the provinces of Anhui,
Jiangxi, Sichuan, Hubei, Hunan, Shaanxi and Shanxi and the
directly-administered municipality of Chongqing from our immediate parent
company, China Mobile Hong Kong (BVI) Limited, pursuant to a conditional sale
and purchase agreement dated May 16, 2002, for a total purchase price of US$
8,573 million. The purchase price will consist of an initial consideration of
US$ 5,773 million and a deferred consideration of US$ 2,800 million. We
currently expect to complete the acquisition before September 30, 2002, subject
to the fulfillment of certain conditions.


                                     -15-
<PAGE>


         The initial consideration of US$5,773 million consists of a cash
payment of US$ 3,150 million and the issuance of new shares for the remaining
US$ 2,623 million to China Mobile Hong Kong (BVI) Limited on the completion of
acquisition. We intend to finance the cash portion of the initial consideration
by using our existing internal cash resources in the amount of US$ 2,400
million and the proceeds from issuing news shares for a total of US$750 million
to Vodafone Group Plc or its wholly- owned subsidiary, Vodafone Holdings
(Jersey) Limited. After the share placement, Vodafone Group Plc's share holding
in us will increase from 2.18% to approximately 3.27%.

          The deferred consideration is payable fifteen years after the date of
the completion of acquisition, and we may make an early payment of all or part
of the deferred consideration at any time. We have agreed to use our best
efforts, subject to market conditions and the receipt of all necessary
regulatory and governmental approvals, to issue RMB denominated bonds and
Chinese depositary receipts and to use the proceeds from such issuances to make
an early payment. We are currently considering issuing RMB denominated bonds
through one of our subsidiaries.

         Completion of the acquisition is predicated upon the fulfillment of
certain conditions, which include obtaining the requisite approvals from our
shareholders, the Hong Kong Stock Exchange and relevant regulatory authorities
in Mainland China, as well as receiving adequate funding to pay the cash
portion of the initial consideration.

         INDUSTRY RESTRUCTURING AND CHANGES IN OUR SHAREHOLDING STRUCTURE

         Prior to 1993, all public telecommunications networks and services in
Mainland China were controlled and operated by the former Ministry of Posts and
Telecommunications through the former Directorate General of
Telecommunications, provincial telecommunications administrations and their
city and county level bureaus.

         As part of the Chinese government's restructuring of the
telecommunications industry, the Ministry of Information Industry was formed in
March 1998 to assume, among others, the responsibilities of the former Ministry
of Posts and Telecommunications. One of the principal objectives of the
restructuring was to separate the government's regulatory function from its
business management functions in respect of state-owned enterprises. In the
first half of 2000, the Chinese government substantially completed the industry
restructuring. As a result, the Ministry of Information Industry ceased to have
an indirect controlling interest in us, and no longer exercises control over
telecommunications operations, but continues in its capacity as industry
regulator providing industry policy guidance as well as exercising regulatory
authority over all telecommunications service providers in Mainland China.

         In addition, as part of the restructuring, the telecommunications
operations previously controlled by the former Ministry of Posts and
Telecommunications were separated along four business lines: fixed line
telecommunications, mobile telecommunications, paging and satellite
telecommunications. China Mobile Communications Corporation was established in
July 1999 as a state-owned company to hold and operate the mobile
telecommunications business nationwide resulting from the separation. As part
of this separation, in July 1999 China Mobile Communications Corporation
obtained the approximately 57% holding of voting shares and economic interest
in China Mobile (Hong Kong) Group Limited, our indirect controlling
shareholder, previously held by Telpo Communications (Group) Limited, an entity
100% controlled by the former Ministry of Posts and Telecommunications. In
addition, in May 2000, the remaining 43% interest in China Mobile (Hong Kong)
Group Limited previously held by the Directorate General of


                                     -16-
<PAGE>


Telecommunications was transferred to China Mobile Communications Corporation.
As a result, China Mobile Communications Corporation has become the owner of
all voting shares and economic interest in China Mobile (Hong Kong) Group
Limited and thus all of the Chinese government's interest in us. As of May
31, 2002, China Mobile Communications Corporation indirectly owned
approximately 75.6% of all our outstanding shares, including shares represented
by ADSs.

          As a state-owned company, the former China Telecommunications
Corporation owns and operates fixed line telephone and data telecommunications
networks. In December 2001, the State Council formally approved the
restructuring of the former China Telecommunications Corporation, China Netcom
Corporation Limited and Jitong Network Communications Company Limited. After the
restructuring, China Netcom Group will consist of ten provincial
telecommunications companies originally owned by the former China
Telecommunications Corporation in Beijing, nine other provinces, one
directly-administered municipality, China Netcom Corporation Limited and Jitong
Network Communications Company Limited. China Telecommunications Corporation
will retain the telecommunications companies originally owned by the former
China Telecommunications Corporation in the remaining provinces,
directly-administered municipalities and autonomous regions. As a result, apart
from China Mobile Communications Corporation, principal participants in the
telecommunications industry in Mainland China also include China
Telecommunications Corporation, China Netcom Group, China United
Telecommunications Corporation, China Satellite Communications Corporation and
China Railcom. Among those six participants, China Mobile Communications
Corporation (including us) and China United Telecommunications Corporation are
the two operators that provide mobile telecommunications services in Mainland
China.

                                     -17-
<PAGE>


         The following chart shows our current shareholding structure and
principal subsidiaries as of May 31, 2002:

                    [CHART OF COMPANY'S CURRENT SHAREHOLDING
           STRUCTURE AND PRINCIPAL SUBSIDIARIES AS OF MAY 31, 2002]

---------
(1)      Intermediate holding companies, all of which are incorporated in the
         British Virgin Islands, are omitted from this chart.

         In addition to its shareholding interest in us, China Mobile
Communications Corporation operates the leading mobile communications
businesses in Mainland China outside our 13 service regions.

GENERAL INFORMATION

         Our principal executive offices are located at 60th Floor, The Center,
99 Queen's Road Central, Hong Kong, China; telephone: 852-3121-8888. We also
maintain a regional headquarters in each of the 13 regions in China where we
operate. Our web site address is www.chinamobilehk.com. The information on our
web site is not a part of this annual report.

BUSINESS OVERVIEW

         We offer mobile telecommunications services principally using the
Global System for Mobile Communications standard, or GSM. GSM is a pan-European
mobile telephone system based on digital transmission and mobile
telecommunications network architecture with roaming capabilities. Our GSM
networks reach all cities and counties and major roads and highways in our
service regions.

         OUR STRATEGY

         We believe the telecommunications market in Mainland China will
continue to expand rapidly, and we have designed our business strategy
accordingly to include the following key elements:

         -        continue to actively grow our core mobile telecommunications
                  services by:

                  -        maintaining focus on developing a high-quality
                           subscriber base;

                  -        broadening our subscriber base and increasing market
                           penetration;

                  -        focusing on integrating our regional mobile
                           telecommunications companies into our operation; and

                  -        nurturing our human capital;

         -        pursue strategic expansion in the broader telecommunications
                  market in Mainland China and capture new revenue streams by:

                  -        expanding our GSM wireless telecommunications
                           capacities, mainly by using various technologies to
                           improve the coverage and quality of our network and
                           building transmission lines in high capacity areas;

                  -        providing corporate subscribers with an integrated
                           wireless voice-data solution;

                  -        developing mobile Internet services by using new
                           technologies, including Wireless Application
                           Protocol and General Packet Radio Service,
                           and transitioning


                                     -18-
<PAGE>


                           to third generation mobile telecommunications
                           technologies; and

                  -        developing new value added services, such as
                           wireless data services; and

         -        take advantage of our current leadership position and
                  increase our operational efficiency by:

                  -        realizing economies of scale in procuring equipment
                           or services, such as line leasing and
                           interconnection;

                  -        centralizing our research and development efforts;
                           and

                  -        maintaining and utilizing the "CHINA MOBILE" brand
                           name to promote our products and services.

         SUBSCRIBERS AND USAGE

         Our subscriber base has grown substantially from 6.5 million at the
end of 1998 to 69.6 million at the end of 2001. As of December 31, 2001, we had
a market share of approximately 72.4% in our 13 service regions. Our
acquisition of a total of 11 regional mobile telecommunications companies
between June 1998 and November 2000 has substantially expanded our subscriber
base. As of December 31, 2001, our total number of subscribers was
approximately 69.64 million. As of April 20, 2002, the total number of our
subscribers was approximately 76.40 million. In addition to our acquisitions,
our subscriber growth is also attributable to a number of other factors,
including:

         -        significant economic growth in our markets;

         -        our network expansion and development;

         -        our increased marketing and sales efforts and improved
                  distribution channels;

         -        decreased cost of initiating services due to a decline in
                  handset prices as well as the gradual decrease and final
                  elimination of the connection fees and the adjustments in
                  other tariffs for our services; and

         -        our new service initiatives, enhanced roaming capabilities
                  and value added services.

         The following table sets forth selected historical information about
our subscriber base and subscriber usage for the periods indicated.


<TABLE>
<CAPTION>

                                                                   AS OF OR FOR THE YEAR ENDED DECEMBER 31,
                                                               -------------------------------------------------
                                                                1999                 2000                  2001
                                                               ------               ------                ------

<S>                                                            <C>                  <C>                   <C>
Subscribers (in thousands)
   Contract subscribers...............................         15,621               32,409                34,010
   Prepaid subscribers................................            --                12,725                35,633
       Total .........................................         15,621               45,134                69,643
Average Churn Rate (%) (1)............................            5.9                  5.4                   6.6
Minutes of Usage (in billions) (2)
   Contract subscribers...............................           89.4                118.2                 130.8
   Prepaid subscribers................................             --                  6.9                  30.5
       Total..........................................           89.4                125.1                 161.3
Average Minutes of Usage Per Subscriber
   Per Month (3)
   Contract subscribers...............................            366                  326                   329
   Prepaid subscribers................................             --                  125                   103
       Overall average................................            366                  299                   233
Average Revenue Per Subscriber
   Per Month (RMB) (4)
   Contract subscribers...............................            299                  241                   199
   Prepaid subscribers................................             --                   87                    72
       Overall average................................            299                  221                   145
</TABLE>

                                      -19-



<PAGE>
---------
(1)      Measures the rate of subscriber disconnections from mobile telephone
         service, determined by dividing (A) the sum of voluntary and
         involuntary deactivations (excluding deactivations due to subscribers
         switching among our different services) during the relevant year by
         (B) the average number of subscribers during the year, calculated as
         the average of the numbers of subscribers at the end of each of the
         thirteen calendar months from the end of the previous year to the end
         of the current year. On this basis, our calculated churn rate will be
         affected by the number of voluntary and involuntary deactivations and
         the significant growth in our subscriber base.

         The average churn rate for each of the full years of 1999, 2000 and
         2001 is calculated based on information pertaining to the relevant
         regional mobile telecommunications companies we acquired prior to and
         after the respective acquisitions and is presented for ease of
         comparison.

(2)      The total minutes of usage for each of the full years of 1999, 2000
         and 2001 are calculated based on information pertaining to the
         relevant regional mobile telecommunications companies we acquired
         prior to and after the respective acquisitions and are presented for
         ease of comparison.

(3)      Calculated by (A) dividing the total minutes of usage during the
         relevant year by the average number of subscribers during the year
         (calculated as the average of the numbers of subscribers at the end of
         each of the thirteen calendar months from the end of the previous year
         to the end of the current year and (B) dividing the result by 12. The
         average minutes of usage per subscriber per month for each of the full
         years of 1999, 2000 and 2001 are calculated based on information
         pertaining to the relevant regional mobile telecommunications
         companies we acquired prior to and after the respective acquisitions
         and are presented for ease of comparison.

(4)      Calculated by (A) dividing the operating revenue during the relevant
         year by the average number of subscribers during the year (calculated
         in the same manner as in note (3) above) and (B) dividing the result
         by 12.

         The size and composition of our subscriber base and subscribers' usage
patterns have changed over the last few years. As tariffs and the price of
handsets have decreased, and as connection fees have been radically reduced and
ultimately eliminated, and mobile telecommunications technology has improved
over time, mobile telecommunications services have become increasingly popular
with the broader middle income market for both business and social uses. In
general, the highest usage subscribers with the greatest telecommunications
needs have tended to be the early subscribers of mobile services. As
penetration increases, newer subscribers on average incur lower monthly usage,
and are generally more price-sensitive. Accordingly, as is typical in many
countries with developing mobile telecommunications markets, the average usage
and revenue per subscriber have declined over the last few years as our mobile
phone penetration has increased. However, total minutes of usage of our
subscribers continued to grow significantly in 1999, 2000 and 2001.


                                     -20-
<PAGE>


         PREPAID SERVICES

         Beginning in the second half of 1999, we introduced prepaid services.
Our prepaid subscribers can make and receive local and domestic and
international long distance calls, and most of those subscribers also enjoy
nationwide domestic roaming services. Unlike our contract subscribers,
subscribers to our prepaid services do not pay monthly fees, and incur only
base usage charges and applicable roaming charges on a per minute basis for
both incoming and outgoing calls, plus applicable long distance tariffs.

         Each prepaid subscriber identity module, or SIM card, has a value of
RMB 50, RMB 100, RMB 300 or RMB 500 with a valid term of 90 days, 180 days, 360
days or 360 days, respectively. Each SIM card contains the personal
identification number of the subscriber as well as basic subscriber data and
network information. When a call is made or received by a prepaid subscriber,
our system automatically deducts usage fees from the value associated with the
card. Prepaid subscribers can add value to their accounts associated with the
SIM cards by purchasing value adding cards, which are available at our outlets
located throughout Mainland China. Under our current arrangement with China
Mobile Communications Corporation, when a prepaid subscriber purchases value
adding cards outside of the service region of the subscriber's home network
(where the subscriber initially purchased the prepaid SIM card), the network
operator in the location that issues the value adding card remits 95% of the
face value of the value adding card to the subscriber's home network operator
and keeps the remainder as a handling charge.

         Our prepaid services complement our traditional contract services and
are an important means of expanding our subscriber base. In addition, continued
economic growth, the benefits of mobility and current low mobile phone
penetration rates in Mainland China compared to demographically and culturally
similar markets are among the important factors that will further drive mobile
phone subscriber growth towards eventual mass popularization. Furthermore,
prepaid services represent an effective tool for capturing additional
subscribers and driving penetration in developing markets, such as Mainland
China, while keeping credit quality in check. Prepaid services also help
introduce the enhanced benefit of mobility to non-mobile users.

         Our prepaid services experienced rapid and significant growth in 2001.
As of December 31, 2001, we had an aggregate of approximately 35.6 million
subscribers for our prepaid service, representing an increase of 180% from
December 31, 2000. Our prepaid subscribers represented 51.2% of our total
subscriber base as of December 31, 2001 and 93.5% of our new subscribers in
2001.

         TARIFFS

         The tariffs payable by our subscribers include primarily usage
charges, monthly fees and service fees for value added services. Our prepaid
subscribers do not have to pay monthly fees. Usage charges for both our
contract and prepaid subscribers include base usage charges for both incoming
and outgoing calls plus, where applicable, an additional component reflecting
domestic and international long distance tariffs. When using roaming services,
subscribers incur a roaming charge instead of the base usage fee, plus
applicable domestic and international long distance charges. Subscribers also
pay fees for selection of specific telephone numbers.

         We have flexible long distance tariff plans distinguishing between day
time and night time and offer tailored service plans based upon customer
requirements as well as our network resources.

         Our tariffs are subject to regulation by various government
authorities, including the Ministry of Information Industry, the State
Development and Planning Commission and the relevant price regulatory
authorities in our service regions. The actual price range in each service
region is proposed by a network


                                     -21-
<PAGE>


operator in that service region and must be approved by the relevant price
regulatory authorities in that service region. In general, base usage charges,
monthly fees, domestic roaming charges and applicable long distance tariffs
(other than tariffs for Internet Protocol phone calls) are also determined by
the Ministry of Information Industry in consultation with the State Development
and Planning Commission.

         Connection fees in all our service regions have been substantially
reduced over the past four years and were eliminated on July 1, 2001. While
elimination of connection fees may adversely affect our revenue growth in the
short term, we believe that the elimination will help to further expand our
subscriber base and increase total subscriber usage of our mobile
telecommunications services, thereby contributing to our revenue growth in the
long term.

         TARIFF ADJUSTMENTS. As part of the efforts to further rationalize the
tariff structure of telecommunications services, the Chinese government
announced a wide range of tariff adjustments, which took effect at various
dates in the first half of 2001. The tariff adjustments that affect our mobile
telecommunications services include the shortening of a billing unit from one
minute to six seconds for long distance call rates (other than rates for
Internet Protocol phone calls), the general reduction in domestic and
international long distance call rates, the elimination of various surcharges
and a general reduction in leased line tariffs. In particular, domestic long
distance call rates have been adjusted from the range of RMB 0.50 to RMB 1.00
per minute to the uniform rate of RMB 0.07 per six-second billing unit.
Although the adjustments in long distance call rates and the elimination of
surcharges may reduce our revenue in the short term, we expect that they are
likely to stimulate increased subscriber usage and contribute to our overall
revenue growth in the long run. In addition, we will be able to achieve savings
in leased line expenses as a result of the reduction in leased line tariffs.

         PACKAGED SERVICE PLANS. In order to meet the specific mobile
telecommunications needs of different subscriber segments and to enable more
efficient use of network resources during both peak and off-peak hours, we
launched in March 2001 packaged mobile service plans tailored towards different
subscriber usage levels. To date, we have adopted six service plans, each of
which has been approved by the relevant regulatory authorities in Mainland
China.

         We have been selectively implementing the appropriate packaged service
plans in our service regions based on local market conditions. We believe that
such tariff plans create a more flexible tariff structure for our subscribers
and can promote greater usage by subscribers. In addition, by offering
significantly lower off-peak rates than peak rates, the service plans encourage
subscribers to make more calls during off-peak hours than during peak hours,
which may result in more efficient use of our network resources.

         INTERCONNECTION

         Interconnection refers to various arrangements that permit the
connection of our networks to other networks such as the fixed line telephone
network.

         INTERCONNECTION WITH THE FORMER CHINA TELECOMMUNICATIONS CORPORATION
(FOR LOCAL AND LONG DISTANCE CALLS). Our networks interconnect with the former
China Telecommunications Corporation's public fixed line network, allowing our
subscribers to communicate with fixed line subscribers and to make and receive
local, domestic and international long distance calls. A majority of calls on
our networks involve interconnection with the former China Telecommunications
Corporation's fixed line network. Each of our operating subsidiaries has an
interconnection agreement with the relevant subsidiary of the former China


                                     -22-
<PAGE>


Telecommunications Corporation that operates the fixed line network in its
service region. The economic terms of these agreements are standardized from
province to province.

         A significant portion of the traffic between our subscribers and China
United Telecommunications Corporation's subscribers interconnects through the
former China Telecommunications Corporation's fixed line network, and the
operator of the calling party settles directly with the former China
Telecommunications Corporation. On March 21, 2001, we began paying the former
China Telecommunications Corporation RMB 0.03 per minute of the base usage
charge for all calls connected through their network. Prior to March 21, 2001,
the settlement rate we paid the former China Telecommunications Corporation RMB
0.05 per minute of the base usage charge for calls connected through their
network when our subscriber was the calling party. No settlement is required
between the operator of the receiving party and the former China
Telecommunications Corporation.

         INTERCONNECTION WITH CHINA MOBILE COMMUNICATIONS CORPORATION (FOR LONG
DISTANCE CALLS AND ROAMING CALLS). We also have an inter-provincial
interconnection and roaming agreement with China Mobile Communications
Corporation, under which the other subsidiaries of China Mobile Communications
Corporation and us provide each other with domestic inter-provincial network
interconnection services and domestic and international roaming services.

         INTERCONNECTION REVENUE SHARING AND SETTLEMENT. Where calls involve
interconnection with the former China Telecommunications Corporation's fixed
line network or China Mobile Communications Corporation's network, our
interconnection arrangement with the former China Telecommunications
Corporation or China Mobile Communications Corporation provides for the sharing
and settlement of revenues from the base usage charge and, if applicable,
roaming charges and domestic and international long distance charges.

         A number of the settlement rates have been adjusted effective March
21, 2001. The following table summarizes the terms of our interconnection
arrangement with the former China Telecommunications Corporation and its
subsidiaries for non-roaming local calls, including the rates after the
adjustment and, in parenthesis, the rates prior to the adjustment.

<TABLE>
<CAPTION>
                                 REVENUE SHARING AND SETTLEMENT OF
                           BASE USAGE CHARGES FOR NON-ROAMING LOCAL CALLS
                           ----------------------------------------------

ORIGINATING SUBSCRIBER                   TERMINATING SUBSCRIBER             SETTLEMENT ARRANGEMENTS
----------------------                   ----------------------             -----------------------

<S>                                      <C>                                <C>
Our subscriber                           The former China                   We pay RMB 0.06 (previously
                                         Telecommunications                 RMB 0.05) per minute to the
                                         Corporation's fixed line           former China Telecommunications
                                         subscriber                         Corporation

The former China                         Our subscriber                     No revenue sharing or settlement
Telecommunications
Corporation's fixed line
subscriber
</TABLE>


                                     -23-
<PAGE>


         Where applicable, we collect domestic long distance charges in
addition to the base usage charges. The following table summarizes the terms of
our interconnection arrangement with each of the former China
Telecommunications Corporation and China Mobile Communications Corporation for
domestic long distance calls.


<TABLE>
<CAPTION>
                              REVENUE SHARING AND SETTLEMENT OF DOMESTIC LONG DISTANCE CHARGES
                              ----------------------------------------------------------------
ORIGINATING                 TERMINATING
SUBSCRIBER                  SUBSCRIBER                  SETTLEMENT ARRANGEMENTS
-----------                 -----------                 -----------------------

<S>                         <C>                         <C>
Our subscriber              The former China            If the call is routed through the former China Telecommunications
                            Telecommunications          Corporation's transmission lines, we keep RMB 0.06 (previously RMB 0.14)
                            Corporation's fixed         per minute of the domestic long distance calling charges(1) and pay the
                            line subscriber             remaining portion to the former China Telecommunications Corporation

                                                        If the call is routed through our IP network, we pay the former China
                                                        Telecommunications Corporation RMB 0.06 (previously RMB 0.05) per minute
                                                        and keep the remaining portion

The former China            Our subscriber or           If the call is routed through our transmission lines, the former China
Telecommunications          China Mobile                Telecommunications Corporation keeps RMB 0.06 (previously RMB 0.14) per
Corporation's fixed         Communications              minute of the domestic long distance charges(1) and pays the remaining
line subscriber in our      Corporation's               portion to us
service regions             subscriber

Our subscriber              China Mobile                We collect the domestic long distance charge of RMB 0.07 per six seconds
                            Communications              (previously RMB 0.60-1.00 per minute), and there is no revenue sharing
                            Corporation's               or settlement(2)
                            subscriber

China Mobile                Our subscriber              China Mobile Communications Corporation collects the domestic long
Communications                                          distance charge of RMB 0.07 per six seconds (previously RMB 0.60-1.00
Corporation's                                           per minute), and there is no revenue sharing or settlement(2)
subscriber
</TABLE>

---------
(1)      The adjusted rates are billed at six-second units.

(2)      Except for roaming calls. See table under "--Roaming" for revenue
         sharing and settlement for roaming calls.

         Where applicable, we collect international long distance charges in
addition to base usage charges. The following table summarizes the terms of our
interconnection arrangement with the former China Telecommunications
Corporation for international long distance calls, including the rates after
the adjustment and, in parenthesis, the rates before the adjustments.


                                      -24-
<PAGE>
<TABLE>
<CAPTION>
                  REVENUE SHARING AND SETTLEMENT OF INTERNATIONAL LONG DISTANCE
                  -------------------------------------------------------------

TYPE OF CALL                           SETTLEMENT ARRANGEMENTS
------------                           -----------------------
<S>                                    <C>
Outgoing calls from our                We keep RMB 0.54 (previously RMB 0.20) per minute(1) (if the
subscriber                             call is routed through our domestic long distance transmission lines)
                                       or RMB 0.06 (previously RMB 0.20) per minute(1) (if the call is not routed
                                       through our domestic long distance transmission lines) of the international
                                       long distance charge and pay the remaining portion to the former China
                                       Telecommunications Corporation

Incoming calls to our                  We receive from the international telecommunications operator of
subscriber                             the calling party RMB 0.54 (previously RMB 0.63) per minute (if
                                       the call is routed through our domestic long distance transmission lines) or RMB
                                       0.06 (previously RMB 0.07) per minute of the calling charge (if the call is not
                                       routed through our domestic long distance transmission lines)
</TABLE>

---------
(1)      The adjusted rates are billed at six-second units.

         ROAMING

         We provide roaming services to our subscribers, which allow them to
make and receive telephone calls while they are physically outside of their
registered service area and are in other parts of our service regions or in the
coverage areas of other mobile phone networks with which we have roaming
arrangements.

         Under our domestic roaming arrangement with China Mobile
Communications Corporation, our subscribers can make and receive calls while
they are located in the coverage areas of China Mobile Communications
Corporation in the rest of Mainland China outside our service regions.
Conversely, we offer roaming services to China Mobile Communications
Corporation's subscribers while they are in our service regions. In addition,
we offer roaming capabilities in 90 countries and regions around the world
under our roaming arrangements with relevant local operators.

         A mobile phone subscriber using roaming services is charged at our
per-minute roaming charge (instead of the base usage charge) for both incoming
and outgoing calls, plus applicable long distance charges. The following table
sets forth our revenue sharing and settlement arrangement with China Mobile
Communications Corporation for base roaming charges. We currently do not have a
roaming arrangement with China United Telecommunications Corporation.

                                      -25-

<PAGE>

<TABLE>
<CAPTION>
                        REVENUE SHARING AND SETTLEMENT OF THE BASE ROAMING CHARGES
                        ----------------------------------------------------------
TYPE OF ROAMING                              SETTLEMENT ARRANGEMENTS
---------------                              -----------------------
<S>                                          <C>
Our subscriber roaming into the              We pay China Mobile Communications Corporation 80% of mobile
network of China Mobile                      the base roaming charge payable by our subscribers
Communications Corporation

Subscriber of China Mobile                   China Mobile Communications Corporation pays us 80% of
Communications Corporation roaming           the base roaming charge charged to its subscribers
into our network
</TABLE>

         REVENUE SHARING AND SETTLEMENT OF LONG DISTANCE CHARGE WHEN ROAMING.
In addition to the base roaming charge, long distance charges may be assessed
when a subscriber is roaming. Where a mobile phone subscriber makes a call
while roaming, the home network operator collects all long distance charges
incurred and pays all such charges to the operator of the visited network. The
visited network operator then settles those long distance charges, if
settlement applies, in accordance with the long distance revenue sharing and
settlement arrangements described above. Where a mobile phone subscriber
receives a call while roaming, the home network operator receives and keeps all
long distance charges incurred by that subscriber.

         VALUE ADDED SERVICES

         In addition to basic mobile telecommunications services, we offer a
number of value added services such as wireless data and voice functions.

         VOICE FUNCTIONS. We offer a variety of basic value added services with
voice functions, including call forwarding, call waiting, conference calling,
call limitation, voice mail and "Chinese Secretary", a live answering service.

         WIRELESS DATA AND MOBILE INTERNET SERVICES. We believe that wireless
data will be one of the fastest growing segments of the telecommunications
market in Mainland China over the next several years. We intend to further
expand our wireless data services. As of December 31, 2001, our wireless data
services subscribers reached 21.3 million, which represented a 74.9% increase
compared to 12.2 million subscribers as of December 31, 2000, and accounted for
30.6% of our total subscribers.

         In 1999, we began using our short message service platform to develop
new value added services in selected cities in our service areas, including
stock price quotations, sports news, weather forecasts and online payments. The
short message usage volume has grown rapidly since then and has reached 6.08
billion in 2001 from 440 million in 2000. We plan to continue utilizing our GSM
network to provide data services based on the current short message service
platform where consumer demands can be more economically served by short
message service. These data services include, for example, the transmission of
short messages to facsimile and e-mail addresses.

         In the last quarter of 2000, we introduced our mobile Internet portal
"Monternet" based on the mobile information service platform, making us the
first mobile service provider in Mainland China to combine an Internet portal
with mobile telecommunications services. As of December 31, 2001, over 300


                                     -26-
<PAGE>


service providers had joined the Monternet network to provide mobile Internet
content and services through our mobile telecommunications channels and mobile
information service platform. During 2001, we launched extensive "Monternet"
applications and services, including "M-Zone" targeting the youth market and
"M-Office" targeting the corporate subscriber and individual business
subscriber markets. In addition, by providing the corporate subscribers with an
integrated, unified mobile voice-data solution, utilizing a combination of such
technologies as virtual private mobile network and group short messaging
services, we believe "Monternet" will foster the development of our wireless
data businesses, make our services more appealing to customers and help us
attract and keep corporate subscribers.

         In 2001, we completed the construction of an Internet Protocol
backbone network, known as CMNet, in our 13 service regions and launched our
Internet Protocol-based, or IP-based long distance call services over CMNet.
See "-- IP-Based Long Distance Call Services" below. We expect that CMNet will
also serve as an important component of our wireless data and mobile Internet
services.

         During 2001, we commenced commercial trials of our General Packet
Radio Services or GPRS. GPRS technology enables operators to provide end-to-end
packet-switched data transmission on the existing GSM network, which improves
wireless network utilization and enhances the wireless access rate for a
variety of data applications, including Wireless Application Protocol, or WAP.
WAP is a software protocol stack that defines a standardized means of
transmitting Internet-based content and data to mobile handsets and other
wireless handheld devices.

         IP-BASED LONG DISTANCE CALL SERVICES. In May 2000, we began providing
IP-based long distance call services which allow users to make domestic and
international long distance calls at relatively lower cost. IP-based long
distance call services cover all of our 13 service regions. Our current
interconnection and settlement arrangements with the former China
Telecommunications Corporation with respect to IP-based long distance calls
allow us to reduce our interconnection costs, especially with respect to calls
routed through our CMNet, compared to long distance calls routed through
conventional circuit switched networks. We intend to continue building customer
awareness of the benefits of our IP-based long distance call services through
marketing and promotional efforts.

         ISP SERVICES. We began providing Internet service provider, or ISP,
services in 2000. ISP services enable both mobile and fixed line subscribers to
access the Internet via our networks by dialing the prefix "172XX". We are
planning to provide integrated voice, data and video access to both mobile
phone and non-mobile phone users through such services in the near future.

         We intend to continue focusing on the application of GPRS and new
mobile telecommunications technologies in order to provide more wireless data
services and products.

         RESEARCH AND DEVELOPMENT

         Our research and development efforts focus on:

         -        developing advanced data application solutions suitable for
                  the particulars of the consumer markets in Mainland China;
                  and

         -        monitoring technological trends that may have an impact on
                  the development of our current business and the
                  implementation of our wireless data strategy.


                                     -27-
<PAGE>


         In light of the increasingly competitive and rapidly evolving
telecommunications market in Mainland China, we expect to continue to devote
resources to the research and development of new products, services and
technology applications.

         To focus our mobile data activities and consolidate related research
and development efforts, we formed Aspire Holdings Limited as a majority-owned
subsidiary based in Shenzhen, China, in June 2000. The principal business
focuses of Aspire include systems integration, product development, and
technical support for mobile data systems and related applications in Mainland
China. Aspire also operates our mobile research and development center in
Shenzhen, China.

         In January 2001, Aspire formed a business alliance with
Hewlett-Packard Company to develop wireless data and Internet and related
applications. Hewlett-Packard assists with the design, implementation and
support of Aspire's services in China, and will be the preferred provider of
hardware and related services to Aspire if these products and services are of
at least the same quality and pricing terms as other competing products and
services. Conversely, Hewlett-Packard will treat Aspire as its preferred
customer, which will entitle Aspire to the best customer price and financing
options available for Hewlett-Packard's products and services under
Hewlett-Packard's preferred partner programs prevailing in Mainland China. As
part of the business alliance, Hanover Asia-Pacific Investments Limited, an
indirectly wholly-owned subsidiary of Hewlett-Packard, agreed to make an equity
investment of up to 7% in Aspire. In January 2002, Vodafone Jersey, a
wholly-owned subsidiary of Vodafone Group Plc, invested US$ 34.965 million in
Aspire, and as a result, Hanover invested an additional US$ 16 million in
Aspire to maintain its equity holding in Aspire at 7%.

         Also in January 2001, Aspire entered into a master agreement with each
of us and China Mobile Communications Corporation for the development of our
mobile information service center platform and that of China Mobile
Communications Corporation. Under each of the master agreements, Aspire will
provide system and gateway integration services, hardware, software and system
development, technical support and major overhaul services of data centers to
us and China Mobile Communications Corporation.

         As part of the strategic alliance with Vodafone Group Plc, Vodafone
Holdings (Jersey) Limited, a wholly-owned subsidiary of Vodafone invested in
January 2002, approximately US$ 35 million in Aspire, and Vodafone Americas, a
subsidiary of Vodafone, entered into a business alliance agreement with Aspire.
Under the business alliance agreement between Aspire and Vodafone Americas,
Aspire will engage Vodafone Global Platform and Internet Services, a unit of
Vodafone Americas, as a preferred provider of wireless data application
software in relation to the Aspire Mobile Information Service Center Platform,
provided that the software supplied to Aspire has at least equivalent technical
specifications on the same or better commercial terms. Aspire and Vodafone
Global Platform and Internet Services also agreed to use their reasonable
efforts to coordinate the development of their respective wireless data
platforms with the intention of providing seamless delivery of services to
their respective roaming customers on their wireless data platforms and
enabling content and application providers to use a single application
programming interface.

         Aspire is an important part of our overall strategy to capture the
fast growing wireless data sector in Mainland China. In addition, we expect
that Aspire's business will broaden our revenue sources into various wireless
services and help us to further grow our subscriber base.


                                     -28-
<PAGE>


         CUSTOMER SERVICE, BILLING AND CREDIT CONTROL

         We provide a full range of services that emphasize customer care from
the point of sale onward. At the point of sale, after all application
procedures have been completed, we are generally able to activate new
subscriber connections within a few hours for our GSM services. Our after-sales
customer support services include a general customer service hotline for all of
our 13 service regions, which offers an interactive voice response system as
well as live operator assistance.

         We consider high-usage corporate and individual subscribers to be
valuable customers. In this regard, each of our 13 operating subsidiaries has
established service centers to serve major accounts, and has established
service guidelines and databases for these customers. Designated account
managers have also been appointed to coordinate all issues relating to sales
and services for these major accounts.

         Through dedicated account executives, the Group provides comprehensive
VIP services to high-value customers and corporate customers, often including
such personalized accommodations as on-site visits and analyses. We also issue
VIP cards to our high-value subscribers so that they may enjoy privileges in
other industries. In addition, we provide training on the use of new services
to our high-value subscribers, as well as preferential trial use of new
services. Furthermore, for certain corporate customers, we provide virtual
private mobile network services.

         While contract subscribers are not required to deposit funds before
the initiation of local service, these subscribers may choose to make such
deposits. In addition, those subscribers may establish direct debits from their
bank accounts. Our prepaid subscribers may also choose to authorize the
automatic adding of value to their stored value cards through direct debit
arrangements. Despite the lack of widely available credit information services
in Mainland China, we have implemented certain subscriber registration
procedures, such as identity checks and background checks for corporate
customers, to enhance credit control.

         Generally, we have the same settlement policy for all of our
subscribers. This policy requires our subscribers to settle their individual
accounts on a monthly basis. Subscribers may make payment either through direct
debit accounts established at certain branches of banks and certain post
offices, or by paying in person at numerous retail outlets and authorized
dealers in various cities and counties. Detailed statements are made available
upon the subscriber's request.

         We impose a late payment fee on each subscriber whose account is not
paid by the monthly due date. Our current policy is to deactivate the
subscriber's services if the subscriber's account remains overdue after one
month. Subscribers whose services have been involuntarily deactivated must pay
all overdue amounts, including applicable late payment fees, to reactivate
services.

         We make provision for doubtful accounts based on our assessment of the
recoverability of accounts receivable on maturity. In particular, we make full
provision for accounts receivable older than three months. The total amount of
the provision for doubtful accounts for each of 1999, 2000 and 2001 was RMB 771
million, RMB 1,346 million and RMB 1,737 million, respectively, or 2.0%, 2.1%
and 1.7% of total operating revenue, respectively.

         INFORMATION SYSTEM

         Our information systems primarily consist of a business operation
support system, a management information system and our internal communication
network. The business operation support system provides day-to-day operational
support to each business unit, and is a unified and comprehensive system


                                     -29-
<PAGE>


that enables the sharing of information resources. This system standardizes and
integrates each of our sales, billing, settlement, customer service and network
failure handling databases in a centralized and orderly manner. The management
information system collects and processes our management information and
provides support to our management personnel. In addition, this system has
computerized and automated our management in finance, inventory, procurement
and projects. Our internal communication network consists of our internal
computer network, video conference system, telephone system and others, the
combination of which supports our internal communications.

         We have upgraded and integrated our information systems several times
to keep up with our operational and management needs. We have been successfully
operating our management information system since 2000 in our regional
companies in Guangdong, Jiangsu and Zhejiang. During 2001, we began to set up
the management information system in our remaining regional companies and have
achieved good results.

         SALES NETWORK AND MARKETING

         Since early 1997, we have significantly expanded our marketing and
distribution efforts to attract an increasingly diverse base of new
subscribers. We have focused on expanding our distribution channels while
emphasizing our brand name, superior network and service quality.

         Our sales network is organized along the following sales and service
channels:

         -        proprietary sales outlet and customer service hotline, which
                  form the core of our network;

         -        franchised stores, which serve as the primary sales and
                  service locations;

         -        retail outlets, which provide the principal sales force; and

         -        online and mobile sales outlets.

Our proprietary sales outlets, while relatively few in number, have become our
flagship sales and service channels. Franchised stores provide sales and a
variety of other quality services to customers, whereas retail outlets focus
mainly on providing sales services through their extensive networks.

         At December 31, 2001, we had a sales network consisting of
approximately 35,000 outlets, representing an increase of 31.7% over 2000. Among
these outlets, approximately 1,500 were our proprietary sales outlets.

         BRAND NAME

         As the first and leading mobile telephone services provider in our
markets, we believe we are well positioned to further develop our brand name.
We market our services under the "CHINA MOBILE" brand name, which is a
registered trademark in Mainland China owned by China Mobile Communications
Corporation and the marketing name used by it throughout Mainland China. As a
result of promotional and marketing initiatives by us and China Mobile
Communications Corporation's other operating subsidiaries, the brand has
attained wide recognition and is closely identified with us by consumers. In
addition, China Mobile Communications Corporation has filed applications in
Hong Kong to register the "CHINA MOBILE" name and logo as trademark for certain
goods and services.


                                     -30-
<PAGE>


         In April 2002, we entered into a new non-exclusive licensing agreement
with China Mobile Communications Corporation for the use of the "CHINA MOBILE"
name and logo by us and our existing operating subsidiaries, as well as the
eight regional mobile telecommunications companies we have recently agreed to
acquire. Under this agreement, no license fee is payable by us for the first
five years from the effective date of the trademark registration in China and
any fees payable after that will be no less favorable than fees paid by other
affiliates of China Mobile Communications Corporation.

         MOBILE COMMUNICATIONS NETWORKS

         We offer mobile telecommunications services using the GSM standard.
Each of our GSM networks consists of:

         -        base stations or base transceiver stations, which are
                  transmitters and receivers that serve as a bridge between all
                  mobile users in a cell and connect mobile calls to the mobile
                  switching center;

         -        base station controllers, which connect to, and monitor and
                  control, the base transceiver station within each cell,
                  performing the functions of message exchange and frequency
                  administration;

         -        mobile switching centers, which are central switching points
                  to which each call is connected, and which control the base
                  station controllers and the routing of calls;

         -        transmission lines, which link the mobile switching centers,
                  base station controllers, base transceiver stations and other
                  telecommunications networks; and

         -        software applications that drive the mobile
                  telecommunications infrastructure.

         The following table sets forth certain selected information regarding
our GSM networks as of December 31, 1999, 2000 and 2001:


<TABLE>
<CAPTION>
                                              1999              2000            2001
                                             ------            ------          ------

<S>                                          <C>               <C>             <C>
Subscribers (in thousands)                   14,023            43,185          69,643
Voice channels (in thousands)                   727             1,860           2,787
Mobile switching centers                        212               470             599
Base station controllers                        576             1,162           1,480
Base transceiver stations                    13,532            31,593          43,223
</TABLE>


         GSM NETWORK CAPACITY EXPANSION PLANS. As of January 1, 2002, all of
our subscribers use digital GSM services. We intend to continue our network
expansion and improvement with an emphasis on increasing the coverage and
capacity and improving the operating efficiency of our GSM networks. We intend
to achieve capacity expansion by adding base stations in areas already within
our network coverage


                                     -31-
<PAGE>


and by expanding and improving coverage, including along railways and highways
and indoors. Our network expansion plans depend to a large extent upon the
availability of sufficient spectrum. In addition, in order to improve the
capacity of our mobile telecommunications networks in certain major urban
centers, we introduced the GSM-compatible 1800 MHz Digital Cellular System.

         MIGRATION FROM ANALOG TO DIGITAL NETWORK. Recent advances in GSM
technologies have substantially increased network capacity and service quality.
The economic life cycle of our analog network equipment was also much more
limited than that of our digital networks. We terminated our analog services on
December 31, 2001 in order to utilize our spectrum resources more efficiently
and accelerate the enhancement of our network. As of January 1, 2002,
substantially all of our analog service subscribers have migrated to our GSM
network.

         SPECTRUM. A mobile telecommunications network's capacity is to a
certain extent limited by the amount of frequency spectrum available. The
Ministry of Information Industry allocated a total of 34 MHz in the 900 MHz
frequency band and the 1800 MHz frequency band to our parent company, China
Mobile Communications Corporation. Under the existing agreement between China
Mobile Communications Corporation and us, we have the exclusive right to use
such frequency spectrum in our service regions.

         TRANSMISSION INFRASTRUCTURE. The physical infrastructure linking our
base transceiver stations, base station controllers and mobile switching
centers and interconnecting our networks to the fixed line network consists of
transmissions lines, which provide the backbone infrastructure by which mobile
call traffic is carried.

         INTRA-PROVINCIAL TRANSMISSION LINES. We currently lease
intra-provincial and local transmission lines from the former China
Telecommunications Corporation's subsidiaries that operate the fixed line
networks in our 13 service regions and pay them fees based on tariff schedules
stipulated by the relevant regulatory authorities after adjusting for the
discounts that we have negotiated.

         We have also built our own infrastructure in certain areas where the
fixed line network operators do not currently have any transmission lines in
place or where the leasing of existing lines is not economical. As part of our
network operation strategy, we have allocated funds, and have planned certain
capital expenditures, for the construction of our own transmission lines where
economically advantageous, such as in high call traffic areas. In areas where
the leasing of transmission lines makes more economic sense, we intend to
continue to leverage our group buying capacity to negotiate preferential
leasing rates.

         INTER-PROVINCIAL TRANSMISSION LINES. We entered into an
inter-provincial leased line arrangement with China Mobile Communications
Corporation in May 2000, with retroactive effect from April 1, 1999 for Fujian
Mobile, Henan Mobile and Hainan Mobile and from October 1, 1999 for Guangdong
Mobile, Zhejiang Mobile and Jiangsu Mobile. The leased inter-provincial
transmission lines link our mobile switching centers with each other and with
China Mobile Communications Corporation's other mobile switching centers.

         Prior to these arrangements, we leased intra-provincial transmission
lines to link our network to the fixed line network, but did not lease any
inter-provincial transmission lines. Instead, we paid China Mobile
Communications Corporation an inter-provincial interconnection fee. The leasing
charge payable by us is determined based on the standard leasing fee stipulated
by the relevant regulatory authorities after adjusting


                                     -32-
<PAGE>


for the discounts that we have negotiated, and the mobile telecommunications
network operators at both ends of the transmission lines will share the leasing
fees equally.

         NETWORK OPERATIONS AND MAINTENANCE. We believe that we have
considerable network operation and maintenance experience and technical
expertise. Day-to-day traffic management, troubleshooting and system
maintenance are conducted by our experienced team of engineers and technicians.
Technical staff are available for emergency repair work 24 hours a day and we
employ specialist teams for central maintenance of the networks. We continue to
seek to attract and retain qualified technical staff. Currently, most technical
difficulties relating to the networks are resolved by our staff, although our
equipment suppliers also provide back-up maintenance and technical support.

         BASE STATION SITES. In urban areas, our base transceiver station sites
are located mostly on existing structures, typically at the top of tall
buildings. In rural areas, masts are often constructed for locating base
transceiver stations. Typically, base station sites are of limited size, as
base transceiver station equipment does not generally require significant
space. Generally, depending on the length of time required for negotiation with
respect to use of the land or buildings, construction of a base transceiver
station takes approximately one to three months in an urban area and
approximately three to six months in a rural area. We anticipate that we will
need a significant number of new sites in connection with the expansion of our
mobile telecommunications networks. There can be no assurance that we will be
able to obtain the requisite number of sites on reasonable commercial terms.

         EQUIPMENT SUPPLIERS. We select our principal suppliers from among
leading international and domestic manufacturers of mobile telecommunications
equipment and in accordance with technical standards set by the Ministry of
Information Industry. Our GSM networks use equipment primarily supplied by
Ericsson, Nokia, Alcatel, Siemens and Huawei Technologies.

         STRATEGIC ALLIANCE WITH VODAFONE

         On October 4, 2000, we entered into a non-binding memorandum of
understanding with Vodafone Group Plc., which sets forth the principal terms of
alliance and cooperation between the two parties. In connection with the
alliance, Vodafone purchased US$ 2.5 billion of our ordinary shares as part of
our share offering in November 2000, representing approximately 2% of our
issued and outstanding share capital following the offering.

         On February 27, 2001, we entered into a binding strategic alliance
agreement with Vodafone. The agreement has formalized a number of cooperation
arrangements set forth in the memorandum of understanding, including:

         -        the exchange and sharing of corporate management, technical
                  and operational expertise and resources;

         -        joint research and development;

         -        the introduction of global products and services for the
                  mobile community; and


                                     -33-
<PAGE>


         -        the development and implementation of standards and protocols
                  relevant to mobile telecommunications.

         Under the agreement, we have agreed to make Vodafone our preferred
partner in the above mentioned areas, and Vodafone has agreed to make us its
sole strategic partner in China for all areas of potential cooperation within
the scope of the strategic alliance. As part of the alliance, Sir Christopher
Gent, Chief Executive of Vodafone, joined our board of directors as an
independent non-executive director in February 2001. See "Item 6. Directors,
Senior Management and Employees". In addition, Vodafone has agreed in May 2002
to pay us US$ 750 million for the purchase of our ordinary shares either
directly or through its wholly-owned subsidiary, Vodafone Holdings (Jersey)
Limited, in connection with our acquisition of the eight regional mobile
telecommunications companies from our immediate parent company, China Mobile
Hong Kong (BVI) Limited. As a result, Vodafone's share holding in us will
increase from 2.18% to approximately 3.27%. See "-- History and Development of
Company -- Expansion of Business Coverage Through Acquisitions".

         We believe that the strategic alliance with Vodafone will enhance our
strengths in the telecommunications market in Mainland China and will better
position us to pursue further expansion opportunities globally. In particular,
this alliance has enabled us to have frequent and broad exchanges of expertise
and market information. Moreover, this strategic alliance will enable Vodafone
and us to share information and establish benchmarks to better assess and
enhance each other's performance, thereby better positioning both parties in
the global telecommunications market. See " -- Research and Development".

         COMPETITION

         We compete with other telecommunications service providers. In all of
the provinces, municipalities and autonomous regions in which we operate, we
are one of the two licensed mobile services providers. The Chinese government
encourages orderly and fair competition in the telecommunications industry in
Mainland China. In particular, the Chinese government has extended favorable
regulatory policies to some of our competitors, such as China United
Telecommunications Corporation, in order to help them become more viable
competitors to us and China Mobile Communications Corporation. For example, the
Chinese government has permitted China United Telecommunications Corporation to
apply mobile service tariffs as much as 10% below the governmental guidance
rates. We believe this policy has helped China United Telecommunications
Corporation's market share by capturing a significant number of price-sensitive
and low-usage mobile phone subscribers.

         In accordance with the Chinese government policy of encouraging
competition in the telecommunications industry, the government has previously
authorized new entrants to offer IP-based long distance call services, data and
Internet services. More recently, the State Council formally approved the
restructuring of the former China Telecommunications Corporation, China Netcom
Corporation Limited and Jitong Network Communications Company Limited, which
will create two large telecommunications companies, China Telecommunications
Corporation and China Netcom Group. Increased competition from new entrants in
China's telecommunications industry could adversely affect our financial
condition and results of operations. See "Item 3. Key Information -- Risk
Factors -- New entrants in the telecommunications industry in China may further
intensify competition and adversely affect our results of operations".


                                     -34-
<PAGE>


         We compete on the basis of our network coverage and quality, the
pricing of our services, the range of services we offer and our service
quality. We believe that we have significant competitive advantages due to:

         -        our superior mobile telecommunications networks;

         -        our widely-recognized brand name and logo that are closely
                  identified with us by consumers;

         -        our broad distribution networks and our focus on customer
                  services;

         -        our extensive range of value added services;

         -        our experienced management team and high quality employees;
                  and

         -        our financial resources.

         We believe these advantages have contributed to our superior
subscriber quality compared to that of our competitors, as measured by average
usage levels, average revenues per subscriber and doubtful accounts levels.

         The State Council and the Ministry of Information Industry may approve
additional mobile service providers in the future that may compete with us. We
may also be subject to competition from providers of new telecommunications
services based on new or existing technologies. Nonetheless, given the
relatively low mobile phone penetration rates in our markets and in Mainland
China in general, we believe there is substantial growth potential for our
mobile telecommunications business. We believe that the restructuring of the
telecommunications industry in Mainland China has helped to create a fair,
orderly, transparent and healthy telecommunications market.

         We also face indirect competition from other telecommunications
services, such as Xiaolingtong, a local area wireless telephone service with
limited mobility and limited coverage operated by the former China
Telecommunications Corporation and its subsidiaries. Xiaolingtong offers lower
priced services. As a result Xiaolingtong's services are targeted at lower usage
customers who tend to spend smaller amounts on mobile telecommunications. We do
not believe that Xiaolingtong is a significant competitor, as it provides a much
more limited range of services compared to our mobile telecommunications
services.

         In addition, China United Telecommunications Corporation has launched
its 800 MHz Code Division Multiple Access, or CDMA, technology. As there are
significantly more mobile telecommunications services providers using GSM
networks than are using CDMA networks, operators employing GSM networks provide
far more extensive international roaming coverage to subscribers. Currently in
Mainland China, services provided over GSM networks are more widely-accepted by
subscribers than those provided over CDMA networks. As a result, we decided not
to pursue the development of the current second generation CDMA technology.


                                     -35-
<PAGE>


         WORLD TRADE ORGANIZATION

         On December 11, 2001, China officially joined the WTO. Under the
Protocol on the Accession of the People's Republic of China, dated as of
November 11, 2001, China agreed to gradually open the various segments and
regions of its telecommunications market to foreign investment. Pursuant to
this accession protocol, both the percentage of ownership of Sino-foreign joint
ventures offering telecommunication services in China and the regions where
those joint ventures are permitted to offer telecommunications services will be
gradually expanded over a period of six years. Under the accession protocol,
the telecommunication market is divided into fixed line services, mobile voice
and data services, paging services and value added services. Value added
services include electronic mail, voice mail and online information and
database retrieval. By December 11, 2004, foreign investors will be permitted
to own up to 49% of joint ventures that offer mobile voice and data services in
17 cities in China. By December 11, 2006, such joint ventures will be permitted
to offer mobile voice and data services in China without any geographic
restrictions.

         The table below summarizes the foreign ownership restrictions for
telecommunications joint ventures in China as well as applicable geographic
restrictions:


<TABLE>
<CAPTION>
                                FOREIGN OWNERSHIP PERCENTAGE AND GEOGRAPHIC RESTRICTIONS
                                    FOR FOREIGN-FUNDED TELECOMMUNICATIONS ENTERPRISES
-----------------------------------------------------------------------------------------------------------------------------------
                                                    AS OF DECEMBER 31,
SECTOR                2001               2002               2003             2004          2005           2006             2007
------            -------------      --------------     ------------     --------------    ----      --------------    ------------
<S>               <C>                <C>                <C>              <C>               <C>       <C>               <C>

                       25%                35%                                49%                          49%
   Mobile         (3 cities)(1)      (17 cities)(2)                      (17 cities)(2)              (nationwide)
                                                                             25%                          35%              49%
 Fixed-line                                                              (3 cities)(1)               (17 cities)(2)    (nationwide)
                       30%                49%               50%
Value-added       (3 cities)(1)      (17 cities)(2)     (nationwide)
                       30%                49%               50%
   Paging         (3 cities)(1)      (17 cities)(2)     (nationwide)
</TABLE>


---------
(1)      The initial three cities are Beijing, Shanghai and Guangzhou.

(2)      The 17 cities include Beijing, Chengdu, Chongqing, Dalian, Fuzhou,
         Guangzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shenyang, Shanghai,
         Shenzhen, Xiamen, Xi'an, Taiyuan and Wuhan.

         REGULATION

         The mobile telecommunications industry in Mainland China is subject to
a high degree of regulation by the Chinese government. Regulations issued or
implemented by the State Council, the Ministry of Information Industry and
other relevant government authorities including the Ministry of Foreign Trade
and Economic Cooperation and the State Development Planning Commission
encompass all key aspects of mobile telecommunications network operations,
including entry into the telecommunications industry, scope of permissible
business, interconnection and transmission line arrangements, technology and
equipment standards, tariff standards, capital investment priorities, foreign
investment policies and spectrum and number resources allocation.

         The Ministry of Information Industry, under the leadership of the
State Council, is responsible for, among other things:

         -        formulating and enforcing industry policy, standards and
                  regulations;


                                     -36-
<PAGE>


         -        granting telecommunications licenses;

         -        formulating interconnection and settlement standards for
                  implementation between telecommunications networks;

         -        together with other relevant regulatory authorities,
                  formulating tariff and service charge standards for
                  telecommunications services;

         -        supervising the operations of telecommunications service
                  providers;

         -        promoting fair and orderly market competition among
                  operators; and

         -        allocating and administering public telecommunications
                  resources, such as radio frequencies, number resources,
                  domain names and addresses of telecommunications networks.

         In order to provide a uniform regulatory framework to encourage the
orderly development of the telecommunications industry, the Ministry of
Information Industry, under the direction of the State Council, is currently
preparing a draft telecommunications law. We expect that, if and when the
telecommunications law is adopted by the National People's Congress, it will
become the basic telecommunications statute and the legal source of
telecommunications regulations in Mainland China. In addition, the State
Council promulgated a set of new telecommunications regulations on September
25, 2000. These regulations are substantially consistent with the existing
rules and guidelines for the telecommunications industry, and are primarily
intended to streamline and clarify the existing rules and guidelines. They
apply in the interim period prior to the adoption of the telecommunications
law. Although we expect that the telecommunications law will have a positive
effect on the overall development of the telecommunications industry in
Mainland China, we do not know what the nature and scope of the
telecommunications law will be.

         ENTRY INTO THE INDUSTRY. The new telecommunications regulations adopt
the existing regulatory distinction between basic and value added
telecommunications services and provide a classification of those services.
Operators of mobile telecommunications networks, providers of other basic
telecommunications services such as local and long distance fixed line
telephone services, and value added service providers whose telecommunications
services cover two or more provinces, municipalities or autonomous regions in
China must apply for specific permits from the Ministry of Information Industry
in order to provide such services. Granting of permits for providing basic
telecommunications services will be through a tendering process. Currently, in
addition to us and other entities controlled by China Mobile Communications
Corporation which operate in Mainland China outside of our markets, China
United Telecommunications Corporation is also authorized to provide mobile
services in all provinces, municipalities and autonomous regions in China.

         On December 11, 2001, China officially joined the WTO. To implement
China's commitments under the WTO, the Administration of Foreign-Funded
Telecommunications Enterprises Provisions became effective on January 1, 2002,
permitting foreign investment in joint ventures that provide telecommunications
services in China. However, such investments will presumably bear no direct
relation to the issuance of licenses to providers of telecommunications
services in Mainland China, as the issuance of new licenses by the relevant
authority is governed by a separate set of rules and regulations. Pursuant to
the Administration of Foreign-Funded Telecommunications Enterprises Provisions,
foreign ownership in a telecommunications enterprise may be gradually increased
to 49% if such enterprise provides basic telecommunication services


                                     -37-
<PAGE>


and 50% if such enterprise provides value added telecommunications services
(including radio paging services).

         SPECTRUM USAGE. In coordination with the relevant provincial
authorities, the Ministry of Information Industry regulates the allocation of
radio frequency. The frequency assigned to an entity is not allowed to be
leased or, without approval of the Ministry of Information Industry,
transferred by the entity to any other third party. In accordance with a joint
circular from the State Development Planning Commission and the Ministry of
Finance, China Mobile Communications Corporation determines the amount of fees
to be paid to the Ministry of Information Industry for spectrum usage by each
mobile telecommunications network operator under its control based on the
bandwidth of the frequency used and the number of base transceiver stations
within the operator's network.

         On May 2, 2002, the relevant regulatory authorities in China informed
us that the standard spectrum usage fees for GSM networks will be adjusted
progressively over a period of three years, and that the adjustments will be
effective for a period of five years from July 1, 2002. For the first year,
spectrum usage fees for GSM networks will be charged at the annual rate of RMB
7.5 million per MHz frequency. For the second year, the annual fee will be RMB
11.25 million per MHz frequency and beginning in the third year and thereafter,
the annual fee will be RMB 15 million per MHz frequency. All adjusted annual
fees are charged on the basis that upward and downward frequencies are
separately charged. The allocation of spectrum usage fees between China Mobile
Communications Group and us remains the same under our existing agreement. The
adjustments will increase our expenses on an after-tax basis by approximately
RMB 224 million, RMB 343 million and RMB 462 million, respectively, for the
first, second, and third years after the effectiveness of these new rates.

         NUMBER RESOURCES. The Ministry of Information Industry is responsible
for the administration of the number resources within Mainland China, including
the mobile telecommunications network number and subscriber numbers. The use of
number resources by any telecommunications operator is subject to the approval
by the Ministry of Information Industry. In April 2000, the Ministry of
Information Industry implemented new provisional measures on administration of
telecommunications network number resources. In accordance with these new
measures, the telecommunications network number resources are owned by the
state, and the user of number resources is required to pay a usage fee to the
state. However, the standard for the usage fee has not yet been determined. It
is also not clear when the standard for the usage fee will be determined and
when we will be required to pay such fee. The new measures also provide for
procedures for application for the use, upgrade and adjustment of number
resources by telecommunications operators.

         TARIFF SETTING. The levels and categories of our current tariffs are
subject to regulation by various government authorities, including the Ministry
of Information Industry, the State Development Planning Commission and, at the
local level, the relevant provincial price regulatory authorities. Under the
new telecommunications regulations, telecommunications tariffs are categorized
into market based tariffs, government guidance tariffs and government fixed
tariffs. In general, base usage charges, monthly fees, domestic roaming usage
charges and tariffs for all domestic long distance calls (other than Internet
Protocol phone calls) and international calls are fixed jointly by the Ministry
of Information Industry and the State Development Planning Commission.
International roaming charges are set in accordance with agreements between
China Mobile Communications Corporation and the relevant foreign mobile
operators. Under the new telecommunications regulations, tariffs for those
telecommunications businesses that are considered fully competitive may be set
by the service providers as market based tariffs.


                                     -38-
<PAGE>


         INTERCONNECTION ARRANGEMENTS AND LEASE LINE ARRANGEMENTS. Under the
new telecommunications regulations, parties seeking interconnection must enter
into an interconnection agreement and file such interconnection agreement with
the Ministry of Information Industry. Major telecommunications service
providers that have control over essential telecommunications infrastructure
and possess significant market share must allow interconnection to their
networks by other operators. They must establish interconnection rules and
procedures based on the principles of non-discrimination and transparency and
submit such rules and procedures to the Ministry of Information Industry for
approval. Such rules and procedures will be binding upon those major
telecommunications service providers. The termination of any interconnection
arrangements will require prior approval by the Ministry of Information
Industry.

         The applicable regulations provide that interconnection related
equipment must conform with the technical standards approved by the Ministry of
Information Industry. See "--Technical Standards" below. The Ministry of
Information Industry also determines the standard lease tariffs to be paid by
telecommunications operators with respect to the leasing of transmission lines
that facilitate interconnection between telecommunications networks. The
relevant provincial operating subsidiaries of the former China
Telecommunications Corporation and those of China Mobile Communications
Corporation are responsible for the maintenance of the transmission lines and
related equipment in their respective localities.

         TECHNICAL STANDARDS. Certain regulatory authorities in Mainland China,
including the Ministry of Information Industry, set technical standards and
control the type and quality of mobile telecommunications equipment used in or
connected to public networks, all radio telecommunications equipment and all
interconnection related equipment.

         The establishment of base transceiver stations requires the approval
of the relevant provincial regulatory authorities. A number of these approvals
with respect to the base stations of our operating subsidiaries are currently
pending. We have not experienced and do not expect to experience material
difficulty in obtaining permission to establish additional sites.

         CAPITAL INVESTMENT. Some of our major investment projects, including
mobile telecommunications network development projects, may be required to
obtain approvals from relevant regulatory authorities in Mainland China.

         EMPLOYEES

         The total number of our employees increased from 12,530 as of December
31, 1998 to 38,343 as of December 31, 2000, mainly as a result of our
acquisitions of various regional mobile telecommunications companies in China
between 1998 and 2000. In 2001, our total number of employees increased to
38,748. As of December 31, 2001, we had 47 employees in Hong Kong and 38,701
employees in the rest of Mainland China as classified in the following table.
Approximately 48% of our permanent employees have college or graduate degrees.


<TABLE>
<S>                                       <C>
Management ...................             8,288
Technical and engineering ....            12,981
Sales and marketing ..........            15,616
Financial and accounting .....             1,816

     Total ...................            38,701
</TABLE>


                                     -39-
<PAGE>


         We provide benefits to certain employees, including housing,
retirement benefits and hospital, maternity, disability and dependent medical
care benefits. Most of our employees are members of a labor association. We
have not experienced any strikes, slowdowns or labor disputes that have
interfered with our operations to date, and we believe that our relations with
our employees are good.

ORGANIZATIONAL STRUCTURE

         See "-- History and Development of the Company -- Industry
Restructuring and Changes in Our Shareholding Structure".

PROPERTY, PLANTS AND EQUIPMENTS

         We own, lease or have usage rights in various properties which consist
of land and buildings for offices, administrative centers, staff quarters,
retail outlets and technical facilities. We have obtained land use right
certificates and property title certificates for all but five of these
properties. In 2001, we obtained real estate ownership certificates for four
properties located in Guangdong Province and we are currently in the process of
obtaining certificates for the remaining five properties, all of which are also
located in Guangdong Province. We believe that our use of these properties is
not affected by the fact that we have not yet obtained the relevant land use
right certificates and property title certificates. China Mobile (Hong Kong)
Group Limited, our indirect controlling shareholder, has agreed to indemnify us
against any loss or damage caused by or arising from any challenge of, or
interference with, our right to use any of the properties we had or used in our
business as of May 31, 1997, the date of asset revaluation in preparation for
our initial public offering. We believe that all of our owned and leased
properties are well maintained and are suitable and adequate for their present
use.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

         You should read the following discussion and analysis in conjunction
with our consolidated financial statements, together with the related notes,
included elsewhere in this annual report. The consolidated financial statements
have been prepared in accordance with Hong Kong GAAP, which differ in certain
significant respects from U.S. GAAP. Note 29 to our consolidated financial
statements summarizes the significant differences between Hong Kong GAAP and
U.S. GAAP as they relate to us and provides a reconciliation to U.S. GAAP of
net profit and shareholders' equity. In addition, note 29 to our consolidated
financial statements includes our condensed consolidated financial statements
prepared and presented in accordance with U.S. GAAP for the relevant periods.
The consolidated financial statements present, and the discussion and analysis
in this section pertain to, our consolidated financial position and results of
operations as of and for the years ended December 31, 1999, 2000 and 2001. Our
consolidated financial statements reflect the results of Fujian Mobile, Henan
Mobile and Hainan Mobile from November 12, 1999, and the results of Beijing
Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile,
Shandong Mobile and Guangxi Mobile from November 13, 2000, the respective dates
of the acquisitions.

OVERVIEW OF OUR OPERATIONS

         During 1999, 2000 and 2001, our network capacity, subscriber base and
usage and operations experienced significant growth. We believe that with the
market-oriented restructuring of the telecommunications industry, as well as
the development of the economy and increase in per capita income in


                                     -40-
<PAGE>


Mainland China, the telecommunications industry will continue to grow rapidly.
Given the relatively low penetration rates in our markets, we believe that
there is potential for significant future subscriber growth.

         Our results of operations, like those of other mobile
telecommunications network operators, are substantially dependent on a number
of factors, including:

         -        the number and quality of subscribers;

         -        the level of subscriber usage;

         -        the level and structure of tariffs; and

         -        interconnection, roaming and transmission line arrangements
                  with other telecommunications operators.

         We operate in an extensively regulated environment and our operations
and financial performance are significantly affected by the Chinese
government's regulation of the telecommunications industry. These regulations
and policies may affect, among other things, our interconnection and
transmission line leasing arrangements, technology and equipment standards and
capital investment, as described in more detail under "Item 3. Key Information
-- Risk Factors -- Adverse changes in the economic policies of the Chinese
government could have a material adverse effect on the overall economic growth
of Mainland China, which could reduce the demand for our services and adversely
affect our business, financial condition and results of operations" and "Item
4. Information on the Company -- Business Overview -- Regulation". Our
financial performance is also subject to the economic and social conditions in
Mainland China and foreign currency exchange rate fluctuations.

         OUR ACQUISITIONS OF 11 REGIONAL MOBILE TELECOMMUNICATIONS COMPANIES IN
         THE PAST FOUR YEARS HAVE MATERIALLY IMPACTED OUR FINANCIAL RESULTS

         We acquired Jiangsu Mobile on June 4, 1998, Fujian Mobile, Henan
Mobile and Hainan Mobile on November 12, 1999 and Beijing Mobile, Shanghai
Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and
Guangxi Mobile on November 13, 2000. We have adopted the acquisition method to
account for these acquisitions under Hong Kong GAAP. Accordingly, the
consolidated financial statements include the results of these companies from
the respective dates of the acquisitions. Under U.S. GAAP, our acquisitions of
these companies are considered a combination of entities under common control
which would be accounted for under the "as if pooling-of-interests" method,
whereby assets and liabilities are accounted for at historical cost and the
accounts of previously separate companies for periods prior to the combination
generally are restated on a combined basis.

         These acquisitions have had a material impact on our overall results
of operations. In particular, our financial results in 2001 were significantly
affected by the inclusion of the full year results of operations for the seven
regional mobile telecommunications companies we acquired in November 2000. By
comparison, our financial results in 2000 only included the results of
operations of these companies for two months. See "-- Results of Operations --
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000". These
acquisitions have, among other things, significantly expanded the size of the
mobile telecommunications markets we serve and increased the number of our
subscribers and usage of our services. As a result, our operating revenue and
operating expenses have also increased significantly.


                                     -41-
<PAGE>


         ANALOG-TO-DIGITAL MIGRATION

         Due to the rapid development of mobile telecommunications technologies
and the potentially limited economic life cycle of our analog network
equipment, we accelerated the enhancement of our technology and assisted the
migration of our analog subscribers to our GSM network. See "Item 4.
Information on the Company -- Business Overview -- Migration from Analog to
Digital Network". As a result, we wrote down RMB 282 million of analog network
equipment in 1998, and we wrote down RMB 6,720 million of analog network
equipment and wrote off an additional RMB 1,522 million of analog network
equipment in 1999. In 2000, we wrote down and wrote off the entire RMB 1,525
million in remaining net book value of our analog network equipment. We
discontinued our analog service on December 31, 2001.

         To encourage the migration of our analog subscribers to our GSM
services, we offered temporary free air time for GSM services to these
subscribers. We believe the analog-to-digital migration has increased our
network utilization rate, improved our operational efficiency and allowed us to
provide better services to our customers.

         OPERATING ARRANGEMENTS WE ENTERED INTO OVER THE LAST SEVERAL YEARS
         HAVE MATERIALLY IMPACTED OUR FINANCIAL RESULTS

         Our current organizational structure was established pursuant to the
restructuring completed in September 1997 in preparation for our initial public
offering and our acquisitions of the 11 regional mobile telecommunications
companies in Mainland China in 1998, 1999 and 2000. In connection with these
transactions, we entered into various operating arrangements to facilitate the
transfer of the operations to us, to integrate these operations within our
operating structure and to improve our overall operational efficiency. These
arrangements included:

         -        interconnection revenue sharing and settlement arrangements
                  with the former China Telecommunications Group and with China
                  Mobile Communications Corporation;

         -        intra-provincial transmission line leasing agreements with
                  the former China Telecommunications Group;

         -        service agreements with China Mobile Communications
                  Corporation and the former China Telecommunications Group
                  with respect to various telecommunications services and
                  support;

         -        a change in the tax treatment of connection fees and certain
                  surcharge revenue for our services;

         -        the revaluation of fixed assets of the companies we acquired
                  as of the respective dates set forth in the financial
                  statements included in this annual report; and

         -        an agreement with China Mobile Communications Corporation for
                  inter-provincial interconnection and domestic and
                  international roaming.

         The original terms of our agreements relating to interconnection,
leased lines and roaming have been revised as a result of tariff adjustments by
the government and/or commercial negotiation with the relevant


                                     -42-
<PAGE>


parties. See "Item 4. Information on the Company -- Business Overview --
Interconnection" and "-- Roaming" as well as the notes to our consolidated
financial statements for a description of these arrangements as amended to
date.

         Our financial results reflect the impact of the above arrangements as
of the dates they became effective. These arrangements and changes have had a
material impact on our overall results of operations. In particular, the
implementation of the interconnection agreements led to significant increases
in both operating revenue and operating expenses. In addition, other operating
expenses including selling, general and administrative expenses increased in
1999 and 2000 as a result of the implementation of agreements relating to
billing and collection services and distribution and sales. In each of 1999 and
2000, depreciation expense increased as a result of the revaluation of fixed
assets, while our effective income tax rates increased as a result of
connection fees and certain surcharges becoming fully taxable after the
acquired companies had registered as wholly foreign owned enterprises following
the acquisitions.

         OUR OPERATING ARRANGEMENTS WITH CHINA MOBILE COMMUNICATIONS
         CORPORATION HAVE AFFECTED AND MAY CONTINUE TO AFFECT OUR FINANCIAL
         RESULTS

         In May 2000, we entered into two agreements with China Mobile
Communications Corporation for:

         -        inter-provincial interconnection and domestic and
                  international roaming services; and

         -        sharing of inter-provincial leased line fees.

         The agreements, as supplemented in November 2000, apply to the seven
regional mobile telecommunications companies we acquired in November 2000,
effective upon the acquisition and to our other six operating subsidiaries with
retroactive effect from April 1, 1999, except that with regard to Guangdong
Mobile, Zhejiang Mobile and Jiangsu Mobile, the leased line fee sharing
arrangement had retroactive effect from October 1, 1999.

         Prior to these arrangements, we leased intra-provincial transmission
lines from the former China Telecommunications Corporation to link our network
to the fixed line network, but did not lease any inter-provincial transmission
lines. Instead, we paid China Mobile Communications Corporation an inter-
provincial interconnection fee. Under the inter-provincial transmission line
leasing agreement with China Mobile Communications Corporation, the leasing fee
payable by us is determined based on the standard leasing fee stipulated by the
relevant regulatory authorities after adjusting for the volume discount to
which we are entitled, and on the basis that the mobile network operators at
both ends of the transmission lines will share the leasing fees equally. As a
result, these arrangements led to an increase in our transmission line leasing
expenses, but a reduction in our inter-provincial interconnection and roaming
settlement expenses, resulting in net savings in our operating expenses in
2000. We have reflected the financial impact of these arrangements in 1999 as a
one-time gain in our accounts for 2000.

         TARIFF ADJUSTMENTS

         As part of the efforts to further rationalize the tariff structure of
telecommunications services, the government introduced a wide range of tariff
adjustments effective from early 2001. The tariff adjustments that affect our
mobile telecommunications services include the shortening of the billing unit
for long distance charges (other than for IP-based long distance call
services), from one minute to six seconds, the general


                                     -43-
<PAGE>


reduction in domestic and international long distance call rates, the
elimination of various surcharges and a general reduction in leased line
tariffs. In particular, effective from early 2001, domestic long distance call
rates have been adjusted from the range of RMB 0.50 to RMB 1.00 per minute to
the uniform rate of RMB 0.07 per six seconds. In addition, connection fees
charged to new contract subscribers were eliminated as of July 1, 2001.
Although the adjustments in long distance call rates and the elimination of
surcharges and fees may reduce our revenue in the short term, we expect that
they will stimulate increased subscriber usage and contribute to our overall
revenue growth in the long term. In addition, we will be able to achieve
savings in leased line expenses as a result of the reduction in leased line
tariffs.

         AMENDMENT TO REVENUE SHARING ARRANGEMENT FOR PREPAID SERVICES

         We offer prepaid services in each of our 13 service regions. Some of
our prepaid services allow subscribers to add value to their SIM cards in any
of our service regions or in the service regions of other subsidiaries of China
Mobile Communications Corporation. In May 2001, we entered into an agreement
with China Mobile Communications Corporation to amend the then-existing revenue
sharing arrangements with respect to prepaid services, with retroactive effect
from April 21, 2001. The new agreement amended the prior arrangement by
allowing the network operator in the location that sells the value-adding
prepaid card to charge 5% of the face value of the card as a handling charge,
and remit the other 95% (as compared to 85% prior to the amendment) to the
subscriber's home network operator. We do not expect the new agreement to have
a material impact on our financial condition or results of operations.

         RENMINBI BOND OFFERING

         Following the approval by the relevant Chinese regulatory authorities,
on June 18, 2001 our wholly-owned subsidiary, Guangdong Mobile, issued RMB 5
billion of guaranteed bonds due in 2011. These bonds are listed on the Shanghai
Stock Exchange. The bonds bear interest, payable annually, at a floating rate
calculated as the sum of:

         -        a base rate, being the one-year fixed time deposit rate
                  published by the People's Bank of China on (1) the date of
                  the issuance of the bonds, which is 2.25% per annum, with
                  respect to the 12-month period following such date of
                  issuance, and (2) such rate as is fixed on each subsequent
                  anniversary date of the issuance, to apply with respect to
                  the 12- month period following such anniversary date; and

         -        an interest rate spread of 1.75% per annum, which will remain
                  fixed throughout the term of the bonds.

         We have issued an irrevocable guarantee for the performance of the
bonds, and China Mobile Communications Corporation has issued a further
guarantee in relation to the performance by us of our guarantee. The bonds are
rated "AAA" by China Chengxin International Credit Rating Company Limited, an
affiliate of Fitch International Limited.

         The proceeds from the offering were applied solely to repay part of
the RMB 12.5 billion syndicated loans we raised through our wholly-owned
subsidiary, China Mobile (Shenzhen) Limited, in 2000 for our acquisition of the
seven mobile telecommunications companies. The syndicated loans had a weighted
average interest rate of approximately 5.2% per annum in 2000, which is higher
than the 4% per annum interest rate borne by bonds during the 12-month period
following the original issuance.


                                     -44-
<PAGE>


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The following discussion and analysis is based on our consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in Hong Kong. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the
years reported. Actual results could differ from those estimates. Estimates are
used when accounting for certain items such as unbilled usage fees, allowance
for doubtful accounts, depreciation and amortization period, and impairment of
long lived assets including fixed assets and goodwill arising from acquisitions
(including that taken initially to reserves). Actual results may differ from
those estimates under different assumptions or conditions.

         We believe that the following critical accounting policies have a more
significant impact on our consolidated financial statements, either because of
the significance of the financial statement elements to which they relate, or
because they require judgment and estimation.

         We maintain allowances for doubtful accounts based upon evaluation of
the recoverability of the accounts receivables at each balance sheet date. We
base our estimates on the aging of our accounts receivable balances and our
historical write-off experience, net of recoveries. If the financial condition
of our customers were to deteriorate, additional allowances may be required.

         Our fixed assets, consisting primarily of telecommunication
transceivers, switching centers and other network equipment, comprise a
significant portion of our total assets. Changes in technology or industry
conditions may cause the estimated period of use or the value of these assets
to change. We perform annual reviews to confirm the appropriateness of
estimated economic useful lives for each class of fixed assets. For the three
years ended December 31, 2001, no changes of assets useful lives have occurred.
In addition, long-lived assets including fixed assets and goodwill arising on
acquisition (including that initially taken to reserve) are reviewed for
impairment whenever events or changes in circumstances have indicated that
their carrying amounts may not be recoverable. If any such indication exists,
the asset's recoverable amount is estimated. An impairment loss is recognized
whenever the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount of an asset is the greater of its net selling price and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of time value of money and the risks specific to the
asset. Where an asset does not generate cash inflows largely independent of
those from other assets, the recoverable amount is determined for the smallest
group of assets that generates cash inflows independently (i.e. a
cash-generating unit). Estimates and assumptions used in setting depreciable
lives and testing for recoverability require both judgment and estimation. Our
policies regarding accounting for these assets and assessing their
recoverability are included in note 2(f) and note 2(h) to our consolidated
financial statements.

RESULTS OF OPERATIONS

         As a result of our acquisitions and the material changes made to our
operating arrangements, our results of operations are not directly comparable
with those in prior years.

         The following table sets forth selected income statement data,
expressed as percentages of operating revenue, for the periods indicated:


                                     -45-
<PAGE>


<TABLE>
<CAPTION>
                                                                                      YEAR ENDED DECEMBER 31,
                                                                                ----------------------------------------
                                                                                 1999             2000              2001
                                                                                -----             -----            -----

<S>                                                                             <C>               <C>              <C>
Operating revenue:                                                              100.0%            100.0%           100.0%
    Usage fees...................................................                66.8              71.2             73.2
    Monthly fees.................................................                12.9              14.8             14.1
    Connection fees..............................................                11.2               3.4              0.7
    Others.......................................................                 9.1              10.6             12.0
Operating expenses:
    Leased lines.................................................                 9.6               8.5              5.0
    Interconnection..............................................                16.7              12.8             13.0
    Depreciation.................................................                19.2              15.0             17.6
    Personnel....................................................                 5.8               6.1              5.3
    Other operating expenses                                                     13.4              16.3             18.2
                                                                                -----             -----            -----
         Total operating expenses................................                64.7              58.7             59.1
Operating profit                                                                 35.3              41.3             40.9
    Write-down and write-off of analog network
         equipment...............................................               (21.3)             (2.3)            --
    Other net income.............................................                 1.4               1.4              1.6
    Finance costs................................................                (0.9)             (1.3)            (1.7)
    Interest income..............................................                 2.0               1.5              0.8
    Non-operating net income/(expenses)..........................                 0.2               0.0              0.0
                                                                                -----             -----            -----
    Profit before tax and minority interests.....................                16.7              40.6             41.6
    Income tax...................................................                (4.3)            (12.9)           (13.7)
                                                                                -----             -----            -----
    Profit before minority interest..............................                12.4              27.7             27.9
    Minority interest............................................                --                --                0.0
                                                                                -----             -----            -----
Net Profit.......................................................                12.4%             27.7%            27.9%
                                                                                =====             =====            =====
</TABLE>

     YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

         Our results of operations in 2001 were materially affected by our
acquisition of seven regional mobile telecommunications companies in November
2000. In particular, our operating revenue and operating expenses increased
significantly in 2001. This was primarily due to the inclusion of the full year
results of operations of these companies. By comparison, our results in 2000
only include the results of operations of these companies since November 13,
2000. See "-- Overview of Our Operations -- Our Acquisitions of 11 Regional
Mobile Telecommunications Companies in the Past Four Years Have Materially
Impacted Our Financial Results". Our acquisitions of eight regional mobile
telecommunications companies in 2002 will further expand the size of the mobile
telecommunications markets we serve and increase the number of our subscribers
and usage of our services. As a result, our operating revenue and operating
expenses in 2002 are expected to further increase. See "Item 4. Information on
the Company -- History and Development of the Company -- Expansion of Business
Coverage Through Acquisitions".


                                     -46-
<PAGE>


         OPERATING REVENUE. We derive operating revenue principally from usage
fees and monthly fees and, until July 1, 2001, one-time connection fees charged
to new contract subscribers. Usage fees include standard local usage fees for
airtime and applicable domestic and international long distance charges
receivable from subscribers for the use of our mobile telecommunications
networks and facilities, and fees in respect of roaming out calls made by our
subscribers outside their registered service areas. Other operating revenue
includes charges for wireless data and value added services, telephone number
selection fees, interconnection revenue and roaming in fees. As a result of the
introduction and development of new businesses including wireless data
services, we expect that revenue from new businesses will contribute to an
increasing portion of our operating revenue in 2002.

         Operating revenue increased 54.4% from RMB 64,984 million in 2000 to
RMB 100,331 million (US$ 12,122 million) in 2001. This increase was primarily
due to an increase in usage fees as a result of subscriber growth as well as
the full year effect of including usage fees from subscribers of the seven
companies we acquired in November 2000. This increase was partially offset by
certain tariff adjustments implemented in early 2001. The tariff adjustments
included the cancellation of various surcharges and the adjustment of long
distance call tariffs during the first quarter of 2001. In addition, connection
fees were eliminated as of July 1, 2001. Our total number of subscribers was
approximately 69.6 million at December 31, 2001, compared to approximately 45.1
million at December 31, 2000. Excluding connection fees, operating revenue
increased from RMB 62,771 million in 2000 to RMB 99,620 million (US$ 12,036
million) in 2001.

         Revenue from usage fees increased 58.7% from RMB 46,287 million in
2000 to RMB 73,458 million (US$ 8,875 million) in 2001. This increase was
primarily a result of the increase in total subscriber numbers and the growth
in usage volume. As a percentage of operating revenue, usage fees increased
from 71.2% in 2000 to 73.2% in 2001.

         Revenue from monthly fees increased 46.4% from RMB 9,623 million in
2000 to RMB 14,085 million (US$ 1,702 million) in 2001. This increase was
mainly due to the increase in total contract subscriber numbers, as well as the
full year effect of including monthly fees from subscribers of the seven
companies we acquired in November 2000. As a percentage of operating revenue,
monthly fees decreased from 14.8% in 2000 to 14.1% in 2001. This decrease was
primarily due to the continued growth in our prepaid subscriber base, which led
to an increase in the proportion of prepaid subscribers in our total subscriber
base.

         Revenue from connection fees decreased 67.9% from RMB 2,213 million in
2000 to RMB 711 million (US$ 86 million) in 2001. This decrease was primarily
due to the gradual decrease and eventual elimination of connection fees charged
to new contract subscribers. As a percentage of operating revenue, connection
fees decreased from 3.4% in 2000 to 0.7% in 2001. Although the elimination of
connection fees may reduce our revenue in the short term, we believe that the
elimination of connection fees for new subscribers will help expand our
subscriber base and result in increased total subscriber usage of our mobile
telecommunications services.

         Other operating revenue increased 76.0% from RMB 6,861 million in 2000
to RMB 12,077 million (US$ 1,459 million) in 2001. This increase resulted
principally from increased revenue from wireless data and value added services,
incoming roaming revenue and interconnection revenue, as well as the full year
effect of our acquisition of the seven companies in November 2000.


                                     -47-
<PAGE>


         OPERATING EXPENSES. Operating expenses include leased line expenses,
interconnection expenses, depreciation expenses relating to our mobile
telecommunications network and other fixed assets, personnel expenses and other
operating expenses. Other operating expenses primarily consist of selling and
promotion expenses, administrative expenses and one-off analog subscriber
migration costs.

         Operating expenses increased 55.5% from RMB 38,158 million in 2000 to
RMB 59,319 million (US$ 7,167 million) in 2001. This increase primarily
reflected the full year effect of including expenses attributable to the seven
companies we acquired in 2000, our overall expanded network coverage and
service scope and our larger subscriber base.

         Total leased line payments decreased 9.0% from RMB 5,501 million in
2000 to RMB 5,005 million (US$ 605 million) in 2001. This decrease was
primarily due to a reduction of leased line tariffs in 2001 and the
construction of our own transmission lines in high traffic areas as well as our
termination of the Total Access Communications System, or TACS, network. This
decrease was partially offset by the full year effect of including leased line
payments for transmission lines made by the seven companies we acquired in
November 2000 and our network expansion into new coverage areas. As a
percentage of operating expenses, total leased line payments decreased from
14.4% in 2000 to 8.4% in 2001.

         Interconnection expenses increased 56.7% from RMB 8,329 million in
2000 to RMB 13,055 million (US$ 1,577 million) in 2001. This increase was
mainly due to the full year effect of including interconnection expenses
attributable to the seven companies we acquired in November 2000, as well as
the increased traffic volume. This increase was partially offset by the cost
savings achieved by realizing the economies of scale of increased traffic
volume transmitted over our expanded network and the increased use of IP-based
long distance call services. Interconnection expenses as a percentage of
operating expenses increased from 21.8% in 2000 to 22.0% in 2001.

         Depreciation expense increased 81.0% from RMB 9,759 million in 2000 to
RMB 17,664 million (US$ 2,134 million) in 2001. This increase was mainly due to
the full year impact of the inclusion of the depreciation expenses of the seven
companies we acquired in November 2000, as well as the increase in our network
capacity, the additional investment we made in our GSM networks and the
additional strategic investments we made in certain transmission networks and
stations. As a percentage of operating expenses, depreciation expense increased
from 25.6% in 2000 to 29.8% in 2001.

         Personnel expenses increased 33.4% from RMB 3,991 million in 2000 to
RMB 5,325 million (US$ 643 million) in 2001. This increase was primarily due to
the full year effect of including personnel expenses of the seven companies we
acquired in November 2000, as well as an increase in performance-based
incentive compensation as a result of our further improved operating results.
We believe that implementation of our performance-based compensation system has
helped us to retain and attract talented staff and enhance employee
productivity. As a percentage of operating expenses, personnel expenses
decreased from 10.5% in 2000 to 9.0% in 2001.

         Other operating expenses increased 72.7% from RMB 10,578 million in
2000 to RMB 18,270 million (US$ 2,208 million) in 2001. This increase was
primarily due to the increase in selling and promotion expenses and the one-off
costs associated with the migration of subscribers to our GSM networks from our
analog service. The increase in selling and promotion expenses primarily
reflects our larger subscriber base and the full year effect of our acquisition
of the seven companies in November 2000. As a percentage of operating expenses,
other operating expenses increased from 27.7% in 2000 to 30.8% in 2001.


                                     -48-
<PAGE>


         OPERATING PROFIT. As a result of the foregoing, operating profit
increased 52.9% from RMB 26,826 million in 2000 to RMB 41,012 million (US$
4,955 million) in 2001, and operating margin (operating profit as a percentage
of operating revenue) decreased slightly from 41.3% in 2000 to 40.9% in 2001.

         ADJUSTED EBITDA. Adjusted EBITDA represents earnings before interest
income, interest expense, income taxes, depreciation and amortization,
non-operating net (expenses)/income, and write-down and write-off of fixed
assets. Adjusted EBITDA increased 60.7% from RMB 37,500 million in 2000 to RMB
60,270 million (US$ 7,282 million) in 2001. This increase was primarily due to
the full year effect of including the results of operations of the seven
companies we acquired in November 2000, the increase in operating revenue due
to subscriber growth and service expansion and our various cost control
efforts. Adjusted EBITDA margin (adjusted EBITDA as a percentage of operating
revenue) increased from 57.7% in 2000 to 60.1% in 2001, reflecting further
improvements in our operating efficiency. While EBITDA is commonly used in the
telecommunications industry worldwide as an indicator of operating performance,
leverage and liquidity, it is not presented as a measure of performance in
accordance with generally accepted accounting principles and should not be
considered as representing net cash flows from operating activities.

         OTHER NET INCOME. Other net income represents primarily gross profit
from sales of SIM cards, handsets and accessories. Given that the gross margin
from sales of SIM cards will decrease as a result of the increasing market
competition, we expect that the amount of other net income will gradually
decrease. Other net income increased 74.2% from RMB 915 million in 2000 to RMB
1,594 million (US$ 193 million) in 2001. This increase was principally due to
the full year effect of our acquisition of the seven companies in November 2000,
as well as increased sales of SIM cards due to our subscriber growth.

         FINANCE COSTS. Finance costs increased from RMB 824 million in 2000 to
RMB 1,740 million (US$ 210 million) in 2001. This increase was primarily due to
the full year effect of including finance costs attributable to the seven
companies we acquired in November 2001. This increase was also partly due to
the full year impact of the interest on the US$ 690 million fixed rate
convertible notes issued in November 2000. In 2001, the average interest rate
that we paid on our outstanding borrowings was approximately 5%.

         INTEREST INCOME. Interest income decreased 14.8% from RMB 1,006
million in 2000 to RMB 857 million (US$ 104 million) in 2001. The higher
interest income in 2000 was primarily due to our larger cash balances resulting
from our capital raising and financing activities in 2000.

         NON-OPERATING NET INCOME/(EXPENSES). Non-operating net expenses
increased 20.0% from RMB 5 million in 2000 to RMB 6 million (US$ 1 million) in
2001. This increase was primarily due to the full year effect of our
acquisition of the seven companies in November 2000.

         PROFIT BEFORE TAX AND MINORITY INTERESTS. As a result of the
foregoing, profit before tax and minority interests increased 58.1% from RMB
26,393 million in 2000 to RMB 41,717 million (US$ 5,041 million) in 2001.

         TAXATION. Our income tax expense increased 63.8% from RMB 8,366
million in 2000 to RMB 13,703 million (US$ 1,656 million) in 2001. This
increase was primarily due to an increase in our profit. Our effective tax rate
increased from 31.7% in 2000 to 32.8% in 2001. The increase was largely a
result of our acquisition of the seven companies in November 2000. The
connection fee revenue and certain


                                     -49-
<PAGE>


surcharge revenue from those seven companies were not subject to taxation in
2000 prior to their completion of the registration as wholly foreign-owned
enterprises. The full year effect of interest expenses on the US$ 690 million
convertible notes and the additional interest expenses on the RMB 5 billion
bonds we issued in 2001, both of which are not tax deductible, also contributed
to the higher effective tax rate.

         NET PROFIT. As a result of the foregoing, net profit increased 55.4%
from RMB 18,027 million in 2000 to RMB 28,015 million (US$ 3,385 million) in
2001. Net profit margin (net profit as a percentage of operating revenue)
increased from 27.7% in 2000 to 27.9% in 2001.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

         OPERATING REVENUE. Operating revenue increased 68.3% from RMB 38,623
million in 1999 to RMB 64,984 million in 2000. This increase was due primarily
to the increase in usage fees as a result of subscriber growth in Guangdong,
Zhejiang and Jiangsu, the full year impact of the inclusion of usage fees from
subscribers of Fujian Mobile, Henan Mobile and Hainan Mobile following their
acquisition by us in November 1999, and the inclusion of usage fees from
subscribers of the seven regional mobile communications companies we acquired
in November 2000. Our total number of subscribers was approximately 45.1
million at December 31, 2000, compared to approximately 15.6 million at
December 31, 1999. Excluding connection fees, operating revenue increased from
RMB 34,304 million in 1999 to RMB 62,771 million in 2000.

         Revenue from usage fees increased 79.3% from RMB 25,812 million in
1999 to RMB 46,287 million in 2000. This increase was primarily a result of
the increase in total subscriber numbers, the expanded telecommunications
opportunities for subscribers as a result of the expansion and improvement of
fixed line and mobile telecommunications networks throughout Mainland China and
the expansion of the scope and variety of our services. As a percentage of
operating revenue, usage fees increased from 66.8% in 1999 to 71.2% in 2000.

         Revenue from monthly fees increased 93.2% from RMB 4,981 million in
1999 to RMB 9,623 million in 2000 due to the increase in total contract
subscriber numbers. As a percentage of operating revenue, monthly fees
increased from 12.9% in 1999 to 14.8% in 2000.

         Revenue from connection fees decreased 48.8% from RMB 4,319 million in
1999 to RMB 2,213 million in 2000 primarily due to reduction in average
connection fees charged to new contract subscribers. As a percentage of
operating revenue, connection fees decreased from 11.2% in 1999 to 3.4% in
2000.

         Other operating revenue increased 95.4% from RMB 3,511 million in 1999
to RMB 6,861 million in 2000. This increase resulted principally from increased
revenue from value added services, incoming roaming revenue and interconnection
revenue.

         OPERATING EXPENSES. Operating expenses increased 52.7% from RMB 24,983
million in 1999 to RMB 38,158 million in 2000. This increase primarily
reflected the full year impact of inclusion of operation expenses of Fujian
Mobile, Henan Mobile and Hainan Mobile in 2000, the inclusion of operation
expenses of the seven regional mobile telecommunications companies we acquired
in November 2000 following the acquisition, our overall expanded network
coverage and service scope, and our larger subscriber base.


                                     -50-
<PAGE>


         Total leased line payments increased 47.8% from RMB 3,723 million in
1999 to RMB 5,501 mil lion in 2000. This increase was primarily due to the
inclusion of leased line payments for intra-provincial transmission lines by
Fujian Mobile, Henan Mobile and Hainan Mobile for the full year of 2000, the
inclusion of leased line payments for inter-provincial transmission lines
pursuant to our agreement with China Mobile Communications Corporation by six
of our operating subsidiaries in 2000 and by the other seven regional mobile
telecommunications companies we acquired in November 2000, and our network
expansion into new coverage areas. This increase was partially offset by a
reduction of leased line tariffs in 2000. However, as a percentage of operating
expenses, total leased line payments decreased from 14.9% in 1999 to 14.4% in
2000, reflecting our increased efficiency in network management and
transmission lines utilization.

         Interconnection expenses increased 29.1% from RMB 6,453 million in
1999 to RMB 8,329 million in 2000. This increase was principally a result of
increased traffic volume reflecting the inclusion of the interconnection
expenses of Fujian Mobile, Henan Mobile and Hainan Mobile for the full year of
2000, and increased inter-network traffic, especially the increased volume of
roaming-out calls by our subscribers. This increase was partially offset by the
reduction in interconnection expenses as a result of inter-provincial leased
line arrangement and inter-provincial interconnection arrangement with China
Mobile Communications Corporation entered into in May 2000. As a result,
interconnection expenses as a percentage of operating expenses decreased from
25.8% in 1999 to 21.8% in 2000.

         Depreciation expense increased 31.7% from RMB 7,411 million in 1999 to
RMB 9,759 million in 2000. This increase was primarily due to the increase in
fixed assets following our acquisition of the three regional mobile
telecommunications companies in November 1999 and an additional seven regional
mobile telecommunications companies in November 2000, and increased capital
expenditures that we made to improve and expand our networks. This increase was
partially offset by the reduction in the carrying costs of our fixed assets due
to the write-downs and write-offs of our analog network equipment in 1999. As a
percentage of operating expenses, depreciation expense decreased from 29.7% in
1999 to 25.6% in 2000.

         Personnel expenses increased 76.9% from RMB 2,256 million in 1999 to
RMB 3,991 million in 2000. This increase was largely a result of the inclusion
of the full year personnel expenses of Fujian Mobile, Henan Mobile and Hainan
Mobile we acquired in November 1999, personnel expenses of the seven regional
mobile telecommunications companies we acquired in November 2000 as well as an
increase in performance-based incentive compensation as a result of our further
improved operating results. As a percentage of operating expenses, personnel
expenses increased from 9.0% in 1999 to 10.5% in 2000.

         Other operating expenses increased from RMB 5,140 million in 1999 to
RMB 10,578 million in 2000. This increase was mainly due to an increase in
selling and promotion expenses from RMB 1,582 million in 1999 to RMB 3,940
million in 2000. This increase reflects primarily the increased sales
commission paid to third party agents for developing new subscribers, and the
increased advertising and marketing activities to promote our existing services
as well as new services such as IP-based long distance call services and
prepaid card services. As a percentage of operating expenses, other operating
expenses increased from 20.6% in 1999 to 27.7% in 2000.

         OPERATING PROFIT. As a result of the foregoing, operating profit
increased 96.7% from RMB 13,640 million in 1999 to RMB 26,826 million in 2000,
and operating margin increased from 35.3% in 1999 to 41.3% in 2000.


                                     -51-
<PAGE>


         WRITE-DOWN AND WRITE-OFF OF ANALOG NETWORK EQUIPMENT. The total amount
of write-down and write-off of our analog network equipment was RMB 8,242
million in 1999 and RMB 1,525 million in 2000, representing the entire net book
value of our analog network equipment as of December 31, 2000. The write-downs
and write-offs reflect our decision to terminate our analog services by the end
of 2001 and migrate our analog subscribers to our GSM services. See "--
Overview of Our Operations -- Analog-to-Digital Migration" and "Item 4.
Information on the Company -- Business Overview -- Migration from Analog to
Digital Network".

         ADJUSTED EBITDA. Adjusted EBITDA increased 73.6% from RMB 21,603
million in 1999 to RMB 37,500 million in 2000. This increase was primarily due
to the inclusion of the results of Fujian Mobile, Henan Mobile and Hainan
Mobile for the full year of 2000 and those of the seven regional mobile
telecommunications companies we acquired in November 2000 following the
acquisition, the increase in operating revenue due to subscriber growth and
service expansion, and our various cost control efforts. Adjusted EBITDA margin
increased from 55.9% in 1999 to 57.7% in 2000, reflecting further improvements
in our operating efficiency. While EBITDA is commonly used in the
telecommunications industry worldwide as an indicator of operating performance,
leverage and liquidity, it is not presented as a measure of performance in
accordance with generally accepted accounting principles and should not be
considered as representing net cash flows from operating activities.

         OTHER NET INCOME. Other net income, which includes primarily gross
profit from sales of SIM cards, handsets and accessories, increased 65.8% from
RMB 552 million in 1999 to RMB 915 million in 2000. This increase reflected the
inclusion of the full year results of Fujian Mobile, Henan Mobile and Hainan
Mobile for the full year of 2000 as well as the increased sales of SIM cards
due to our subscriber growth.

         FINANCE COSTS. Finance costs increased from RMB 343 million in 1999 to
RMB 824 million in 2000. This increase was primarily due to the interest on the
US$ 600 million fixed rate notes issued in November 1999.

         INTEREST INCOME. Interest income increased 31.2% from RMB 767 million
in 1999 to RMB 1,006 million in 2000. This increase was principally a result of
increased cash on hand from our expanded operations.

         NON-OPERATING NET (EXPENSES)/INCOME. Non-operating expenses totaled
RMB 5 million in 2000, compared to a non-operating income of RMB 70 million in
1999, were due to the loss on disposal of certain fixed assets in 2000.

         PROFIT BEFORE TAX AND MINORITY INTERESTS. As a result of the
foregoing, profit before tax and minority interests increased 309.6% from RMB
6,444 million in 1999 to RMB 26,393 million in 2000.

         TAXATION. Our income tax expense increased from RMB 1,647 million in
1999 to RMB 8,366 million in 2000, primarily due to a significant increase in
our profit. Our effective tax rate increased from 25.6% in 1999 to 31.7% in
2000, which was due primarily to the fact that connection fee revenue and
certain surcharge revenues in Fujian Mobile, Henan Mobile and Hainan Mobile
were subject to taxation for the full year in 2000. The connection fee revenue
and certain surcharge revenues in the seven regional mobile telecommunications
companies we acquired in 2000 were not subject to taxation prior to their
completion of the registration as wholly foreign-owned enterprises. However,
the continuous decrease in connection fee revenue reduced the impact on the
effective tax rate.


                                     -52-
<PAGE>


         NET PROFIT. As a result of the foregoing, net profit increased from
RMB 4,797 million in 1999 to RMB 18,027 million in 2000. Net profit margin
increased from 12.4% in 1999 to 27.7% in 2000.

LIQUIDITY AND CAPITAL RESOURCES

         LIQUIDITY

         Our principal source of liquidity is cash generated from our
operations. As a result, our liquidity would be adversely affected to the
extent there is a significant decrease in demand for our services and products.
As of December 31, 2001, we had a working capital surplus (current assets minus
current liabilities) of RMB 11,513 million (US$ 1,391 million) compared to RMB
7,491 million as of December 31, 2000. As of December 31, 2000 and December 31,
2001, accounts receivable totaled RMB 7,252 million and RMB 5,728 million (US$
692 million), respectively. The substantial decrease in accounts receivable was
principally due to the fact that approximately 93.5% of the new subscribers we
acquired in 2001 were customers for prepaid services. Ongoing improvements in
our internal credit control and billing systems also contributed to the
decrease in our accounts receivable. Short-term bank and other loans and the
current portion of obligations under capital leases totaled RMB 12,095 million
and RMB 5,439 million (US$ 658 million) as at December 31, 2000 and December
31, 2001, respectively.

         The following table summarizes certain cash flow information for the
periods indicated.


<TABLE>
<CAPTION>

                                                                                   YEAR ENDED DECEMBER 31,
                                                                      -----------------------------------------------
                                                                        1999               2000                 2001
                                                                      -------             -------               -----
                                                                                  (in millions of Renminbi)

<S>                                                                   <C>                 <C>                 <C>
Net cash inflows from operating activities ...............             21,662              41,401              63,890
Net cash outflow from returns on investments and
   servicing of finance and taxation .....................             (1,989)             (5,821)            (13,992)
                                                                      -------             -------               -----
Net cash outflow from investing activities ...............            (36,117)            (92,880)            (46,198)
Net cash (outflow)/inflow before financing activities ....            (16,444)            (57,300)              3,700
                                                                      -------             -------               -----
Net cash inflow/(outflow) from financing activities ......             18,337              65,653              (9,581)
                                                                      -------             -------               -----
Increase/(decrease) in cash and cash equivalents .........              1,893               8,353              (5,881)
</TABLE>


         Net cash inflows from operating activities increased from 1999 to
2001, generally reflecting the growth in operating revenue due to the increase
in our subscriber base through internal growth and acquisitions.

         Net cash outflow from returns on investments and servicing of finance
and taxation increased from 1999 to 2000. This increase was principally a
result of a significant increase in Chinese income tax paid and the full year
effect of interest payments on the US$ 600 million fixed rate notes issued in
November 1999. Net cash outflow from returns on investments and servicing of
finance and taxation increased from 2000 to 2001. This increase was primarily
due to an increase in Chinese income tax paid after the acquisition of the
seven regional mobile telecommunications companies in November 2000.


                                     -53-
<PAGE>


         Net cash outflow from investing activities increased significantly
from 1999 to 2000. This increase was principally a result of the payment of the
consideration for our acquisition of seven companies in November 2000. Net cash
outflow from investing activities decreased in 2001. This decrease was
primarily due to the fact that we did not conduct any significant acquisitions
during 2001.

         Net cash inflow from financing activities reflects net borrowings or
repayments of debt, but excludes credit extended to us by equipment suppliers
for additions to construction in progress. Net cash inflow from financing
activities increased significantly from 1999 to 2000. This increase was
primarily due to the net proceeds received from the concurrent US$ 690 million
convertible notes offering and US$ 6.9 billion share offering in November 2000,
and the RMB 12.5 billion syndicated bank loans we obtained in October 2000.
These net proceeds were primarily used to finance our acquisitions of seven
regional mobile telecommunications companies in Mainland China in 2000. Net
cash from financing activities decreased significantly from 2000 to 2001. This
decrease was principally due to the fact that we significantly reduced our
capital raising and financing activities during 2001, except for the RMB 5
billion floating rate bonds issued by Guangdong Mobile in June 2001. The
proceeds from these bonds were applied solely to repay part of the RMB 12.5
billion syndicated loans. See "-- Contractual Obligations and Commitments --
Indebtedness" below for more information regarding the offerings and the
syndicated bank loans.

         CAPITAL EXPENDITURES

         Capital expenditures during 1999, 2000 and 2001 were RMB 12,226
million, RMB 20,729 million and RMB 42,417 million (US$ 5,125 million),
respectively. We incurred capital expenditures principally for the construction
of our GSM networks, support systems, transmission facilities, infrastructure
buildings and the development of new technologies and new businesses.

         We estimate that we will spend approximately RMB 37,350 million in
2002, RMB 34,030 million in 2003 and RMB 31,540 million in 2004. We expect to
incur these expenditures primarily for the purpose of:

         -        further expanding our GSM network capacity and coverage;

         -        increasing our efforts in improving our business and network
                  support system;

         -        building our own transmission line where economically
                  advantageous;

         -        constructing infrastructure buildings where economically
                  advantageous; and

         -        developing and providing new technologies and new businesses.

         Following our initial public offering, we have funded our capital
requirements primarily with cash generated from operations, proceeds from
equity and debt offerings and, to the extent necessary, short-term and
long-term borrowings. We believe our available cash and cash generated from
future operations will be sufficient to fund most of the capital expenditures
and working capital necessary for the planned network expansion and continued
growth of our mobile telecommunications operations through the end of 2004.

         In addition, our long-standing strategy is to acquire mobile
telecommunications assets in Mainland China in order to expand our businesses.
We have agreed to acquire from our immediate parent company, China Mobile Hong
Kong (BVI) Limited, eight regional mobile telecommunications services providers
located


                                     -54-
<PAGE>


in the provinces of Anhui, Jiangxi, Sichuan, Hubei, Hunan, Shaanxi and Shanxi
and the directly-administered municipality of Chongqing pursuant to a
conditional sale and purchase agreement dated May 16, 2002. See "Item 4.
Information on the Company -- History and Development of the Company --
Expansion of Business Coverage Through Acquisitions".

         We may seek to obtain additional sources of financing to fund our
network expansion and possible future acquisitions, to the extent necessary.

         CONTRACTUAL OBLIGATIONS AND COMMITMENTS

         INDEBTEDNESS

         As of December 31, 2000 and 2001, our aggregate long-term bank and
other loans and obligation under capital leases (excluding current portions)
totaled RMB 13,708 million and RMB 6,739 million (US$ 814 million),
respectively, and our short-term bank and other loans (including the current
portion of long-term loans) and current portion of obligation under capital
leases totaled RMB 12,095 million and RMB 5,439 million (US$ 658 million),
respectively. Our short-term loans and long-term loans decreased in 2001 due to
the repayment of a portion of the RMB 12.5 billion syndicated loans we entered
into in October 2000. Capital lease obligations totaled RMB 1,720 million (US$
208 million) at December 31, 2001. Total scheduled long-term loans and
obligations under capital leases payable in 2002, 2003 and 2004 will be
approximately RMB 3,737 million, RMB 4,048 million and RMB 1,680 million,
respectively. We currently plan to repay loan amounts due using cash in hand
and cash from our operating activities.

         On November 2, 1999, we issued unsecured fixed rate notes with a
principal amount of US$ 600,000,000 due on November 2, 2004. The notes bear
interest at the rate of 7.875% per annum and such interest is payable
semi-annually on May 2 and November 2 of each year, commencing May 2, 2000.

         On November 3, 2000, we issued unsecured convertible notes with a
principal amount of US$ 690,000,000 due on November 3, 2005. The notes bear
interest at the rate of 2.25% per annum and such interest is payable
semi-annually on May 3 and November 3 of each year, commencing May 3, 2001.

         Pursuant to agreements entered into on October 7, 2000 between our
wholly-owned subsidiary, China Mobile (Shenzhen) Limited, and a syndicate of
international and domestic Chinese commercial banks, we borrowed an aggregate
of RMB 12.5 billion in bank loans, including (1) an RMB 5.0 billion loan for a
six-month term with a fixed interest rate of 5.022% per annum and (2) an RMB
7.5 billion loan for a three-year term with an interest rate of 5.346% per
annum for the first year, to be adjusted annually on each anniversary of the
first drawdown date of the loan to equal the rate that is 10% below the three-
year base lending rate for financial institutions prevailing on such
anniversary date as announced by the People's Bank of China. The loans are
guaranteed jointly and severally by six of our operating subsidiaries. We
repaid in full the RMB 5.0 billion loan and RMB 5.0 billion of the RMB 7.5
billion loan with proceeds from the Renminbi bond offering described above
under " -- Overview of Our Operations -- Renminbi Bond Offering". As of
December 31, 2001, RMB 2.5 billion of the loans had been drawn down and
remained outstanding. During 2001, the average interest rate of these loans was
approximately 5%.

         On June 18, 2001, Guangdong Mobile, one of our wholly-owned
subsidiaries, issued bonds with a principal amount RMB 5 billion at a floating
rate due June 18, 2011. Guangdong Mobile's payment obligations under the bonds
are guaranteed in full by us, and our guarantee is further guaranteed by China
Mobile Communications Corporation.


                                     -55-
<PAGE>


         We currently enjoy a rating of Baa2 from Moody's and BBB from Standard
& Poor's, which is equivalent to China's sovereign rating. Any downgrade in our
credit rating will not trigger any events on our outstanding bonds or loans or
our existing credit facilities. In addition, our management frequently
communicates with the rating agencies and currently believes that a downgrade
below Baa2 or BBB is not likely. However, under the terms of our US$ 690 million
floating rate notes and our US$ 600 million fixed rate notes, we are obligated
to ensure that the aggregate debt of our subsidiaries does not exceed 120% of
our consolidated adjusted earnings before interest, tax, depreciation and
amortization, or EBITDA, for the most recently completed twelve-month period. In
addition, six of our operating subsidiaries acting as guarantors under the
syndicated loan agreement among China Mobile (Shenzhen) Limited and some Chinese
commercial banks are obligated to ensure that their aggregate debt does not
exceed 120% of their respective shareholder equities. Currently we do not
foresee any event that would cause us to violate any of these covenants.

         For a discussion of our interest rate risk, please see "Item 11.
Quantitative and Qualitative Disclosures about Market Risk".

         OTHER CONTRACTUAL OBLIGATIONS AND COMMITMENTS

         As of December 31, 2001, we had various contractual obligations and
commitments which are more fully disclosed in the notes to our consolidated
financial statements. The principal components of these obligations and
commitments include:

         -        our long-term debt (in addition to the bonds and notes
                  described under "-- Indebtedness" above), which includes
                  finance leases;

         -        operating leases; and

         -        capital commitments.

         In the ordinary course of our business, we routinely enter into
commercial commitments for various aspects of our operations, such as repair
and maintenance. However, we believe that those commitments will not have a
material effect on our financial condition, results of operations or cash
flows.

         For further disclosure regarding leases and other commitments, please
see note 20 to our consolidated financial statements included elsewhere in this
annual report.

         The following table sets forth certain information regarding our
contractual obligations to make future payments as of December 31, 2001:


<TABLE>
<CAPTION>
                                                                                 PAYMENTS DUE BY PERIOD
                                                              --------------------------------------------------------------
                                                                                            OVER 1     OVER 3
                                                                                           YEAR BUT   YEARS BUT
                                                                            LESS THAN     LESS THAN   LESS THAN       AFTER
CONTRACTUAL OBLIGATIONS                                        TOTAL         1 YEAR        3 YEARS     5 YEARS       5 YEARS
                                                              ------        ---------     ---------   ---------      -------

<S>                                                           <C>           <C>           <C>         <C>            <C>
SHORT-TERM DEBT                                                1,702          1,702           --            --           --
BILLS PAYABLE                                                  1,458          1,458           --            --           --
LONG-TERM DEBT                                                24,420          2,829        9,872         6,649        5,070
CAPITAL LEASE OBLIGATIONS                                      1,720            908          812            --           --
TRADE PAYABLE                                                 11,317         11,317           --            --           --
TOTAL CONTRACTUAL CASH OBLIGATIONS                            40,617         18,214       10,684         6,649        5,070
</TABLE>


                                      -56-
<PAGE>
         The following table sets forth certain information regarding our other
commercial commitments as of December 31, 2001:


<TABLE>
<CAPTION>
                                                           AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
                                                ----------------------------------------------------------------
                                                                              OVER 1       OVER 3
                                                TOTAL                        YEAR BUT     YEARS BUT
                                                AMOUNT        LESS THAN     LESS THAN     LESS THAN       OVER
OTHER COMMERCIAL COMMITMENTS                  COMMITTED        1 YEAR        3 YEARS       5 YEARS       5 YEARS
                                              ---------       ---------     ---------     ---------      -------

<S>                                           <C>             <C>           <C>           <C>            <C>
OPERATING LEASES COMMITMENTS                    14,706          5,057         3,955         3,167          2,527
CAPITAL COMMITMENTS                             10,366         10,366            --            --             --
TOTAL COMMERCIAL COMMITMENTS                    25,072         15,423         3,955         3,167          2,527
</TABLE>

         As of December 31, 2001, we did not have any off-balance sheet
arrangements or any written options on non-financial assets.

         FOREIGN EXCHANGE

         We maintain our accounts in Renminbi and substantially all of our
revenue and expenses are denominated in Renminbi. Our capital expenditures
totaled the equivalent of RMB 12,226 million, RMB 20,729 million and RMB 42,417
million (US$ 5,125 million) for 1999, 2000 and 2001, respectively. For 1999 and
2000, a substantial portion of our capital expenditures was denominated in U.S.
dollars and incurred in connection with our purchase of imported equipment. In
addition, we also incur interest expense on foreign currency (mainly U.S.
dollar) denominated borrowings. U.S. dollar denominated debt totaled the
equivalent of RMB 13,254 million and RMB 11,855 million (US$ 1,432 million) at
December 31, 2000 and 2001, respectively, constituting 35.4% and 40.5% of our
total debt as of those dates, respectively.

         All of our current operating subsidiaries are incorporated in Mainland
China. Under the current foreign exchange system in Mainland China, our
subsidiaries may not be able to hedge effectively against currency risk,
including any possible future Renminbi devaluation. See "Item 3. Key
Information-- Risk Factors-- Fluctuations in exchange rates could adversely
affect our financial results" and "Item 10. Additional Information-- Exchange
Controls".

         Each of our operating subsidiaries is able to purchase foreign
exchange for settlement of current account transactions, as defined in
applicable regulations, in order to satisfy its foreign exchange requirements.

U.S. GAAP RECONCILIATION


                                     -57-
<PAGE>
         Our consolidated financial statements are prepared in accordance with
Hong Kong GAAP, which differ in certain significant respects from U.S. GAAP.
The following table sets forth a comparison of our net profit and shareholders'
equity in accordance with Hong Kong GAAP and U.S. GAAP.


<TABLE>
<CAPTION>
                                                                     AS OF OR FOR THE YEAR ENDED DECEMBER 31,
                                                        ------------------------------------------------------------------
                                                           1999               2000              2001                2001
                                                        ----------         ----------        ----------          ---------
                                                                                  (in millions)

<S>                                                     <C>                <C>              <C>                  <C>
Net profit in accordance with:
   Hong Kong GAAP...........................            RMB  4,797         RMB 18,027       RMB  28,015          US$ 3,385
   U.S. GAAP................................            RMB 10,993         RMB 24,280       RMB  29,075          US$ 3,513
Shareholders' equity in accordance with:
   Hong Kong GAAP...........................            RMB 57,092         RMB 83,760       RMB 111,779          US$13,505
   U.S. GAAP................................            RMB 77,073         RMB 79,660       RMB 109,016          US$13,172
</TABLE>

         Under Hong Kong GAAP, we adopted the acquisition method to account for
our acquisitions of the ten regional mobile telecommunications companies in
1999 and 2000. Under the acquisition method, the acquired results of these
companies were included in the results of operations from the respective dates
of acquisition. Goodwill arising on the acquisition date, being the excess of
the cost over the fair value of our share of the separable net assets acquired,
was eliminated against reserves immediately on acquisition.

         For U.S. GAAP, because we and the acquired companies were deemed to be
under common control prior to the acquisitions, the acquisitions were
considered a "combination of entities under common control". Under U.S. GAAP,
combinations of entities under common control are accounted for under the "as
if pooling-of-interests" method, whereby assets and liabilities are accounted
for at historical cost and the financial statements of previously separate
companies for periods prior to the combination generally are restated on a
combined basis. The cash consideration we paid in each acquisition was treated
as an equity transaction in the respective years of each acquisition for U.S.
GAAP purposes.

         In addition, there are other differences between Hong Kong GAAP and
U.S. GAAP for the periods presented, which relate primarily to:

         -        the computation of capitalized interest;

         -        the revaluation of fixed assets of the acquired companies
                  under Hong Kong GAAP;

         -        the recognition of deferred income taxes;

         -        the non-recognition under Hong Kong GAAP of certain of our
                  employee housing scheme costs;

         -        the treatment of share options we grant to directors and
                  employees;

         -        the recognition as revenue of connection fees and telephone
                  number selection fees; and

         -        the net savings arising from interconnection, roaming and
                  leased line agreements.


                                     -58-
<PAGE>


         Historically, connection fee revenue was recognized as received for
both Hong Kong GAAP and U.S. GAAP for all periods presented to June 30, 1999.
Beginning July 1, 1999, we adopted a new accounting policy under U.S. GAAP to
defer connection fees received in excess of direct costs and recognize such
deferred amount over the estimated customer usage period for the related
service. Effective January 1, 2000, under U.S. GAAP, we have adopted the
provisions of Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements". Under this Staff Accounting Bulletin, connection fees
and telephone number selection fees received and incremental direct costs up to
but not exceeding such fees are deferred and amortized over the estimated
customer usage period for the related service. These changes in accounting
policy for U.S. GAAP have significantly impacted the timing of connection fee
revenue recognized. Connection fees were, however, eliminated as of July 1,
2001.

         Disclosure relating to these differences can be found in note 29 to
our consolidated financial statements. In addition, our condensed consolidated
balance sheets as of December 31, 1999 and 2000 and our condensed consolidated
statements of income, total shareholders' equity and cash flows for the years
ended December 31, 1998, 1999 and 2000 prepared and presented under U.S. GAAP
have been included in notes 29 and 30 to our consolidated financial statements
to reflect the impact of the significant differences between Hong Kong GAAP and
U.S. GAAP.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

DIRECTORS AND SENIOR MANAGEMENT

         The following table sets forth certain information concerning our
directors and senior management as of December 31, 2001.


<TABLE>
<CAPTION>
NAME                            AGE              POSITION
----                            ---              --------
<S>                             <C>              <C>
Mr. WANG Xiaochu                 44              Chairman; Chief Executive Officer
Mr. LI Zhenqun                   56              Vice Chairman; Chief Operating Officer
Mr. DING Donghua                 65              Director; Chief Financial Officer
Mr. LI Gang                      45              Director
Mr. XU Long                      45              Director
Mr. HE Ning                      40              Director
Mr. LIU Ping                     56              Director
Mr. YUAN Jianguo                 51              Director
Mr. WEI Yiping                   50              Director
Professor Arthur K.C. LI         56              Independent Non-Executive Director
Sir Christopher GENT             53              Independent Non-Executive Director
Dr. LO Ka Shui                   55              Independent Non-Executive Director
</TABLE>


         Mr. Wang Xiaochu has served as our Chairman and Chief Executive
Officer since 1999. Mr. Wang is in charge of our overall management. He is also
Vice President of China Mobile Communications Corporation and the Chairman of
China Mobile (Hong Kong) Group Limited and China Mobile Hong Kong


                                     -59-
<PAGE>


(BVI) Limited. Prior to joining us, Mr. Wang served as the Director General of
the Tianjin Posts and Telecommunications Administration. He also served as
Director and Deputy Director of the Hangzhou Telecommunications Bureau in
Zhejiang province. He was responsible for the development of China Telecom's
telephone network management systems and various other information technology
projects, and received the Class Three National Science and Technology
Advancement Award and the former Posts and Telecommunications Bureau's Class
One Science and Technology Advancement Award. Mr. Wang graduated from the
Beijing University of Posts and Telecommunications in 1980 and has over 21
years of management experience in the telecommunications industry.

         Mr. Li Zhenqun has served as our Vice Chairman and Chief Operating
Officer since 2000. Mr. Li is in charge of our business operations and investor
relations. He is also the Vice Chairman of China Mobile (Hong Kong) Group
Limited and China Mobile Hong Kong (BVI) Limited. He joined us in August, 2000.
Since 1998 and prior to joining us, Mr. Li was the Director of the Xiamen
Telecommunications Bureau in Fujian province. He also served as the Director of
the Xiamen Posts and Telecommunications Bureau in Fujian Province from 1984 to
1998. He graduated from Peking University in 1970. Mr. Li has 30 years of
management experience in the telecommunications industry.

         Mr. Ding Donghua has served as our Director and Chief Financial
Officer since 1997. Mr. Ding is in charge of our financial management. Mr. Ding
is also a director of China Mobile Hong Kong (BVI) Limited. Prior to joining
us, Mr. Ding was previously the Chief Economist, Chief Accountant, Deputy Chief
Economist and Department Director of the Guangdong Posts and Telecommunications
Administration. He graduated from the Beijing University of Posts and
Telecommunications in 1961 and has 40 years of management experience in the
telecommunications industry, as well as in economics and finance.

         Mr. Li Gang has served as our Director since 1999. Mr. Li is
responsible for the mobile telecommunications operations in Guangdong Province.
He is also the Chairman and President of Guangdong Mobile. He was formerly the
Vice Chairman and President of Guangdong Mobile. He previously served as
Director of the Network Maintenance Division and as Deputy Director of the
Telecommunications Division of the Guangdong Posts and Telecommunications
Administration. He graduated from Peking University of Posts and
Telecommunications in 1985, and has 28 years of experience in the
telecommunications industry.

         Mr. Xu Long has served as our Director since 1999. Mr. Xu is
responsible for the mobile telecommunications operations in Zhejiang Province.
He is also the Chairman and President of Zhejiang Mobile. He previously served
as the Deputy Director General and the Director of the General Office of
Zhejiang Posts and Telecommunications Administration, the President of Zhejiang
Nantian Posts and Telecommunications Group Company and Deputy Director of
Shaoxing Posts and Telecommunications Bureau in Zhejiang Province. He graduated
from the Zhejiang Radio and Television University in 1985, and has 24 years of
experience in the telecommunications industry.

         Mr. He Ning has served as our Director since 1998. Mr. He is
responsible for the mobile telecommunications operations in Jiangsu Province.
He is also the Chairman and President of Jiangsu Mobile. Mr. He previously
served as the Deputy Director General of the Jiangsu Posts and
Telecommunications Administration, the Director and Deputy Director of the
Jiangsu Mobile Communications Bureau, and Deputy Director of the Zhenjiang
Posts and Telecommunications Bureau in Jiangsu Province. He graduated from the
Nanjing Institute of Posts and Telecommunications in 1983, and has 18 years of
experience in the telecommunications industry.


                                     -60-
<PAGE>

         Mr. Liu Ping has served as our Director since 1999. Mr. Liu is
responsible for the mobile telecommunications operations in Fujian Province. He
is also the Chairman and President of Fujian Mobile. Mr. Liu previously served
as the Deputy Director General of the Fujian Posts and Telecommunications
Administration and Director of the Fuzhou Posts and Telecommunications Bureau.
He graduated from the Nanjing Institute of Posts and Telecommunications in
1985, and has 24 years of experience in the telecommunications industry.

         Mr. Yuan Jianguo has served as our Director since 1999. Mr. Yuan is
responsible for the mobile telecommunications operations in Henan Province. He
is also the Chairman and President of Henan Mobile. Mr. Yuan previously served
as the Deputy Director General of the Henan Posts and Telecommunications
Administration, and as Director and Deputy Director of the Henan Mobile
Communications Bureau. He holds a Masters Degree in Economics Law from the
Chinese Academy of Social Sciences, and has 31 years of experience in the
telecommunications industry.

         Mr. Wei Yiping has served as our Director since 1999. Mr. Wei is
responsible for the mobile telecommunications operations in Hainan Province. He
is also the Chairman and President of Hainan Mobile. Mr. Wei previously served
as the Deputy Director General of the Hainan Posts and Telecommunications
Administration, and as Director of the Sanya Posts and Telecommunications
Bureau. He graduated from Xi'an Foreign Languages Institute and received a
Masters Degree in Political Economics from the Beijing Normal University, and
has 31 years of experience in the telecommunications industry.

         Professor Arthur K.C. Li has served as our Director since 1997.
Professor Li is the Vice Chancellor of the Chinese University of Hong Kong, a
Director of the Bank of East Asia Limited, a Non-Executive Director and
Chairman of the Board of Regal Hotel Group Plc., a Non-Executive Director of
Henderson Cyber Limited and a Non-Executive Director of The Wharf (Holdings)
Limited. He holds a doctorate degree in medicine from Cambridge University and
an honorary doctorate degree in science from the University of Hull, an
honorary doctorate degree in letters from Hong Kong University of Science and
Technology and an honorary doctorate degree from Soka University, Japan. He
previously served as Board Member of the Hong Kong Hospital Authority and
President of the College of Surgeons of Hong Kong. Professor Li was an Advisor
on Hong Kong Affairs to the People's Republic of China, a Member of the Basic
Law Consultative Committee, a Member of the Preparatory Committee of the Hong
Kong Special Administrative Region of the National People's Congress, and a
Member of the Selection Committee of the First Government of the Hong Kong
Special Administrative Region. Professor Li is a National Committee Member of
the Ninth Annual Chinese People's Political Consultative Conference.

         Sir Christopher Gent has served as our Director since February 2001.
Sir Christopher is the Chief Executive of Vodafone Group Plc., the world's
largest mobile telecommunications company in terms of subscriber numbers as of
December 31, 2001. Sir Christopher joined the Vodafone Group as Managing
Director of Vodafone Limited in 1985 when Vodafone launched its first mobile
phone service in the UK, and held that position until December 1996, when he
became Group Chief Executive. He is also the Chairman of the supervisory board
of Mannesmann AG. Sir Christopher has many years of management experience in
the telecommunications industry worldwide.

         Dr. Lo Ka Shui has served as our Director since April 2001. Dr. Lo is
the Deputy Chairman and Managing Director of Great Eagle Holdings Limited, as
well as an independent Non-Executive Director of The Hong Kong and Shanghai
Banking Corporation Limited, Shanghai Industrial Holdings Limited and Phoenix
Satellite Television Holdings Limited. Dr. Lo is also a director of Hong Kong
Exchanges and Clearing


                                     -61-
<PAGE>


Limited, Chairman of the Listing Committee of the Growth Enterprise Market, a
Vice President of the Real Estate Developers Association of Hong Kong, a
Trustee of the Hong Kong Centre for Economic Research, a member of Long-term
Housing Strategy Advisory Committee, a member of the Council of Advisors on
Innovation and Technology and Chairman of the Hospital Authority. Dr. Lo has
many years of commercial management experience.

COMPENSATION

         The aggregate amount of compensation that we paid to our directors and
executive officers during 2001 for services performed as directors, officers or
employees was approximately RMB 14 million (US$ 1.69 million).

         We have adopted a share option scheme pursuant to which our directors
may, at their discretion, invite our employees, including executive directors,
or employees of our subsidiaries, to take up options to subscribe for ordinary
shares up to a maximum aggregate number of ordinary shares equal to 10% of our
total issued share capital. The consideration payable by a participant for the
grant of an option under the share option scheme will be HK$1.00. The price for
a share payable by a participant upon the exercise of an option will be
determined by our directors in their discretion, except that such price may not
be set below a minimum price which is the higher of (i) the nominal value of a
share and (ii) 80% of the average of the closing prices of ordinary shares on
the Hong Kong Stock Exchange on the five trading days immediately preceding the
date of grant of the option. With effect from September 1, 2001, the Hong Kong
Stock Exchange requires the exercise price of options to be at least the higher
of the closing price of the shares on the date of grant and the average closing
prices of the shares for the five trading days immediately preceding the date of
grant. As of May 31, 2002 we have not granted any options on or after September
1, 2001.

         The period during which an option may be exercised will be determined
by the directors in their discretion, except that no option may be exercised
later than 10 years after the adoption date of the scheme. During 2001, options
for a total of 76,773,000 ordinary shares were granted under the share option
scheme to certain of our directors and employees. See "-- Share Ownership"
below for details on options granted to our directors.

BOARD PRACTICES

         To enhance our corporate governance, we established two board
committees, the audit committee and the remuneration committee, in 1998 and
2000, respectively. These committees are comprised solely of independent
non-executive directors. In 2001, having considered the relevant rules on
corporate governance and the Code of Best Practice of the Listing Rules of the
London Stock Exchange, we established the nomination committee. The nomination
committee is comprised primarily of independent non-executive directors.

         AUDIT COMMITTEE

         The members of our audit committee are Professor Arthur K.C. Li, as
chairman of the committee, and Dr. Lo Ka Shui. The audit committee's major
responsibilities include:

         -        to review the financial reports, the related auditors' review
                  report and management's responses to the review reports;


                                     -62-
<PAGE>


         -        to discuss audit procedures with the auditors as well as any
                  issues arising out of such procedures;

         -        to review the auditors' appointment, the auditors' fees and
                  any matters relating to the termination or resignation of the
                  auditor; and

         -        to examine the effectiveness of our internal controls, to
                  review our internal audit plan and to submit relevant reports
                  and recommendations to our Board on a regular basis.

         The audit committee usually meets four times each year.

         REMUNERATION COMMITTEE

         The members of our remuneration committee are Professor Arthur K.C.
Li, as chairman of the committee, and Dr. Lo Ka Shui. The remuneration
committee's major responsibilities include:

         -        to advise the Board in relation to the remuneration structure
                  and payments of our executive directors and executives; and

         -        to represent the Board in confirming the individual
                  remuneration packages and employment terms of executive
                  directors and approving their related employment contracts.

         Meetings of the remuneration committee are held when necessary.

         NOMINATION COMMITTEE

         The members of our nomination committee are Mr. Wang Xiaochu, as
chairman of the committee, Professor Arthur K.C. Li and Dr. Lo Ka Shui. The
primary responsibilities of the nomination committee include reviewing,
advising and making recommendations to the board on the matters in relation to
the appointment and re-appointment of board members, and ensuring the proper
and transparent procedures for the appointment and re-appointment of directors.
Meetings of the nomination committee are held when necessary.

EMPLOYEES

         See "Item 4. Information on the Company-- Business Overview--
Employees".

SHARE OWNERSHIP

         As of December 31, 2001, the following directors and those members of
our senior management named in the section entitled "Directors and Senior
Management" had interests in our share capital:


                                     -63-
<PAGE>


<TABLE>
<CAPTION>
                                                            Number of        Percentage
Director                                                      ADSs            of class
--------                                                    ---------        ---------
<S>                                                         <C>              <C>
Wang Xiaochu..........................................         500               *
Li Zhenqun............................................         100               *
Ding Donghua..........................................         500               *
</TABLE>

---------
*        Less than 1%.

         Under our Memorandum and Articles of Association, our directors and
senior management do not have different voting rights when compared to other
holders of shares in the same class.

         As of December 31, 2001, options exercisable for an aggregate of
16,389,000 shares had been granted to the following directors and those members
of our senior management named in the section "Directors and Senior Management"
under our share option scheme and were outstanding:

         The following options are exercisable at a price of HK$11.10 per share
through March 8, 2006.


<TABLE>
<CAPTION>
DIRECTOR                                 NUMBER OF SHARES COVERED BY OPTIONS
<S>                                      <C>
Ding Donghua                                          2,100,000
</TABLE>

         The following options are exercisable at a price of HK$33.91 per share
through October 7, 2007.


<TABLE>
<CAPTION>
DIRECTOR                                 NUMBER OF SHARES COVERED BY OPTIONS
<S>                                      <C>
Wang Xiaochu                                          3,900,000
Ding Donghua                                          1,100,000
Li Gang                                               1,000,000
He Ning                                               1,000,000
</TABLE>

         The following options are exercisable at a price of HK$45.04 per share
through October 7, 2007.


<TABLE>
<CAPTION>
DIRECTOR                                 NUMBER OF SHARES COVERED BY OPTIONS
<S>                                      <C>
Wang Xiaochu                                          200,000
Ding Donghua                                          200,000
Li Gang                                               180,000
Xu Long                                             1,170,000
He Ning                                               166,000
Liu Ping                                            1,162,000
Yuan Jianguo                                        1,160,000
Wei Yiping                                          1,156,000
</TABLE>


                                     -64-
<PAGE>


         The following options are exercisable at a price of HK$32.10 per share
through October 7, 2007.


<TABLE>
<CAPTION>
DIRECTOR                                 NUMBER OF SHARES COVERED BY OPTIONS
<S>                                      <C>
Wang Xiaochu                                           120,000
Li Zhenqun                                           1,120,000
Ding Donghua                                           120,000
Li Gang                                                100,000
Xu Long                                                 95,000
He Ning                                                 90,000
Liu Ping                                                80,000
Yuan Jianguo                                            90,000
Wei Yiping                                              80,000
</TABLE>

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

MAJOR SHAREHOLDERS

         As of May 31, 2002, approximately 75.6% of our outstanding shares were
held by China Mobile Hong Kong (BVI) Limited, a wholly-owned subsidiary of China
Mobile (Hong Kong) Group Limited. China Mobile Communications Corporation, a
state-owned company, holds all of the voting shares and economic interest in
China Mobile (Hong Kong) Group Limited. No other persons own 5% or more of our
ordinary shares. Between our initial public offering and April 30, 2002, our
majority shareholders held, directly or indirectly, between approximately 75%
and 76.5% of equity interest in us, except for brief periods following our
equity offerings in 1999 and 2000 but before the issuance of consideration
shares to our direct shareholder, China Mobile Hong Kong (BVI) Limited, for the
related acquisitions, during which periods the shareholding was temporarily
lower. See "Item 4. Information on the Company -- Industry Restructuring and
Changes in Our Shareholding Structure" for changes during the past three years
with respect to our majority shareholders. Under our Memorandum and Articles of
Association, our major shareholders do not have different voting rights when
compared to other holders of shares in the same class.

         We are not aware of any arrangement which may at a subsequent date
result in a change of control over us.

RELATED PARTY TRANSACTIONS

         As of May 31, 2002, China Mobile Communications Corporation
indirectly owns an aggregate of approximately 75.6% of our issued and
outstanding share capital.

         We and each of our subsidiaries have entered into various related
party transactions. The principal terms of the agreements for these related
party transactions are described below.


                                     -65-
<PAGE>


         Certain charges for the services under these agreements are based on
tariffs set by the Chinese regulatory authorities. Those transactions where the
charges are not set by Chinese regulatory authorities are based on commercial
negotiation between the parties, in each case on an arm's length basis. In this
regard, we have the benefit of the undertaking from China Mobile Communications
Corporation that to the extent within its control, we will be treated equally
with any other mobile telecommunications entities in respect of all approvals,
transactions and arrangements between us on the one hand and China Mobile
Communications Corporation and other mobile telecommunications operators
controlled by China Mobile Communications Corporation on the other hand, as
described below under "Undertaking from China Mobile Communications
Corporation".

         ROAMING ARRANGEMENTS

         We offer domestic and international roaming services to our
subscribers. In September 1997, in connection with our initial public offering,
we entered into domestic roaming arrangements with the mobile communications
networks previously controlled by the former Ministry of Posts and
Telecommunications. Those arrangements were replaced by our interconnection and
roaming agreement with China Mobile Communications Corporation entered in May
2000, which sets forth the current terms of our domestic and international
roaming arrangements. Under this agreement, with regard to inter-provincial
roaming, 80% of the base roaming calling charges payable by a roaming
subscriber is credited to the visited network and the remaining 20% is retained
by the roaming subscriber's home network. This agreement is valid for two years
from April 1, 1999, and will be automatically renewed on an annual basis unless
either party notifies the other of its intention to terminate at least three
months prior to the expiration of the term.

         With regard to international roaming, roaming calling charges incurred
by an international mobile phone subscriber making or receiving a call while
roaming in our service regions in Mainland China are collected for us and
credited to us by China Mobile Communications Corporation, and we will make the
necessary settlement with the relevant telecommunications operators in Mainland
China. China Mobile Communications Corporation also collects a 15% handling
charge on the roaming calling charges from the international mobile
telecommunications operators and shares such handling charge equally with us
with respect to roaming in calls to our service regions. When our subscribers
roam internationally, we will collect the roaming calling charges together with
a 15% handling charge from our subscribers and will pay the roaming calling
charges together with half of the handling charge collected to China Mobile
Communications Corporation, which will make the necessary settlement with the
international mobile telecommunications operators concerned.

         In addition, China Mobile Communications Corporation provides
inter-provincial and international roaming clearing and settlement services. We
pay to China Mobile Communications Corporation a roaming call record processing
fee of RMB 0.02 for each inter-provincial roaming call record processed and RMB
0.30 for each international roaming call record processed.

         LICENSING OF TRADEMARK

         China Mobile Communications Corporation is the owner of the "CHINA
MOBILE" name and logo, a registered trademark in Mainland China. In addition,
it has filed applications in Hong Kong to register the "CHINA MOBILE" name and
logo as a trademark for certain goods and services. In April 2002, we entered
into a new licensing agreement with China Mobile Communications Corporation
for, among other things, the use of the "CHINA MOBILE" name and logo by us and
our operating subsidiaries. The new licensing


                                     -66-
<PAGE>


agreement replaces the previous licensing agreements entered into with China
Mobile Communications Corporation in October 1999 and the supplemental licensing
agreement entered into in September 2000. Under this agreement, no license fee
is payable by us for the first five years from the effective date of the
trademark registration in China and any fees payable after that will be no less
favorable than fees paid by other affiliates of China Mobile Communications
Corporation. China Mobile Communications Corporation may terminate the license
agreement if it no longer has any interests in us.

         SPECTRUM FEES

         The Ministry of Information Industry and the Ministry of Finance
jointly determine the standardized spectrum fees payable to the Ministry of
Information Industry by all mobile communications operators in Mainland China,
including us. Based on this standardized fee scale, China Mobile Communications
Corporation determines the allocation of spectrum usage fees to be paid by each
mobile communications operator under its control and the aggregate sum payable
to the Ministry of Information Industry. In October 1999, we entered into an
agreement with China Mobile Communications Corporation, under which we have
been granted the exclusive right to use the frequency spectrum and telephone
numbers allocated to us in our service regions. For the usage of the 800/900
MHz and the 1800 MHz frequency bands, the charges will be shared between our
operating subsidiaries and China Mobile Communications Corporation's operating
subsidiaries. Sixty percent of the charges will be shared on the basis of the
number of base stations at the end of the previous year and 40% of the charges
will be shared on the basis of the bandwidth of the spectrum used. The
agreement is valid for one year and will be automatically renewed on an annual
basis unless either party notifies the other of its intention to terminate at
least three months prior to the expiration of the term.

         On May 2, 2002, the relevant regulatory authorities in China informed
us that the standard spectrum usage fees for GSM networks will be adjusted
progressively over a period of three years, and the adjustments will be
effective from July 1, 2002 for a period of five years. For the first year,
spectrum usage fees for GSM networks will be charged at the annual rate of RMB
7.5 million per MHz frequency. For the second year, the annual fee will be RMB
11.25 million per MHz frequency and from the third year onward, the annual fee
will be RMB 15 million per MHz frequency. All adjusted annual fees are charged
on the basis that upward and downward frequencies are separately charged. The
allocation of spectrum usage fees between China Mobile Communications Group and
us remains the same under our existing agreement. The adjustments will increase
our expenses on an after-tax basis by approximately RMB 224 million, RMB 343
million and RMB 462 million, respectively for the first, second, and third year
after the effectiveness of these new rates.

         SHARING OF INTER-PROVINCIAL TRANSMISSION LINE LEASING FEES

         In May 2000, we entered into an agreement with China Mobile
Communications Corporation in relation to the leasing of inter-provincial
transmission lines. This agreement is valid for two years from April 1, 1999 and
will be automatically renewed on an annual basis unless either party notifies
the other of its intention to terminate at least three months prior to the
expiration of the term. More details about the arrangements are described under
"Item 5. Operating and Financial Review and Prospects -- Overview of Our
Operations -- Our Operating Arrangements with China Mobile Communications
Corporation Have Affected and May Continue to Affect Our Financial Results".


                                     -67-
<PAGE>


         INTERCONNECTION ARRANGEMENTS

         Our networks interconnect with the mobile telecommunications networks
of China Mobile Communications Corporation in other regions. In May 2000, we
entered into an interconnection and roaming agreement with China Mobile
Communications Corporation. Under this agreement, with regard to
inter-provincial roaming, when the roaming subscriber places a call from a
roaming location, the operator of the visited network receives all long
distance calling charges, if any, and when the roaming subscriber receives a
call at a roaming location, the network operator with whom the subscriber is
registered retains all long distance calling charges, if any.

         International long distance calling charges incurred by an
international mobile phone subscriber making an international long distance
call while roaming in the areas in Mainland China where we operate are
collected by China Mobile Communications Corporation and are credited to us. We
will make the necessary settlement with the relevant telecommunications
operators in Mainland China. China Mobile Communications Corporation also
collects a 15% handling charge on such international long distance calling
charges from the international mobile telecommunications operators and shares
such handling charges equally with us. When our subscribers roam
internationally, we will collect the international long distance calling
charges, if any, together with a 15% handling charge from our subscribers and
will pay the international long distance calling charges together with half of
the handling charges to China Mobile Communications Corporation, which will
make the necessary settlement with the international mobile communications
operators concerned. Where long distance charges cannot be distinguished from
base roaming charges, such long distance charges are grouped under roaming
charges.

         PREPAID SERVICES

         Prepaid services allow subscribers to add value to their SIM cards by
purchasing value-adding cards from any of our network operators or China Mobile
Communications Corporation's other network operators. We have entered into an
agreement with China Mobile Communications Corporation regarding the sharing
and settlement of revenue when prepaid subscribers purchase value adding cards
from network operators other than their home network operators. This agreement
is for a term of one year from July 1, 2000 (the sharing of revenue from
prepaid subscribers purchasing value adding cards from network operators other
than their home network operators commenced from February 1, 2000) and will be
automatically renewed on an annual basis unless either party notifies the other
of its intention to terminate at least three months prior to the expiration of
the term. The agreement was amended on May 11, 2001 with retroactive effect
from April 21, 2001. Under the amended agreement, the mobile network operator
in the location that issues the value adding card remits 95% of the face value
of the value-adding card to the subscriber's home network operator, and keeps
the remainder as a handling charge. Prior to the amendment, the remittance
amount to home network operator was 85% of the face value of the value adding
card.

         PLATFORM DEVELOPMENT

         Aspire Holdings Limited is 66.4% owned by us, and it is a joint venture
with Vodafone Group Plc and Hewlett-Packard Company. It entered into a platform
development master agreement with each of us and China Mobile Communications
Corporation on January 10, 2001. Under the two platform development master
agreements, Aspire (or its subsidiaries) will provide the same scope of
technology platform development and maintenance services to us and our
subsidiaries and to China Mobile Communications Corporation and their respective
mobile telecommunications subsidiaries in various regions in Mainland China.
These services include system and gateway integration services, hardware,
software and system development (including development of


                                     -68-
<PAGE>


applications), technical support and major overhaul services for a
standardized, nation-wide platform for wireless data.

         Under the platform development master agreements, we and China Mobile
Communications Corporation will each pay Aspire equipment charges, systems
integration fees, software licensing fees, technical support fees and/or major
overhaul charges, which will be determined according to standards laid down by
the relevant governmental departments and/or by reference to market rates.

         PROPERTY LEASING AND MANAGEMENT SERVICES

         We lease from other subsidiaries of China Mobile Communications
Corporation various properties that are used as office space and for locating
our cell sites and switching equipment. In relation to leased properties, the
rental payments are determined with reference to market rates. In relation to
properties sub-leased by such subsidiaries to the companies that we acquired in
November 2000 (which were in turn leased to such subsidiaries by third
parties), the rental is equal to the rental payable to such third parties, and
such subsidiaries do not make any gains as the intermediate lessors. Some of
such subsidiaries of China Mobile Communications Corporation also provide
property management services in relation to the properties leased or subleased
(other than for Tianjin Mobile and Guangxi Mobile). Property management fees
are determined with reference to market rates.

         The initial terms of such leases and sub-leases range from six months
to ten years. The initial terms of such leases and sub-leases to Guangxi Mobile
are renewable on an annual basis if Guangxi Mobile gives six months' notice of
its intention to renew. Guangxi Mobile is entitled to terminate such leases and
sub-leases by giving three months' notice at any time. The initial terms of
such leases and sub-leases to Tianjin Mobile are automatically renewable on an
annual basis unless terminated by Tianjin Mobile by three months' notice given
at any time or by the relevant lessor by giving notice of its intention to
terminate three months prior to expiration of the relevant term. The initial
terms of such leases and sub-leases to Shanghai Mobile are automatically
renewed on an annual basis unless terminated by Shanghai Mobile by three
months' notice given at any time or in relation to sub-leases terminated by the
relevant lessor by giving three months' notice prior to the expiration of the
relevant term. In relation to our other subsidiaries, the relevant lease terms
and (subject to the relevant head lease being valid or renewable for the
extended term) sub-lease terms will be automatically renewed on an annual basis
unless terminated by the relevant companies with three months' notice given at
any time and, in relation to sub-leased properties, the relevant lessor may
also terminate by giving three months' notice prior to the expiration of the
relevant term. Beijing Mobile also leases certain properties and provides
property management services to a subsidiary of China Mobile Communications
Corporation for an initial term of one year and on terms substantially similar
to those set out above in this paragraph.

         CONSTRUCTION AND RELATED SERVICES

         Beijing Mobile, Shanghai Mobile, Liaoning Mobile and Shandong Mobile
entered into agreements with certain subsidiaries of China Mobile
Communications Corporation under which such subsidiaries provide services such
as construction, design, equipment installation, testing and/or maintenance
services and/or act as general contractors in relation to construction and
other projects of our subsidiaries. Such agreements are for terms of between 6
months and 16 months, which will be automatically renewed on an annual basis
unless either party (in the case of Shandong Mobile, Shanghai Mobile and
Beijing Mobile) or Liaoning Mobile (in the case of Liaoning Mobile) notifies
the other in writing at least three months prior to the expiration of the term
of its intention to terminate the arrangement. Beijing Mobile had also
previously entered into other


                                     -69-
<PAGE>


agreements for the provision of certain construction and related services which
have continued to be performed according to their terms after Beijing Mobile
was acquired by us in November 2000. The charges payable for services rendered
under such agreements are determined according to standards laid down by
relevant governmental departments and/or by reference to market rates.

         EQUIPMENT MAINTENANCE AND RELATED SERVICES

         Beijing Mobile, Shanghai Mobile and Liaoning Mobile entered into
agreements with certain subsidiaries of China Mobile Communications Corporation
under which such subsidiaries provide equipment maintenance and related services
to such companies. Such agreements are for terms of between 6 months and 15
months, which will be automatically renewed on an annual basis unless either
party (in the case of Beijing Mobile) or Shanghai Mobile or Liaoning Mobile (in
the case of Shanghai Mobile and Liaoning Mobile, respectively) notifies the
other of its intention to terminate in writing at least three months prior to
the expiration of the term. Beijing Mobile had also previously entered into
another agreement for the provision of certain equipment maintenance services
which continued to be performed according to its terms after Beijing Mobile was
acquired by us in November 2000. The charges payable for services rendered under
such agreements are determined according to standards laid down by relevant
governmental departments and/or by reference to market rates.

         TRANSMISSION TOWER PRODUCTION, SALES AND OTHER SERVICES AND ANTENNA
         MAINTENANCE SERVICES

         Hebei Mobile entered into an agreement with a subsidiary of China
Mobile Communications Corporation under which such subsidiary provides
transmission tower design, production, installation and maintenance services
and antenna maintenance services to Hebei Mobile, and sells transmission towers
and spare parts to Hebei Mobile. The initial term of this agreement is for one
year from August 1, 2000 to July 30, 2001. This agreement will be automatically
renewed on an annual basis unless either party notifies the other of its
intention to terminate in writing at least three months prior to the expiration
of the term. The price of such transmission towers and spare parts and the
charges payable for services rendered under this agreement are determined
according to standards laid down by relevant governmental departments and/or by
reference to market rates.

         COLLECTION SERVICES AND SALES ARRANGEMENTS

         Henan Mobile entered into an agreement with a subsidiary of China
Mobile Communications Corporation in August 1999 in respect of the provision by
the China Mobile Communications Corporation subsidiary of certain payment
collection services to Henan Mobile. The collection service charges payable by
Henan Mobile amount to 1% of the collections.

         In addition, Henan Mobile also entered into a sales service agreement
with a subsidiary of China Mobile Communications Corporation in August 1999
pursuant to which such subsidiary has agreed to market through its outlets
Henan Mobile's mobile phone services. The maximum sales service charges of RMB
250 per subscriber are based on commercial negotiation on an arm's length basis
by reference to the prevailing market rates.

         MISCELLANEOUS

         These transactions entered into by us (including our subsidiaries)
have been entered into in the ordinary course of business and on normal
commercial terms. Under the Listing Rules of the Hong Kong


                                     -70-
<PAGE>


Stock Exchange, these transactions are considered to be "connected transactions"
and (other than the licensing of trademarks) would normally require full
disclosure and prior independent shareholders' approval on each occasion they
arise. As the transactions are expected to be continued in the normal course of
business, our directors consider that such disclosure and approval would be
impractical. Accordingly, our directors have requested the Hong Kong Stock
Exchange to grant, and the Hong Kong Stock Exchange has granted, a waiver from
compliance with the normal approval and disclosure requirements related to
connected transactions under the Listing Rules (except for the licensing of
trademarks), which will be effective until December 31, 2004, except that the
waivers for transactions relating to prepaid services and platform development
will expire on December 31, 2003, upon the following conditions as applicable:

         (1)      the transactions as well as the respective agreements
                  governing such transactions will be (a) entered into in the
                  ordinary and usual course of business on terms that are fair
                  and reasonable so far as our independent shareholders are
                  concerned, and (b) on normal commercial terms and in
                  accordance with the terms of the agreements governing such
                  transactions;

         (2)      details of the transactions, as required by rule 14.25(1)(A)
                  to (D) of the Listing Rules, shall be disclosed in our Hong
                  Kong annual report;

         (3)      our independent non-executive directors shall review annually
                  the transactions and confirm in our Hong Kong annual report
                  and accounts for the relevant year that the transactions have
                  been conducted in the manner stated in paragraph (1) above
                  and within the upper limits stated below;

         (4)      our auditors shall review annually the transactions and
                  provide our directors with a letter, details of which will be
                  set out in our Hong Kong annual accounts, stating that the
                  transactions:

                  -        received the approval of our board of directors;

                  -        are in accordance with the pricing policies as
                           stated in our annual report;

                  -        have been conducted in the manner as stated in
                           (1)(b) above; and

                  -        have not exceeded the upper limits as set forth in
                           paragraph (7) below;

         (5)      details of the transactions are disclosed to our independent
                  shareholders who shall have voted in favor of an ordinary
                  resolution to approve the connected transactions and the
                  upper limits set out below at our extraordinary general
                  meeting;

         (6)      China Mobile Communications Corporation has undertaken to us
                  that our auditors will be granted access to such of its and
                  its associates' accounting records for the purposes of
                  reviewing the transactions mentioned above; and

         (7)      with respect to the following types of transactions entered
                  into and to be entered into by us, the waiver was applied for
                  and granted under the additional condition that they shall
                  not exceed the relevant upper limits set out below in each of
                  our fiscal years:


                                     -71-
<PAGE>


                  -        payments by us to subsidiaries of China Mobile
                           Communications Corporation for collection service
                           charges in any fiscal year shall not exceed 0.1% of
                           our consolidated operating revenue in such year, and
                           payment by us to subsidiaries of China Mobile
                           Communications Corporation for sales service charges
                           in any fiscal year shall not exceed 0.3% of our
                           consolidated operating revenue in such year;

                  -        payments by us to subsidiaries of China Mobile
                           Communications Corporation for rental and property
                           management fees in any fiscal year shall not exceed
                           0.56% of our consolidated turnover for such fiscal
                           year;

                  -        payments by us to subsidiaries of China Mobile
                           Communications Corporation for construction and
                           related services in any fiscal year shall not exceed
                           0.25% of our consolidated total operating revenue in
                           such year;

                  -        payments by us to subsidiaries of China Mobile
                           Communications Corporation for equipment maintenance
                           and related services in any fiscal year shall not
                           exceed 0.05% of our consolidated total operating
                           revenue in such year;

                  -        payments by Hebei Mobile to the relevant subsidiary
                           of China Mobile Communications Corporation for
                           purchase of transmission towers and transmission
                           tower-related services and antenna maintenance
                           services in any fiscal year shall not exceed 0.06%
                           of our consolidated total operating revenue in such
                           year;

                  -        handling charges received by us from subsidiaries of
                           China Mobile Communications Corporation in respect
                           of prepaid services in any fiscal year shall not
                           exceed 2% of our consolidated total operating
                           revenue in such year, and handling charges paid by
                           us to subsidiaries of China Mobile Communications
                           Corporation in respect of prepaid services in any
                           fiscal year shall not exceed 2% of our total
                           operating revenue in such year; and

                  -        payments by each of us and China Mobile
                           Communications corporation to Aspire in respect of
                           equipment charges, system integration fees, software
                           licensing fees, technical support fees and/or major
                           overhaul charges for mobile Internet service
                           platform in any fiscal year shall not exceed 3% of
                           our consolidated net tangible assets as of the end
                           of such year.

         Our independent shareholders approved the connected transactions and
the related upper limits at our extraordinary general meeting held on June 12,
2001.

         UNDERTAKING FROM CHINA MOBILE COMMUNICATIONS CORPORATION

         China Mobile Communications Corporation has undertaken that:

         -        it will extend its full support to our present operations and
                  future development;


                                     -72-
<PAGE>


         -        we will be the only mobile telecommunications services
                  company operating in Mainland China under China Mobile
                  Communications Corporation's control that will be listed on
                  any securities exchange in Hong Kong or outside China;

         -        to the extent within China Mobile Communications
                  Corporation's control, we will be treated equally with any
                  other mobile telecommunications operators in respect of all
                  approvals, transactions and arrangements between us and China
                  Mobile Communications Corporation and other mobile
                  telecommunications entities controlled by China Mobile
                  Communications Corporation;

         -        China Mobile Communications Corporation and the provincial
                  entities under its control will not, directly or indirectly,
                  participate in the operation of any mobile telecommunications
                  services in any province in which we currently operate or may
                  operate in the future; and

         -        in the provinces in which we operate, we will have the option
                  to operate additional telecommunications services that fall
                  within China Mobile Communications Corporation's scope of
                  business (including the testing and commercial operation of
                  services using new technologies), and we will have the right
                  to acquire China Mobile Communications Corporation's interest
                  in such services.

ITEM 8.  FINANCIAL INFORMATION.

CONSOLIDATED FINANCIAL STATEMENTS

         Our audited consolidated financial statements are set forth beginning
on page F-1.

LEGAL PROCEEDING

         We are not involved in any material litigation, arbitration or
administrative proceedings, and, so far as we are aware, no such litigation,
arbitration or administrative proceedings are pending or threatened.

POLICY ON DIVIDEND DISTRIBUTIONS

         Our board of directors did not recommend the payment of a dividend for
the year ended December 31, 2001, and we have not declared or paid any
dividends since our incorporation in September 1997. Having considered our
existing business operations, financial and cash flow position, capital
expenditures and other related considerations, we believe that our financial
resources are sufficient to support the realization of our long-term
development objectives as well as the distribution of appropriate dividends to
our shareholders. Therefore, barring unforeseen circumstances, we will commence
the payment of appropriate dividends, with the first dividend to be paid for
the fiscal year ended December 31, 2002. Depending on our overall operational
and cash flow positions at that time, the specific amounts of the dividends
will be recommended by our board of directors.

ITEM 9.  THE OFFER AND LISTING.

         In connection with our initial public offering, our American
depositary shares, or ADSs, each representing twenty ordinary shares, were
listed and commenced trading on the New York Stock Exchange on


                                     -73-
<PAGE>


October 22, 1997 under the symbol "CHL". Effective from July 5, 2000, our
ADS-to-share ratio has been changed to one-to-five. Our shares were listed and
commenced trading on the Hong Kong Stock Exchange on October 23, 1997. Prior to
these listings, there was no public market for our equity securities. The New
York Stock Exchange and the Hong Kong Stock Exchange are the principal trading
markets for our ADSs and ordinary shares, which are not listed on any other
exchanges in or outside the United States.

         As of December 31, 2001 and May 31, 2002, there were 18,605,405,241
ordinary shares issued and outstanding. As of December 31, 2001 and May 31,
2002, there were, respectively, 108 and 113 registered holders of American
depositary receipts evidencing 49,510,837 and 41,628,139 ADSs. Since certain of
the ADSs are held by nominees, the above number may not be representative of the
actual number of U.S. beneficial holders of ADSs or the number of ADSs
beneficially held by U.S. persons. The depositary for the ADSs is The Bank of
New York.

         The high and low closing sale prices of the shares on the Hong Kong
Stock Exchange and of the ADSs on the NYSE for the periods indicated are as
follows. The information for periods prior to July 2000 has been restated to
reflect the change in our ADS-to-share ratio from one-to-twenty to one-to-five,
which became effective on July 5, 2000.


<TABLE>
<CAPTION>
                                                   PRICE PER SHARE (HK$)                          PRICE PER ADS (US$)
                                                ---------------------------                   ---------------------------
                                                HIGH                    LOW                   HIGH                    LOW
                                                ----                   ----                   ----                   ----

<S>                                             <C>                    <C>                    <C>                    <C>
1997 (FROM LISTING DATE)
    Fourth Quarter                              14.40                  10.55                   9.50                   6.91
1998                                            16.25                   8.90                  10.66                   5.73
1999                                            48.60                  12.60                  32.16                   8.09
2000
    First Quarter                               79.00                  41.70                  50.73                  27.41
    Second Quarter                              72.25                  47.90                  46.91                  30.80
    Third Quarter                               75.75                  47.20                  48.94                  31.63
    Fourth Quarter                              59.00                  40.30                  37.38                  25.94
2001
    First Quarter                               50.50                  33.30                  33.00                  21.45
    Second Quarter                              42.70                  29.70                  27.45                  19.50
    Third Quarter                               42.30                  19.40                  26.99                  13.19
    Fourth Quarter                              29.95                  21.30                  19.03                  13.76

    December 2001                               29.95                  26.85                  19.03                  17.25
    January 2002                                28.40                  21.50                  17.87                  13.60
    February 2002                               23.70                  21.50                  15.28                  13.80
    March 2002                                  25.35                  22.45                  16.35                  14.60
    April 2002                                  25.55                  22.95                  16.61                  14.54
    May 2002                                    27.30                  24.65                  17.61                  15.75
</TABLE>


                                     -74-
<PAGE>


ITEM 10. ADDITIONAL INFORMATION.

MEMORANDUM AND ARTICLES OF ASSOCIATION

         Under Section 3 of our Memorandum of Association, we have the capacity
and the rights, powers and privileges of a natural person and, in addition and
without limit, we may do anything which it is permitted or required to do by
any enactment or rule of law.

         DIRECTORS

         MATERIAL INTERESTS. A director who is in any way directly or
indirectly interested in a contract or proposed contract with us shall declare
the nature of his interest in accordance with the provisions of the Companies
Ordinance (Chapter 32) of Hong Kong and the Articles of Association. A director
shall not vote, or be counted in the quorum, on any resolution of the board in
respect of any contract or arrangement or proposal in which he is, to his
knowledge, materially interested, and if he shall do so his vote shall not be
counted or counted in the quorum for that resolution. The above prohibition
shall not apply to any contract, arrangement or proposal:

         -        for the giving by us of any security or indemnity to the
                  director in respect of money lent or obligations incurred or
                  undertaken by him at the request of, or for, our or any of
                  our subsidiaries' benefit;

         -        for the giving by us of any security to a third party in
                  respect of our or any of our subsidiaries' debt or obligation
                  for which the director has himself assumed responsibility or
                  guaranteed or secured in whole or in part whether alone or
                  jointly;

         -        concerning an offer of the shares or debentures or other
                  securities of or by us or any other company which we may
                  promote or be interested in for subscription or purchase
                  where the director is, or is to be, interested as a
                  participant in the underwriting or sub-underwriting of the
                  offer;

         -        in which the director is interested in the same manner as
                  other holders of our shares or debentures or other securities
                  by virtue only of his interest in our shares or debentures or
                  other securities;

         -        concerning any other company in which the director is
                  interested, directly or indirectly, as an officer or a
                  shareholder or in which the director is beneficially
                  interested in shares of that company other than a company in
                  which the director, together with any of his associates, is
                  beneficially interested in five percent or more of the issued
                  share of any class of the equity share capital of such
                  company (or of any third company through which his interest
                  is derived) or of the voting rights;

         -        for the benefit of our or any of our subsidiaries' employees,
                  including the adoption, modification or operation of a
                  pension fund or retirement, death or disability benefit
                  scheme which relates to both our, or any of our
                  subsidiaries', directors and employees and does not give the
                  director any privilege not generally accorded to the class of
                  persons to whom such scheme or fund relates; and

         -        concerning the adoption, modification or operation of any
                  employees' share scheme involving the issue or grant of
                  options over shares or other securities by us to, or for the
                  benefit of, our or any of our subsidiaries' employees under
                  which the director may benefit.


                                     -75-
<PAGE>


         COMPENSATION AND PENSION. The directors are entitled to receive by way
of remuneration for their services such sum as we may determine from time to
time in general meeting. The directors are also entitled to be repaid their
reasonable traveling, hotel and other expenses incurred by them in or about the
performance of their duties as directors. The directors may award special
remuneration out of our funds, by way of salary, commission or otherwise as the
directors may determine, to any director who performs services which, in the
opinion of the directors, are outside the scope of the ordinary duties of a
director.

         The board may establish and maintain any contributory or
non-contributory pension or superannuation funds for the benefit of, or give
donations, gratuities, pensions, allowances or emoluments to any persons (1)
who are or were at any time in employment or service of our company (or any of
our subsidiaries) or are allied or associated with us or any of our
subsidiaries, or (2) who are or were at any time our (or any of our
subsidiaries') directors or officers, and who are holding or have held any
salaried employment or office in our company or any of our subsidiaries, and
the wives, widows, families and dependants of any of these persons. Any
director holding any such employment or office is entitled to participate in,
and retain for his own benefit, any such donation, gratuity, pension, allowance
or emolument.

         BORROWING POWERS. The directors may exercise all the powers of our
company to borrow money and to mortgage or charge all or any part of our
undertaking, property and assets (present and future) and uncalled capital and
to issue debentures, debenture stocks, bonds and other securities, whether
outright or as collateral security for the debt, liability or obligation of our
company or any third party.

         QUALIFICATION; RETIREMENT. A director need not hold any of our shares
to qualify as a director. There is no age limit requirement for a director's
retirement or non-retirement.

         At each annual general meeting, one-third of the directors for the
time being, or, if their number is not three or a multiple of three, then the
number nearest one-third, shall retire from office by rotation except for any
director holding office as chairman or chief executive officer. The directors
to retire in every year shall be those who have been longest in office since
their last election, but as between persons who became directors on the same
day shall be determined by lot unless they otherwise agree between themselves.
The retiring directors shall be eligible for re-election.

         RIGHTS ATTACHING TO ORDINARY SHARES

         The section entitled "Description of Share Capital" in our
Registration Statement on Form F-3 (File No. 333-47256), as filed with the
Securities and Exchange Commission on October 30, 2000, is incorporated by
reference into this annual report.

         Pursuant to ordinary resolutions passed at our extraordinary general
meeting held on November 10, 2000, our authorized share capital was increased,
by the creation of an additional 14,000,000,000 ordinary shares of HK$0.10
each, which rank pari passu with the existing ordinary shares, to a total of
HK$3,000,000,000 divided into 30,000,000,000 ordinary shares.

         ANNUAL GENERAL MEETINGS AND EXTRAORDINARY GENERAL MEETINGS

         We must hold, in each year, a general meeting as our annual general
meeting in addition to any other meetings in that year. The annual general
meeting must be held at such time (which shall be within a period of


                                     -76-
<PAGE>


not more than 15 months, or such longer period as the Registrar of Companies
may authorize in writing, after the holding of the last preceding annual
general meeting) and place as may be determined by the directors. All other
general meetings are extraordinary meetings. The directors may proceed to
convene an extraordinary general meeting whenever they think fit, in accordance
with the Companies Ordinance.

         In general, an annual general meeting and a meeting called for the
passing of a special resolution shall be called by not less than 21 days'
notice in writing, and any other general meeting shall be called by not less
than 14 days' notice in writing. The notice must specify the place, date and
time of the meeting and, in the case of special business, the general nature of
that business.

         MISCELLANEOUS

         We keep our share register with our share registrar, which is Hong
Kong Registrars Limited, 2nd Floor, Vicwood Plaza, 199 Des Voeux Road Central,
Hong Kong, China. In addition, we also file certain documents with the
Registrar of Companies, Hong Kong, China, in accordance with the requirements
of the Companies Ordinance. Our company number is 622909.

MATERIAL CONTRACTS

         See "Item 7. Major Shareholders and Related Party Transactions --
Related Party Transactions" for certain arrangements we have entered into with
China Mobile Communications Corporation.

         In addition, in the ordinary course of our business, we have entered
into the following agreements with the former China Telecommunications
Corporation or its subsidiaries.

         INTERCONNECTION ARRANGEMENTS

         Each of our operating subsidiaries has entered into an interconnection
agreement with the subsidiary of the former China Telecommunications
Corporation that operates the fixed line network in its network area. A
majority of calls on our networks involve interconnection with the former China
Telecommunications Corporation's fixed line network. The economic terms of the
interconnection arrangements are described under "Item 4. Information on the
Company -- Business Overview -- Interconnection". Each of these agreements is
valid for one year from various dates between October 1, 1999 and August 10,
2000, and will be renewed automatically on an annual basis.

         LEASING OF INTRA-PROVINCIAL OR LOCAL TRANSMISSION LINES

         Each of our operating subsidiaries leases certain transmission lines
from the relevant subsidiary of the former China Telecommunications Corporation
in its network area in order to link our base transceiver stations, base
station controllers and mobile switching centers and to interconnect our
network to the fixed line networks of the former China Telecommunications
Corporation and the mobile telecommunications networks of other operators. The
agreement is valid for ten years and two months from October 20, 1997 in the
case of Guangdong Mobile, three years from January 1, 2000 in the case of
Zhejiang Mobile and eight years from July 1, 1999 in the case of Jiangsu
Mobile. Each of the remaining agreements is valid for one year from various
dates between January 1 and August 10, 2000. On the expiration of the initial
term, the agreement in respect


                                     -77-
<PAGE>


of Guangdong Mobile will be renewed automatically for another ten years (unless
either party notifies the other of its intention to terminate at least six
months prior to the expiration of the term), the agreement in respect of
Zhejiang Mobile will be renewable subject to agreement by the parties and the
agreement in respect of Jiangsu Mobile will be renewed automatically for
another year (unless either party notifies the other of its intention to
terminate at least three months prior to the expiration of the term), and each
of the other agreements will be renewed automatically on an annual basis
(unless either party notified the other of its intention to terminate at least
three months prior to the expiration of the term).

         ACCOUNT PROCESSING SERVICES

         Shanghai Mobile has entered into an account processing service
agreement with the subsidiary of the former China Telecommunications
Corporation in Shanghai, under which the former China Telecommunications
Corporation subsidiary in Shanghai provides bill processing and mailing
services to Shanghai Mobile. The agreement is valid for one year from August
10, 2000 and will be renewed automatically on an annual basis unless either
party notifies the other of its intention to terminate at least three months
prior to the expiration of the term. The monthly service fee payable by
Shanghai Mobile is RMB 0.86 per mobile phone number.

         COLLECTION SERVICES

         We entered into various services agreements with certain subsidiaries
of the former China Telecommunications Corporation in connection with our
payment collection services. The maximum service fee payable under each of
these agreements does not exceed RMB 0.01 for each RMB1.00 collected.

         DISTRIBUTION AND MARKETING ARRANGEMENTS

         We market and sell our mobile telecommunications services in part
through authorized dealers under the control of certain subsidiaries of the
former China Telecommunications Corporation pursuant to various services
agreements. Under those agreements, we agree to pay a commission not exceeding
RMB 250 per new contract subscriber acquired.

         EQUIPMENT MAINTENANCE SERVICES

         Each of Fujian Mobile, Beijing Mobile, Tianjin Mobile and Guangxi
Mobile has entered into an equipment maintenance service agreement with the
relevant subsidiary of the former China Telecommunications Corporation that
operates the fixed line network in its network area, under which the fixed line
operator provides maintenance services for the operating equipment of the
mobile telecommunications operator. In the case of Fujian Mobile, the annual
service fee is 1% of the total book value of equipment maintained, and the term
of the agreement is one year from January 1, 2000, and will be renewed
automatically on an annual basis unless either party notifies the other of its
intention to terminate at least three months prior to the expiration of the
term. In the case of Beijing Mobile, the annual service fee is 0.3% of the
total book value of equipment maintained, and the initial term of the agreement
is one year from August 8, 2000, and will be renewed automatically on an annual
basis unless either party notifies the other of its intention to terminate at
least three months prior to the expiration of the term. In the case of Tianjin
Mobile and Guangxi Mobile, the annual service fee is the rate set by the
Chinese government, or if there is no such rate, the rate agreed by the
parties, and the term of the agreement is one year from August 10, 2000, and
will be renewed automatically on an annual basis unless either party notifies
the other of its intention to terminate at least three months prior to the
expiration of the term.


                                     -78-
<PAGE>


         LEASING OF OFFICES AND SITES FOR NETWORK EQUIPMENT

         Each of our operating subsidiaries has leased certain premises from
the relevant subsidiary of the former China Telecommunications Corporation that
operates the fixed line network in its network area for use as offices, retail
outlets, warehouses and sites for locating equipment. Each of Fujian Mobile,
Beijing Mobile, Shanghai Mobile and Tianjin Mobile also leases to the fixed
line operator in Fujian, Beijing, Shanghai and Tianjin, respectively, certain
properties under similar terms.

         ASPIRE BUSINESS ALLIANCE WITH VODAFONE

         In addition, on January 9, 2002, Vodafone Americas, a subsidiary of
Vodafone, and Aspire entered into a business alliance agreement under which
Aspire will engage Vodafone Global Platform and Internet Services, a unit of
Vodafone Americas, as a preferred provider of wireless data applications
software in relation to the Aspire Mobile Information Service Center Platform,
provided that software supplied to Aspire has at least equivalent technical
specifications on the same or better commercial terms. Aspire and Vodafone
Global Platform and Internet Services also agreed to use their reasonable
efforts to coordinate the development of their respective wireless data
platforms with the intention of providing a seamless delivery of wireless data
services for their respective customers and enabling content and application
providers to use a single application programming interface.

EXCHANGE CONTROLS

         The Renminbi currently is not a freely convertible currency. The State
Administration of Foreign Exchange, under the authority of the People's Bank of
China, controls the conversion of Renminbi into foreign currency. Prior to
January 1, 1994, Renminbi could be converted to foreign currency through the
Bank of China or other authorized institutions at official rates fixed daily by
the State Administration of Foreign Exchange. Renminbi could also be converted
at swap centers open to Chinese enterprises and foreign invested enterprises,
subject to State Administration of Foreign Exchange approval of each foreign
currency trade, at exchange rates negotiated by the parties for each
transaction. In the year ended December 31, 1993, as much as 80% by value of
all foreign exchange transactions in China took place through the swap centers.
The exchange rate quoted by the Bank of China differed substantially from that
available in the swap centers. Effective January 1, 1994, a unitary exchange
rate system was introduced in China, replacing the dual-rate system previously
in effect. In connection with the creation of a unitary exchange system, the
China Foreign Exchange Trading System inter-bank foreign exchange market was
established. Under the unitary foreign exchange system, People's Bank of China
sets daily exchange rates for conversion of Renminbi into U.S. dollars and
other currencies based on the China Foreign Exchange Trading System interbank
market rates, and the Bank of China and other authorized banks may engage in
foreign exchange transactions at rates that vary within a prescribed range
above or below rates set by the People's Bank of China.

         In the event of shortages of foreign currencies, China Mobile may be
unable to convert sufficient Renminbi into foreign currency to meet its foreign
currency obligations or to pay dividends in foreign currency.

         The value of the Renminbi is subject to changes in Chinese government
policies and to international economic and political developments. During the
few years prior to 1994, the Renminbi experienced a devaluation against most
major currencies, and a devaluation of approximately 50% of the Renminbi
against the U.S. dollar occurred on January 3, 1994 in connection with the
adoption of the new unitary exchange rate system. Since 1994, the official
exchange rate for the conversion of Renminbi to U.S. dollars has been stable,
and the Renminbi has appreciated slightly against U.S. dollars. Any future
devaluation of the Renminbi would


                                     -79-
<PAGE>


increase our effective cost of foreign manufactured equipment or components,
and of satisfying any other foreign currency denominated liabilities. In
addition, any such devaluation would reduce the U.S. dollar value of any
dividends declared in Renminbi. During 1999 and 2000, the Renminbi has remained
stable against the U.S. dollar.

         There are no limitations on the right of non-resident or foreign
owners to remit dividends or to hold or vote the ordinary shares or the ADSs
imposed by Hong Kong law or by our memorandum and articles of association or
other constituent documents.

TAXATION -- HONG KONG

         The taxation of income and capital gains of holders of ordinary shares
or ADSs is subject to the laws and practices of Hong Kong and of jurisdictions
in which holders of ordinary shares or ADSs are resident or otherwise subject
to tax. The following summary of certain relevant taxation provisions under
Hong Kong law is based on current law and practice, is subject to changes
therein and does not constitute legal or tax advice. The discussion does not
deal with all possible tax consequences relating to an investment in the
ordinary shares or ADSs. Accordingly, each prospective investor (particularly
those subject to special tax rules, such as banks, dealers, insurance
companies, tax-exempt entities and holders of 10% or more of our voting capital
stock) should consult its own tax advisor regarding the tax consequences of an
investment in the ordinary shares and ADSs. The discussion is based upon laws
and relevant interpretations thereof in effect as of the date of this annual
report, all of which are subject to change. There is no reciprocal tax treaty
in effect between Hong Kong and the United States.

         TAX ON DIVIDENDS

         Under the current practices of the Hong Kong Inland Revenue
Department, no tax is payable in Hong Kong in respect of dividends paid by us
unless such dividends are attributable to a trade, profession or business
carried on in Hong Kong.

         PROFITS TAX

         No tax is imposed in Hong Kong in respect of capital gains from the
sale of property (such as the ordinary shares and ADSs). Trading gains from the
sale of property by persons carrying on a trade, profession or business in Hong
Kong where such gains are derived from or arise in Hong Kong from such trade,
profession or business will be chargeable to Hong Kong profits tax, which is
currently imposed at the rate of 16% on corporations and at a maximum rate of
15% on individuals. Gains from sales of the ordinary shares effected on the
Hong Kong Stock Exchange may be considered to be derived from or arise in Hong
Kong. Liability for Hong Kong profits tax may thus arise in respect of trading
gains from sales of ordinary shares or ADSs realized by persons carrying on a
business or trading or dealing in securities in Hong Kong.

         STAMP DUTY

         Hong Kong stamp duty, currently charged at the rate of HK$1 per
HK$1,000 or part thereof on the higher of the consideration for or the value of
the ordinary shares, will be payable by the purchaser on every purchase and by
the seller on every sale of ordinary shares (i.e., a total of HK$2 per HK$1,000
or part thereof is currently payable on a typical sale and purchase transaction
involving ordinary shares). In addition, a fixed duty of HK$5 is currently
payable on any instrument of transfer of ordinary shares. The withdrawal of


                                     -80-
<PAGE>


ordinary shares upon the surrender of ADSs, and the issuance of ADSs upon the
deposit of ordinary shares, will also attract stamp duty at the rate described
above for sale and purchase transactions unless the withdrawal or deposit does
not result in a change in the beneficial ownership of the ordinary shares under
Hong Kong law, in which case only a fixed duty of HK$5 is payable on the
transfer. The issuance of the ADSs upon the deposit of ordinary shares issued
directly to the depositary or for the account of the depositary does not
attract stamp duty. No Hong Kong stamp duty is payable upon the transfer of
ADSs outside Hong Kong.

         ESTATE DUTY

         The ordinary shares are Hong Kong property under Hong Kong law, and
accordingly such ordinary shares may be subject to estate duty on the death of
the beneficial owner of the ordinary shares (regardless of the place of the
owner's residence, citizenship or domicile). Hong Kong estate duty is imposed
on a progressive scale from 5% to 15%. The rate of and the threshold for estate
duty has, in the past, been adjusted on a fairly regular basis. No estate duty
is payable when the aggregate value of the dutiable estate does not exceed
HK$7.5 million, and the maximum rate of duty of 15% applies when the aggregate
value of the dutiable estate exceeds HK$10.5 million.

TAXATION -- UNITED STATES FEDERAL INCOME TAXATION

         This section describes the material United States Federal income tax
consequences of the purchase, ownership and disposition of our shares or ADSs.
This section applies to you only if you hold your shares or ADSs as capital
assets for United States Federal income tax purposes. This section does not
discuss special rules that may apply to you if you are a member of a special
class of holders subject to special rules, including:

         -        a dealer in securities;

         -        a trader in securities that elects to use a mark-to-market
                  method of accounting for your securities holdings;

         -        a tax-exempt organization;

         -        a life insurance company;

         -        a person liable for alternative minimum tax;

         -        a person that actually or constructively owns 10% or more of
                  our voting stock;

         -        a person that holds shares as part of a straddle or a hedging
                  or conversion transaction; or

         -        a person whose functional currency is not the U.S. dollar.

         This section is based on the Internal Revenue Code of 1986, as
amended, its legislative history, existing and proposed regulations, published
rulings and court decisions, all as currently in effect. These laws are subject
to change, possibly on a retroactive basis. In addition, this section is based
in part upon the representations of the Depositary and the assumption that each
obligation in the Deposit Agreement and any related agreement will be performed
in accordance with its terms.


                                     -81-
<PAGE>


         You are a U.S. holder if you are a beneficial owner of shares or ADSs
and you are:

         -        a citizen or resident of the United States;

         -        a domestic corporation;

         -        an estate whose income is subject to United States Federal
                  income tax regardless of its source; or

         -        a trust if a United States court can exercise primary
                  supervision over the trust's administration and one or more
                  United States persons are authorized to control all
                  substantial decisions of the trust.

         A "non-U.S. holder" is a beneficial owner of shares that is not a U.S.
holder.
         YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE UNITED STATES
FEDERAL, STATE AND LOCAL AND OTHER TAX CONSEQUENCES OF OWNING AND DISPOSING OF
SHARES OR ADSS IN YOUR PARTICULAR CIRCUMSTANCES.

         In general, and taking into account the earlier assumptions, for
United States Federal income tax purposes, if you hold ADRs evidencing ADSs,
you will be treated as the owner of the shares represented by those ADSs.
Exchanges of shares for ADSs, and ADSs for shares, generally will not be
subject to the United States Federal income tax.

         TAXATION OF DIVIDENDS

         Under the United States Federal income tax laws, and subject to the
passive foreign investment company, or PFIC, rules discussed below, if you are
a U.S. holder, you must include in your gross income the gross amount of any
dividend paid by us out of our current or accumulated earnings and profits (as
determined for United States Federal income tax purposes). The dividend is
ordinary income that you must include in income when you receive the dividend,
actually or constructively. The dividend will not be eligible for the
dividends-received deduction generally allowed to United States corporations in
respect of dividends received from other United States corporations. The amount
of the dividend distribution that you must include in your income will be the
U.S. dollar value of the Hong Kong dollar payments made, determined at the spot
Hong Kong dollar/U.S. dollar rate on the date the dividend distribution is
includible in your income, regardless of whether the payment is in fact
converted into U.S. dollars. Generally, any gain or loss resulting from
currency exchange fluctuations during the period from the date you include the
dividend payment in income to the date you convert the payment into U.S.
dollars will be treated as ordinary income or loss. This gain or loss generally
will be from sources within the United States for foreign tax credit limitation
purposes. Distributions in excess of current and accumulated earnings and
profits (as determined for United States Federal income tax purposes) will be
treated as a non-taxable return of capital to the extent of your basis in the
shares and thereafter as capital gain.

         Subject to generally applicable limitations, the Hong Kong tax
withheld and paid over to Hong Kong will be creditable against your United
States Federal income tax liability. Dividends will be income from sources
outside the United States, but generally will be "passive income" or "financial
services income", which is treated separately from other types of income for
purposes of computing the foreign tax credit allowable to you.


                                     -82-
<PAGE>


         TAXATION OF CAPITAL GAINS

         Subject to the PFIC rules discussed below, if you are a U.S. holder
and you sell or otherwise dispose of your shares, you will recognize capital
gain or loss for United States Federal income tax purposes equal to the
difference between the U.S. dollar value of the amount that you realize and
your tax basis, determined in U.S. dollars, in your shares. Capital gain of a
noncorporate U.S. holder is generally taxed at a maximum rate of 20% where the
property is held more than one year, and 18% where the property is held for
more than five years. The deductibility of capital losses is subject to
limitations. The gain or loss will generally be from sources within the United
States for foreign tax credit limitation purposes.

         PFIC RULES

         We believe that shares should not be treated as stock of a PFIC for
United States Federal income tax purposes, but this conclusion is a factual
determination that is made annually and thus may be subject to change. In
general, if you are a U.S. holder, we will be a PFIC with respect to you if for
any taxable year in which you held our shares:

         -        at least 75% of our gross income for the taxable year is
                  passive income or

         -        at least 50% of the value, determined on the basis of a
                  quarterly average, of our assets is attributable to assets
                  that produce or are held for the production of passive
                  income.

         Passive income generally includes dividends, interest, royalties,
rents (other than certain rents and royalties derived in the active conduct of
a trade or business), annuities and gains from assets that produce passive
income. If a foreign corporation owns at least 25% by value of the stock of
another corporation, the foreign corporation is treated for purposes of the
PFIC tests as owning its proportionate share of the assets of the other
corporation, and as receiving directly its proportionate share of the other
corporation's income.

         If we are treated as a PFIC, and you are a U.S. holder that did not
make a mark-to-market election, as described below, you will be subject to
special rules with respect to:

         -        any gain you realize on the sale or other disposition of your
                  shares or ADSs and

         -        any excess distribution that we make to you (generally, any
                  distributions to you during a single taxable year that are
                  greater than 125% of the average annual distributions
                  received by you in respect of the shares during the three
                  preceding taxable years or, if shorter, your holding period
                  for the shares).

         Under these rules:

         -        the gain or excess distribution will be allocated ratably
                  over your holding period for the shares,

         -        the amount allocated to the taxable year in which you
                  realized the gain or excess distribution will be taxed as
                  ordinary income,


                                     -83-
<PAGE>


         -        the amount allocated to each prior year, with certain
                  exceptions, will be taxed at the highest tax rate in effect
                  for that year, and

         -        the interest charge generally applicable to underpayments of
                  tax will be imposed in respect of the tax attributable to
                  each such year.

         If you own shares in a PFIC that are treated as marketable stock, you
may also make a mark-to-market election. If you make this election, you will
not be subject to the PFIC rules described above. Instead, in general, you will
include as ordinary income each year the excess, if any, of the fair market
value of your shares at the end of the taxable year over your adjusted basis in
your shares. You will also be allowed to take an ordinary loss in respect of
the excess, if any, of the adjusted basis of your shares over their fair market
value at the end of the taxable year (but only to the extent of the net amount
of previously included income as a result of the mark-to-market election). Your
basis in the shares will be adjusted to reflect any such income or loss
amounts.

         If you own shares during any year that we are a PFIC, you must file
Internal Revenue Service Form 8621.

DOCUMENTS ON DISPLAY

         You may read and copy documents referred to in this annual report on
Form 20-F that have been filed with the U.S. Securities and Exchange Commission
at the SEC's public reference room located at 450 Fifth Street, NW, Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms and their copy charges. The SEC also maintains a web
site at http://www.sec.gov that contains reports, proxy statements and other
information regarding registrants that file electronically with the SEC.

         The SEC allows us to "incorporate by reference" the information we
file with the SEC. This means that we can disclose important information to you
by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be part of this annual
report on Form 20-F.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         We are subject to market rate risks due to fluctuations in interest
rates. The majority of our debt is in the form of long-term, fixed- and
variable-rate bank and other loans with original maturities ranging from one to
five years. Accordingly, fluctuations in interest rates can lead to significant
fluctuations in the fair value of these debt instruments. From time to time, we
may enter into interest rate swap agreements designed to mitigate our exposure
to interest rate risks, although we did not consider it necessary to do so in
2001.

         We are also exposed to foreign currency risk as a result of our
telecommunications equipment being sourced substantially from overseas
suppliers. Specifically, our foreign currency exposure relates primarily to our
foreign currency-denominated short-term and long-term debt, our firm purchase
commitments and, to a limited extent, cash and cash equivalents denominated in
foreign currencies. We may, from time to time, enter into currency swap
agreements and foreign exchange forward contracts designed to mitigate our
exposure to foreign currency risks, although we did not consider this to be
necessary in 2001. Our foreign currency


                                     -84-
<PAGE>


hedging activity generally is expected to be limited to hedging of specific
future commitments and long-term debt denominated in foreign currencies.

         The following table provides information regarding our interest
rate-sensitive financial instruments, which consist of fixed and variable rate
short-term and long-term debt obligations, as of December 31, 2001 and 2000.


<TABLE>
<CAPTION>
                                                                                                AS OF               AS OF
                                                                                             DECEMBER 31,        DECEMBER 31,
                                                EXPECTED MATURITY DATE                           2001                2000
                                     --------------------------------------------------    ----------------    -----------------
                                                                                            TOTAL               TOTAL
                                                                                 THERE-    RECORDED   FAIR     RECORDED    FAIR
                                     2002     2003     2004     2005     2006     AFTER     AMOUNT    VALUE     AMOUNT    VALUE
                                     -----    -----    -----    -----    -----   ------    --------   -----    --------   ------
                                                    (RMB EQUIVALENT IN MILLIONS, EXCEPT INTEREST RATES)
<S>                                  <C>      <C>      <C>      <C>      <C>     <C>       <C>        <C>      <C>        <C>
Debt:
Fixed rate bank and other loans...   2,750      337    1,374      501      440       70     5,472     5,553     14,630    14,700
   Average interest rate..........    5.89%    6.57%    6.08%    5.97%    6.05%    6.21%     6.01%       --       5.59%       --
Variable rate bank and other loans   1,781    3,205       --       --       --       --     4,986     4,986      8,314     8,314
                                     -----    -----    -----    -----    -----    -----     -----     -----     ------    ------
   Average interest rate..........    5.99%    5.49%      --       --       --       --      5.67%       --       5.79%       --
</TABLE>

---------
*        The interest rates for variable rate bank and other loans are
         calculated based on the year-end indices.

         The following table provides information regarding our foreign
currency-sensitive financial instruments and transactions, which consist of
cash and cash equivalents, short and long-term debt obligations and capital
commitments as of December 31, 2001 and 2000.


<TABLE>
<CAPTION>
                                                                                               AS OF               AS OF
                                                                                            DECEMBER 31,        DECEMBER 31,
                                                                                                2001                2000
                                                                                          ----------------    -----------------
                                                                                           TOTAL               TOTAL
                                                                                THERE-    RECORDED   FAIR     RECORDED    FAIR
                                    2002     2003     2004     2005     2006     AFTER     AMOUNT    VALUE     AMOUNT    VALUE
                                    -----    -----    -----    -----    -----   ------    --------   -----    --------   ------
                                                   (RMB EQUIVALENT IN MILLIONS, EXCEPT INTEREST RATES)
<S>                                 <C>      <C>      <C>      <C>      <C>     <C>       <C>        <C>      <C>        <C>

On-balance sheet financial
instruments:
Cash and cash equivalents:
   in U.S. dollars ............     2,505      --      --        --      --       --       2,505      2,505     3,788     3,788
   in Hong Kong dollars .......     1,068      --      --        --      --       --       1,068      1,068     1,288     1,288
Debt:
   Fixed rate bank and other
    loans (U.S. dollar) .......       166     165      82        --      --       --         413        436       526       536
   Average interest rate ......      7.50%   7.50%   7.50%       --      --       --        7.50%        --      7.50%       --
   Variable rate bank and other
    loans (U.S.  dollar) ......        79      --      --        --      --       --          79         79       274       274
   Average interest rate ......      7.58%     --      --        --      --       --        7.58%      7.58%     7.68%       --
Off-balance sheet commitments .       469      --      --        --      --       --         469        469     3,526     3,526
   Capital commitments
   authorized and contracted
   for in U.S. dollars
</TABLE>

---------
*        The interest rates for variable rate bank and other loans are
         calculated based on the year-end indices.


ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

         Not Applicable.


                                     -85-
<PAGE>


                                    PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

         Not applicable.

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

         The following use of proceeds information relates to our registration
statement on Form F-1 (File No. 333-7634), filed by us in connection with our
initial public offering. The registration statement was declared effective by
the SEC on October 15, 1997.

         As of December 31, 1999, the balance of net proceeds from the above
referenced offering was RMB 3,953 million. In 2000, approximately RMB 2,365
million of this amount was paid to China Mobile Hong Kong (BVI) Limited, our
direct parent company, as part of the purchase price for our acquisition of
seven regional mobile telecommunications companies in Mainland China in
November 2000. The rest of the amount was applied to fund the development and
expansion of our mobile telecommunications networks in our service regions in
Mainland China. None of the network related payments were direct or indirect
payments to our directors, officers and general partners or their associates,
persons owning 10% or more of our ordinary shares, or our affiliates. As of
December 31, 2000, all of the net proceeds had been applied.

ITEM 15. [RESERVED]

ITEM 16. [RESERVED]

                                    PART III

ITEM 17. FINANCIAL STATEMENTS.

         The Company has elected to provide the financial statements and
related information specified in Item 18 in lieu of Item 17.

ITEM 18. FINANCIAL STATEMENTS.

         The following financial statements are filed as part of this annual
report.

CHINA MOBILE (HONG KONG) LIMITED:

<TABLE>
<S>                                                                                                <C>
Index to consolidated financial statements.......................................................  F-1
Independent auditors' report.....................................................................  F-2
Consolidated statements of income for each of the three years ended December 31,
     1999, 2000 and 2001.........................................................................  F-3
Consolidated statements of recognized gains and losses for each of the three years
     ended December 31, 1999, 2000 and 2001......................................................  F-5
Consolidated balance sheets as of December 31, 2000 and 2001.....................................  F-6
Consolidated statements of cash flows for each of the three years ended
     December 31, 1999, 2000 and 2001............................................................  F-8
Consolidated statements of shareholders' equity for each of the three years ended
     December 31, 1999, 2000 and 2001............................................................  F-13
Notes to consolidated financial statements.......................................................  F-14
</TABLE>


                                     -86-
<PAGE>


ITEM 19. EXHIBITS.

(a)      See Item 18 for a list of the financial statements filed as part of
         this annual report.

(b)      Exhibits to this annual report:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                     DESCRIPTION OF EXHIBIT

<S>             <C>
1.1             Memorandum and Articles of Association (as amended). (6)

2.1             Agreement concerning the provision of the documents relating to Renminbi denominated
                bonds issued by Guangdong Mobile. (6)

2.2             Guarantee from China Mobile Communications Corporation for the RMB 5 billion
                guaranteed bonds due in 2011 issued by Guangdong Mobile. (6)

4.1             Trademark License Agreement, dated April 24, 2002, between China Mobile
                Communications Corporation and China Mobile (Hong Kong) Limited.

4.2             Conditional Sale and Purchase Agreement, dated May 16, 2002, among China Mobile Hong Kong
                (BVI) Limited, China Mobile (Hong Kong) Limited and China Mobile Communications Corporation.

4.3             Subscription Agreement, dated May 16, 2002, among Vodafone Group PLC, Vodafone
                Holdings (Jersey) Limited and China Mobile (Hong Kong) Limited.

4.4             Prepaid services agreement dated May 11, 2001, between China Mobile (Hong Kong)
                Limited and China Mobile Communications Corporation. (6)

4.5             Inter-Provincial Long-Distance Transmission Leased Line Fee Sharing Agreement, dated
                May 5, 2000, between China Mobile Communications Corporation and China Telecom
                (Hong Kong) Limited. (4)

4.6             Inter-Provincial Network Interconnection, Domestic and International Roaming and
                Settlement Agreement, dated May 5, 2000, between China Mobile Communications
                Corporation and China Telecom (Hong Kong) Limited. (4)

4.7             Tenancy Agreement, dated June 7, 2000, between Fu Hao Properties Limited and China
                Telecom (Hong Kong) Limited. (4)
</TABLE>


                                     -87-
<PAGE>


<TABLE>
EXHIBIT
NUMBER                                        DESCRIPTION OF EXHIBIT
<S>             <C>
4.8             Agreement Regarding the Roaming Settlement of "Shenzhouxing" Prepaid Services
                "Shenzhouxing" and Revenues Sharing for Sales of Stored Value for Stored Value Cards,
                dated October 4, 2000, between China Mobile Communications Corporation and China
                Mobile (Hong Kong) Limited. (1)

4.9             Contract on Termination of the Trademark Licensing, dated September 15, 2000, between
                China Telecommunications Corporation and China Mobile (Hong Kong) Limited. (1)

4.10            Building Leasing and Property Management Agreement, dated September 18, 2000,
                between Beijing Mobile and Beijing Communications Service Company ("Beijing
                Service"). (1)

4.11            Building Leasing and Property Management Agreement, dated September 18, 2000,
                between Beijing Mobile and Beijing Service. (1)

4.12            Agreement on Mobile Communications Equipment Maintenance and Modulation, dated
                September 18, 2000, between Beijing Mobile and Beijing Huarui Wireless
                Communications Equipment Installation Company ("Beijing Huarui"). (1)

4.13            Agreement on Communications Projects Design and Construction, dated September 18,
                2000, between Beijing Mobile and Beijing Huarui. (1)

4.14            Capital Contribution Agreement, dated August 30, 2000, among China Mobile
                Communications Corporation, Beijing Mobile and Beijing Service. (1)

4.15            Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly
                Related to Mobile Communication Services, dated August 30, 2000, among China Mobile
                Communications Corporation, Beijing Mobile and Beijing Service. (1)

4.16            Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the
                Related Rights and Obligations, dated August 30, 2000, between Beijing Mobile and
                Beijing Service. (1)

4.17            Agreement on Mobile Communications Equipment Maintenance, dated September 20,
                2000, between Shanghai Mobile and Shanghai Long-distance Telecommunications
                Engineering Company ("Shanghai Engineering"). (1)

4.18            Agreement on Contracting Mobile Communications Projects, dated September 20, 2000,
                between Shanghai Mobile and Shanghai Engineering. (1)

4.19            Building Leasing and Property Management Agreement, dated September 20, 2000,
                between Shanghai Mobile and Shanghai Communications Service Company ("Shanghai
                Service"). (1)

4.20            Capital Contribution Agreement, dated August 30, 2000, among China Mobile
                Communications Corporation, Shanghai Mobile and Shanghai Service. (1)

4.21            Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly
                Related to Mobile Communication Services, dated August 30, 2000, among China Mobile
                Communications Corporation, Shanghai Mobile and Shanghai Service. (1)

4.22            Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the
                Related Rights and Obligations, dated August 30, 2000, between Shanghai Mobile and
                Shanghai Service. (1)

4.23            Building Leasing Agreement, dated August 1, 2000, between Tianjin Mobile and Tianjin
                Communications Service Company ("Tianjin Service"). (1)
</TABLE>


                                     -88-
<PAGE>


<TABLE>
EXHIBIT
NUMBER                                        DESCRIPTION OF EXHIBIT
<S>             <C>
4.24            Capital Contribution Agreement, dated August 30, 2000, among China Mobile
                Communications Corporation, Tianjin Mobile and Tianjin Service. (1)

4.25            Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly
                Related to Mobile Communication Services, dated August 30, 2000, among China Mobile
                Communications Corporation, Tianjin Mobile and Tianjin Service. (1)

4.26            Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the
                Related Rights and Obligations, dated August 30, 2000, between Tianjin Mobile and
                Tianjin Service. (1)

4.27            Building Leasing and Property Management Agreement, dated August 1, 2000, between
                Hebei Mobile and Hebei Communications Service Company ("Hebei Service"). (1)

4.28            Agreement on the Sales and Maintenance of Masts and Maintenance of Antennas and
                Feeder Lines, dated August 1, 2000, between Hebei Mobile and Hebei Provincial Posts
                and Telecommunications Equipment and Machinery Plant. (1)

4.29            Capital Contribution Agreement, dated August 30, 2000, among China Mobile
                Communications Corporation, Hebei Mobile and Hebei Service. (1)

4.30            Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly
                Related to Mobile Communication Services, dated August 30, 2000, among China Mobile
                Communications Corporation, Hebei Mobile and Hebei Service. (1)

4.31            Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the
                Related Rights and Obligations, dated August 30, 2000, between Hebei Mobile and Hebei
                Service. (1)

4.32            Building Leasing and Property Management Agreement, dated August 10, 2000, between
                Liaoning Mobile and Liaoning Communications Service Company ("Liaoning Service").
                (1)

4.33            Agreement on Communications Equipment Maintenance, dated September 8, 2000,
                between Liaoning Mobile and Liaoning Provincial Posts and Telecommunications
                Engineering Bureau ("Liaoning Engineering"). (1)

4.34            Agreement on Mobile Communications Projects Construction, dated September 8, 2000,
                between Liaoning Mobile and Liaoning Engineering. (1)

4.35            Capital Contribution Agreement, dated August 30, 2000, among China Mobile
                Communications Corporation, Liaoning Mobile and Liaoning Service. (1)

4.36            Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly
                Related to Mobile Communication Services, dated August 30, 2000, among China Mobile
                Communications Corporation, Liaoning Mobile and Liaoning Service. (1)

4.37            Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the
                Related Rights and Obligations, dated August 30, 2000, between Liaoning Mobile and
                Liaoning Service. (1)

4.38            Building Leasing and Property Management Agreement, dated September 1, 2000,
                between Shandong Mobile and Shandong Communications Service Company ("Shandong
                Service"). (1)
</TABLE>


                                     -89-
<PAGE>


<TABLE>
EXHIBIT
NUMBER                                        DESCRIPTION OF EXHIBIT
<S>             <C>
4.39            Agreement on Contracting Mobile Communications Projects, dated September 1, 2000,
                between Shandong Mobile and Shandong Mobile Communications Engineering Bureau. (1)

4.40            Capital Contribution Agreement, dated August 30, 2000, among China Mobile
                Communications Corporation, Shandong Mobile and Shandong Service. (1)

4.41            Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly
                Related to Mobile Communication Services, dated August 30, 2000, among China Mobile
                Communications Corporation, Shandong Mobile and Shandong Service. (1)

4.42            Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the
                Related Rights and Obligations, dated August 30, 2000, between Shandong Mobile and
                Shandong Service. (1)

4.43            Building Lease Agreement, dated August 26, 2000, between Guangxi Mobile and
                Guangxi Communications Service Company ("Guangxi Service"). (1)

4.44            Capital Contribution Agreement, dated August 30, 2000, among China Mobile
                Communications Corporation, Guangxi Mobile and Guangxi Service. (1)

4.45            Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly
                Related to Mobile Communication Services, dated August 30, 2000, among China Mobile
                Communications Corporation, Guangxi Mobile and Guangxi Service. (1)

4.46            Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the
                Related Rights and Obligations, dated August 30, 2000, between Guangxi Mobile and
                Guangxi Service. (1)

4.47            Strategic Investor Placing Agreement among China Mobile (Hong Kong) Limited,
                Vodafone Group Plc, China International Capital Corporation, Goldman Sachs (Asia)
                L.L.C. and Merrill Lynch Far East Limited. (1)

4.48            Syndicated loan agreement for RMB 7,500,000,000 among China Mobile (Shenzhen) Limited,
                Construction Bank of China, Bank of China, State Development Bank, Agriculture Bank of China,
                Industrial and Commercial Bank of China, Bank of Communications, Hong Kong and
                Shanghai Banking Corporation Ltd., China Merchants Bank and Construction Bank of China,
                Shenzhen Branch, dated October 7, 2000. (1)

4.49            Syndicated loan agreement for RMB 5,000,000,000 among China Mobile (Shenzhen) Limited,
                Construction Bank of China, Bank of China, State Development Bank, Agriculture Bank
                of China, Industrial and Commercial Bank of China, Bank of Communications, Hong
                Kong & Shanghai Banking Corporation Ltd., China Merchants Bank and Construction Bank
                of China, Shenzhen Branch, dated October 7, 2000. (1)

4.50            Conditional Sale and Purchase Agreement, dated October 4, 2000, among China Mobile
                Communications Corporation, China Mobile Hong Kong (BVI) Limited and China
                Mobile (Hong Kong) Limited. (1)

4.51            Conditional Sale and Purchase Agreement, dated October 4, 1999, among China Telecom
                Hong Kong (BVI) Limited, China Telecom (Hong Kong) Group Limited and China
                Telecom (Hong Kong) Limited. (2)

4.52            Agreement Regarding Provincial Network Interconnection, Roaming and Settlement of
                Account, dated October 8, 1999, between China Telecom (Hong Kong) Limited and
                China Mobile (Hong Kong) Limited. (2)
</TABLE>


                                     -90-
<PAGE>


<TABLE>
EXHIBIT
NUMBER                                        DESCRIPTION OF EXHIBIT
<S>             <C>
4.53            Agreement Regarding  the Use of Frequency/Number Resources, dated October 8, 1999, between
                China Telecom (Hong Kong) Limited and China Mobile (Hong Kong) Limited. (2)

4.54            Supplemental Agreement to Trademark Licensing Agreement, dated September 15, 1999,
                between China Telecom (Hong Kong) Limited and Directorate General
                Telecommunications. (2)

4.55            Agreement Regarding Network Interconnection and Settlement of Account, dated October
                8, 1999, between Guangdong Mobile and Guangdong Posts and Telecommunications
                Administration ("PTA"). (2)

4.56            Agreement Regarding Network Interconnection and Settlement of Account, dated
                October 5, 1999, between Zhejiang Mobile and Zhejiang PTA. (2)

4.57            Agreement Regarding Network Interconnection and Settlement of Account, dated October
                8, 1999, between Jiangsu Mobile and Jiangsu PTA. (2)

4.58            Agreement Regarding Network Interconnection and Settlement of Account, dated
                August 30, 1999, between Fujian Mobile Communication Bureau and Fujian PTA. (2)

4.59            Synchronous Clock Port Leasing Agreement, dated August 30, 1999, between Fujian
                Mobile Communication Bureau and Fujian PTA. (2)

4.60            Local Transmission Line Leasing Agreement, dated August 30, 1999, between Fujian
                Mobile Communication Bureau and Fujian PTA. (2)

4.61            Long Distance Line Leasing Agreement, dated August 30, 1999, between Fujian Mobile
                Communication Bureau and Fujian PTA. (2)

4.62            Business Agency Agreement, dated August 30, 1999, between Fujian Mobile
                Communication Bureau and Fujian PTA. (2)

4.63            Account Processing Agreement, dated August 30, 1999, between Fujian Mobile
                Communication Bureau and Fujian PTA. (2)

4.64            Collection Agreement, dated August 30, 1999, between Fujian Mobile Communication
                Bureau and Fujian PTA. (2)

4.65            Building and Facilities Leasing Agreement, dated August 30, 1999, between Fujian
                Mobile and Fujian PTA. (2)

4.66            Building and Facilities Leasing Agreement (leasing to PTA), dated August 30, 1999,
                between Fujian Mobile Communication Bureau and Fujian PTA. (2)

4.67            Agreement on Equipment Maintenance, dated August 30, 1999, between Fujian Mobile
                Communication Bureau and Fujian PTA. (2)

4.68            Building and Facility Leasing Agreement, dated September 25, 1999, between Fujian
                Mobile and Fujian Xunjie Communications Technical Services Company ("Xunjie"). (2)

4.69            Agreement Regarding Network Interconnection and Settlement of Account, dated August
                20, 1999, between Henan Mobile and Henan PTA. (2)

4.70            Synchronous Clock Port Leasing Agreement, dated August 19, 1999, between Henan
                Mobile and Henan PTA. (2)
</TABLE>


                                     -91-
<PAGE>


<TABLE>
EXHIBIT
NUMBER                                        DESCRIPTION OF EXHIBIT
<S>             <C>
4.71            Local Transmission Line Leasing Agreement, dated August 19, 1999, between Henan
                Mobile and Henan PTA. (2)

4.72            Long Distance Line Leasing Agreement, dated August 19, 1999, between Henan Mobile
                and Henan PTA. (2)

4.73            Business Agency Agreement, dated August 19, 1999, between Henan Mobile and Henan
                PTA. (2)

4.74            Business Agency Agreement, dated August 19, 1999, between Henan Mobile and Henan
                Feida Communication Development Company Limited ("Feida"). (2)

4.75            Account Processing Agreement, dated August 19, 1999, between Henan Mobile and
                Henan PTA. (2)

4.76            Collection Agreement, dated August 19, 1999, between Henan Mobile and Henan PTA.
                (2)

4.77            Collection Agreement, dated August 19, 1999, between Henan Mobile and Feida. (2)

4.78            Building and Facilities Leasing Agreement, dated August 19, 1999, between Henan
                Mobile and Henan PTA. (2)

4.79            Real Estates Leasing Agreement, dated September 23, 1999, between Henan Mobile and
                Feida. (2)

4.80            Agreement Regarding Network Interconnection and Settlement of Account, dated
                August 20, 1999, between Hainan Mobile and Hainan PTA. (2)

4.81            Synchronous Clock Port Leasing Agreement, dated August 20, 1999, between Hainan
                Mobile and Hainan PTA. (2)

4.82            Local Transmission Line Leasing Agreement, dated August 20, 1999, between Hainan
                Mobile and Hainan PTA. (2)

4.83            Long Distance Line Leasing Agreement, dated August 20, 1999, between Hainan Mobile
                and Hainan PTA. (2)

4.84            Business Agency Agreement, dated August 20, 1999, between Hainan Mobile and Hainan
                PTA. (2)

4.85            Account Processing Agreement, dated August 20, 1999, between Hainan Mobile and
                Hainan PTA. (2)

4.86            Collection Agreement, dated August 20, 1999, between Hainan Mobile and Hainan PTA. (2)

4.87            Building and Facilities Leasing Agreement, dated August 20, 1999, between Hainan
                Mobile and Hainan PTA. (2)

4.88            Real Estates Leasing Agreement, dated September 24, 1999, between Hainan Mobile and
                Hainan Communication Service Company ("Hainan Service"). (2)

4.89            Transmission Line Leasing Agreement, dated April 27, 1998, between Jiangsu Mobile and
                Jiangsu PTA. (5)

4.90            Collection Agreement, dated April 27, 1998, between Jiangsu Mobile and Jiangsu PTA. (5)

4.91            Master Building Contract, dated April 27, 1998, between Jiangsu Mobile and Jiangsu PTA. (5)
</TABLE>


                                     -92-
<PAGE>


<TABLE>
EXHIBIT
NUMBER                                        DESCRIPTION OF EXHIBIT
<S>             <C>
4.92            Marketing Agreement, dated October 15, 1998, between Guangdong Mobile and
                Guangdong PTA. (5)

4.93            Distribution and Marketing Agreement, dated April 27, 1998, between Jiangsu Mobile
                and Jiangsu PTA. (5)

4.94            Deed of Indemnity, dated October 8, 1997, among China Telecom (Hong Kong) Group Limited,
                China Telecom (Hong Kong) Limited, Guangdong Mobile and Zhejiang Mobile. (3)

4.95            Investment Agreement, dated September 27, 1997, between Zhejiang Provincial PTA and
                Zhejiang Mobile. (3)

4.96            Joint Venture Agreement, dated July 27, 1997, among China Mobile (Hong Kong) Limited,
                Zhejiang Financial Development Company, Zhejiang Jianda Industrial Development Company,
                Zhejiang Wireless Electric Communications Technology Company and MPT Hangzhou
                Communications Equipment Factory. (3)

4.97            Master Building Contract, dated May 30, 1997, between Guangdong Mobile and
                Guangdong PTA. (3)

8.1             List of major subsidiaries. (6)
</TABLE>

---------------
(1)      Incorporated by reference to our Registration Statement on Form F-3
         (File No. 333-47256), filed with the Securities and Exchange
         Commission on October 30, 2000.

(2)      Incorporated by reference to our Registration Statement on Form F-3
         (File No. 333-10956), filed with the Securities and Exchange
         Commission on October 30, 1999.

(3)      Incorporated by reference to our Registration Statement on Form F-1
         (File No. 333-7634), filed with the Securities and Exchange Commission
         on September 29, 1997.

(4)      Incorporated by reference to our Annual Report on Form 20-F for the
         fiscal year ended December 31, 1999 (File No. 1-14696), filed with the
         Securities and Exchange Commission on June 20, 2000.

(5)      Incorporated by reference to our Annual Report on Form 20-F for the
         fiscal year ended December 31, 1998 (File No. 1-14696), filed with the
         U.S. Securities and Exchange Commission on June 25, 1999.

(6)      Incorporated by reference to our Annual Report on Form 20-F for the
         fiscal year ended December 31, 2000 (File No. 1-14696), filed with the
         U.S. Securities and Exchange Commission on June 26, 2001.


                                     -93-
<PAGE>


                                   SIGNATURES

         The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.


                                    CHINA MOBILE (HONG KONG) LIMITED


                                    By:  /s/  Wang Xiaochu
                                       ----------------------------------------
                                       Name:  Wang Xiaochu
                                       Title: Chairman and Chief Executive
                                              Officer


Date:  June 13, 2002


<PAGE>


                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT
NUMBER                               DESCRIPTION OF EXHIBIT

<S>               <C>
1.1               Memorandum and Articles of Association (as amended). (6)

2.1               Agreement concerning the provision of the documents relating to Renminbi denominated bonds issued
                  by Guangdong Mobile. (6)

2.2               Guarantee from China Mobile Communications Corporation for the RMB 5 billion guaranteed bonds due
                  in 2011 issued by Guangdong Mobile. (6)

4.1               Trademark License Agreement, dated April 24, 2002, between China Mobile Communications Corporation
                  and China Mobile (Hong Kong) Limited.

4.2               Conditional Sale and Purchase Agreement, dated May 16, 2002, among China Mobile Hong Kong (BVI)
                  Limited, China Mobile (Hong Kong) Limited and China Mobile Communications Corporation.

4.3               Subscription Agreement, dated May 16, 2002, among Vodafone Group PLC, Vodafone Holdings (Jersey)
                  Limited and China Mobile (Hong Kong) Limited.

4.4               Prepaid services agreement dated May 11, 2001, between China Mobile (Hong Kong) Limited and China
                  Mobile Communications Corporation. (6)

4.5               Inter-Provincial Long-Distance Transmission Leased Line Fee Sharing Agreement, dated May 5, 2000,
                  between China Mobile Communications Corporation and China Telecom (Hong Kong) Limited. (4)

4.6               Inter-Provincial Network Interconnection, Domestic and International Roaming and Settlement
                  Agreement, dated May 5, 2000, between China Mobile Communications Corporation and China Telecom
                  (Hong Kong) Limited. (4)

4.7               Tenancy Agreement, dated June 7, 2000, between Fu Hao Properties Limited and China Telecom (Hong
                  Kong) Limited. (4)

4.8               Agreement Regarding the Roaming Settlement of "Shenzhouxing" Prepaid Services "Shenzhouxing" and
                  Revenues Sharing for Sales of Stored Value for Stored Value Cards, dated October 4, 2000, between
                  China Mobile Communications Corporation and China Mobile (Hong Kong) Limited. (1)

4.9               Contract on Termination of the Trademark Licensing, dated September 15, 2000, between China
                  Telecommunications Corporation and China Mobile (Hong Kong) Limited. (1)

4.10              Building Leasing and Property Management Agreement, dated September 18, 2000, between Beijing
                  Mobile and Beijing Communications Service Company ("Beijing Service"). (1)

4.11              Building Leasing and Property Management Agreement, dated September 18, 2000, between Beijing
                  Mobile and Beijing Service. (1)

4.12              Agreement on Mobile Communications Equipment Maintenance and Modulation, dated September 18, 2000,
                  between Beijing Mobile and Beijing Huarui Wireless Communications Equipment Installation Company
                  ("Beijing Huarui"). (1)

4.13              Agreement on Communications Projects Design and Construction, dated September 18, 2000, between
                  Beijing Mobile and Beijing Huarui. (1)
</TABLE>

                                      -95-
<PAGE>


<TABLE>
EXHIBIT
NUMBER                                       DESCRIPTION OF EXHIBIT
<S>               <C>
4.14              Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
                  Corporation, Beijing Mobile and Beijing Service. (1)

4.15              Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
                  Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
                  Beijing Mobile and Beijing Service. (1)

4.16              Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
                  Rights and Obligations, dated August 30, 2000, between Beijing Mobile and Beijing Service. (1)

4.17              Agreement on Mobile Communications Equipment Maintenance, dated September 20, 2000, between
                  Shanghai Mobile and Shanghai Long-distance Telecommunications Engineering Company ("Shanghai
                  Engineering"). (1)

4.18              Agreement on Contracting Mobile Communications Projects, dated September 20, 2000, between
                  Shanghai Mobile and Shanghai Engineering. (1)

4.19              Building Leasing and Property Management Agreement, dated September 20, 2000, between Shanghai
                  Mobile and Shanghai Communications Service Company ("Shanghai Service"). (1)

4.20              Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
                  Corporation, Shanghai Mobile and Shanghai Service. (1)

4.21              Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
                  Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
                  Shanghai Mobile and Shanghai Service. (1)

4.22              Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
                  Rights and Obligations, dated August 30, 2000, between Shanghai Mobile and Shanghai Service. (1)

4.23              Building Leasing Agreement, dated August 1, 2000, between Tianjin Mobile and Tianjin
                  Communications Service Company ("Tianjin Service"). (1)

4.24              Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
                  Corporation, Tianjin Mobile and Tianjin Service. (1)

4.25              Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
                  Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
                  Tianjin Mobile and Tianjin Service. (1)

4.26              Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
                  Rights and Obligations, dated August 30, 2000, between Tianjin Mobile and Tianjin Service. (1)

4.27              Building Leasing and Property Management Agreement, dated August 1, 2000, between Hebei Mobile and
                  Hebei Communications Service Company ("Hebei Service"). (1)

4.28              Agreement on the Sales and Maintenance of Masts and Maintenance of Antennas and Feeder Lines,
                  dated August 1, 2000, between Hebei Mobile and Hebei Provincial Posts and Telecommunications
                  Equipment and Machinery Plant. (1)

4.29              Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
                  Corporation, Hebei Mobile and Hebei Service. (1)
</TABLE>


                                      -96-
<PAGE>


<TABLE>
EXHIBIT
NUMBER                                        DESCRIPTION OF EXHIBIT
<S>               <C>
4.30              Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
                  Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
                  Hebei Mobile and Hebei Service. (1)

4.31              Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
                  Rights and Obligations, dated August 30, 2000, between Hebei Mobile and Hebei Service. (1)

4.32              Building Leasing and Property Management Agreement, dated August 10, 2000, between Liaoning Mobile
                  and Liaoning Communications Service Company ("Liaoning Service"). (1)

4.33              Agreement on Communications Equipment Maintenance, dated September 8, 2000, between Liaoning
                  Mobile and Liaoning Provincial Posts and Telecommunications Engineering Bureau ("Liaoning
                  Engineering"). (1)

4.34              Agreement on Mobile Communications Projects Construction, dated September 8, 2000, between
                  Liaoning Mobile and Liaoning Engineering. (1)

4.35              Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
                  Corporation, Liaoning Mobile and Liaoning Service. (1)

4.36              Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
                  Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
                  Liaoning Mobile and Liaoning Service. (1)

4.37              Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
                  Rights and Obligations, dated August 30, 2000, between Liaoning Mobile and Liaoning Service. (1)

4.38              Building Leasing and Property Management Agreement, dated September 1, 2000, between Shandong
                  Mobile and Shandong Communications Service Company ("Shandong Service"). (1)

4.39              Agreement on Contracting Mobile Communications Projects, dated September 1, 2000, between Shandong
                  Mobile and Shandong Mobile Communications Engineering Bureau. (1)

4.40              Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
                  Corporation, Shandong Mobile and Shandong Service. (1)

4.41              Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
                  Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
                  Shandong Mobile and Shandong Service. (1)

4.42              Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
                  Rights and Obligations, dated August 30, 2000, between Shandong Mobile and Shandong Service. (1)

4.43              Building Lease Agreement, dated August 26, 2000, between Guangxi Mobile and Guangxi Communications
                  Service Company ("Guangxi Service"). (1)

4.44              Capital Contribution Agreement, dated August 30, 2000, among China Mobile Communications
                  Corporation, Guangxi Mobile and Guangxi Service. (1)

4.45              Agreement Regarding the Transfer of Personnel, Finances and Assets Not Directly Related to Mobile
                  Communication Services, dated August 30, 2000, among China Mobile Communications Corporation,
                  Guangxi Mobile and Guangxi Service. (1)
</TABLE>


                                      -97-
<PAGE>


<TABLE>
EXHIBIT
NUMBER                                        DESCRIPTION OF EXHIBIT
<S>               <C>
4.46              Agreement on the Confirmation of the Transfer of Personnel, Finances and Assets and the Related
                  Rights and Obligations, dated August 30, 2000, between Guangxi Mobile and Guangxi Service. (1)

4.47              Strategic Investor Placing Agreement among China Mobile (Hong Kong) Limited, Vodafone Group Plc,
                  China International Capital Corporation, Goldman Sachs (Asia) L.L.C. and Merrill Lynch Far East
                  Limited. (1)

4.48              Syndicated loan agreement for RMB 7,500,000,000 among China Mobile (Shenzhen) Limited,
                  Construction Bank of China, Bank of China, State Development Bank, Agriculture Bank of China,
                  Industrial and Commercial Bank of China, Bank of Communications, Hong Kong and Shanghai Banking
                  Corporation Ltd., China Merchants Bank and Construction Bank of China, Shenzhen Branch, dated
                  October 7, 2000. (1)

4.49              Syndicated loan agreement for RMB 5,000,000,000 among China Mobile (Shenzhen) Limited,
                  Construction Bank of China, Bank of China, State Development Bank, Agriculture Bank of China,
                  Industrial and Commercial Bank of China, Bank of Communications, Hong Kong & Shanghai Banking
                  Corporation Ltd., China Merchants Bank and Construction Bank of China, Shenzhen Branch, dated
                  October 7, 2000. (1)

4.50              Conditional Sale and Purchase Agreement, dated October 4, 2000, among China Mobile Communications
                  Corporation, China Mobile Hong Kong (BVI) Limited and China Mobile (Hong Kong) Limited. (1)

4.51              Conditional Sale and Purchase Agreement, dated October 4, 1999, among China Telecom Hong Kong
                  (BVI) Limited, China Telecom (Hong Kong) Group Limited and China Telecom (Hong Kong) Limited. (2)

4.52              Agreement Regarding Provincial Network Interconnection, Roaming and Settlement of Account, dated
                  October 8, 1999, between China Telecom (Hong Kong) Limited and China Mobile (Hong Kong) Limited. (2)

4.53              Agreement Regarding the Use of Frequency/Number Resources, dated October 8, 1999, between China
                  Telecom (Hong Kong) Limited and China Mobile (Hong Kong) Limited. (2)

4.54              Supplemental Agreement to Trademark Licensing Agreement, dated September 15, 1999, between China
                  Telecom (Hong Kong) Limited and Directorate General Telecommunications. (2)

4.55              Agreement Regarding Network Interconnection and Settlement of Account, dated October 8, 1999,
                  between Guangdong Mobile and Guangdong Posts and Telecommunications Administration ("PTA"). (2)

4.56              Agreement Regarding Network Interconnection and Settlement of Account, dated October 5, 1999,
                  between Zhejiang Mobile and Zhejiang PTA. (2)

4.57              Agreement Regarding Network Interconnection and Settlement of Account, dated October 8, 1999,
                  between Jiangsu Mobile and Jiangsu PTA. (2)

4.58              Agreement Regarding Network Interconnection and Settlement of Account, dated August 30, 1999,
                  between Fujian Mobile Communication Bureau and Fujian PTA. (2)
</TABLE>


                                      -98-
<PAGE>


<TABLE>
EXHIBIT
NUMBER                                        DESCRIPTION OF EXHIBIT
<S>               <C>
4.59              Synchronous Clock Port Leasing Agreement, dated August 30, 1999, between Fujian Mobile
                  Communication Bureau and Fujian PTA. (2)

4.60              Local Transmission Line Leasing Agreement, dated August 30, 1999, between Fujian Mobile
                  Communication Bureau and Fujian PTA. (2)

4.61              Long Distance Line Leasing Agreement, dated August 30, 1999, between Fujian Mobile Communication
                  Bureau and Fujian PTA. (2)

4.62              Business Agency Agreement, dated August 30, 1999, between Fujian Mobile Communication Bureau and
                  Fujian PTA. (2)

4.63              Account Processing Agreement, dated August 30, 1999, between Fujian Mobile Communication Bureau
                  and Fujian PTA. (2)

4.64              Collection Agreement, dated August 30, 1999, between Fujian Mobile Communication Bureau and Fujian
                  PTA. (2)

4.65              Building and Facilities Leasing Agreement, dated August 30, 1999, between Fujian Mobile and Fujian
                  PTA. (2)

4.66              Building and Facilities Leasing Agreement (leasing to PTA), dated August 30, 1999, between Fujian
                  Mobile Communication Bureau and Fujian PTA. (2)

4.67              Agreement on Equipment Maintenance, dated August 30, 1999, between Fujian Mobile Communication
                  Bureau and Fujian PTA. (2)

4.68              Building and Facility Leasing Agreement, dated September 25, 1999, between Fujian Mobile and
                  Fujian Xunjie Communications Technical Services Company ("Xunjie"). (2)

4.69              Agreement Regarding Network Interconnection and Settlement of Account, dated August 20, 1999,
                  between Henan Mobile and Henan PTA. (2)

4.70              Synchronous Clock Port Leasing Agreement, dated August 19, 1999, between Henan Mobile and Henan
                  PTA. (2)

4.71              Local Transmission Line Leasing Agreement, dated August 19, 1999, between Henan Mobile and Henan
                  PTA. (2)

4.72              Long Distance Line Leasing Agreement, dated August 19, 1999, between Henan Mobile and Henan PTA.
                  (2)

4.73              Business Agency Agreement, dated August 19, 1999, between Henan Mobile and Henan PTA. (2)

4.74              Business Agency Agreement, dated August 19, 1999, between Henan Mobile and Henan Feida
                  Communication Development Company Limited ("Feida"). (2)

4.75              Account Processing Agreement, dated August 19, 1999, between Henan Mobile and Henan PTA. (2)

4.76              Collection Agreement, dated August 19, 1999, between Henan Mobile and Henan PTA. (2)

4.77              Collection Agreement, dated August 19, 1999, between Henan Mobile and Feida. (2)

4.78              Building and Facilities Leasing Agreement, dated August 19, 1999, between Henan Mobile and Henan
                  PTA. (2)
</TABLE>


                                      -99-
<PAGE>


<TABLE>
EXHIBIT
NUMBER                                        DESCRIPTION OF EXHIBIT
<S>               <C>
4.79              Real Estates Leasing Agreement, dated September 23, 1999, between Henan Mobile and Feida. (2)

4.80              Agreement Regarding Network Interconnection and Settlement of Account, dated August 20, 1999,
                  between Hainan Mobile and Hainan PTA. (2)

4.81              Synchronous Clock Port Leasing Agreement, dated August 20, 1999, between Hainan Mobile and Hainan
                  PTA. (2)

4.82              Local Transmission Line Leasing Agreement, dated August 20, 1999, between Hainan Mobile and Hainan
                  PTA. (2)

4.83              Long Distance Line Leasing Agreement, dated August 20, 1999, between Hainan Mobile and Hainan PTA. (2)

4.84              Business Agency Agreement, dated August 20, 1999, between Hainan Mobile and Hainan PTA. (2)

4.85              Account Processing Agreement, dated August 20, 1999, between Hainan Mobile and Hainan PTA. (2)

4.86              Collection Agreement, dated August 20, 1999, between Hainan Mobile and Hainan PTA. (2)

4.87              Building and Facilities Leasing Agreement, dated August 20, 1999, between Hainan Mobile and Hainan
                  PTA. (2)

4.88              Real Estates Leasing Agreement, dated September 24, 1999, between Hainan Mobile and Hainan
                  Communication Service Company ("Hainan Service"). (2)

4.89              Transmission Line Leasing Agreement, dated April 27, 1998, between Jiangsu Mobile and Jiangsu PTA. (5)

4.90              Collection Agreement, dated April 27, 1998, between Jiangsu Mobile and Jiangsu PTA. (5)

4.91              Master Building Contract, dated April 27, 1998, between Jiangsu Mobile and Jiangsu PTA. (5)

4.92              Marketing Agreement, dated October 15, 1998, between Guangdong Mobile and Guangdong PTA. (5)

4.93              Distribution and Marketing Agreement, dated April 27, 1998, between Jiangsu Mobile and Jiangsu
                  PTA. (5)

4.94              Deed of Indemnity, dated October 8, 1997, among China Telecom (Hong Kong) Group Limited, China
                  Telecom (Hong Kong) Limited, Guangdong Mobile and Zhejiang Mobile. (3)

4.95              Investment Agreement, dated September 27, 1997, between Zhejiang Provincial PTA and Zhejiang
                  Mobile. (3)

4.96              Joint Venture Agreement, dated July 27, 1997, among China Mobile (Hong Kong) Limited, Zhejiang
                  Financial Development Company, Zhejiang Jianda Industrial Development Company, Zhejiang Wireless
                  Electric Communications Technology Company and MPT Hangzhou Communications Equipment Factory. (3)

4.97              Master Building Contract, dated May 30, 1997, between Guangdong Mobile and Guangdong PTA. (3)

8.1               List of major subsidiaries. (6)
</TABLE>


                                     -100-
<PAGE>


---------
(1)      Incorporated by reference to our Registration Statement on Form F-3
         (File No. 333-47256), filed with the Securities and Exchange
         Commission on October 30, 2000.

(2)      Incorporated by reference to our Registration Statement on Form F-3
         (File No. 333-10956), filed with the Securities and Exchange
         Commission on October 30, 1999.

(3)      Incorporated by reference to our Registration Statement on Form F-1
         (File No. 333-7634), filed with the Securities and Exchange Commission
         on September 29, 1997.

(4)      Incorporated by reference to our Annual Report on Form 20-F for the
         fiscal year ended December 31, 1999 (File No. 1-14696), filed with the
         Securities and Exchange Commission on June 20, 2000.

(5)      Incorporated by reference to our Annual Report on Form 20-F for the
         fiscal year ended December 31, 1998 (File No. 1-14696), filed with the
         U.S. Securities and Exchange Commission on June 25, 1999.

(6)      Incorporated by reference to our Annual Report on Form 20-F for the
         fiscal year ended December 31, 2000 (File No. 1-14696), filed with the
         U.S. Securities and Exchange Commission on June 26, 2001.


                                     -101-
<PAGE>
KPMG


                        China Mobile (Hong Kong) Limited

                      For the year ended December 31, 2001

                       Consolidated Financial Statements


<PAGE>

                   Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                                  PAGE NO.
                                                                                                ----------
<S>                                                                                             <C>
Independent auditors' report                                                                           F-2

Consolidated statements of income for each of the three years ended December 31, 1999,
   2000 and 2001                                                                                 F-3 - F-4

Consolidated statements of recognized gains and losses for each of the three
   years ended December 31, 1999, 2000 and 2001                                                        F-5

Consolidated balance sheets as of December 31, 2000 and 2001                                     F-6 - F-7

Consolidated statements of cash flows for each of the three years ended December 31,
   1999, 2000 and 2001                                                                          F-8 - F-12

Consolidated statements of shareholders' equity for each of the three years ended
   December 31, 1999, 2000 and 2001                                                                   F-13

Notes to consolidated financial statements                                                     F-14 - F-97
</TABLE>



                                      F-1
<PAGE>


Independent Auditors' Report

The Board of Directors and Shareholders of
China Mobile (Hong Kong) Limited:


We have audited the accompanying consolidated balance sheets of China Mobile
(Hong Kong) Limited and subsidiaries (the "Group") as of December 31, 2000 and
2001 and the related consolidated statements of income, recognized gains and
losses, shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 2001, all expressed in Renminbi. These
consolidated financial statements are the responsibility of the Group's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States of America and Hong Kong. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of China Mobile (Hong
Kong) Limited and subsidiaries as of December 31, 2000 and 2001 and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2001 in conformity with accounting
principles generally accepted in Hong Kong.

Accounting principles generally accepted in Hong Kong vary in certain material
respects from accounting principles generally accepted in the United States of
America. Application of accounting principles generally accepted in the United
States of America would have affected results of operations for each of the
years in the three-year period ended December 31, 2001 and shareholders' equity
as of December 31, 2000 and 2001 to the extent summarized in Note 29 to the
consolidated financial statements.

The accompanying consolidated financial statements as of and for the year ended
December 31, 2001 have been translated into United States dollars solely for
the convenience of the reader. We have audited the translation, and in our
opinion, the consolidated financial statements expressed in Renminbi have been
translated into United States dollars on the basis set forth in Note 1 to the
consolidated financial statements.



KPMG
Hong Kong

18 March, 2002


                                      F-2

<PAGE>


Consolidated Statements of Income
(Amounts in millions, except share data)

<TABLE>
<CAPTION>
                                                                     Year ended December 31,
                                                         --------------------------------------------------
                                                Note         1999          2000          2001          2001
                                                              RMB           RMB           RMB           US$
<S>                                             <C>      <C>           <C>            <C>           <C>
OPERATING REVENUE

Usage fees                                                 25,812        46,287        73,458         8,875
Monthly fees                                                4,981         9,623        14,085         1,702
Connection fees                                             4,319         2,213           711            86
Other operating revenue                                     3,511         6,861        12,077         1,459
                                                         --------      --------     ---------      --------

TOTAL OPERATING REVENUE                            4       38,623        64,984       100,331        12,122
                                                         --------      --------     ---------      --------
OPERATING EXPENSES

Leased lines                                                3,723         5,501         5,005           605
Interconnection                                             6,453         8,329        13,055         1,577
Depreciation                                                7,411         9,759        17,664         2,134
Personnel                                                   2,256         3,991         5,325           643
Other operating expenses                                    5,140        10,578        18,270         2,208
                                                         --------      --------     ---------      --------

TOTAL OPERATING EXPENSES                           5       24,983        38,158        59,319         7,167
                                                         ========      ========     =========      ========

OPERATING PROFIT                                           13,640        26,826        41,012         4,955

WRITE-DOWN AND WRITE-OFF OF ANALOG NETWORK
  EQUIPMENT                                        6       (8,242)       (1,525)           --            --

OTHER NET INCOME                                   7          552           915         1,594           193

NON-OPERATING NET INCOME / (EXPENSES)              8           70            (5)           (6)           (1)

INTEREST INCOME                                               767         1,006           857           104

FINANCE COSTS                                     19         (343)         (824)       (1,740)         (210)
                                                         --------      --------     ---------      --------

PROFIT BEFORE TAX                                           6,444        26,393        41,717         5,041

INCOME TAX                                         9       (1,647)       (8,366)      (13,703)       (1,656)
                                                         --------      --------     ---------      --------

PROFIT AFTER TAX                                            4,797        18,027        28,014         3,385

MINORITY INTERESTS                                             --            --             1            --
                                                         --------      --------     ---------      --------

PROFIT ATTRIBUTABLE TO SHAREHOLDERS                         4,797        18,027        28,015         3,385
                                                         ========      ========     =========      ========
</TABLE>


                                      F-3

<PAGE>

Consolidated Statements of Income (Continued)
(Amounts in millions, except share data)

<TABLE>
<CAPTION>
                                                              Year ended December 31,
                                            -----------------------------------------------------------------

                                   Note             1999             2000             2001              2001
                                                     RMB              RMB              RMB               US$
<S>                                <C>      <C>             <C>              <C>                 <C>
BASIC NET PROFIT PER SHARE         2(u)     RMB 40 cents    RMB 125 cents    RMB 151 cents       US$18 cents
                                            ============    =============    =============       ===========

WEIGHTED AVERAGE
  NUMBER OF SHARES USED
  IN CALCULATING BASIC NET
  PROFIT PER SHARE
  (THOUSANDS)                                 12,069,108       14,394,313       18,605,371
                                            ============    =============    =============

DILUTED NET PROFIT PER
  SHARE                            2(u)     RMB 40 cents    RMB 125 cents    RMB 151 cents       US$18 cents
                                            ============    =============    =============       ===========

WEIGHTED AVERAGE
  NUMBER OF SHARES USED
  IN CALCULATING DILUTED
  NET PROFIT PER SHARE
  (THOUSANDS)                                 12,072,383       14,409,503       18,698,023
                                            ============    =============    =============
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-4

<PAGE>

Consolidated Statements of Recognized Gains and Losses
(Amounts in millions)

<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                                                    -------------------------------------------------------
                                                          1999           2000           2001           2001
                                                           RMB            RMB            RMB            US$
<S>                                                 <C>           <C>              <C>             <C>
Net profit for the year                                  4,797        18,027         28,015           3,385
Elimination of goodwill arising on the
  acquisition of subsidiaries against reserves         (42,440)     (239,540)            --              --

                                                    ----------    ----------       --------        --------
                                                       (37,643)     (221,513)        28,015           3,385
                                                    ==========    ==========       ========        ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-5

<PAGE>

Consolidated Balance Sheets
(Amounts in millions)

<TABLE>
<CAPTION>
                                                                             December 31,
                                                            ---------------------------------------------------

                                                   Note              2000               2001              2001
                                                                      RMB                RMB               US$
<S>                                                <C>      <C>               <C>               <C>
ASSETS

Current assets
  Cash and cash equivalents                                       27,702             21,821              2,636
  Deposits with banks                                             12,204             14,970              1,809
  Accounts receivable                                10            7,252              5,728                692
  Other receivables                                  11            2,297              1,189                144
  Inventories                                                        828              1,029                124
  Prepayments and other current assets                             1,289              1,571                190
  Amount due from ultimate holding
     company                                         12              557                503                 61
                                                            ------------      -------------     --------------

  Total current assets                                            52,129             46,811              5,656

Fixed assets                                         13           87,465            105,208             12,711
Construction in progress                                          13,527             19,981              2,414
Interest in associates                               14               46                 16                  2
Investment securities                                15               61                 77                  9
Deferred tax assets                                  16            3,046              1,476                178
Deferred expenses                                    17              164                180                 22
                                                            ------------      -------------     --------------

TOTAL ASSETS                                                     156,438            173,749             20,992
                                                            ============      =============     ==============
</TABLE>


                                      F-6

<PAGE>

Consolidated Balance Sheets (Continued)
(Amounts in millions)

<TABLE>
<CAPTION>
                                                                            December 31,
                                                             --------------------------------------------------
                                                  Note               2000               2001              2001
                                                                      RMB                RMB               US$
<S>                                               <C>        <C>                 <C>              <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
  Accounts payable                                  18            11,581             11,317             1,367
  Bills payable                                                    1,005              1,458               176
  Bank loans and other interest-bearing
   borrowings                                       19            10,471              4,531               548
  Taxes payable                                                    6,735              6,003               725
  Obligations under capital lease
   -current portion                                 20             1,624                908               110
 Amount due to immediate holding company            12             4,136                 --                --
  Amount due to ultimate holding company            12               678                241                29
  Accrued expenses and other payables               21             8,408             10,840             1,310
                                                             -----------         ----------       -----------

  Total current liabilities                                       44,638             35,298             4,265

 Bank loans and other interest-bearing
   borrowings                                       19            23,134             21,591             2,608
Obligations under capital lease-long term
   portion                                          20             1,235                812                98
Deferred revenue                                    22             3,654              4,237               512
                                                             -----------         ----------       -----------

TOTAL LIABILITIES                                                 72,661             61,938             7,483

Minority interests                                                    17                 32                 4

SHAREHOLDERS' EQUITY                                              83,760            111,779            13,505
                                                             -----------         ----------       -----------

TOTAL LIABILITIES AND  SHAREHOLDERS' EQUITY                      156,438            173,749            20,992
                                                             ===========         ==========       ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-7

<PAGE>

Consolidated Statements of Cash Flows
(Amounts in millions)

<TABLE>
<CAPTION>
                                                                     Year ended December 31,
                                                          ----------------------------------------------------
                                                Note          1999           2000          2001          2001
                                                               RMB            RMB           RMB           US$
<S>                                             <C>       <C>           <C>            <C>           <C>
 NET CASH INFLOWS FROM OPERATING
   ACTIVITIES                                    (a)         21,662        41,401         63,890         7,719
                                                          ---------     ---------      ---------     ---------
 RETURNS ON INVESTMENTS AND
   SERVICING OF FINANCE
 Interest received                                              934           994            867           105
 Interest paid                                                 (445)         (863)        (2,008)         (243)
 Dividend received from associate                                --            --             14             2
                                                          ---------     ---------      ---------     ---------

 NET CASH INFLOW/(OUTFLOW) FROM
   RETURNS ON INVESTMENTS AND
   SERVICING OF FINANCE                                         489           131         (1,127)         (136)
                                                        -----------   -----------    -----------   -----------
 TAXATION
 Hong Kong profits tax refunded                                   1           --             --            --
 PRC income tax paid                                        (2,479)       (5,952)       (12,865)       (1,554)
                                                        ----------    ----------      ---------    ----------

 TAX PAID                                                    (2,478)       (5,952)       (12,865)       (1,554)
                                                        -----------   -----------    -----------   -----------
 INVESTING ACTIVITIES
 Payment for acquisition of minority
    interests                                                   (15)           --             --            --
 Payment of amount due to immediate
    holding company in respect of
    acquisition of subsidiaries                                  --            --         (4,136)         (500)
 Payment for acquisition of
    subsidiaries (net of cash and
    cash equivalents acquired)                              (18,187)      (67,299)            --            --
 Capital expenditures                                       (11,708)      (21,964)       (39,500)       (4,772)
 Proceeds from sale of fixed assets                             709           264            204            25
 Increase in deposits with banks                             (6,916)       (3,881)        (2,766)         (334)
                                                        -----------   -----------    -----------   -----------

 NET CASH (OUTFLOW)/INFLOW FROM
   INVESTING ACTIVITIES                                     (36,117)      (92,880)       (46,198)       (5,581)
                                                        ===========   ===========    ===========   ===========
 NET CASH OUTFLOW BEFORE
   FINANCING ACTIVITIES                                     (16,444)      (57,300)         3,700           448
                                                        ===========   ===========    ===========   ===========
</TABLE>


                                      F-8

<PAGE>

Consolidated Statements of Cash Flows (Continued)
(Amounts in millions)

<TABLE>
<CAPTION>
                                                                     Year ended December 31,
                                                         ----------------------------------------------------
                                                Note          1999           2000          2001          2001
                                                               RMB            RMB           RMB           US$
<S>                                             <C>      <C>            <C>           <C>            <C>
FINANCING ACTIVITIES
Proceeds from issue of shares, net of
  expenses                                                  16,223         55,812             4            --
Proceeds from issue of fixed rates
  notes, net of discount                         (b)         4,952             --            --            --
Expenses on issue of fixed rate notes                          (53)            --            --            --
Proceeds from issue of convertible notes         (b)            --          5,708            --            --
Expenses on issue of convertible notes                          --           (128)           --            --
Proceeds from issue of bonds                     (b)            --             --         5,000           604
Expenses on issue of bonds                                      --             --           (55)           (7)
Proceeds from bank and other loans               (b)         6,868         12,736         5,407           653
Repayments of bank and other loans               (b)        (9,653)        (8,130)      (17,897)       (2,162)
Repayments of obligation under
  capital lease                                  (b)            --           (362)       (2,055)         (248)
Increase in amounts due to minority
  interests                                      (b)            --             17            15             2
                                                         ---------      ---------     ---------      --------

NET CASH INFLOW/(OUTFLOW) FROM
  FINANCING ACTIVITIES                                      18,337         65,653        (9,581)       (1,158)
                                                         ---------      ---------     ---------      --------
INCREASE/(DECREASE) IN CASH AND
  CASH EQUIVALENTS                                           1,893          8,353        (5,881)         (710)

EFFECT OF CHANGES IN FOREIGN
  EXCHANGE RATES                                               (25)            --            --            --

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR                                         17,481         19,349        27,702         3,346
                                                         ---------      ---------     ---------      --------

CASH AND CASH EQUIVALENTS AT END
  OF YEAR                                                   19,349         27,702        21,821         2,636
                                                         =========      =========     =========      ========
ANALYSIS OF THE BALANCES OF CASH
  AND CASH EQUIVALENTS

Deposits with banks maturing within
  three months when placed                                   6,986          6,457         3,818           461
Cash and bank balances                                      12,363         21,245        18,003         2,175
                                                         ---------      ---------     ---------      --------

                                                            19,349         27,702        21,821         2,636
                                                         =========      =========     =========      ========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-9

<PAGE>

Consolidated Statements of Cash Flows (Continued)
(Amounts in millions)

(A)      THE RECONCILIATION OF PROFIT BEFORE TAX TO NET CASH INFLOWS FROM
         OPERATING ACTIVITIES IS AS FOLLOWS:

<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                                 ------------------------------------------------------------
                                                                       1999             2000             2001           2001
                                                                        RMB              RMB              RMB            US$
         <S>                                                     <C>              <C>              <C>              <C>
         Profit before taxation                                       6,444           26,393           41,717           5,041
         Depreciation of fixed assets                                 7,411            9,759           17,664           2,134
         Write-down and write-off of analog
           network equipment                                          8,242            1,525               --              --
         Provision for interest in associates                            --               --               30               4
         Provision for doubtful accounts                                771            1,346            1,737             210
         Amortization of deferred expenses                                2               15               39               5
         Loss on sale of fixed assets                                     1              126              275              33
         Interest income                                               (767)          (1,006)            (857)           (104)
         Interest expenses and capital lease charges                    343              824            1,740             210

         Dividend income                                                 --              (26)             (43)             (5)
         Unrealized exchange loss/(gain), net                            25               (2)               4              --
         Increase in accounts receivable                             (2,167)            (985)            (213)            (26)
         (Increase)/decrease in other receivables                      (245)              54            1,111             134
         Increase in inventories                                        (43)            (408)            (124)            (15)
         Decrease in amount due from ultimate
           holding company                                               14              409               54               6
         Decrease/(increase) in prepayments
           and other current assets                                     781             (262)            (282)            (34)
         (Increase)/decrease in amounts due from
           related parties                                             (127)           1,700               --              --
         (Decrease)/increase in accounts payable                        (36)           1,179           (1,724)           (208)
         Increase/(decrease) in amount due to
           ultimate holding company                                     329               14             (437)            (53)
         Increase/(decrease) in amounts due to
           related parties                                              426           (1,696)              --              --
         Increase in accrued expenses and
           other payables                                               523            1,319            2,616             316
         (Decrease)/increase in deferred revenue, net                  (265)           1,123              583              71
                                                                 ----------       ----------       ----------       ---------

         Net cash inflows from operating activities                  21,662           41,401           63,890           7,719
                                                                 ==========       ==========       ==========       =========
</TABLE>


                                     F-10

<PAGE>

Consolidated Statements of Cash Flows (Continued)
(Amounts in millions)

(B)      ANALYSIS OF CHANGES IN FINANCING DURING THE YEARS:

<TABLE>
<CAPTION>
                                                                                             Obligation
                                                                        Fixed                     under
                                                       Bank and         rates  Convertible      capital                Minority
                                                    other loans         notes        notes        lease        Bonds  interests
                                                            RMB           RMB          RMB          RMB          RMB        RMB
         <S>                                        <C>             <C>        <C>           <C>            <C>       <C>
         Balance at January 1, 1999                       6,328            --           --           --           --         --
         Acquired on acquisition of subsidiaries          3,033            --           --          175           --         --
         Proceeds from bank and other loans               6,868            --           --           --           --         --
         Repayments of bank and other loans              (9,653)           --           --           --           --         --
         Issue of fixed rates notes                          --         4,952           --           --           --         --
                                                     ----------     ---------     --------    ---------     --------    -------

         Balance at December 31, 1999                     6,576         4,952           --          175           --         --
                                                     ==========     =========     ========    =========     ========    =======

         Balance at January 1, 2000                       6,576         4,952           --          175           --         --
         Acquired on acquisition of subsidiaries         11,762            --           --        3,011           --         --
         Proceeds from bank and other loans              12,736            --           --           --           --         --

         Repayments of bank and other loans              (8,130)           --           --           --           --         --
         Effect of foreign exchange rates                    --            (2)          --           --           --         --
         Amortization of discount arising on
           issuance of notes                                 --             3           --           --           --         --
         Issue of convertible notes                          --            --        5,708           --           --         --
         Inception of capital lease contracts                --            --           --           35           --         --
         Repayment of obligation under capital
           leases                                            --            --           --         (362)          --         --
         Proceeds from minority interests                    --            --           --           --           --         17
                                                     ----------     ---------     --------    ---------     --------    -------

         Balance at December 31, 2000                    22,944         4,953        5,708        2,859           --         17
                                                     ==========     =========     ========    =========     ========    =======

         Balance at January 1, 2001                      22,944         4,953        5,708        2,859           --         17
         Proceeds from bank and other loans               5,407            --           --           --           --         --
         Repayments of bank and other loans             (17,897)           --           --           --           --         --
         Effect of foreign exchange rates                     4            --           --           --           --         --
         Amortization of discount arising on
           issuance of notes                                 --             3           --           --           --         --
         Issue of bonds                                      --            --           --           --        5,000         --
         Inception of capital lease contracts                --            --           --          916           --         --
         Repayments of obligation under capital
           leases                                            --            --           --       (2,055)          --         --
         Proceeds from minority interests                    --            --           --           --           --         15
                                                     ----------     ---------     --------    ---------     --------    -------

         Balance at December 31, 2001                    10,458         4,956        5,708        1,720        5,000         32
                                                     ==========     =========     ========    =========     ========    =======
</TABLE>


                                     F-11

<PAGE>

Consolidated Statements of Cash Flows (Continued)
(Amounts in millions)

(C)      SIGNIFICANT NON-CASH TRANSACTIONS:

         The Group incurred payables of RMB8,679 and RMB1,337 to equipment
         suppliers and banks respectively for additions of construction in
         progress during the year ended December 31, 2001.

         The Group incurred payables of RMB5,555 and RMB1,005 to equipment
         suppliers and banks respectively for additions of construction in
         progress during the year ended December 31, 2000. In November 2000,
         the Group issued new shares to China Mobile Hong Kong (BVI) Limited
         ("CMHK (BVI)") at HK$181,412 (RMB equivalent 192,369) as part of the
         consideration for the acquisition of Beijing Mobile (BVI) Limited
         ("Beijing Mobile BVI"), Shanghai Mobile (BVI) Limited ("Shanghai
         Mobile BVI"), Tianjin Mobile (BVI) Limited ("Tianjin Mobile BVI"),
         Hebei Mobile (BVI) Limited ("Hebei Mobile BVI"), Liaoning Mobile (BVI)
         Limited ("Liaoning Mobile BVI"), Shandong Mobile (BVI) Limited
         ("Shandong Mobile BVI") and Guangxi Mobile (BVI) Limited ("Guangxi
         Mobile BVI").

         The Group incurred payables of RMB3,374 and RMB1,486 to equipment
         suppliers and banks respectively for additions of construction in
         progress during the year ended December 31, 1999. In November 1999,
         the Group issued new shares to CMHK (BVI) at HK$30,684 (RMB equivalent
         32,685) as part of the consideration for the acquisition of Fujian
         Mobile (BVI) Limited ("Fujian Mobile BVI"), Henan Mobile (BVI) Limited
         ("Henan Mobile BVI") and Hainan Mobile (BVI) Limited ("Hainan Mobile
         BVI").


                                     F-12
<PAGE>

Consolidated Statements of Shareholders' Equity
(Amounts in millions, except share data)

STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS:

<TABLE>
<CAPTION>
                                                                             Number of
                                                                              ordinary      Share          Share         Capital
                                                                                shares    capital        premium         Reserve
                                                                                              RMB            RMB             RMB
<S>                                                                    <C>                <C>            <C>             <C>
Shareholders' equity at January 1, 1999                                11,780,788,000       1,261         50,643         (14,490)
Goodwill arising on acquisition of Fujian Mobile, Henan Mobile                     --          --             --         (42,440)
  and Hainan Mobile
Transfer from statement of income                                                  --          --             --              --
Shares issued under share option scheme                                     7,500,000           1             88              --
Issue of new shares to the professional and institutional                 644,804,000          69         16,484              --
  investors
Issue of consideration shares for acquisition of subsidiaries           1,273,195,021         136         32,549              --
Expenses incurred in connection with the issue of new shares to
  professional and institutional investors                                         --          --           (419)             --
Appropriation                                                                      --          --             --              --
                                                                      ---------------     -------     ----------      ----------

Shareholders' equity at December 31, 1999                              13,706,287,021       1,467         99,345         (56,930)
                                                                      ===============     =======     ==========      ==========

Shareholders' equity at January 1, 2000                                13,706,287,021       1,467         99,345         (56,930)
Goodwill arising on acquisition of Beijing Mobile, Shanghai
  Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong
  Mobile and Guangxi Mobile                                                        --          --             --        (239,540)
Transfer from statement of income                                                  --          --             --              --
Shares issued under share option scheme                                     3,974,000          --             89              --
Issue of new shares to the professional and institutional               1,115,643,845         119         56,694              --
  investors
Issue of consideration shares for acquisition of subsidiaries           3,779,407,375         400        191,969              --
Expenses incurred in connection with the issue of new shares to
  professional and institutional investors                                         --          --         (1,090)             --
Appropriation                                                                      --          --             --              --
                                                                      ---------------     -------     ----------      ----------

Shareholders' equity at December 31, 2000                              18,605,312,241       1,986        347,007        (296,470)
                                                                      ===============     =======     ==========      ==========

Shareholders' equity at January 1, 2001                                18,605,312,241       1,986        347,007        (296,470)

Transfer from statement of income                                                  --          --             --              --
Shares issued under share option scheme                                        93,000          --              4              --
Appropriation                                                                      --          --             --              --
                                                                      ---------------     -------     ----------      ----------

Shareholders' equity at December 31, 2001                              18,605,405,241       1,986        347,011        (296,470)
                                                                      ===============     =======     ==========      ==========

<CAPTION>

                                                                                            PRC
                                                                         General      statutory        Retained
                                                                         reserve       reserves        earnings           Total
                                                                             RMB            RMB             RMB             RMB

Shareholders' equity at January 1, 1999                                       72          2,203           6,138          45,827
Goodwill arising on acquisition of Fujian Mobile, Henan Mobile                --             --              --         (42,440)
and Hainan Mobile
Transfer from statement of income                                             --             --           4,797           4,797
Shares issued under share option scheme                                       --             --              --              89
Issue of new shares to the professional and institutional                     --             --              --          16,553
investors
Issue of consideration shares for acquisition of subsidiaries                 --             --              --          32,685
Expenses incurred in connection with the issue of new shares to
professional and institutional investors                                      --             --              --            (419)
Appropriation                                                                 --          3,524          (3,524)             --
                                                                      ----------     ----------      ----------      ----------

Shareholders' equity at December 31, 1999                                     72          5,727           7,411          57,092
                                                                      ==========     ==========      ==========      ==========

Shareholders' equity at January 1, 2000                                       72          5,727           7,411          57,092
Goodwill arising on acquisition of Beijing Mobile, Shanghai
Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile,
  Shandong Mobile and Guangxi Mobile                                          --             --              --        (239,540)
Transfer from statement of income                                             --             --          18,027          18,027
Shares issued under share option scheme                                       --             --              --              89
Issue of new shares to the professional and institutional                     --             --              --          56,813
investors
Issue of consideration shares for acquisition of subsidiaries                 --             --              --         192,369
Expenses incurred in connection with the issue of new shares to
  professional and institutional investors                                    --             --              --          (1,090)
Appropriation                                                                 --          6,916          (6,916)             --
                                                                      ----------     ----------      ----------      ----------

Shareholders' equity at December 31, 2000                                     72         12,643          18,522          83,760
                                                                      ==========     ==========      ==========      ==========

Shareholders' equity at January 1, 2001                                       72         12,643          18,522          83,760
Transfer from statement of income                                             --             --          28,015          28,015
Shares issued under share option scheme                                       --             --              --               4
Appropriation                                                                 --          5,033          (5,033)             --
                                                                      ----------     ----------      ----------      ----------

Shareholders' equity at December 31, 2001                                     72         17,676          41,504         111,779
                                                                      ==========     ==========      ==========      ==========
</TABLE>

See accompanying notes to consolidated financial statements.


                                     F-13



<PAGE>

Notes to Consolidated Financial Statements
(Amounts in millions, except share data)




1      ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION

       China Mobile (Hong Kong) Limited ("the Company") and its subsidiaries
       (hereinafter collectively referred to as the "Group") are principally
       engaged in the provision of cellular telephone and related services in
       Guangdong, Zhejiang, Jiangsu, Fujian, Henan, Hainan, Hebei, Liaoning and
       Shandong provinces, Beijing, Shanghai and Tianjin municipalities, and
       Guangxi autonomous region of the People's Republic of China ("PRC") and
       market their services under the "China Mobile" logo, which is a
       registered trademark owned by China Mobile Communications Corporation
       ("China Mobile"), a company incorporated in the PRC in July 1999 to hold
       and operate the cellular telecommunications networks nationwide as a
       result of restructuring of the telecommunications industry in the PRC.
       The telecommunications operations in the PRC previously controlled by the
       Ministry of Information Industry ("MII") have been separated into four
       business lines: fixed line communications, mobile communications, paging
       services and satellite communications. Since then, the MII act
       exclusively as the industry regulator and are not involved in managing
       the day-to-day operations of telecommunications service providers in the
       PRC.

       Prior to the restructuring (as described below, the "Restructuring"), the
       Group's Total Access Communications Systems ("TACS") and Global System
       for Mobile Communications ("GSM") cellular networks in Guangdong were
       owned by Guangdong Mobile Communication Corporation (together with the
       successor wholly-owned foreign enterprise formed in connection with the
       Restructuring, "Guangdong Mobile"), an enterprise formed in September
       1988 and wholly owned by the MII on behalf of the State. Prior to the
       Restructuring, the Group's GSM cellular network in Zhejiang was owned by
       Zhejiang GSM Mobile Communication Company Limited (together with the
       successor sino-foreign joint venture company formed in connection with
       the Restructuring, "Zhejiang Mobile"), a company formed in February 1996
       and 98.55% owned by the Zhejiang Provincial Posts and Telecommunications
       Administrations ("PTA") ("Zhejiang PTA"), while the Group's TACS cellular
       networks in Zhejiang were owned and operated directly by the Zhejiang
       PTA.



                                      F-14
<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




1      ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION (CONTINUED)

       Restructuring

       Pursuant to the Restructuring, the Company was established as a
       wholly-owned subsidiary of China Mobile Hong Kong (BVI) Limited ("CMHK
       (BVI)"), a company incorporated with limited liability in the British
       Virgin Islands. CMHK (BVI) is controlled by China Mobile (Hong Kong)
       Group Limited ("CMHKG"), which in turn is 51% owned by Telpo
       Communications (Group) Limited ("Telpo"), a Hong Kong company wholly
       owned by the MII, and as to 49% by the China Telecommunications
       Corporation (previously known as the Directorate General of
       Telecommunications, or the DGT). At December 31, 1999, the percentages of
       equity interests of CMHK (BVI), which in turn were owned by Telpo and DGT
       were changed to 57% and 43%, respectively. On May 12, 2000, China Mobile
       acquired a 100% controlling interest in CMHKG. As a result of this, China
       Mobile now indirectly holds approximately 75% equity interest in the
       Company. Guangdong Mobile was formed as a wholly foreign-owned enterprise
       whereas Zhejiang Mobile was formed as a sino-foreign joint venture
       company. The Company is the sole equity owner in Guangdong Mobile and was
       initially the 99.63% joint venture partner in Zhejiang Mobile, with the
       remaining interests held by various local investors. The Company acquired
       the remaining 0.37% interest in Zhejiang Mobile in April 1999. Subsequent
       to the acquisition, Zhejiang Mobile became a wholly foreign-owned
       enterprise.

       In connection with the Restructuring and in anticipation of the initial
       offering of the Company's ordinary shares, the fixed assets of Guangdong
       Mobile and Zhejiang Mobile were revalued as of May 31, 1997, by a firm of
       independent valuers and approved by the China State-owned Assets
       Administration Bureau. The value of fixed assets of Guangdong Mobile and
       Zhejiang Mobile pursuant to the valuation, based on a depreciated
       replacement cost basis, was determined at RMB15,630. Upon the transfer of
       interests in Guangdong Mobile and Zhejiang Mobile by the MII and the DGT
       to the Company, 9,010,000,000 ordinary shares of HK$0.10 each were issued
       by the Company to CMHK (BVI) for consideration valued at RMB19,466. Such
       amount was based on the net asset value of Guangdong Mobile and Zhejiang
       Mobile at May 31, 1997, the effective date of the Restructuring, adjusted
       for additional earnings to September 26, 1997, the completion date of the
       Restructuring, of RMB1,132, which is reflected as capital reserve.



                                      F-15
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)



1      ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION (CONTINUED)

       Equity offering

       Subsequent to the Restructuring, in October 1997, the Company completed
       an initial public offering (the "Offering") of an aggregate of
       2,770,788,000 ordinary shares. Net proceeds to the Company for the
       Offering, after deduction of offering expenses, were approximately
       RMB33,570.

       Acquisition of Jiangsu Mobile Communication Company Limited ("Jiangsu
       Mobile")

       Pursuant to the ordinary resolution passed by the Company's shareholders
       on June 3, 1998, the Company acquired the entire issued share capital of
       China Telecom Jiangsu Mobile (BVI) Limited ("Jiangsu Mobile BVI") from
       CMHK (BVI) by a total cash consideration of HK$22,475 (RMB equivalent
       24,120) (hereinafter referred to as the "First Acquisition").

       The only asset of Jiangsu Mobile BVI is its interest in the entire equity
       of Jiangsu Mobile. Subsequent to the First Acquisition, Jiangsu Mobile
       became a wholly foreign-owned enterprise.

       In connection with the First Acquisition, the fixed assets of Jiangsu
       Mobile were revalued as of December 31, 1997, by a firm of independent
       valuers and approved by the China State-owned Assets Administration
       Bureau. The value of fixed assets of Jiangsu Mobile pursuant to the
       valuation, based on a depreciated replacement cost basis, was determined
       at RMB7,879.

       Goodwill arising on the acquisition of Jiangsu Mobile BVI and Jiangsu
       Mobile (RMB15,622), being the excess of the cost of investments
       (RMB24,120) over the fair value of the Group's share of the separable net
       assets acquired (RMB8,498), was eliminated against reserves immediately
       on acquisition. The fair value of the Group's share of the separable net
       assets acquired was based on the net asset value of Jiangsu Mobile at
       December 31, 1997 (RMB8,009), adjusted for additional earnings to June 3,
       1998, the completion date of the First Acquisition, of RMB489.



                                      F-16
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




1      ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION (CONTINUED)

       Acquisition of Fujian Mobile Communication Company Limited ("Fujian
       Mobile"), Henan Mobile Communication Company Limited ("Henan Mobile") and
       Hainan Mobile Communication Company Limited ("Hainan Mobile")

       Pursuant to an ordinary resolution passed by the Company's shareholders
       on November 11, 1999, the Company acquired the entire issued share
       capital of Fujian Mobile (BVI) Limited ("Fujian Mobile BVI"), Henan
       Mobile (BVI) Limited ("Henan Mobile BVI") and Hainan Mobile (BVI) Limited
       ("Hainan Mobile BVI") from CMHK (BVI) for a total consideration of
       HK$49,715 (RMB equivalent 52,953) (hereinafter referred to as the "Second
       Acquisition"). The consideration was satisfied by cash of HK$19,031 (RMB
       equivalent 20,268) and an allotment of 1,273,195,021 ordinary shares of
       HK$0.10 each to CMHK (BVI) amounting to HK$30,684 (RMB equivalent
       32,685). The only assets of each of Fujian Mobile BVI, Henan Mobile BVI
       and Hainan Mobile BVI are their interests in the entire equity of Fujian
       Mobile, Henan Mobile and Hainan Mobile, respectively.

       In connection with the Second Acquisition, the fixed assets of Fujian
       Mobile, Henan Mobile and Hainan Mobile were revalued as of June 30, 1999,
       by a firm of independent valuers and approved by the Ministry of Finance.
       The value of fixed assets of Fujian Mobile, Henan Mobile and Hainan
       Mobile pursuant to the valuation, based on a depreciated replacement cost
       basis, was determined at RMB10,684.

       Goodwill arising on the acquisition of Fujian Mobile, Henan Mobile and
       Hainan Mobile (RMB42,440), being the excess of the cost of investments
       (RMB52,953) over the fair value of the Group's share of the separable net
       assets acquired (RMB10,513), was eliminated against reserves immediately
       on acquisition. The fair value of the Group's share of the separable net
       assets acquired was based on the net assets of Fujian Mobile, Henan
       Mobile and Hainan Mobile at June 30, 1999 (RMB9,524), adjusted for
       additional earnings to November 11, 1999, the completion date of the
       Second Acquisition, of RMB989.



                                      F-17
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




1      ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION (CONTINUED)

       Equity offering and debt offering

       In order to finance the acquisition consideration, the Company completed
       an international offering of an aggregate of 644,804,000 ordinary shares
       and debt offering with a principal amount of US$600 with maturity due on
       November 2, 2004. Further the Company issued totalling 1,273,195,021
       consideration shares to CMHK (BVI), credited as fully paid as part of the
       acquisition consideration. Net proceeds to the Company for such equity
       offering and debt offering, after deduction of offering expenses and
       discount, were approximately RMB16,134 and RMB4,899, respectively.

       Acquisition of Beijing Mobile Communication Company Limited ("Beijing
       Mobile"), Shanghai Mobile Communication Company Limited ("Shanghai
       Mobile"), Tianjin Mobile Communication Company Limited ("Tianjin
       Mobile"), Hebei Mobile Communication Company Limited ("Hebei Mobile"),
       Liaoning Mobile Communication Company Limited ("Liaoning Mobile"),
       Shandong Mobile Communication Company Limited ("Shandong Mobile") and
       Guangxi Mobile Communication Company Limited ("Guangxi Mobile")


       Pursuant to an ordinary resolution passed by the Company's shareholders
       on November 10, 2000, the Company acquired the entire issued share
       capital of Beijing Mobile (BVI) Limited ("Beijing Mobile BVI"), Shanghai
       Mobile (BVI) Limited ("Shanghai Mobile BVI"), Tianjin Mobile (BVI)
       Limited ("Tianjin Mobile BVI"), Hebei Mobile (BVI) Limited ("Hebei Mobile
       BVI"), Liaoning Mobile (BVI) Limited ("Liaoning Mobile BVI"), Shandong
       Mobile (BVI) Limited ("Shandong Mobile BVI") and Guangxi Mobile (BVI)
       Limited ("Guangxi Mobile BVI") from CMHK (BVI) for a total consideration
       of HK$256,021 (RMB equivalent 271,485) (hereinafter referred to as the
       "Third Acquisition"). The consideration was satisfied by cash of
       HK$74,609 (RMB equivalent 79,116) and an allotment of 3,779,407,375
       ordinary shares of HK$0.10 each to CMHK (BVI) amounting to HK$181,412
       (RMB equivalent 192,369). The only assets of each of Beijing Mobile BVI,
       Shanghai Mobile BVI, Tianjin Mobile BVI, Hebei Mobile BVI, Liaoning
       Mobile BVI, Shandong Mobile BVI and Guangxi Mobile BVI are their
       interests in the entire equity of Beijing Mobile, Shanghai Mobile,
       Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and
       Guangxi Mobile, respectively.


                                      F-18
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




1      ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION (CONTINUED)

       In connection with the Third Acquisition, the fixed assets of Beijing
       Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile,
       Shandong Mobile and Guangxi Mobile were revalued as of June 30, 2000, by
       a firm of independent valuers and approved by the Ministry of Finance.
       The value of fixed assets of Beijing Mobile, Shanghai Mobile, Tianjin
       Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile
       pursuant to the valuation, based on a depreciated replacement cost basis,
       was determined at RMB37,252.

       Goodwill arising on the acquisition of Beijing Mobile, Shanghai Mobile,
       Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and
       Guangxi Mobile (RMB239,540), being the excess of the cost of investments
       (RMB271,485) over the fair value of the Group's share of the separable
       net assets acquired (RMB31,945), was eliminated against reserves
       immediately on acquisition. The fair value of the Group's share of the
       separable net assets acquired was based on the net assets of Beijing
       Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile,
       Shandong Mobile and Guangxi Mobile at June 30, 2000 (RMB29,317), adjusted
       for additional earnings to November 12, 2000, the completion date of the
       Third Acquisition, of RMB2,628.

       Equity offering and debt offering

       In order to finance the acquisition consideration, the Company completed
       an international offering of an aggregate of 1,115,643,845 ordinary
       shares and debt offering with a principal amount of US$690 with maturity
       due on November 3, 2005. Further the Company issued totalling
       3,779,407,375 consideration shares to CMHK (BVI), credited as fully paid
       as part of the acquisition consideration. Net proceeds to the Company for
       such equity offering and debt offering, after deduction of offering
       expenses and discount, were approximately RMB55,723 and RMB5,580,
       respectively.



                                      F-19
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




1      ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION (CONTINUED)

       Basis of preparation

       The consolidated financial statements have been prepared on a
       consolidated basis to reflect the financial position and results of
       operations of the Company, Guangdong Mobile and Zhejiang Mobile from the
       date of the Restructuring and of Jiangsu Mobile, Fujian Mobile, Henan
       Mobile, Hainan Mobile, Beijing Mobile, Shanghai Mobile, Tianjin Mobile,
       Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile from
       their respective dates of acquisition. The consolidated statements of
       income for the year ended December 31, 2001 includes the results of the
       Company, Guangdong Mobile, Zhejiang Mobile, Jiangsu Mobile, Fujian
       Mobile, Henan Mobile, Hainan Mobile, Beijing Mobile, Shanghai Mobile,
       Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and
       Guangxi Mobile for the year ended December 31, 2001. The consolidated
       statements of income for the year ended December 31, 2000 includes the
       results of the Company, Guangdong Mobile, Zhejiang Mobile, Jiangsu
       Mobile, Fujian Mobile, Henan Mobile and Hainan Mobile for the year ended
       December 31, 2000 and the post-acquisition results of Beijing Mobile,
       Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong
       Mobile and Guangxi Mobile for the period from November 13, 2000 to
       December 31, 2000. The consolidated statements of income for the year
       ended December 31, 1999 includes the results of the Company, Guangdong
       Mobile, Zhejiang Mobile and Jiangsu Mobile for the year ended December
       31, 1999 and the post-acquisition results of Fujian Mobile, Henan Mobile
       and Hainan Mobile for the period from November 12, 1999 to December 31,
       1999.

       The financial statements have been prepared in accordance with accounting
       principles generally accepted in Hong Kong ("HK GAAP"). Significant
       differences between HK GAAP and accounting principles generally accepted
       in the United States ("US GAAP") are set forth in Note 29.

       The consolidated financial statements are expressed in Renminbi. Solely
       for the convenience of the reader, for the December 31, 2001 financial
       statements have been translated into United States dollars at the rate of
       US$1.00 = RMB8.2766 quoted by the People's Bank of China on December 31,
       2001. 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 certain rate on December 31, 2001, or any other certain
       date.



                                      F-20
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




2      PRINCIPAL ACCOUNTING POLICIES

(A)    BASIS OF CONSOLIDATION

       The consolidated financial statements include the accounts of the Company
       and all of its subsidiaries (see Note 28 for details of the Company's
       principal subsidiaries). The results of subsidiary companies are included
       in the consolidated statements of income, and the share attributable to
       minority interest is deducted from or added to the consolidated income
       after taxation. All significant inter-company balances and transactions
       have been eliminated.

(B)    CASH AND CASH EQUIVALENTS

       Cash and cash equivalents are short-term, highly liquid investments which
       are readily convertible into known amounts of cash without notice and
       which are within three months of maturity when acquired. For the purposes
       of the statement of cash flows, cash equivalents would also include
       advances from banks repayable within three months from the date of the
       advance. None of the Group's cash and cash equivalents is restricted as
       to withdrawal.

(C)    ASSOCIATES

       An associate is a company in which the Group has significant influence,
       but not control or joint control, over its management, including
       participation in the financial and operating policy decisions.

       The Group's share of the results of its associates is included in the
       consolidated statements of income. Such amounts were immaterial for the
       periods presented. In the consolidated balance sheets, interest in
       associates is stated at cost adjusted for post-acquisition retained
       result of operations, less impairment losses (see note 2(h)), unless it
       is acquired and held exclusively with a view to subsequent disposal in
       the near future or operates under severe long-term restrictions that
       significantly impair its ability to transfer funds to the investor, in
       which case, it is stated at fair value with changes in fair value
       recognized in the consolidated statements of income as they arise.



                                      F-21
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




2      PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(D)    GOODWILL

       Positive goodwill arising on consolidation represents the excess of the
       cost of the acquisition over the Group's share of the fair value of the
       identifiable assets and liabilities acquired. In respect of controlled
       subsidiaries:

       -      for acquisitions before 1 January 2001, positive goodwill is
              eliminated against reserves and is reduced by impairment losses
              (see note 2(h)); and

       -      for acquisitions on or after 1 January 2001, positive goodwill is
              amortized to the consolidated statements of income on a
              straight-line basis over its estimated useful life of not
              exceeding 20 years. Positive goodwill is stated in the
              consolidated balance sheets at cost less any accumulated
              amortization and any impairment losses (see note 2(h)).

       In respect of acquisitions of associates, positive goodwill is amortized
       to the consolidated statements of income on a straight-line basis over
       its estimated useful life. The cost of positive goodwill less any
       accumulated amortization and any impairment losses (see note 2(h)) is
       included in the carrying amount of the interest in associates.

       Negative goodwill arising on acquisitions of controlled subsidiaries and
       associates represents the excess of the Group's share of the fair value
       of the identifiable assets and liabilities acquired over the cost of the
       acquisition. Negative goodwill is accounted for as follows:

       -      for acquisitions before 1 January 2001, negative goodwill is
              credited to a capital reserve; and

       -      for acquisitions on or after 1 January 2001, to the extent that
              negative goodwill relates to an expectation of future losses and
              expenses that are identified in the plan of acquisition and can be
              measured reliably, but which have not yet been recognized, it is
              recognized in the consolidated statements of income when the
              future losses and expenses are recognized. Any remaining negative
              goodwill, but not exceeding the fair values of the non-monetary
              assets acquired, is recognized in the consolidated statements of
              income over the weighted average useful life of those non-monetary
              assets that are depreciable/amortizable. Negative goodwill in
              excess of the fair values of the non-monetary assets acquired is
              recognized immediately in the consolidated statements of income.


                                      F-22
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)



2      PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(D)    GOODWILL (CONTINUED)

       In respect of any negative goodwill not yet recognized in the
       consolidated statements of income:

       -      for controlled subsidiaries, such negative goodwill is shown in
              the consolidated balance sheets as a deduction from assets in the
              same balance sheet classification as positive goodwill; and

       -      for associates, such negative goodwill is included in the carrying
              amount of the interests in associates.

(E)    OTHER INVESTMENTS IN SECURITIES

       The Group's policies for investments in securities other than investments
       in associates are as follows:

       (i)    Investments held on a continuing basis for an identified long-term
              purpose are classified as investment securities. Investment
              securities are stated in the consolidated balance sheet at cost
              less any provisions for diminution in value. Provisions are made
              when the fair values have declined below the carrying amounts,
              unless there is evidence that the decline is temporary, and are
              recognized as an expense in the consolidated statements of income,
              such provisions being determined for each investment individually.

       (ii)   Profits or losses on disposal of investments in securities are
              determined as the difference between the estimated net disposal
              proceeds and the carrying amount of the investments and are
              accounted for in the consolidated statements of income as they
              arise.

(F)    FIXED ASSETS AND DEPRECIATION

       (i)    Fixed assets are stated at cost/revalued amount less accumulated
              depreciation and impairment losses (see note 2(h)). The
              circumstances and basis under which the revalued amount is arrived
              at are set out in details in Note 13.



                                      F-23
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




2      PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(F)    FIXED ASSETS AND DEPRECIATION (CONTINUED)

       (ii)   The cost of fixed assets comprises the purchase price and any
              directly attributable costs of bringing the asset to its working
              condition and location for its intended use. Expenditure incurred
              after the fixed asset has been put into operation, such as repairs
              and maintenance and overhaul costs, are normally charged to the
              consolidated statements of income in the year in which it is
              incurred. In situations where it can be clearly demonstrated that
              the expenditure has resulted in an increase in the future economic
              benefits expected to be obtained from the use of the fixed asset,
              the expenditure is capitalized as an additional cost of the fixed
              asset.

       (iii)  Gains or losses arising from the retirement or disposal of a fixed
              asset are determined as the difference between the net disposal
              proceeds and the carrying amount of the asset and are recognized
              as income or expense in the consolidated statements of income on
              the date of retirement or disposal.

       (iv)   Depreciation is calculated to write-off the cost, or revalued
              amount where appropriate, of fixed assets on a straight-line basis
              over their estimated useful lives, to residual values, as follows:

<TABLE>
<CAPTION>
                                                                Depreciable life                 Residual value
              <S>                                         <C>                                    <C>
              Land use rights                             Over the period of grant                      --
              Buildings                                                8 -35 years                       3%
              Telecommunication transceivers,
                switching centers and other
                network equipment                                          7 years                       3%
              Office equipment, furniture and
                fixtures and others                                   4 - 18 years                       3%
</TABLE>

(G)    LEASED ASSETS

       Leases of assets under which the lessee assumes substantially all the
       risks and benefits of ownership are classified as capital leases.



                                      F-24
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




2      PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(G)    LEASED ASSETS (CONTINUED)

       Where the Group acquires the use of assets under capital leases, the
       amounts representing the fair value of the leased asset, or, if lower,
       the present value of the minimum lease payments, of such assets are
       included in the fixed assets and the corresponding liabilities, net of
       finance charges, are recorded as obligations under capital leases.
       Depreciation is provided at rates which write-off the cost of the assets
       in equal annual amounts over the term of the relevant lease or, where it
       is likely the Group will obtain ownership of the asset, the life of the
       asset, as set out in note 2(f). Impairment losses are accounted for in
       accordance with the accounting policy as set out in note 2(h). Finance
       charges implicit in the lease payments are charged to the consolidated
       statements of income over the period of the leases so as to produce an
       approximately constant periodic rate of charge on the remaining balance
       of the obligations for each accounting year.

H)     IMPAIRMENT OF ASSETS

       Internal and external sources of information are reviewed at each balance
       sheet date to identify indications that the following assets may be
       impaired or an impairment loss previously recognized no longer exists or
       may have decreased:

       -      fixed assets;

       -      construction in progress;

       -      investments in associates; and

       -      positive goodwill (whether taken initially to reserves or
              recognized as an asset).

       If any such indication exists, the asset's recoverable amount is
       estimated. An impairment loss is recognized whenever the carrying amount
       of an asset exceeds its recoverable amount.



                                      F-25
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




2      PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(H)    IMPAIRMENT OF ASSETS (CONTINUED)

       (i)    Calculation of recoverable amount

              The recoverable amount of an asset is the greater of its net
              selling price and value in use. In assessing value in use, the
              estimated future cash flows are discounted to their present value
              using a pre-tax discount rate that reflects current market
              assessments of time value of money and the risks specific to the
              asset. Where an asset does not generate cash inflows largely
              independent of those from other assets, the recoverable amount is
              determined for the smallest group of assets that generates cash
              inflows independently (i.e. a cash-generating unit).

       (ii)   Reversals of impairment losses

              In respect of assets other than goodwill, an impairment loss is
              reversed if there has been a change in the estimates used to
              determine the recoverable amount. An impairment loss in respect of
              goodwill is reversed only if the loss was caused by a specific
              external event of an exceptional nature that is not expected to
              recur, and the increase in recoverable amount relates clearly to
              the reversal of the effect of that specific event.

              A reversal of impairment losses is limited to the asset's carrying
              amount that would have been determined had no impairment loss been
              recognized in prior years. Reversals of impairment losses are
              credited to the consolidated statements of income in the year in
              which the reversals are recognized.

(I)    CONSTRUCTION IN PROGRESS

       Construction in progress is stated at cost. Cost comprises direct costs
       of construction as well as interest expense and exchange differences
       capitalized during the years of construction and installation.
       Capitalization of these costs ceases and the construction in progress is
       transferred to fixed assets when substantially all the activities
       necessary to prepare the assets for their intended use are completed. No
       depreciation is provided in respect of construction in progress until it
       is completed and ready for its intended use.



                                      F-26
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




2      PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(J)    INVENTORIES

       Inventories, which consist primarily of handsets, SIM cards and
       accessories, are stated at the lower of cost and net realizable value.
       Cost represents purchase cost of goods calculated using the weighted
       average cost method. Net realizable value is determined by reference to
       the sales proceeds of items sold in the ordinary course of business after
       the balance sheet date or to management's estimates based on prevailing
       market conditions.

       When inventories are sold, the carrying amount of those inventories is
       recognized as a deduction of other income due to its insignificance. The
       amount of any write-down of inventories to net realizable value and all
       losses of inventories are recognized as an expense in the year the
       write-down or loss occurs. The amount of any reversal of any write-down
       of inventories, arising from an increase in net realizable value, is
       recognized as a reduction in the amount of inventories recognized as an
       expense in the year in which the reversal occurs.

(K)    DEFERRED REVENUE

       Deferred revenue, which consists primarily of deferred revenue from
       prepaid service fees received from subscribers and deferred revenue from
       assignment of rights to income from subscribers with distributions of
       telecommunications services are stated in the balance sheet at the amount
       of consideration received according to the relevant assignment contracts
       if applicable, less income recognized in the consolidated statements of
       income up to the balance sheet date.

       Revenue from prepaid service fees is recognized when the cellular
       services are rendered.

       Income from assignment of rights is deferred and recognized on a
       straight-line basis over the relevant assignment period. For assignment
       contract which the distributors surrender for early cancellation, the
       balance of the Group's deferred revenue in respect of those contracts is
       recognized as non-operating income in the consolidated statements of
       income when the assignment contracts are cancelled.



                                      F-27
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




2      PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(L)    FIXED RATE NOTES, BONDS AND CONVERTIBLE NOTES

       Fixed rate notes, bonds and convertible notes are stated in the balance
       sheet at face value, less unamortized discount arising thereon, if any.
       The discount is amortized on a straight-line basis over the period from
       the date of issue to the date of maturity.

(M)    DEFERRED EXPENSES

       Deferred expenses comprise incidental costs incurred in relation to the
       issue of the fixed rate notes, bonds and convertible notes of the Group
       and are amortized on a straight-line basis over the periods from the date
       of issue to the date of maturity. In the event that the notes are
       redeemed prior to the maturity date, the unamortized expenses are charged
       immediately to the consolidated statements of income.

(N)    BORROWING COSTS

       Borrowing costs are expensed in the consolidated statements of income in
       the year in which they are incurred, except to the extent that they are
       capitalized as being directly attributable to the acquisition or
       construction of an asset which necessarily takes a substantial period of
       time to get ready for its intended use.

(O)    REVENUE RECOGNITION

       Revenue is recognized when it is probable that the economic benefits will
       accrue to the Group and when the revenue can be measured reliably on the
       following basis:

       (i)    usage fees are recognized as revenue when the service is rendered;

       (ii)   monthly fees are recognized as revenue in the month during which
              the service is rendered;

       (iii)  connection fees are recognized as revenue when receivable;



                                      F-28
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




2      PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(O)    REVENUE RECOGNITION (CONTINUED)

       (iv)   deferred revenue from prepaid service is recognized as income when
              the cellular telephone services are rendered upon actual usage by
              subscribers;

       (v)    deferred revenue from assignment of rights to income from
              subscribers is recognized on a straight-line basis over the
              duration of the assignment period;

       (vi)   interest income is recognized on a time proportion basis by
              reference to the principal outstanding and the rate applicable;
              and

       (vii)  sales of SIM cards and handsets are recognized on delivery of
              goods to the buyer. Such revenue, net of cost of goods sold, is
              included in other net income due to its insignificance.

(P)    ALLOWANCE FOR DOUBTFUL ACCOUNTS

       An allowance for doubtful accounts is provided based upon evaluation of
       the recoverability of the receivables at the balance sheet date.

(Q)    TRANSLATION OF FOREIGN CURRENCIES

       The functional currency of the Group's operations is Renminbi. See Note
       27. Foreign currency transactions are recorded at the applicable rates of
       exchange prevailing on the transaction dates. Monetary assets and
       liabilities denominated in currencies other than the functional currency
       are translated at the exchange rates ruling at the balance sheet date.
       Exchange differences attributable to the translation of borrowings
       denominated in currencies other than the functional currency, and used
       for financing the construction of fixed assets, are included in the cost
       of the related construction in progress. Exchange differences capitalized
       to construction in progress are immaterial for the years presented. Other
       exchange gains and losses are recognized in the consolidated statements
       of income.



                                      F-29
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




2      PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(R)    DEFERRED TAXATION

       Deferred taxation is provided under the liability method in respect of
       the taxation effect arising from all material timing differences between
       the accounting and tax treatment of income and expenditure, which are
       expected with reasonable probability to crystallize in the foreseeable
       future. Future deferred tax benefits are not recognized unless their
       realization is assured beyond reasonable doubt.

(S)    PROVISIONS AND CONTINGENT LIABILITIES

       Provisions are recognized for liabilities of uncertain timing or amount
       when the Group has a legal or constructive obligation arising as a result
       of a past event, it is probable that an outflow of economic benefits will
       be required to settle the obligation and a reliable estimate can be made.
       Where the time value of money is material, provisions are stated at the
       present value of the expenditures expected to settle the obligation.

       Where it is not probable that an outflow of economic benefits will be
       required, or the amount cannot be estimated reliably, the obligation is
       disclosed as a contingent liability, unless the probability of outflow of
       economic benefits is remote. Possible obligations, whose existence will
       only be confirmed by the occurrence or non-occurrence of one or more
       future events are also disclosed as contingent liabilities unless the
       probability of outflow of economic benefits is remote.

(T)    RETIREMENT BENEFITS

       Contributions to retirement schemes are charged to the consolidated
       statements of income as and when incurred. See Note 24.



                                      F-30
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




2      PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(U)    NET PROFIT PER SHARE

       The calculation of basic net profit per share for the years ended
       December 31, 1999, 2000 and 2001 are based on the net profit and the
       weighted average number of shares in issue during the years.

       The calculation of diluted net profit per share for the years ended
       December 31, 1999 and 2001 have been computed after adding back the
       interest expense on the convertible notes and adjusting for the effects
       of all dilutive potential ordinary shares. All dilutive potential
       ordinary shares arise from the share options granted to the directors
       under the share option scheme and convertible notes issued by the Group
       which, if converted to ordinary shares, would decrease net profit per
       share. In 2000, since all potential ordinary shares arising from the
       convertible notes, if converted to ordinary shares, would increase profit
       attributable to shareholders per share as a result of the savings on the
       interest payable on the convertible notes, the effects of anti-dilutive
       potential ordinary shares were ignored in calculating diluted net profit
       per share.

(V)    OPERATING LEASES

       Leases of assets under which the lessor has not transferred all the risks
       and benefits of ownership are classified as operating leases.

       Where the Group has the use of assets under operating lease, payments
       made under the leases are charged to the consolidated statements of
       income in equal instalments over the accounting periods covered by the
       lease term, except where an alternative basis is more representative of
       the pattern of benefits to be derived from the leased asset. Lease
       incentives received are recognized in the consolidated statements of
       income as an integral part of the aggregate net lease payments made.
       Contingent rentals are charged to the consolidated statements of income
       in the accounting period in which they are incurred.



                                      F-31
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




2      PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(W)    RELATED PARTIES

       For the purposes of these accounts, parties are considered to be related
       to the Group if the Group has the ability, directly or indirectly, to
       control the party or exercise significant influence over the party in
       making financial and operating decisions, or vice versa, or where the
       Group and the party are subject to common control or common significant
       influence. Related parties may be individuals or other entities.

(X)    SEGMENT REPORTING

       A segment is a distinguishable component of the group that is engaged
       either in providing products or services (business segment), or in
       providing products or services within a particular economic environment
       (geographical segment), which is subject to risks and rewards that are
       different from those of other segments.

       No analysis of the Group's operating revenue and contribution to profit
       from operations by geographical segment or business segment has been
       presented as all the Group's operating activities are carried out in the
       PRC and less than 10% of the Group's operating revenue and contribution
       to profit from operations were derived from activities outside the
       Group's cellular telephone and related services activities. There is no
       other geographical or business segment with segment assets equal to or
       greater than 10% of the Group's total assets.

(Y)    USE OF ESTIMATES

       The preparation of financial statements in conformity with generally
       accepted accounting principles requires management to make estimates and
       assumptions that affect the reported amounts of assets and liabilities
       and disclosure of contingent assets and liabilities at the date of the
       financial statements and revenues and expenses during the years reported.
       Actual results could differ from those estimates. Estimates are used when
       accounting for allowance for doubtful accounts, the fixed assets'
       depreciation and amortization periods and impairment of long-lived assets
       including goodwill. Actual results may differ from these estimates.



                                      F-32
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




3      CHANGES IN ACCOUNTING POLICIES

(I)    GOODWILL

       In prior years, positive or negative goodwill arising on acquisition of
       subsidiaries was eliminated against reserves or was credited to a capital
       reserve respectively. With effect from January 1, 2001, in order to
       comply with Statement of Standard Accounting Practice 30 ("SSAP 30")
       issued by the Hong Kong Society of Accountants, the Group adopted a new
       accounting policy for goodwill as set out in Note 2(d).

       The Group has adopted the transitional provisions set out in paragraph 88
       of SSAP 30 with effect that the new accounting policy has been adopted
       prospectively and no adjustments have been made to the opening balances
       of retained earnings and reserves and comparative information.

       The new accounting policy has no impact on the Group's net assets as at
       the year ends and on the Group's profit attributable to shareholders for
       the years presented.

4      OPERATING REVENUE

       The principal activities of the Group are the provision of cellular
       telephone and related services in Guangdong, Zhejiang, Jiangsu, Fujian,
       Henan, Hainan, Hebei, Liaoning and Shandong provinces, Beijing, Shanghai
       and Tianjin municipalities and Guangxi autonomous region of the PRC. The
       principal activity of the Company is investment holding.

       Operating revenue primarily represents usage fees, monthly fees and
       connection fees for the use of the Group's cellular telephone networks,
       net of PRC business tax and government surcharges. Business tax and
       government surcharges are charged at approximately 3% to 3.33% of the
       corresponding revenue.



                                      F-33
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




4      OPERATING REVENUE (CONTINUED)

       Operating revenue consist of:

       (i)    Usage fees which represent standard local usage fee for airtime
              and, where applicable, Domestic Direct Dial ("DDD") charges and
              International Direct Dial ("IDD") charges receivable from
              subscribers for the use of the Group's cellular telecommunication
              networks and facilities; revenue from assignment of rights to
              income from subscribers, and fees in respect of roaming out calls.
              Roaming out calls are those made by the Group's subscribers
              outside the local service areas. See Note 5(ii).

       (ii)   Monthly fees which represent fixed amounts charged to subscribers
              each month for their entitlement to use the Group's cellular
              telephone and related services.

       (iii)  Connection fees which represent amounts charged to subscribers for
              the initial connection to the Group's cellular telecommunications
              network.

       (iv)   Other operating revenue mainly represents charges for wireless
              data and value added services, telephone number selection fees,
              interconnection revenue and roaming in fees. Roaming in fees are
              received from China Mobile (previously the MII) in respect of
              calls made by non-subscribers using the Group's cellular
              telecommunications networks. With effect from April 1, 2000, all
              settlements of inter-provincial roaming and corresponding
              interconnection revenues are made through China Mobile (previously
              the MII).

5      OPERATING EXPENSES

       Operating expenses consist of:

       (i)    Leased line charges which represent expenses paid or payable for
              the use of leased lines between the main switches, base
              transceiver stations, base station controllers, base stations,
              fixed line network connectors and long distance network
              connectors.



                                      F-34
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




5      OPERATING EXPENSES (CONTINUED)

       (ii)   Interconnection charges which represent amounts paid or payable in
              respect of call made between the Group's cellular networks, the
              fixed line networks and other GSM network operators in the
              relevant provinces and other provinces in the PRC. Included in the
              amounts are also charges in respect of the Group's subscribers
              roaming outside the service areas of Guangdong Mobile, Zhejiang
              Mobile, Jiangsu Mobile, Fujian Mobile, Henan Mobile, Hainan
              Mobile, Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei
              Mobile, Liaoning Mobile, Shandong Mobile or Guangxi Mobile (see
              Note 4(i)).

       (iii)  Personnel expenses which represent staff salaries, bonuses and
              medical benefits, provision for staff welfare expenses and
              contributions to staff retirement scheme.

       (iv)   Other operating expenses which consist of:

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                 --------------------------------------------

                                                                 1999                2000               2001
                                                                  RMB                 RMB                RMB
       <S>                                                       <C>                <C>                <C>
       Selling and promotion                                     1,582               3,940              7,897
       Maintenance                                                 499                 745              1,289
       Provision for doubtful accounts (Note 10)                   771               1,346              1,737
       Operating lease charges                                     539                 936              1,347
       Other expenses (Note (a))                                 1,749               3,611              6,000
                                                                 -----              ------             ------
                                                                 5,140              10,578             18,270
                                                                 =====              ======             ======
</TABLE>

       (a)    Other expenses consist of offices expenses, utilities charges,
              travelling expenses, entertainment expenses, spectrum charges,
              insurance expenses, consumables and supplies, debt collection fees
              and other miscellaneous expenses.


                                      F-35
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




6      WRITE-DOWN AND WRITE-OFF OF ANALOG NETWORK EQUIPMENT


<TABLE>
<CAPTION>
                                                                          Year ended December 31,
                                                                 --------------------------------------

                                                                  1999             2000            2001
                                                                   RMB              RMB             RMB
       <S>                                                       <C>              <C>              <C>
       Write-down of analog network equipment (a)                6,720            1,330              --
       Write-off of analog network equipment (b)                 1,522              195              --
                                                                 -----            -----            ----
                                                                 8,242            1,525              --
                                                                 =====            =====            ====
</TABLE>

       (a)    The Group reviewed the carrying value of all analog network and
              related equipment at December 31, 1999. Based on the estimated
              recoverable value of these assets, a write-down of RMB6,720 was
              made in 1999. In 2000, based on the operations and net cash flow
              position of the analog network, the Group considered that the
              recoverable amount of the analog network equipment had declined
              below its carrying amount. Based on the expected future cash flows
              to be generated by the analog network, a full provision was made
              against the carrying amount of the analog network equipment at
              December 31, 2000. The amount of the write-down of RMB1,330 was
              recognized as an expense in the consolidated statements of income.
              At December 31, 2001, all analog network equipment which had been
              written down in previous years had been removed from service.

       (b)    This represents the write-off of certain analog network equipment
              which had been removed from service.

7      OTHER NET INCOME

       Other net income primarily consists of the gross margin from sales of
       cellular telephone SIM cards and handsets.


<TABLE>
<CAPTION>
                                                                         Year ended December 31,
                                                                 --------------------------------------

                                                                  1999             2000            2001
                                                                   RMB              RMB             RMB
       <S>                                                       <C>             <C>             <C>
       Sales of SIM cards and handsets                           1,242            1,928           3,338
       Cost of SIM cards and handsets                             (690)          (1,013)         (1,744)
                                                                 -----           ------          ------
                                                                   552              915           1,594
                                                                 =====           ======          ======
</TABLE>


                                      F-36
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




8      NON-OPERATING NET INCOME/(EXPENSES)

       Non-operating net income/(expenses) consists of:


<TABLE>
<CAPTION>
                                                                         Year ended December 31,
                                                                 ------------------------------------

                                                                 1999            2000            2001
                                                                  RMB             RMB             RMB
       <S>                                                       <C>             <C>             <C>
       Exchange loss                                              (9)             (60)            (39)
       Loss on sale of other fixed assets                         (1)            (126)           (275)
       Penalty income on overdue accounts                         72              149             165
       Others                                                      8               32             143
                                                                 ---             ----            ----
       Total non-operating net income/(expenses)                  70               (5)             (6)
                                                                 ===             ====            ====
</TABLE>

       In 2001, there is RMB54 included in others being gain recognized on
       deemed disposal of shareholding in Aspire Holdings Limited, a non-wholly
       owned subsidiary of the Company. The Company has no intention to
       re-acquire the shares of this subsidiary.

9      INCOME TAX

       (i)    No provision has been made for Hong Kong profits tax as there were
              no estimated Hong Kong assessable profits for the years ended
              December 31, 1999, 2000 and 2001.

       (ii)   The provision for the PRC enterprise income tax is based on a
              statutory rate of 33% of the assessable profit of the Group as
              determined in accordance with the relevant income tax rules and
              regulations of the PRC during the year, except for certain
              subsidiaries of the Company and certain operations of the
              subsidiaries located within special economic zones in the PRC,
              which enjoy a preferential rate of 30% and 15% respectively.



                                      F-37
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




9      INCOME TAX (CONTINUED)

       Income tax in the consolidated statements of income represents:

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                              --------------------------------------
                                                                1999            2000            2001
                                                                 RMB             RMB             RMB
      <S>                                                     <C>            <C>             <C>
      Over-provision in respect of Hong Kong
         profits tax for prior year                               (2)             --              --
      Provision for PRC enterprise income tax on
         the estimated taxable profits for the year            3,776           8,371          12,153
      Under/(over)-provision in respect of PRC
        enterprise income tax for prior year                      24              12             (20)
                                                              ------         -------         -------
                                                               3,798           8,383          12,133
      Transfer (to)/from deferred tax assets (Note 16)        (2,151)            (17)          1,570
                                                              ------         -------         -------
                                                               1,647           8,366          13,703
                                                              ======         =======         =======
</TABLE>

       The provision for income tax differs from the amount computed by applying
       the PRC statutory income tax rate of 33% to profit before tax and
       minority interests for the following reasons:


<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                              --------------------------------------
                                                                1999            2000            2001
                                                                 RMB             RMB             RMB
      <S>                                                     <C>            <C>             <C>

      Expected PRC taxation at statutory tax rates             2,127           8,710          13,767
      Non-taxable items
        - Connection fee                                         (29)            (36)             --
        - Surcharge                                              (37)            (28)             --
        - Interest income                                        (66)            (74)            (32)
      Non-deductible expenses                                    150             422             142
      Rate differential on PRC operations                       (371)           (718)           (558)
      Rate differential on Hong Kong operations                  (45)             32             165
      Reversal of deferred taxation due to change of tax rate     --              --              29
      Tax losses not recognized for deferred tax                  --              --             203
      Non-recognition of deferred taxes
        - Generation of timing difference                        254             423             519
        - Reversal of timing difference                         (265)           (388)           (565)
      Others                                                     (71)             23              33
                                                              ------         -------         -------

      Income tax                                               1,647           8,366          13,703
                                                              ======         =======         =======
</TABLE>



                                      F-38
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




10     ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
                                                          December 31,
                                                    ----------------------
                                                     2000             2001
                                                      RMB             RMB
        <S>                                         <C>             <C>
       Accounts receivable                           11,312          9,701

       Less: Allowance for doubtful accounts         (4,060)        (3,973)
                                                    -------         ------

                                                      7,252          5,728
                                                    =======         ======
</TABLE>


The ageing of accounts receivable, net of allowance for doubtful accounts, is
analyzed as follows:


<TABLE>
<CAPTION>
                                                          December 31,
                                                    ---------------------
                                                     2000            2001
                                                      RMB            RMB
       <S>                                          <C>             <C>
       Within 30 days                               6,451           5,100
       31-60 days                                     524             443
       61-90 days                                     277             185
                                                    -----           -----

                                                    7,252           5,728
                                                    =====           =====
</TABLE>


       Balances are due for payment within one month from the date of billing.
       Customers with balances that are overdue or exceed credit limits are
       required to settle all outstanding balances before any further phone
       calls can be made.



                                      F-39
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




10     ACCOUNTS RECEIVABLE (CONTINUED)

       Allowance for doubtful accounts for the years is analyzed as follows:

<TABLE>
<CAPTION>
                                                        RMB

       <S>                                            <C>
       At January 1, 1999                                901
       Acquired on acquisition of subsidiaries           517
       Provision for the year                            771
       Written-off                                      (833)
                                                      ------

       At December 31, 1999                            1,356
       Acquired on acquisition of subsidiaries         2,533
       Provision for the year                          1,346
       Written-off                                    (1,175)
                                                      ------

       At December 31, 2000                            4,060
       Provision for the year                          1,737
       Written-off                                    (1,824)
                                                      ------
       At December 31, 2001                            3,973
                                                      ======
</TABLE>

11     OTHER RECEIVABLES

       Included in other receivables as at December 31, 2000 and 2001 are
       amounts due from the China Telecommunications Corporation ("China
       Telecom") and its subsidiaries (collectively the China Telecom Group)
       amounting to RMB998 and RMB108, representing primarily revenue collected
       on behalf of the Group. The balances with the China Telecom Group were
       unsecured, non-interest bearing and repayable within one year.

12     AMOUNTS DUE FROM/TO ULTIMATE HOLDING COMPANY AND AMOUNT DUE TO IMMEDIATE
       HOLDING COMPANY

       Amounts due from/to ultimate holding company are unsecured, non-interest
       bearing, repayable on demand and arose in the ordinary course of
       business.

       At 31 December 2000, amount due to immediate holding company primarily
       represented the balance of the purchase consideration for acquisition of
       subsidiaries, which was unsecured, non-interest bearing and was repaid
       during the year.



                                      F-40
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




13     FIXED ASSETS

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                  ----------------------

                                                                     2000           2001
                                                                      RMB            RMB
                                                                  -------        -------
       <S>                                                        <C>            <C>
       Land use rights and buildings                                7,996         10,594
       Telecommunication transceivers, switching
         centers and other network equipment                      107,911        127,392
       Office equipment, furniture and fixtures and others          3,702          6,095
                                                                  -------        -------

                                                                  119,609        144,081
       Less: accumulated depreciation                              32,144         38,873
                                                                  -------        -------

                                                                   87,465        105,208
                                                                  =======        =======
</TABLE>

       All of the Group's buildings are located outside Hong Kong.

       The carrying value of fixed assets of the Group includes an amount of
       RMB7,046 and RMB6,836 in respect of assets held under capital lease as at
       December 31, 2000 and 2001, respectively. None of the leases include
       contingent rentals.

       In connection with the Restructuring, pursuant to an approval document
       dated September 5, 1997 issued by China State-owned Assets Administration
       Bureau, the fixed assets of Guangdong Mobile and Zhejiang Mobile as of
       May 31, 1997 were valued by Zhongqihua Assets Appraisal Company ("ZAAC"),
       a firm of independent valuers registered in the PRC, on a depreciated
       replacement cost basis. The value of fixed assets of Guangdong Mobile and
       Zhejiang Mobile has been determined at RMB15,630 reflecting a surplus on
       revaluation of approximately RMB3,529.

       In connection with the acquisition of Jiangsu Mobile, and pursuant to an
       approval document dated April 7, 1998 issued by China State-owned Assets
       Administration Bureau, the fixed assets of Jiangsu Mobile as of December
       31, 1997 were valued by ZAAC on a depreciated replacement cost basis. The
       value of fixed assets of Jiangsu Mobile has been determined at RMB7,879
       reflecting a surplus on revaluation of approximately RMB2,443.



                                      F-41
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




13     FIXED ASSETS (CONTINUED)

       In connection with the acquisition of Fujian Mobile, Henan Mobile and
       Hainan Mobile, and pursuant to an approval document dated September 27,
       1999 issued by the Ministry of Finance, the fixed assets of Fujian
       Mobile, Henan Mobile and Hainan Mobile as of June 30, 1999 were valued by
       China International Engineering Consulting Corporation ("CIECC") on a
       depreciated replacement cost basis. The aggregate value of fixed assets
       of Fujian Mobile, Henan Mobile and Hainan Mobile has been determined at
       RMB10,684 reflecting a surplus on revaluation of approximately RMB391.

       In connection with the acquisition of Beijing Mobile, Shanghai Mobile,
       Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and
       Guangxi Mobile and pursuant to an approval document dated August 28, 2000
       issued by the Ministry of Finance, the fixed assets of Beijing Mobile,
       Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong
       Mobile and Guangxi Mobile as of June 30, 2000 were valued by China Assets
       Appraisal Corporation Ltd. ("CAAC") on a depreciated replacement cost
       basis. The aggregate value of fixed assets of Beijing Mobile, Shanghai
       Mobile, Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile
       and Guangxi Mobile has been determined at RMB37,252 reflecting a surplus
       on revaluation of approximately RMB4,823.

       The Group's land and buildings in Guangdong Mobile and Zhejiang Mobile,
       Jiangsu Mobile, Fujian Mobile, Henan Mobile and Hainan Mobile, and
       Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile, Liaoning
       Mobile, Shandong Mobile and Guangxi Mobile were also valued separately by
       Chesterton Petty Limited, independent qualified valuers in Hong Kong as
       of May 31, 1997, December 31, 1997, June 30, 1999 and June 30, 2000
       respectively. The values of such reports have been determined at
       approximately the same amounts as the ZAAC, CIECC and CAAC reports.

       Other than revaluations carried out in compliance with relevant PRC rules
       and regulations, the Group has no plan to revalue its fixed assets on a
       regular basis.

       The effect of the above four revaluations is to increase annual
       depreciation charges by approximately RMB1,098(2000: approximately
       RMB1,927).



                                      F-42
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




13     FIXED ASSETS (CONTINUED)

       The historical cost net book value of the fixed assets of these
       subsidiaries in the Group's financial statements as of the respective
       revaluation dates and the revalued basis of these fixed assets are as
       follows:

<TABLE>
<CAPTION>
                                                                  Net Book      Revalued
                                                                   Value         Amount
                                                                    RMB            RMB
                                                                  --------      --------
       <S>                                                        <C>           <C>
       Land use rights and buildings                                2,808          4,251
       Telecommunication transceivers, switching
         centers and other network equipment                       55,994         65,706
       Office equipment, furniture and fixtures and others          1,457          1,488
                                                                  -------        -------

                                                                   60,259         71,445
                                                                  =======        =======
</TABLE>


14     INTEREST IN ASSOCIATES

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                  ----------------------

                                                                    2000           2001
                                                                    RMB            RMB
                                                                  -------        -------
       <S>                                                        <C>            <C>

       Unlisted shares, at cost                                        37             37

       Capital contributions, at cost                                   9              9
                                                                  -------        -------

                                                                       46             46
       Less:  Provision for impairment                                 --            (30)
                                                                  -------        -------

                                                                       46             16
                                                                  =======        =======
</TABLE>


                                      F-43
<PAGE>
Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)

14       INTEREST IN ASSOCIATES (CONTINUED)

         Details of the associates, all of which are unlisted corporate
         entities, are as follows:

<TABLE>
<CAPTION>
                                                                      Proportion of
                                                    Place of              ownership
                                               incorporation          interest held                       Principal
         Name of associate                     and operation      by the subsidiary                        activity
         <S>                                   <C>                <C>                   <C>
         China Motion United                       Hong Kong                    30%                    Provision of
           Telecom Limited                                                               telecommunication services

         Shenzhen China Motion                           PRC                    30%                    Provision of
           Telecom United                                                                telecommunication services
           Limited

         Fujian Nokia Mobile                             PRC                    50%            Network planning and
           Communication Technology                                                        optimizing construction-
           Company Limited                                                                 testing and supervising,
                                                                                                technology support,
                                                                                        development and training of
                                                                                          Nokia GSM 900/1800 Mobile
                                                                                               Communication System
</TABLE>

15       INVESTMENT SECURITIES

<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                    ----------------------------------
                                                                                            2000               2001
                                                                                             RMB                RMB
         <S>                                                                        <C>                     <C>
         Unlisted equity securities in the PRC, at cost                                       61                 77
                                                                                         =======            =======
</TABLE>


                                     F-44

<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)

16       DEFERRED TAX ASSETS

         Movements on deferred tax assets comprise:

<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                        ----------------------------
                                                                                              2000             2001
                                                                                               RMB              RMB
         <S>                                                                            <C>               <C>
         Balance at beginning of year                                                        2,306            3,046
         Acquired on acquisition of subsidiaries                                               723               --
         Transferred from/(to) consolidated statements of income (Note 9)                       17           (1,570)
                                                                                       -----------        ---------

         Balance at end of year                                                              3,046            1,476
                                                                                       ===========        =========
</TABLE>

         Deferred tax assets of the Group provided for are as follows:

<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                        ----------------------------
                                                                                              2000             2001
                                                                                               RMB              RMB
         <S>                                                                            <C>               <C>
         Provision for obsolete inventories                                                     12                4
         Write-down of fixed assets relating to analog network equipment                     2,102              171
         Amortization of deferred revenue                                                       60              140
         Income recognition on prepaid service fees                                            872            1,161
                                                                                        ----------        ---------

                                                                                             3,046            1,476
                                                                                        ==========        =========
</TABLE>

         Deferred tax assets of the Group not provided for are as follows:

<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                        ----------------------------
                                                                                              2000             2001
                                                                                               RMB              RMB
         <S>                                                                            <C>               <C>
         Provision for doubtful accounts                                                     1,264            1,204
                                                                                        ==========        =========
</TABLE>


                                     F-45
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)

16       DEFERRED TAX ASSETS (CONTINUED)

         As described in Note 13, in connection with the Restructuring and the
         subsequent acquisitions, the fixed assets of Guangdong Mobile and
         Zhejiang Mobile, Jiangsu Mobile, Fujian Mobile, Henan Mobile and
         Hainan Mobile, and Beijing Mobile, Shanghai Mobile, Tianjin Mobile,
         Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile were
         revalued on May 31, 1997, December 31, 1997, June 30, 1999 and June
         30, 2000, respectively. As a result of such valuation, the fixed
         assets basis differences that gave rise to the potential deferred tax
         liabilities of these subsidiaries as of May 31, 1997, December 31,
         1997, June 30, 1999 and June 30, 2000 amounting to RMB547, RMB149,
         RMB825 and RMB1,809, respectively, were eliminated.

         Additionally, the tax losses carried forward relating to Liaoning
         Mobile and Guangxi Mobile of RMB72 were eliminated as of June 30,
         2000.

17       DEFERRED EXPENSES

<TABLE>
<CAPTION>
                                                                                          Year Ended December 31,
                                                                                        ---------------------------
                                                                                              2000             2001
                                                                                               RMB              RMB
         <S>                                                                            <C>               <C>
         Balance at beginning of year                                                           51              164
         Additions during the year                                                             128               55
         Less:  Amortization for the year                                                      (15)             (39)
                                                                                        ----------        ---------

         Balance at the end of year                                                            164              180
                                                                                        ==========        =========
</TABLE>


                                     F-46

<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)

18       ACCOUNTS PAYABLE

         Included in accounts payable as at December 31, 2000 and 2001 are
         amounts due to the China Telecom Group amounting to RMB3,449 and
         RMB1,725 respectively, representing primarily payables for leased
         lines and interconnection expenses.

         The ageing analysis of accounts payable as at 31 December is analyzed
         as follows:

<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                        ---------------------------
                                                                                              2000             2001
                                                                                               RMB              RMB
         <S>                                                                            <C>               <C>
         Amounts payables in the next:
         1 month or on demand                                                                6,614            5,964
         2-3 months                                                                            560            1,634
         4-6 months                                                                          1,672            1,022
         7-9 months                                                                            827            1,049
         10-12 months                                                                        1,908            1,648
                                                                                        ----------        ---------
                                                                                            11,581           11,317
                                                                                        ==========        =========
</TABLE>

19       BANK LOANS AND OTHER INTEREST-BEARING BORROWINGS

<TABLE>
<CAPTION>
                                                                      December 31,
                                        -----------------------------------------------------------------------
                                                          2000                               2001
                                        ----------------------------------- -----------------------------------
                                                           Non-                                Non-
                                            Current     current                 Current     current
                                        liabilities liabilities       Total liabilities liabilities       Total
                                        ----------- -----------  ---------- ----------- -----------  ----------
                               Note             RMB          RMB        RMB         RMB         RMB        RMB
         <S>                   <C>      <C>         <C>          <C>        <C>         <C>          <C>
         Bank loans             (a)          10,267      12,014      22,281       4,319       5,680       9,999
         Other loans            (a)             204         459         663         212         247         459
         Fixed rate notes       (b)              --       4,953       4,953          --       4,956       4,956
         Convertible notes      (c)              --       5,708       5,708          --       5,708       5,708
         Bonds                  (d)              --          --          --          --       5,000       5,000
                                         ----------  ----------  ----------  ----------  ----------  ----------
                                             10,471      23,134      33,605       4,531      21,591      26,122
                                         ==========  ==========  ==========  ==========  ==========  ==========
</TABLE>


                                     F-47

<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)

19       BANK LOANS AND OTHER INTEREST-BEARING BORROWINGS (CONTINUED)

         The short-term bank and other loans as at December 31, 2001 are
         unsecured. Included in the current liabilities as at December 31, 2000
         are short-term bank and other loans amounting to RMB100 which are
         secured by cash at banks amounting to RMB113. All other short-term
         bank and other loans are unsecured.

         All of the above bank and other loans under non-current liabilities
         are unsecured.

         The Group's borrowings under short-term bank and other loans are used
         primarily to finance construction projects and generally consist of
         unsecured loans and are repayable in full on respective due dates with
         interest rates ranging from 5.02% to 6.44% at December 31, 2000 and
         from 5.02% to 7.29% at December 31, 2001. The Group's weighted average
         interest rate on short-term loans was 5.17% and 5.67% at December 31,
         2000 and 2001, respectively.

(A)      LONG-TERM BANK AND OTHER LOANS

<TABLE>
<CAPTION>
                                                                                                     December 31,
                                                                                              ---------------------------

                                       Interest rate and final                                      2000           2001
                                       maturity                                                      RMB            RMB
         <S>                           <C>                                                     <C>               <C>
         RENMINBI DENOMINATED BANK LOANS:

         For construction of           Floating interest rates ranging from 5.94%
           telecommunications            to 6.03% per annum as of December 31,
           network                       2001 with maturities 2002 to 2003 (i)                     3,930          2,245

                                       Fixed interest rates ranging from 5.25% to
                                         6.21% per annum with maturities 2002 to
                                         2008 (ii)                                                 6,547          3,449

         For working capital           Floating interest rate at 5.35% per annum as
                                         of December 31, 2001 with maturities
                                         through 2003                                              4,110          2,500

                                       Fixed interest rates ranging from 5.35% to
                                         5.94% per annum with maturities 2003 to
                                         2004                                                        850             70
</TABLE>


                                     F-48

<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)

19       BANK LOANS AND OTHER INTEREST-BEARING BORROWINGS (CONTINUED)

(A)      LONG-TERM BANK AND OTHER LOANS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                             -------------------------

                                       Interest rate and final maturity                             2000          2001
                                                                                                     RMB           RMB
         <S>                           <C>                                                    <C>            <C>
         US DOLLAR DENOMINATED BANK LOANS:

         For construction of           Floating interest rate at 7.29% per annum as
           telecommunications          of December 31, 2001 with maturities
           network                     through 2002 (iii)                                            136            33


         US DOLLAR DENOMINATED OTHER LOANS:

         For construction of           Floating interest rates ranging from 4.36% to
           telecommunications            8.24% per annum as of December 31, 2001
           network                       with maturities through 2002 (iv)                           138            46

                                       Fixed interest rate at 7.5% per annum with
                                         maturities through 2004                                     526           413
                                                                                             -----------   -----------

         Total long-term loans                                                                    16,237         8,756
         Less: current portion                                                                    (3,764)       (2,829)
                                                                                             -----------   -----------

                                                                                                  12,473         5,927
                                                                                             ===========   ===========
</TABLE>


         (i)      At December 31, 2001, bank loan amounting to RMB800 was
                  guaranteed by Liaoning PTC.

         (ii)     At December 31, 2001, bank loans amounting to RMB950, RMB571,
                  RMB250 and RMB250 were guaranteed by Hebei PTC, Liaoning PTC,
                  Henan PTC and Beijing PTC respectively.

         (iii)    At December 31, 2001, bank loan amounting to RMB33 was
                  guaranteed by Shandong PTC.

         (iv)     At December 31, 2001, other loan amounting to RMB8 was
                  guaranteed by Guangdong PTC.


                                     F-49

<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)

19       BANK LOANS AND OTHER INTEREST-BEARING BORROWINGS (CONTINUED)

(A)      LONG-TERM BANK AND OTHER LOANS (CONTINUED)

         The aggregate maturities of long-term bank and other loans subsequent
         to December 31, 2001 are as follows:

<TABLE>
<CAPTION>
                                                                                                                 RMB
          <S>                                                                                                 <C>
          2002                                                                                                 2,829
          2003                                                                                                 3,542
          2004                                                                                                 1,374
          2005                                                                                                   501
          2006                                                                                                   440
          Thereafter                                                                                              70
                                                                                                              ------
                                                                                                               8,756
                                                                                                              ======
</TABLE>

         Interest expense, net of the amounts capitalized, is as follows:

<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                         -----------------------------------------

                                                                            1999             2000              2001
                                                                             RMB              RMB               RMB
         <S>                                                             <C>              <C>              <C>
         Interest incurred                                                   421              477            1,068
         Interest element of capital lease                                     1               52              129
         Interest capitalized                                               (143)            (119)             (88)
                                                                         -------          -------          -------
                                                                             279              410            1,109
         Interest expenses of fixed rate notes                                64              393              394
         Interest expenses of convertible notes                               --               21              129
         Interest expenses of bonds                                           --               --              108
                                                                         -------          -------          -------
         Interest expense                                                    343              824            1,740
                                                                         =======          =======          =======
</TABLE>

(B)      FIXED RATE NOTES

         On November 2, 1999, the Company issued unsecured fixed rate notes
         (the "notes") with a principal amount of US$600 at an issue price
         equal to 99.724% of the principal amount of the notes, due on November
         2, 2004. The notes bear interest at the rate of 7.875% per annum and
         such interest is payable semi-annually on May 2 and November 2 of each
         year, commencing May 2, 2000.


                                     F-50

<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)

19       BANK LOANS AND OTHER INTEREST-BEARING BORROWINGS (CONTINUED)

(C)      CONVERTIBLE NOTES

         (i)      On November 3, 2000, the Company issued convertible notes
                  (the "Notes") in an aggregate principal amount of US$690 at
                  an issue price equal to 100% of the principal amount of the
                  Notes. The Notes bear interest at the rate of 2.25% per
                  annum, payable semi-annually on May 3 and November 3 of each
                  year commencing May 3, 2001. Unless previously redeemed,
                  converted or purchased and cancelled, the Notes will be
                  redeemed at 100% of the principal amount, plus any accrued
                  and unpaid interest on November 3, 2005. The Notes are
                  unsecured, senior and unsubordinated obligations of the
                  Company.

         (ii)     The Notes are convertible at any time on or after December 3,
                  2000 and before the close of business on the third business
                  day prior to the earlier of (1) the maturity date of November
                  3, 2005 or (2) the redemption date fixed for early
                  redemption, at an initial conversion price, subject to
                  adjustment in certain events, of HK$59.04 per share.

         (iii)    During the year, no Notes were converted into ordinary shares
                  of the Company.

(D)      BONDS

         On June 18, 2001, Guangdong Mobile issued guaranteed bonds (the
         "Bonds") with a principal amount of RMB5,000 at an issue price equal
         to the face value of the Bonds.

         The Bonds bear interest at a floating rate, adjusted annually from the
         first day of each interest payable year and payable annually. The
         first annual interest rate of the Bonds is 4%. The Bonds, redeemable
         at 100% of the principal amount, will mature on June 18, 2011 and the
         interest will be accrued up to June 17, 2011. Incidental costs
         incurred in relation to the issue of the Bonds are amortized on a
         straight-line basis over the period from the date of issue to the date
         of maturity.

         The Company has issued a joint and irrevocable guarantee (the
         "Guarantee") for the performance of the Bonds. China Mobile has also
         issued a further guarantee in relation to the performance by the
         Company of its obligations under the Guarantee.


                                     F-51

<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


20       OBLIGATIONS UNDER CAPITAL LEASE

         (i)      Hainan Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile,
                  Shandong Mobile and Guangxi Mobile entered into certain
                  capital lease agreements to finance the purchase of
                  telecommunications equipment. The leases are denominated in
                  United States dollars and Renminbi and the lease term is
                  expiring through 2004. The legal title of the equipment will
                  be transferred to Hainan Mobile, Shanghai Mobile, Tianjin
                  Mobile, Hebei Mobile, Shandong Mobile and Guangxi Mobile when
                  all outstanding lease payments are paid.

         (ii)     The following is a schedule by years of future minimum lease
                  payments under capital lease together with the present value
                  of the net minimum lease payments as of December 31, 2001:

<TABLE>
<CAPTION>
                                                                                             RMB
                  <S>                                                                   <C>
                  2002                                                                       969
                  2003                                                                       530
                  2004                                                                       311
                                                                                        --------
                  Total minimum lease payments                                             1,810
                  Less: Amount representing interest                                         (90)
                                                                                        --------
                  Present value of net minimum lease payments                              1,720
                  Less: Obligations under capital lease - current portion                   (908)
                                                                                        --------
                                                                                             812
                                                                                        ========
</TABLE>

         (iii)    As of December 31, 2001, capital lease payments of RMB68 is
                  guaranteed by Hainan PTC.

21       ACCRUED EXPENSES AND OTHER PAYABLES

<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                        -------------------------

                                                                                           2000              2001
                                                                                            RMB               RMB
         <S>                                                                            <C>              <C>
         Other payables                                                                   5,409             8,418
         Accrued salaries, wages and benefits                                             2,198             1,792
         Accrued expenses                                                                   801               630
                                                                                        -------          --------
                                                                                          8,408            10,840
                                                                                        =======          ========
</TABLE>


                                     F-52

<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


22       DEFERRED REVENUE

         Deferred revenue includes primarily prepaid services fees received
         from subscribers which is recognized as income when the cellular
         telephone services are rendered upon actual usage by subscribers.

         Deferred revenue also includes income from assignment of rights. The
         balance at year end represents the unamortized portion of proceeds
         received by Guangdong Mobile from certain distributors of
         telecommunications services pursuant to agreements under which
         Guangdong Mobile sold certain mobile phone numbers to these
         distributors at RMB0.0092 each, in return for assigning to such
         distributors the rights to certain revenue such as usage fees, monthly
         fees, connection fees, telephone number selection fees and 50%
         value-added services fees from those subscribers over a period of
         seven years. The distributors have no recourse to the Group under the
         relevant agreements and the Group retains no credit risk from such
         subscribers during the seven-year period. The proceeds received by
         Guangdong Mobile have been accounted for as deferred revenue and are
         amortized over a period of seven years. After the expiration of the
         relevant agreements, the rights to income from these subscribers will
         revert to the Group.

<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                                       --------------------------

                                                                                            2000             2001
                                                                                             RMB              RMB
         <S>                                                                           <C>               <C>
         Balance at beginning of year                                                      1,492            3,654
         Additions on acquisition of subsidiaries                                          1,039               --
         Additions during the year                                                         5,689           23,191
         Recognized in the consolidated statements of income                              (4,566)         (22,608)
                                                                                       ---------         --------

         Balance at end of year                                                            3,654            4,237
                                                                                       =========         ========
</TABLE>


                                     F-53

<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


23       COMMITMENTS AND CONTINGENCIES

(A)      OPERATING LEASES

         Future minimum lease payments as of December 31, 2001 under
         non-cancellable operating leases having initial or remaining lease
         terms of more than one year are as follows:

<TABLE>
<CAPTION>
                                                                                         RMB
         <S>                                                                       <C>
         2002                                                                          5,057
         2003                                                                          2,150
         2004                                                                          1,805
         2005                                                                          1,616
         2006                                                                          1,551
         Thereafter                                                                    2,527
                                                                                   ---------

                                                                                      14,706
                                                                                   =========
</TABLE>

(B)      CAPITAL COMMITMENTS

         As of December 31, 2001, the Group had capital commitments as follows:

<TABLE>
<CAPTION>
                                                                                         RMB
         <S>                                                                       <C>

         Authorized and contracted for                                                10,366
         Authorized but not contracted for                                            35,334
                                                                                   ---------

                                                                                      45,700
                                                                                   =========
</TABLE>


                                     F-54

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


24       EMPLOYEE AND RETIREMENT BENEFITS

         The employees of the subsidiaries participate in defined benefit
         retirement plans managed by the local government authorities whereby
         the subsidiaries are required to contribute to the schemes at fixed
         rate of the employees' salary costs. The subsidiaries have no
         obligation for the payment of retirement and other post-retirement
         benefits of staff other than the contributions described above.
         Expenses incurred by the subsidiaries in connection with the
         retirement scheme were RMB251, RMB335 and RMB287, respectively, for
         three years ended December 31, 1999, 2000 and 2001, respectively.

         Pursuant to PRC regulation and prior to the Restructuring and the
         subsequent acquisitions, the subsidiaries were required to provide
         staff quarters to eligible employees and their immediate families. The
         Group has established separate employee housing reform schemes in
         order to comply with the regulation at the provincial level. Under
         such schemes, the Group is required to either purchase or build
         housing which is to be sold or rented to eligible employees. Through
         May 31, 1997, housing provided under the schemes was shared between
         Guangdong Mobile and the Guangdong PTA, in Guangdong Mobile's case,
         and purchased or built entirely by the Zhejiang PTA, in Zhejiang
         Mobile's case. Prior to the acquisitions of Jiangsu Mobile, Fujian
         Mobile, Henan Mobile, Hainan Mobile, Beijing Mobile, Shanghai Mobile,
         Tianjin Mobile, Hebei Mobile, Shandong Mobile and Guangxi Mobile,
         housing provided under the schemes were purchased or built entirely by
         the relevant PTAs or PTCs, except Liaoning Mobile where prior to the
         acquisition housing provided under the schemes were provided by
         Liaoning Mobile.

         Following the Restructuring and the subsequent acquisitions, the Group
         had accrued RMB230 for such housing schemes in respect of employees
         through December 31, 2000. Since the housing schemes had been
         terminated effective from January 1, 2001, no further cost was
         incurred in 2001. All previous costs incurred by the relevant PTAs or
         PTCs have not been charged to the Group.

25       RELATED PARTY TRANSACTIONS

(a)      Parties are considered to be related if the one party has the ability,
         directly or indirectly, to control the other party or exercise
         significant influence over the other party in making financial and
         operating decisions. Parties are also considered to be related if they
         are subject to common control or common significant influence.

         The majority of the Group's business activities are conducted with
         China Mobile (the Company's ultimate holding company) and its
         subsidiaries, other than the Group, (the "China Mobile Group") and the
         China Telecom Group.


                                     F-55

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


25       RELATED PARTY TRANSACTIONS (CONTINUED)

         As a result of the restructuring in May 2000, the MII ceased to have
         controlling interests in China Mobile, the DGT and the PTCs. However,
         the MII continues in its capacity as the industry regulator providing
         policy guidance and exercising regulatory authority over all
         telecommunications services providers in the PRC. China Telecom was
         set up as a result of the restructuring to operate the fixed line
         telephone networks in the PRC previously operated by the DGT and the
         PTCs, and is owned by the PRC government. As such, the MII or entities
         under the control of the MII including the DGT and the PTCs, and the
         China Telecom Group since its formation, are no longer considered to
         be related parties of the Group since May 2000.

         The following is a summary of principal transactions which were
         entered into by the Group with the China Mobile Group since its
         formation, and transactions which were carried out by the Group with
         the MII and the entities under the control of the MII including the
         DGT and the PTCs prior to May 2000.

<TABLE>
<CAPTION>
                                                                           Year ended December 31,
                                                          ---------------------------------------------------------

                                                              Note           1999             2000            2001
                                                                              RMB              RMB             RMB
         <S>                                                <C>             <C>              <C>             <C>
         Interconnection revenue                               (i)          1,242            1,744           1,793
         Interconnection charges                              (ii)          5,275            2,864           1,772
         Leased line charges                                 (iii)          3,723            2,464             278
         Roaming revenue                                      (iv)          1,497            2,674           4,688
         Roaming expenses                                      (v)          1,178            2,076           4,559
         Spectrum fees                                        (vi)             12               15              18
         Operating lease charges                             (vii)            280              226             138
         Sales commission                                   (viii)            378              248               -
         Debt collection service fees                       (viii)            143               91               -
         Billing service fees                               (viii)              2                -               -
         Roaming billing processing fees                    (viii)              -              148             201
         Equipment maintenance service fees                   (ix)              -                1              46
         Rental charges of synchronized clock ports            (x)              2                3               -
         Construction and related service fees                (xi)              -               20             161
         Purchase of transmission tower and
           transmission tower-related service and
           antenna maintenance service fees                  (xii)              -               16              55
         Prepaid card sales commission income               (xiii)              -              114             241
         Prepaid card sales commission expenses             (xiii)              -               99             315
         Interest paid/payable                               (xiv)             18                -               -
</TABLE>


                                     F-56

<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


25       RELATED PARTY TRANSACTIONS (CONTINUED)

         NOTES:

         (i)      Interconnection revenue represents the amounts received or
                  receivable from the China Mobile Group in respect of long
                  distance calls made by non-Group's subscribers.

                  For the years ended December 31, 1999 and 2000,
                  interconnection revenue also included amounts received or
                  receivable from the DGT in respect of long distance calls
                  made by non-subscribers in Guangdong, Zhejiang, Jiangsu,
                  Fujian, Henan and Hainan provinces ("the relevant provinces")
                  and amounts received or receivable from the Guangdong PTC,
                  the Zhejiang PTC, the Jiangsu PTC, the Fujian PTC, the Henan
                  PTC and the Hainan PTC ("the relevant PTCs") in respect of
                  long distance calls made between the Group's cellular
                  networks and the fixed line networks in the relevant
                  provinces and outbound calls originating from the fixed line
                  networks in the relevant provinces which terminate on GSM
                  network operators in other provinces in the PRC.

         (ii)     Interconnection charges represent the amounts paid or payable
                  to the China Mobile Group in respect of long distance calls
                  made by the Group's subscribers roaming outside their
                  registered provinces.

                  For the years ended December 31, 1999 and 2000,
                  interconnection expenses also included amounts paid or
                  payable to the DGT in respect of long distance calls made by
                  the Group's subscribers in the relevant provinces roaming
                  outside their registered provinces and amounts paid or
                  payable to the relevant PTCs in respect of calls made between
                  the Group's cellular network, the fixed line networks in the
                  relevant provinces and other GSM network operators in other
                  provinces in the PRC.

         (iii)    Leased line charges represent expenses paid or payable to the
                  China Mobile Group for the use of inter-provincial leased
                  lines which link the Group's mobile switching centers
                  together and with other mobile switching centers of the China
                  Mobile Group.

                  For the years ended December 31, 1999 and 2000, leased line
                  charges also included expenses paid or payable to the
                  relevant PTCs for the use of leased line.

         (iv)     A cellular telephone user using roaming services is charged
                  at the respective roaming usage rate for roaming in calls, in
                  addition to applicable long distance charges. Roaming revenue
                  represents domestic and international roaming in usage
                  charges from non-subscribers received or receivable from the
                  relevant domestic and international cellular telephone
                  operators through the China Mobile Group.


                                     F-57

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


25       RELATED PARTY TRANSACTIONS (CONTINUED)

         NOTES: (CONTINUED)

         (v)      A cellular telephone user using roaming services is charged
                  at the respective roaming usage rate for roaming out calls,
                  in addition to applicable long distance charges. Roaming
                  expenses represent the amount of domestic and international
                  roaming out charges received or receivable from subscribers
                  which is to be remitted to the relevant domestic and
                  international cellular telephone operators for their share of
                  the roaming revenue through the China Mobile Group.

         (vi)     Spectrum fees represent the spectrum usage fees paid or
                  payable to the China Mobile Group for the usage of the
                  frequency bands allocated to the Company's subsidiaries in
                  the PRC.

         (vii)    Operating lease charges represent the rental and property
                  management fees paid or payable to the subsidiaries of China
                  Mobile for operating leases in respect of land and buildings
                  and others.

                  For the years ended December 31, 1999 and 2000, operating
                  lease charges also included rental and property management
                  fee paid or payable to the relevant PTCs prior to May 2000.

         (viii)   The Group entered into certain services agreements in respect
                  of marketing services with authorized dealers, debt
                  collection services and roaming billing processing with
                  subsidiaries of China Mobile or the relevant PTCs prior to
                  May 2000.

                  Debt collection service fees represent the amounts paid or
                  payable to subsidiaries of China Mobile for their provision
                  of debt collection services to the Company's subsidiaries.

                  Roaming billing processing fees represent the amounts paid or
                  payable to the China Mobile Group for the provision of the
                  roaming billing processing services to the Company's
                  subsidiaries.

                  For the years ended December 31, 1999 and 2000, sales
                  commission, debt collection service fees and roaming billing
                  processing fees also included amounts paid or payable to the
                  relevant PTCs for services rendered in the relevant
                  provinces.


                                     F-58

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


25       RELATED PARTY TRANSACTIONS (CONTINUED)

         NOTES: (CONTINUED)

         (ix)     Equipment maintenance service fees represent the amount paid
                  or payable to subsidiaries of China Mobile for the provision
                  of the maintenance services to Beijing Mobile, Shanghai
                  Mobile and Liaoning Mobile.

                  For the years ended December 31, 1999 and 2000, equipment
                  maintenance service fees included amounts paid or payable to
                  Fujian PTC for services rendered in the relevant province.

         (x)      Rental charges of synchronized clock ports represent expenses
                  paid or payable to the relevant PTCs for leasing of
                  synchronized clock ports by the Company's subsidiaries.

         (xi)     Construction and related service fees represent the amount
                  paid or payable to subsidiaries of China Mobile for the
                  provision of construction services to Beijing Mobile,
                  Shanghai Mobile, Liaoning Mobile and Shandong Mobile.

         (xii)    This represents payment made by Hebei Mobile to acquire
                  transmission towers from relevant subsidiaries of China
                  Mobile and expenses paid or payable to relevant subsidiaries
                  of China Mobile for the provision of transmission tower
                  related services and antenna maintenance services provided to
                  Hebei Mobile.

         (xiii)   Prepaid card sales commission income and commission expenses
                  represent handling charges received/receivable from
                  subsidiaries of China Mobile to the Company's subsidiaries or
                  paid/payable by the Company's subsidiaries to subsidiaries of
                  China Mobile in respect of prepaid card services.

         (xiv)    Interest paid/payable represents the interest incurred on
                  loans borrowed from Zhejiang PTA and Telpo.


                                     F-59

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


25       RELATED PARTY TRANSACTIONS (CONTINUED)

         NOTES: (CONTINUED)

(b)      Pursuant to the ordinary resolution passed by the Company's
         shareholders on November 10, 2000, the Company acquired the entire
         issued share capital of Beijing Mobile BVI, Shanghai Mobile BVI,
         Tianjin Mobile BVI, Hebei Mobile BVI, Liaoning Mobile BVI, Shandong
         Mobile BVI and Guangxi Mobile BVI from CMHK (BVI), the immediate
         holding company of the Company, for a total consideration of
         HK$256,021 (RMB equivalent 271,485). The consideration was satisfied
         by a cash payment of HK$74,609 (RMB equivalent 79,116) and allotment
         of shares to CMHK (BVI) amounted to HK$181,412 (RMB equivalent
         192,369). The only assets of each of Beijing Mobile BVI, Shanghai
         Mobile BVI, Tianjin Mobile BVI, Hebei Mobile BVI, Liaoning Mobile BVI,
         Shandong Mobile BVI and Guangxi Mobile BVI are their interests in the
         entire equity of Beijing Mobile, Shanghai Mobile, Tianjin Mobile,
         Hebei Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile,
         respectively.

         Pursuant to the ordinary resolution passed by the Company's
         shareholders on November 11, 1999, the Company acquired the entire
         issued share capital of Fujian Mobile BVI, Henan Mobile BVI and Hainan
         Mobile BVI from CMHK (BVI), for a total consideration of HK$49,715
         (RMB equivalent 52,953). The consideration was satisfied by a cash
         payment of HK$19,031 (RMB equivalent 20,268) and allotment of shares
         to CMHK (BVI) amounted to HK$30,684 (RMB equivalent 32,685). The only
         assets of each of Fujian Mobile BVI, Henan Mobile BVI and Hainan
         Mobile BVI are their interests in the entire equity of Fujian Mobile,
         Henan Mobile and Hainan Mobile, respectively.


                                     F-60

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


26       SHAREHOLDERS' EQUITY

         SHARE CAPITAL

<TABLE>
<CAPTION>
                                                                                          Nominal
                                                                     Number of          amount of
                                                                      ordinary      each ordinary
                                                                        shares              share            Amount
                                                                                                                HK$
         <S>                                                  <C>                   <C>                     <C>
         AUTHORIZED:

         Balance at December 31, 2000 and 2001                  30,000,000,000            HK$0.10             3,000
                                                              ================                              =======

         ISSUED AND FULLY PAID:

         Balance at January 1, 2000                             13,706,287,021            HK$0.10             1,371

         Issue of new shares to the professional and
           institutional investors                               1,115,643,845            HK$0.10               112

         Issue of consideration shares for acquisition
           of subsidiaries                                       3,779,407,375            HK$0.10               378

         Shares issued under share option scheme                     3,974,000            HK$0.10                --
                                                              ----------------                              -------

         Balance at December 31, 2000                           18,605,312,241                                1,861
                                                              ================                              =======
                                                                                            RMB
                                                                                     equivalent               1,986
                                                                                                            =======

         Balance at January 1, 2001                             18,605,312,241            HK$0.10             1,861

         Shares issued under share option scheme                        93,000            HK$0.10                --
                                                              ----------------                              -------

         Balance at December 31, 2001                           18,605,405,241                                1,861
                                                              ================                              =======
                                                                                            RMB
                                                                                     equivalent               1,986
                                                                                                            =======
</TABLE>


                                     F-61

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


26       SHAREHOLDERS' EQUITY (CONTINUED)

         SHARE CAPITAL (CONTINUED)

         The Company was established in Hong Kong on September 3, 1997 as a
         limited company, with a registered share capital of HK$10,000 divided
         into 100,000 shares of HK$0.10 each, two of which were issued and
         credited as fully paid.

         At an extraordinary general meeting of the Company held on
         September 27, 1997,

         (i)      the authorized share capital of the Company was increased
                  from HK$10,000 to HK$1,600,000,000 by the creation of an
                  additional 15,999,900,000 shares of HK$0.10 each; and

         (ii)     9,009,999,998 shares were credited as fully paid and issued
                  to CMHK (BVI) for the transfer of interests in Guangdong
                  Mobile and Zhejiang Mobile to the Company.

         Pursuant to the resolutions passed on October 21, 1997, the Company
         issued 2,600,000,000 shares of HK$0.10 each at HK$11.68 per share and
         the shares were listed on the New York Stock Exchange and The Stock
         Exchange of Hong Kong Limited on October 22, 1997 and October 23,
         1997, respectively. On November 7, 1997, the Company issued
         170,788,000 shares of HK$0.10 each at HK$11.68 per share by way of a
         placing among professional and institutional investors.

         Pursuant to ordinary resolutions passed at directors' meetings held on
         November 1, 1999 and November 3, 1999 respectively, the Company issued
         560,700,000 and 84,104,000 ordinary shares of HK$0.10 each to
         professional and institutional investors, at a consideration of
         HK$24.10 per share, for financing the acquisition of Fujian Mobile
         BVI, Henan Mobile BVI and Hainan Mobile BVI.

         Pursuant to an ordinary resolution passed at an extraordinary general
         meeting held on November 11, 1999, 1,273,195,021 ordinary shares of
         HK$0.10 each were issued and credited as fully paid to CMHK (BVI), at
         a consideration of HK$24.10 per share as part of the consideration for
         the acquisition of Fujian Mobile BVI, Henan Mobile BVI and Hainan
         Mobile BVI.

         Pursuant to resolutions passed at directors' meetings held on November
         2, 2000 and November 8, 2000 respectively, the Company issued
         1,068,396,405 and 47,247,440 ordinary shares of HK$0.10 each to
         professional and institutional investors, at a consideration of HK$48
         per share, for financing the acquisition of Beijing Mobile BVI,
         Shanghai Mobile BVI, Tianjin Mobile BVI, Hebei Mobile BVI, Liaoning
         Mobile BVI, Shandong Mobile BVI and Guangxi Mobile BVI.


                                     F-62

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


26       SHAREHOLDERS' EQUITY (CONTINUED)

         SHARE CAPITAL (CONTINUED)

         Pursuant to ordinary resolutions passed at an extraordinary general
         meeting held on November 10, 2000, the Company's authorized share
         capital was increased to HK$3,000,000,000 by the creation of an
         additional 14,000,000,000 ordinary shares of HK$0.10 each, ranking
         pari passu with the existing shares of the Company, and 3,779,407,375
         ordinary shares of HK$0.10 each were issued and credited as fully paid
         to CMHK (BVI), at a consideration of HK$48 per share as part of the
         consideration for the acquisition of Beijing Mobile BVI, Shanghai
         Mobile BVI, Tianjin Mobile BVI, Hebei Mobile BVI, Liaoning Mobile BVI,
         Shandong Mobile BVI and Guangxi Mobile BVI.

         RESERVES

         Capital reserve

         As mentioned in Note 1, this amount represents the total of the
         following:

         -        the additional earnings of Guangdong Mobile and Zhejiang
                  Mobile from June 1, 1997 to September 26, 1997, the
                  completion date of the Restructuring (RMB1,132);

         -        goodwill arising on the acquisition of Jiangsu Mobile BVI and
                  Jiangsu Mobile on June 3, 1998 (RMB15,622), which has been
                  eliminated against capital reserve immediately upon
                  acquisition;

         -        goodwill arising on the acquisition of Fujian Mobile BVI,
                  Henan Mobile BVI, Hainan Mobile BVI, Fujian Mobile, Henan
                  Mobile and Hainan Mobile on November 11, 1999 (RMB42,440),
                  which has been eliminated against capital reserve immediately
                  upon acquisition; and

         -        goodwill arising on the acquisition of Beijing Mobile BVI,
                  Shanghai Mobile BVI, Tianjin Mobile BVI, Hebei Mobile BVI,
                  Liaoning Mobile BVI, Shandong Mobile BVI, Guangxi Mobile BVI,
                  Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei
                  Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile
                  on November 12, 2000 (RMB239,540), which has been eliminated
                  against capital reserve immediately upon acquisition.


                                     F-63

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


26       SHAREHOLDERS' EQUITY (CONTINUED)

         RESERVES (CONTINUED)

         PRC statutory reserves

         PRC statutory reserves include general reserve, enterprise expansion
         fund, statutory surplus reserve and statutory public welfare fund.

         In accordance with Accounting Regulations for PRC Enterprises with
         Foreign Investment, foreign investment enterprises in the PRC are
         required to transfer at least 10% of their profit after taxation, as
         determined under accounting principles generally accepted in the PRC
         ("PRC GAAP") to the general reserve until the balance of the general
         reserve is equal to 50% of their registered capital. Moreover, they
         are required to transfer a certain percentage of their profit after
         taxation, as determined under PRC GAAP, to the enterprise expansion
         fund. During the year, appropriations were made by each of the above
         subsidiaries to the general reserve and the enterprise expansion fund
         each at 10% of their profit after taxation determined under PRC GAAP.

         The general reserve can be used to make good losses and to increase
         the capital of the subsidiaries while the enterprise expansion fund
         can be used to increase the capital of the subsidiaries, to acquire
         fixed assets and to increase current assets.

         At December 31, 2000, Shanghai Mobile has not yet registered as a
         wholly-foreign owned enterprise. As a result, appropriations were made
         by Shanghai Mobile, according to its Articles of Association to the
         statutory surplus reserve and the statutory public welfare fund both
         at 10% of its profit after taxation determined under PRC GAAP during
         the year ended December 31, 2000.

         Statutory surplus reserve can be used to make good previous years'
         losses, if any, and may be converted into paid-up capital, provided
         that the balance after such conversion is not less than 25% of the
         registered capital of the subsidiaries. Statutory public welfare fund
         can only be utilized on capital items for the collective benefits of
         the employees such as the construction of staff quarters and other
         staff welfare facilities. This reserve is non-distributable other than
         in liquidation.

         At December 31, 2000 and 2001, the balances of the general reserve,
         enterprise expansion fund, statutory surplus reserve and statutory
         public welfare fund were RMB3,263 and RMB5,766, RMB9,067 and
         RMB11,590, RMB175 and RMB181 and RMB138 and RMB139, respectively.


                                     F-64

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


26       SHAREHOLDERS' EQUITY (CONTINUED)

         RESERVES (CONTINUED)

         Distributable reserves

         At December 31, 2000 and 2001, the amount of distributable reserves of
         the Company amounted to RMB2,889 (restated) and RMB6,780.

         SHARE OPTION SCHEME

         On October 8, 1997, the Company adopted a share option scheme pursuant
         to which the directors of the Company may, at their discretion, invite
         employees, including executive directors, of the Company or any of its
         subsidiaries, to take up options to subscribe for shares up to a
         maximum aggregate number of shares equal to 10% of the total issued
         share capital of the Company. According to the share option scheme,
         the consideration payable by a participant for the grant of an option
         under the share option scheme will be HK$1.00. The price of a share
         payable by a participant upon the exercise of an option will be
         determined by the directors of the Company at their discretion, except
         that such price may not be set below a minimum price which is the
         higher of:

         (i)      the nominal value of a share; and

         (ii)     80% of the average of the closing prices of shares on The
                  Stock Exchange of Hong Kong Limited on the five trading days
                  immediately preceding the date of grant of the option.

         The period during which an option may be exercised will be determined
         by the directors at their discretion, except that no option may be
         exercised later than 10 years after the adoption date of the scheme.

         During the year ended December 2000 and 2001, a total number of share
         options of 31,590,000 and 76,773,000 were granted under the share
         option scheme to certain directors and employees of the Company.
         During the year ended December 31, 2000 and 2001, options were
         exercised to subscribe for 3,974,000 and 93,000 ordinary shares of
         HK$0.10 each at a total consideration of HK$84.0 (RMB equivalent 89.0)
         and HK$3.5 (RMB equivalent 3.7).


                                     F-65

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


26       SHAREHOLDERS' EQUITY (CONTINUED)

         SHARE OPTION SCHEME (CONTINUED)

         At December 31, 2000 and 2001, the outstanding options were as
         follows:

<TABLE>
<CAPTION>
                                                Normal period during          Price per                     Number of shares
                                                       which options        share to be              involved in the options
         Date of options granted                         exercisable            paid on          outstanding at the year end
                                                                            exercise of
                                                                                options
         <S>                                    <C>                         <C>                  <C>
         AT DECEMBER 31, 2001

         March 9, 1998                                 March 9, 1998           HK$11.10                            2,100,000
                                                    to March 8, 2006

         November 26, 1999                         November 26, 1999           HK$33.91                            3,500,000
                                                  to October 7, 2007

         November 26, 1999                         November 26, 2002           HK$33.91                            3,500,000
                                                  to October 7, 2007

         April 25, 2000                            April 25, 2002 to           HK$45.04                           15,264,000
                                                     October 7, 2007

         April 25, 2000                            April 25, 2005 to           HK$45.04                           15,264,000
                                                     October 7, 2007

         June 22, 2001                                 June 22, 2003           HK$32.10                           38,115,000
                                                  to October 7, 2007

         June 22, 2001                                 June 22, 2006           HK$32.10                           38,115,000
                                                  to October 7, 2007
</TABLE>


                                     F-66

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


26       SHAREHOLDERS' EQUITY (CONTINUED)

         SHARE OPTION SCHEME (CONTINUED)
<TABLE>
<CAPTION>
                                                Normal period during          Price per                     Number of shares
                                                       which options        share to be              involved in the options
         Date of options granted                         exercisable            paid on          outstanding at the year end
                                                                            exercise of
                                                                                options
         <S>                                    <C>                         <C>                  <C>
         AT DECEMBER 31, 2000

         March 9, 1998                                 March 9, 1998           HK$11.10                            2,100,000
                                                    to March 8, 2006

         November 26, 1999                         November 26, 1999           HK$33.91                            3,500,000
                                                  to October 7, 2007

         November 26, 1999                         November 26, 2002           HK$33.91                            3,500,000
                                                  to October 7, 2007

         April 25, 2000                            April 25, 2002 to           HK$45.04                           15,608,000
                                                     October 7, 2007

         April 25, 2000                            April 25, 2005 to           HK$45.04                           15,608,000
                                                     October 7, 2007
</TABLE>

27       FOREIGN CURRENCY EXCHANGE

         The Renminbi is not freely convertible into foreign currencies. All
         foreign exchange transactions involving Renminbi must take place
         through the People's Bank of China or other institutions authorized to
         buy and sell foreign exchange or at a swap center.

         Currently the Company's subsidiaries established in the PRC are able
         to purchase foreign exchange for settlement of "current account
         transactions" (as defined in the applicable regulations), including
         payment of dividends without the approval of the State Administration
         of Foreign Exchange ("SAFE"). However, there can be no assurance that
         the current authorization for Foreign Investment Enterprises to retain
         their foreign exchange to satisfy foreign exchange liabilities or to
         pay dividends in the future will not be limited or eliminated or that
         the subsidiaries of the Company will be able to obtain sufficient
         foreign exchange to pay dividends or satisfy their foreign exchange
         requirements. Foreign exchange transactions under the capital account
         continue to be subject to limitations and require approvals of the
         SAFE, which could affect the ability of the Company's subsidiaries
         established in the PRC to obtain foreign exchange through debt or
         equity financing, including by means of loans or capital contribution
         from the Company.


                                     F-67

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


28       PRINCIPAL SUBSIDIARIES

         Details of the Company's principal subsidiaries are as follows:

<TABLE>
<CAPTION>
                                         Place and
                                           date of                                        Attributable
                                    incorporation/        Authorized, issued and                equity
         Name of company             establishment             paid up capital              interest %      Principal activities
         --------------------------------------------------------------------------------------------------------------------------
                                                        Authorized   Issued and paid up
         <S>                        <C>              <C>             <C>                  <C>               <C>
         Guangdong Mobile                      PRC              --            RMB 5,595           100%       Cellular telephone
                                     September 28,                                                                     operator
                                              1988

         Zhejiang Mobile                       PRC              --            RMB 2,118           100%       Cellular telephone
                                       February 2,                                                                     operator
                                              1996

         Jiangsu Mobile BVI                    BVI   10,000 shares      1 share at HK$1           100%       Investment holding
                                     March 6, 1998         at HK$1                                                      company

         Jiangsu Mobile                        PRC              --            RMB 2,800           100%       Cellular telephone
                                      December 10,                                                                     operator
                                              1992

         Fujian Mobile BVI                     BVI   10,000 shares      1 share at HK$1           100%       Investment holding
                                      September 1,         at HK$1                                                      company
                                              1999

         Fujian Mobile                         PRC              --            RMB 5,247           100%       Cellular telephone
                                      September 7,                                                                     operator
                                              1999

         Henan Mobile BVI                      BVI   10,000 shares      1 share at HK$1           100%       Investment holding
                                      September 1,         at HK$1                                                      company
                                              1999

         Henan Mobile                          PRC              --            RMB 4,368           100%       Cellular telephone
                                         August 6,                                                                     operator
                                              1999

         Hainan Mobile BVI                     BVI   10,000 shares      1 share at HK$1           100%       Investment holding
                                      September 1,         at HK$1                                                      company
                                              1999

         Hainan Mobile                         PRC              --              RMB 643           100%       Cellular telephone
                                        August 19,                                                                     operator
                                              1999

         Beijing Mobile BVI                    BVI   10,000 shares      1 share at HK$1           100%       Investment holding
                                      September 1,         at HK$1                                                      company
                                              2000

         Beijing Mobile                        PRC              --             RMB5,358           100%       Cellular telephone
                                           July 26,                                                                    operator
                                              2000
</TABLE>


                                     F-68

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


28       PRINCIPAL SUBSIDIARIES (CONTINUED)

         Details of the Company's principal subsidiaries are as follows
         (Continued):

<TABLE>
<CAPTION>
                                         Place and
                                           date of                                        Attributable
                                    incorporation/        Authorized, issued and                equity
         Name of company             establishment             paid up capital               interest%      Principal activities
         --------------------------------------------------------------------------------------------------------------------------
                                                        Authorized   Issued and paid up
         <S>                        <C>              <C>             <C>                  <C>               <C>
         Shanghai Mobile BVI                   BVI   10,000 shares      1 share at HK$1           100%      Investment holding
                                      September 1,         at HK$1                                                     company
                                              2000

         Shanghai Mobile                       PRC              --             RMB5,405           100%      Cellular telephone
                                         August 4,                                                                    operator
                                              2000

         Tianjin Mobile BVI                    BVI   10,000 shares      1 share at HK$1           100%      Investment holding
                                      September 1,         at HK$1                                                     company
                                              2000

         Tianjin Mobile                        PRC              --             RMB1,857           100%      Cellular telephone
                                          July 24,                                                                    operator
                                              2000

         Hebei Mobile BVI                      BVI   10,000 shares      1 share at HK$1           100%      Investment holding
                                      September 1,         at HK$1                                                     company
                                              2000

         Hebei Mobile                          PRC              --             RMB4,015           100%      Cellular telephone
                                          July 31,                                                                    operator
                                              2000

         Liaoning Mobile BVI                   BVI   10,000 shares      1 share at HK$1           100%      Investment holding
                                      September 1,         at HK$1                                                     company
                                              2000

         Liaoning Mobile                       PRC              --             RMB4,758           100%      Cellular telephone
                                         August 7,                                                                    operator
                                              2000

         Shandong Mobile BVI                   BVI   10,000 shares      1 share at HK$1           100%      Investment holding
                                      September 1,         at HK$1                                                     company
                                              2000

         Shandong Mobile                       PRC              --             RMB5,772           100%      Cellular telephone
                                         August 7,                                                                    operator
                                              2000

         Guangxi Mobile BVI                    BVI   10,000 shares      1 share at HK$1           100%      Investment holding
                                      September 1,         at HK$1                                                     company
                                              2000

         Guangxi Mobile                        PRC              --             RMB2,095           100%      Cellular telephone
                                         August 3,                                                                    operator
                                              2000
</TABLE>


                                     F-69

<PAGE>


Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


28       PRINCIPAL SUBSIDIARIES (CONTINUED)

         Details of the Company's principal subsidiaries are as follows
         (Continued):

<TABLE>
<CAPTION>
                                         Place and
                                           date of                                        Attributable
                                    incorporation/        Authorized, issued and                equity
         Name of company             establishment             paid up capital               interest%      Principal activities
         --------------------------------------------------------------------------------------------------------------------------
                                                        Authorized   Issued and paid up
         <S>                        <C>              <C>             <C>                  <C>               <C>
         China Mobile (Shenzhen)               PRC              --                US$30           100%      Corporate operation
         Limited                           June 9,                                                                   controller
                                              2000

         Aspire Holdings Limited            Cayman   1,500,000,000                HK$79         78.64%       Investment holding
                                           Islands       shares at                                                      company
                                           June 5,          HK$0.1
                                              2000

         Aspire (BVI) Limited                  BVI          50,000             US$0.001         78.64%       Investment holding
                                           June 7,       shares at                                                      company
                                              2000            US$1

         Aspire Technologies                   PRC           US$10               US$1.5         78.64%               Technology
         (Shenzhen) Limited            December 1,                                                                     platform
                                              2000                                                              development and
                                                                                                                    maintenance
</TABLE>

         Dividend declared in respect of previous financial year, approved and
         paid by the Company's subsidiaries for the financial years ended
         December 31, 2000 and 2001 amounting to RMB985 and RMB4,863
         respectively. No dividend was declared for the financial year ended
         December 31, 1999.

         In prior years, dividend income from subsidiaries was recognized as
         income in the Company's statements of income in the period in which
         they related. With effect from January 1, 2001, in order to comply
         with Statement of Standard Accounting Practice 9 (revised) issued by
         the Hong Kong Society of Accountants, the Company recognizes dividend
         income as income in the accounting period in which the dividends are
         declared or proposed and approved by the shareholders of the relevant
         subsidiaries.

         The new accounting policy has been adopted retrospectively, with the
         opening balance of retained earnings and the comparative information
         of the Company adjusted for the amounts relating to prior periods.


                                     F-70




<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP

       The Group's accounting policies conform with generally accepted
       accounting principles in Hong Kong ("HK GAAP") which differ in certain
       material respects from those applicable generally accepted accounting
       principles in the United States of America ("US GAAP").

       The significant differences relate principally to the following items and
       the adjustments considered necessary to present the net profit and
       shareholders' equity in accordance with US GAAP are shown in the tables
       set out below:

(A)    EFFECT OF COMBINATION OF ENTITIES UNDER COMMON CONTROL

       Under HK GAAP, the Group adopted the acquisition method to account for
       the purchase of Jiangsu Mobile, Fujian Mobile, Henan Mobile, Hainan
       Mobile, Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei Mobile,
       Liaoning Mobile, Shandong Mobile and Guangxi Mobile. Under the
       acquisition method, the acquired results are included in the results of
       operations from the date of their acquisition. Goodwill arising on the
       acquisition, being the excess of the cost over the fair value of the
       Group's share of the separable net assets acquired, is eliminated against
       reserves immediately on acquisition.

       As a result of the Group, Jiangsu Mobile, Fujian Mobile, Henan Mobile,
       Hainan Mobile, Beijing Mobile, Shanghai Mobile, Tianjin Mobile, Hebei
       Mobile, Liaoning Mobile, Shandong Mobile and Guangxi Mobile being under
       common control prior to the acquisition, such acquisitions under US GAAP
       are considered "combinations of entities under common control". Under US
       GAAP, combinations of entities under common control are accounted for
       under the "as if pooling-of-interests" method, whereby assets and
       liabilities are accounted for at historical cost and the financial
       statements of previously separate companies for periods prior to the
       combination generally are restated on a combined basis. The cash
       consideration paid by the Group has been treated as an equity transaction
       in the year of acquisition for US GAAP purposes.

(B)    CAPITALIZATION OF INTEREST

       Under HK GAAP, the Group capitalizes interest costs to the extent that
       the related borrowings are directly attributable to the acquisition or
       construction of an asset which necessarily takes a substantial period of
       time to get ready for its intended use.

       Under US GAAP, interest costs capitalized are determined based on
       specific borrowings related to the acquisition or construction of an
       asset, if an entity's financing plans associate a specific new borrowing
       with a qualifying asset. If average accumulated expenditures for the
       asset exceed the amounts of specific new borrowings associated with an
       asset, additional interest costs capitalized are based on the weighted
       average interest rate applicable to other borrowings of the entity.



                                      F-71
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

(C)    REVALUATION AND IMPAIRMENT OF FIXED ASSETS

       For certain periods prior to May 31, 1997, the fixed assets of the
       subsidiaries were revalued in compliance with PRC rules and regulations,
       resulting in an increase in shareholders' equity.

       Additionally, the fixed assets of Guangdong Mobile and Zhejiang Mobile
       were revalued as of May 31, 1997 as a result of the Restructuring
       occurred in 1997. The fixed assets of Jiangsu Mobile were revalued as of
       December 31, 1997 upon its acquisition by the Group on June 3, 1998. The
       fixed assets of Fujian Mobile, Henan Mobile and Hainan Mobile were
       revalued as of June 30, 1999 upon their acquisitions by the Group on
       November 11, 1999. The fixed assets of Beijing Mobile, Shanghai Mobile,
       Tianjin Mobile, Hebei Mobile, Liaoning Mobile, Shandong Mobile and
       Guangxi Mobile were revalued as of June 30, 2000 upon their acquisition
       by the Group on November 10, 2000. These fixed asset revaluations result
       in an increase in shareholders' equity with respect to the increase in
       carrying amount of certain fixed assets above their historical cost
       bases.

       The carrying amount of fixed assets under HK GAAP is reviewed
       periodically in order to assess whether the recoverable amount has
       declined below the carrying amount. When such a decline occurs, the
       carrying amount is reduced to the recoverable amount based on the
       expected future cash flows generated by the fixed assets, discounted to
       their present values. A subsequent increase in the recoverable amount is
       written back to results of operations when circumstances and events that
       led to the write-down or write-off cease to exist.

       Under US GAAP, fixed assets are stated at their historical cost, less
       accumulated depreciation. However, as a result of the tax deductibility
       of the revaluation reserve, a deferred tax asset related to the reversal
       of the revaluation reserve is created under US GAAP with a corresponding
       increase in shareholders' equity.

       Under US GAAP, fixed assets are reviewed for impairment whenever events
       or changes in circumstances indicate that the carrying amount of an asset
       may not be recoverable. Recoverability of assets to be held and used is
       measured by a comparison of the carrying amount of an asset to future
       undiscounted net cash flows expected to be generated by the asset. If
       such assets are considered to be impaired, the impairment to be
       recognized is measured by the amount by which the carrying amounts of the
       assets exceed the fair value of the assets. Assets to be disposed of are
       reported at the lower of the carrying amount or fair value less costs to
       sell.



                                      F-72
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

(D)    EMPLOYEE HOUSING SCHEME

       The Group provides staff quarters under its employee housing schemes at
       below market prices. Under HK GAAP, employee housing scheme costs borne
       by the corresponding PTAs and not charged to the subsidiaries are not
       recognized by the subsidiaries.

       Under US GAAP, employee housing scheme costs borne by the corresponding
       PTAs and not charged to the subsidiaries are reflected as an expense in
       the statement of income and a corresponding capital contribution.
       Additionally, under US GAAP, the costs to be borne by the subsidiaries
       are accrued over the term of the program.

(E)    DEFERRED TAXATION

       Under HK GAAP, the Group provides for deferred tax liabilities only to
       the extent that there is a reasonable probability that such deferred tax
       liabilities will become payable in the foreseeable future. Deferred tax
       assets are not recognized unless their realization is assured beyond
       reasonable doubt.

       Under US GAAP, provisions are made for all deferred taxes as they arise,
       except a valuation allowance is provided against deferred tax assets when
       realization of such amounts does not meet the criterion of "more likely
       than not".

(F)    SHARE OPTION SCHEME

       The Group grants share options to directors and employees. Under HK GAAP,
       the proceeds received are recognized as an increase to capital upon the
       exercise of the share options.

       Under US GAAP, the Group determines compensation expenses based upon the
       excess, if any, of the quoted market price of the shares on the date of
       grant over the exercise price of the options and amortizes this amount
       over the vesting period of the option concerned.



                                      F-73
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

(G)    REVENUE RECOGNITION

       Until June 30, 1999, under both HK GAAP and US GAAP, connection fee
       revenue and telephone number selection fees were recognized as received.
       Under US GAAP, effective July 1, 1999, net connection fees and telephone
       number selection fees received in excess of direct costs were deferred
       and recognized over the estimated customer usage period for the related
       service.

       Under US GAAP, effective January 1, 2000, the Group adopted the
       provisions of Staff Accounting Bulletin No. 101, "Revenue Recognition in
       Financial Statements" ("SAB101"). Under SAB 101, connection fees and
       telephone number selection fees received and incremental direct costs up
       to, but not exceeding such fees, are deferred and amortized over the
       estimated customer usage period for the related service. The cumulative
       effect from the adoption of SAB 101 was not material.

(H)    INTERCONNECTION, ROAMING AND LEASED LINE AGREEMENTS

       In May 2000, the Group entered into new agreements with China Mobile for
       inter-provincial interconnection and domestic and international roaming
       services, and inter-provincial long distance transmission leased line
       arrangement with retrospective effect from October 1, 1999 for Guangdong
       Mobile, Zhejiang Mobile and Jiangsu Mobile and from April 1, 1999 for
       Fujian Mobile, Henan Mobile and Hainan Mobile. Under HK GAAP, the net
       savings refunded to the Group as a result of the two agreements taking
       retrospective effect were recorded in operations for the year ended
       December 31, 2000. Under US GAAP, such net savings are deferred and
       amortized on a straight-line basis over seven years.



                                      F-74
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

(I)    RECENTLY ISSUED ACCOUNTING STANDARDS

       SFAS NOS. 141 AND 142

       In June 2001, the Financial Accounting Standards Board ("FASB") issued
       SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and
       Intangible Assets". SFAS No. 141 requires that the purchase method of
       accounting be used for all business combinations initiated after June 30,
       2001 as well as all purchase method business combinations completed after
       June 30, 2001. SFAS No. 141 also specifies the types of acquired
       intangible assets that are required to be recognized and reported
       separately from goodwill and those acquired intangible assets that are
       required to be included in goodwill. SFAS No. 142 will require that
       goodwill no longer be amortized, but instead tested for impairment at
       least annually. SFAS No. 142 will also require recognized intangible
       assets be amortized over their respective estimated useful lives and
       reviewed for impairment in accordance with SFAS No. 144, "Accounting for
       the Impairment or Disposal of Long-Lived Assets". Any recognized
       intangible asset determined to have an indefinite useful life will not be
       amortized, but instead tested for impairment in accordance with the
       Standard until its life is determined to no longer be indefinite.

       The provisions of SFAS Nos. 141 and 142 shall be applied for fiscal years
       beginning after December 15, 2001, to all goodwill and other intangible
       assets recognized in an entity's statement of financial position at the
       beginning of that fiscal year, regardless of when those previously
       recognized assets were initially recognized, with the exception of the
       immediate requirement to use the purchase method of accounting for all
       business combinations completed after June 30, 2001. However, any
       goodwill and any intangible asset determined to have an indefinite useful
       life that is acquired in a business combination completed after June 30,
       2001 will not be amortized and instead reviewed for impairment in
       accordance with APB No. 17 or SFAS No. 121, "Accounting for the
       Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
       Of", until the date SFAS No. 142 is applied in its entirety.

       SFAS No. 141 will require an entity to evaluate its existing intangible
       assets and goodwill and to make any necessary reclassifications in order
       to conform to the new separation requirements at the date of adoption.
       Upon adoption of SFAS No. 142, an entity will be required to reassess the
       useful lives and residual values of all intangible assets and make any
       necessary amortization period adjustments.

       Because the Group currently has no goodwill arising from business
       combinations or other intangible assets, the adoption of SFAS No. 141 and
       142 will not have a material impact on its financial position or results
       of operation under US GAAP.



                                      F-75
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

(I)    RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)

       SFAS NO. 143

       In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
       Retirement Obligations. SFAS No. 143 requires the Group to record the
       fair value of an asset retirement obligation as a liability in the period
       in which it incurs a legal obligation associated with the retirement of
       tangible long-lived assets that result from the acquisition,
       construction, development and/or normal use of the assets. The Group also
       records a corresponding asset which is depreciated over the life of the
       asset. Subsequent to the initial measurement of the asset retirement
       obligation, the obligation will be adjusted at the end of the period to
       reflect the passage of time and changes in the estimated future cash
       flows underlying the obligation. The Group is required to adopt SFAS No.
       143 on January 1, 2003. The Group has not determined the potential
       effects on the Group's consolidated financial statements of adopting this
       Statement.

       SFAS NO. 144

       In August 2001, the FASB issued SFAS No. 144, "Accounting for the
       Impairment or Disposal of Long-Lived Assets", which supersedes both SFAS
       No. 121, and the accounting and reporting provisions of APB Opinion No.
       30, "Reporting the Results of Operations - Reporting the Effects of
       Disposal of a Segment of a Business, and Extraordinary, Unusual and
       Infrequently Occurring Events and Transactions" (Opinion 30), for the
       disposal of a segment of a business (as previously defined in that
       Opinion). SFAS No. 144 retains the fundamental provisions in SFAS No. 121
       for recognizing and measuring impairment losses on long-lived assets held
       for use and long-lived assets to be disposed of by sale, while also
       resolving significant implementation issues associated with SFAS No. 121.
       For example, SFAS No. 144 provides guidance on how a long-lived asset
       that will be disposed of other than by sale. SFAS No. 144 retains the
       basic provisions of Opinion 30 on how to present discontinued operations
       in the income statement but broadens that presentation to include a
       component of an entity (rather than a segment of a business). Unlike SFAS
       No. 121, an impairment assessment under SFAS No. 141 will never result in
       a write-down of goodwill. Rather, goodwill is evaluated for impairment
       under SFAS No. 142, "Goodwill and Other Intangible Assets".



                                      F-76
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

(I)    RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)

       SFAS NO. 144 (CONTINUED)

       The Group is required to adopt SFAS No. 144 no later than the fiscal year
       beginning after December 15, 2001. Management does not expect the
       adoption of SFAS No. 144 for long-lived assets held for use to have a
       material impact on the Group's consolidated financial statements because
       the impairment assessment under SFAS No. 144 is largely unchanged from
       SFAS No. 121. The provisions of the Statement for assets held for sale or
       other disposal generally are required to be applied prospectively after
       the adoption date to newly initiated disposal activities. Therefore,
       management cannot determine the potential effects that adoption of SFAS
       No. 144 will have on the Group's consolidated financial statements.

       SFAS NO. 133

       In June 1998, FASB issued SFAS No. 133 "Accounting for Derivative
       Instruments and Hedging Activities". SFAS No. 133 requires companies to
       adopt its provisions for all fiscal quarters of all fiscal years
       beginning after June 15, 2000, as deferred by SFAS No. 137. Earlier
       application of all of the provisions of SFAS No. 133 is permitted, but
       the provisions cannot be applied retroactively to financial statements of
       prior periods. SFAS No. 133, as amended by SFAS No. 138, standardizes the
       accounting for derivative instruments by requiring that an entity
       recognize those items as assets or liabilities in the balance sheet and
       measure them at fair value. The adoption of SFAS No. 133 did not have a
       material impact on the Group's consolidated financial statements. The
       Group does not hold nor has it entered into any derivative contracts for
       the periods presented.

(J)    RELATED PARTY TRANSACTIONS

       Under HK GAAP, transactions of the Group entered into with entities under
       the control by the MII prior to May 2000, and China Telecom Group are not
       disclosed as related party transactions.

       Under US GAAP, transactions between the Group and the entities under the
       control by MII prior to May 2000, and China Telecom Group are also
       disclosed as related party transactions.


                                      F-77
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)




29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

       The effect on net profit of significant differences between HK GAAP and
       US GAAP is as follows:


<TABLE>
<CAPTION>
                                                                    Year ended December 31,
                                                            ---------------------------------------

                                                             1999             2000           2001
                                                              RMB              RMB            RMB

       <S>                                                  <C>             <C>             <C>
       Net profit under HK GAAP                               4,797          18,027          28,015

       Adjustments:
         Effect of combination of entities
            under common control                              4,886           7,139              --
         Capitalized interest                                    96              17              85
         Revaluation of fixed assets                          3,781             603           1,098
         Employee housing scheme                               (227)              2              --
         Deferred taxation                                      352            (395)            (46)
         Share option scheme                                    (22)            (99)           (277)
         Amortization of net connection fees and
            telephone number selection fees                  (1,511)           (542)            661
         Amortization of net savings from
            interconnection, roaming and leased
            line agreements                                      --            (543)             86
         Deferred tax effects of US GAAP adjustments         (1,159)             71            (547)
                                                            -------         -------         -------

       Net profit under US GAAP                              10,993          24,280          29,075
                                                            =======         =======         =======

       Basic and diluted net profit per share
         in accordance with US GAAP                            0.65            1.37            1.56
                                                            =======         =======         =======
</TABLE>



                                      F-78
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

       The effect on shareholders' equity of significant differences between HK
       GAAP and US GAAP is as follows:

<TABLE>
<CAPTION>

                                                                                       As of December 31,
                                                                                    ------------------------

                                                                                     2000            2001
                                                                                      RMB             RMB

       <S>                                                                          <C>             <C>
       Shareholders' equity under HK GAAP                                            83,760          111,779

       Adjustments:
         Capitalized interest                                                           491              576
         Revaluation of fixed assets
         - Cost                                                                     (11,410)         (11,410)
         - Accumulated depreciation and other                                         6,167            7,265
         Deferred tax adjustments on revaluations                                     1,697            1,295
         Employee housing scheme                                                     (1,193)          (1,193)
         Deemed capital contribution for employee housing scheme                      1,193            1,193

         Deferral of net connection fees and telephone number selection fees         (2,054)          (1,393)
         Deferral of net savings from interconnection, roaming and leased
           line agreements                                                             (543)            (457)
         Recognition of deferred taxes                                                1,264            1,204
         Deferred tax effects of US GAAP adjustments                                    288              157
                                                                                    -------         --------

       Shareholders' equity under US GAAP                                            79,660          109,016
                                                                                    =======         ========
</TABLE>



                                      F-79
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

       The following are condensed consolidated balance sheets of the Group as
       of December 31, 2000 and 2001, and the related condensed consolidated
       statements of income, total shareholders' equity and cash flows for each
       of the years in the three-year period ended December 31, 2001, restated
       to reflect the impact of the differences between HK GAAP and US GAAP.
       Certain comparative figures have been reclassified to conform with
       current year's presentation.

       CONDENSED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                            Year ended December 31,
                                                                    ---------------------------------------

                                                                     1999             2000           2001
                                                                      RMB              RMB            RMB
       <S>                                                           <C>            <C>             <C>
       OPERATING REVENUE

       Usage fees                                                    47,726          64,220          73,458
       Monthly fees                                                  10,935          14,364          14,085
       Connection fees                                                4,479           1,811           1,848
       Other operating revenue                                        7,463          10,585          12,085
                                                                     ------         -------         -------

       TOTAL OPERATING REVENUE                                       70,603          90,980         101,476
                                                                     ------         -------         -------
       OPERATING EXPENSES

       Leased lines                                                   7,999           7,937           5,029
       Interconnection                                               12,550          13,773          12,948
       Depreciation                                                  12,952          14,169          16,675
       Personnel                                                      3,271           4,871           5,602
       Other operating expenses                                      10,136          14,306          19,026
       Write-down and write-off of analog network equipment           9,775           1,547              --
                                                                     ------         -------         -------

        TOTAL OPERATING EXPENSES                                     56,683          56,603          59,280
                                                                     ======         =======         =======

        OPERATING PROFITS                                            13,920          34,377          42,196

        OTHER NET INCOME                                                628           1,107           1,594

        NON-OPERATING NET INCOME                                        191             223             269

        INTEREST INCOME                                                 809           1,070             857

        FINANCE COSTS                                                  (938)         (1,399)         (1,546)
                                                                     ------         -------         -------

        PROFIT BEFORE TAX                                            14,610          35,378          43,370

        INCOME TAX                                                   (3,617)        (11,097)        (14,296)
                                                                     ------         -------         -------

        PROFIT AFTER TAX                                             10,993          24,281          29,074

        MINORITY INTERESTS                                               --              (1)              1
                                                                     ------         -------         -------

        NET PROFIT                                                   10,993          24,280          29,075
                                                                     ======         =======         =======
</TABLE>



                                      F-80
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

       CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>

                                                                                           December 31,
                                                                                    ------------------------

                                                                                     2000            2001
                                                                                      RMB             RMB

       <S>                                                                          <C>              <C>

       ASSETS

       Current assets
         Cash and cash equivalents                                                   27,702           21,821
         Deposits with banks                                                         12,204           14,970
         Accounts receivable                                                          7,252            5,728
         Other receivables                                                            1,299            1,081
         Inventories                                                                    828            1,029
         Prepayments and other current assets                                         1,289            1,571
         Amount due from ultimate holding company                                       557              503
         Amounts due from related parties                                               998              108
                                                                                    -------          -------

         Total current assets                                                        52,129           46,811

       Fixed assets                                                                  82,223          101,063
       Construction in progress                                                      14,019           20,557
       Investment securities                                                             61               77
       Interest in associates                                                            46               16
       Deferred tax assets                                                            6,295            4,132
       Deferred expenses                                                              1,765            1,298
                                                                                    -------          -------

       TOTAL ASSETS                                                                 156,538          173,954
                                                                                    =======          =======
</TABLE>



                                      F-81
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

       CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>

                                                                                          December 31,
                                                                                    ------------------------

                                                                                     2000            2001
                                                                                      RMB             RMB

       <S>                                                                          <C>              <C>
       LIABILITIES AND SHAREHOLDERS' EQUITY

       Current liabilities
         Accounts payable                                                             8,132            9,592
         Bills payable                                                                1,005            1,458
         Bank loans and other interest-bearing borrowings                            10,471            4,531
         Taxes payable                                                                6,735            6,003
         Obligation under capital lease - current portion                             1,624              908
         Amounts due to related parties                                               3,449            1,725
         Accrued expenses and other payables                                          8,408           10,840
         Amount due to immediate holding company                                      4,136               --
         Amount due to ultimate holding company                                         678              241
                                                                                    -------          -------

         Total current liabilities                                                   44,638           35,298

       Bank loans and other interest-bearing borrowings                              23,134           21,591
       Deferred revenue                                                               7,854            7,205
       Obligation under capital leases - long-term portion                            1,235              812
                                                                                    -------          -------

       TOTAL LIABILITIES                                                             76,861           64,906

       Minority interests                                                                17               32

       SHAREHOLDERS' EQUITY                                                          79,660          109,016
                                                                                    -------          -------

       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                   156,538          173,954
                                                                                    =======          =======
</TABLE>



                                      F-82
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

       CONDENSED CONSOLIDATED STATEMENTS OF TOTAL SHAREHOLDERS' EQUITY FOR THE
       FOLLOWING YEARS:

<TABLE>
<CAPTION>
                                                                          RMB

       <S>                                                            <C>
       Shareholders' equity at January 1, 1999                          70,127

       Net profit for the year ended December 31, 1999                  10,993
       Issue of ordinary shares                                         48,908
       Deemed capital distribution                                     (52,953)
       Distribution to owner                                            (2,185)
       Contribution by owner                                               955
       Deemed capital contribution for employee housing scheme             252
       Tax effect of revaluation                                           954
       Stock-based compensation                                             22
                                                                      --------

       Shareholders' equity at December 31, 1999                        77,073

       Net profit for the year ended December 31, 2000                  24,280
       Issue of ordinary shares                                        248,181
       Deemed capital distribution                                    (271,485)
       Distribution to owner                                            (1,297)
       Contribution by owner                                               278
       Deemed capital contribution for employee housing scheme              84
       Tax effect of revaluation                                         2,469
       Stock-based compensation                                             99
       Others                                                              (22)
                                                                      --------

       Shareholders' equity at December 31, 2000                        79,660

       Net profit for the year ended December 31, 2001                  29,075
       Issue of ordinary shares                                              4
       Stock-based compensation                                            277
                                                                      --------

       Shareholders' equity at December 31, 2001                       109,016
                                                                      ========
</TABLE>



                                      F-83
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

       The Group applies Hong Kong Statement of Standard Accounting Practice No.
       15 "Cash Flow Statements" ("HK SSAP 15"). Its objectives and principles
       are similar to those set out in Statement of Financial Accounting
       Standards No. 95, "Statement of Cash Flows" ("SFAS 95"). The principal
       differences between the standards relate to classification. Under HK SSAP
       15, the Group presents its cash flows for (a) operating activities; (b)
       returns on investments and servicing of finance; (c) taxation; (d)
       investing activities; and (e) financing activities. Cash flows from
       taxation and returns on investments and servicing of finance shown herein
       would be included as operating activities under SFAS 95, with the
       exception of distributions, which under SFAS 95 would be classified as
       financing activities. Summarized cash flow data by operating, investing
       and financing activities in accordance with SFAS 95 are as follows:

<TABLE>
<CAPTION>
                                                                       Year ended December 31,
                                                               ---------------------------------------

                                                                1999             2000           2001
                                                                 RMB              RMB            RMB
       <S>                                                     <C>             <C>             <C>
       Net cash inflow from
         Operating activities                                   35,137          49,341          49,898
         Investing activities                                  (30,646)        (33,722)        (46,198)
         Financing activities                                    1,259         (11,907)         (9,581)
                                                               -------         -------         -------

       Increase/(decrease) in cash and cash equivalents          5,750           3,712          (5,881)

       Cash and cash equivalents at beginning of year           18,240          23,990          27,702
                                                               -------         -------         -------

       Cash and cash equivalents at end of year                 23,990          27,702          21,821
                                                               =======         =======         =======


       Interest paid (net of amounts capitalized)                  844           1,304           2,008
                                                               =======         =======         =======


       Income taxes paid                                         4,093           6,956          12,865
                                                               =======         =======         =======

</TABLE>



                                      F-84
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


29     SIGNIFICANT DIFFERENCES BETWEEN HK GAAP AND US GAAP (CONTINUED)

       SIGNIFICANT NON-CASH TRANSACTIONS

       The Group incurred payables of RMB8,679 and RMB1,337 to equipment
       suppliers and banks respectively for additions of construction in
       progress during the year ended December 31, 2001.

       The Group incurred payables of RMB6,185 and RMB1,068 to equipment
       suppliers and banks respectively for additions of construction in
       progress during the year ended December 31, 2000.

       The Group incurred payables of RMB7,637 and RMB1,779 to equipment
       suppliers and banks respectively for additions of construction in
       progress during the year ended December 31, 1999.

30     ADDITIONAL INFORMATION REQUIRED BY US GAAP

       The following additional financial statement disclosures are required
       under US GAAP and are presented on a US GAAP basis.

       WRITE-DOWN AND WRITE-OFF OF ANALOG NETWORK EQUIPMENT


<TABLE>
<CAPTION>
                                                                    Year ended December 31,
                                                            ---------------------------------------

                                                             1999             2000           2001
                                                              RMB              RMB            RMB
       <S>                                                  <C>             <C>             <C>
       Write-down of analog network equipment                 8,841           1,352              --

       Write-off of analog network equipment                    934             195              --
                                                            -------         -------         -------

                                                              9,775           1,547              --
                                                            =======         =======         =======
</TABLE>



                                      F-85
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30     ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

       WRITE-DOWN AND WRITE-OFF OF ANALOG NETWORK EQUIPMENT (CONTINUED)

       Due to the rapid change of technology, the Company has re-assessed the
       recoverability of the carrying amount of the analog network equipment
       which are held for use at December 31, 1999 and 2000. The Company
       determined the existence of impairment by comparing the carrying amount
       of these equipment to their future undiscounted net cash flows expected
       to be generated over the economic life of each analog network in service
       at December 31, 1999 and 2000. The Company has recognized impairment
       write downs of RMB8,841 and RMB1,352 on these equipment in 1999 and 2000,
       respectively. Such amount of loss is measured by the amount by which the
       carrying amounts of the individual analog network assets exceed their
       fair value determined based on the discounted net cash flow expected to
       be generated by each analog network. Additionally, the Company has
       written-off RMB934 and RMB195 of certain analog network equipment which
       have been removed from service at December 31, 1999 and 2000,
       respectively. At December 31, 2001, all analog network equipment which
       had been written down in previous years had been removed from service.

       INCOME TAX

       The Company is subject to Hong Kong profits tax at 16% for the years
       ended December 31, 1999, 2000 and 2001.

       The Group's PRC subsidiaries are subject to the statutory income tax rate
       of 33%, except for certain subsidiaries of the Company and certain
       operations of the subsidiaries located within special economic zones in
       the PRC, which enjoys a preferential rate of 30% and 15%, respectively.

       The components of income tax expense are as follows:


<TABLE>
<CAPTION>
                                                                    Year ended December 31,
                                                            ---------------------------------------

                                                             1999             2000           2001
                                                              RMB              RMB            RMB
       <S>                                                  <C>             <C>             <C>
       Current                                                5,386           8,714          12,133
       Deferred                                              (1,769)          2,383           2,163
                                                            -------         -------         -------

                                                              3,617          11,097          14,296
                                                            =======         =======         =======
</TABLE>



                                      F-86
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30     ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

       INCOME TAX (CONTINUED)

       The provision for income tax differs from the amount computed by applying
       the PRC statutory income tax rate of 33% to profit before tax and
       minority interests for the following reasons:


<TABLE>
<CAPTION>
                                                                    Year ended December 31,
                                                             --------------------------------------

                                                             1999             2000           2001
                                                              RMB              RMB            RMB
       <S>                                                   <C>             <C>             <C>
       Expected PRC taxation at statutory tax rates           4,822          11,675          14,312
       Non-taxable items
         - Connection fee                                      (571)           (287)           (111)
         - Surcharge                                           (430)           (207)             --
         - Interest income                                      (66)            (74)            (32)
       Non-deductible expenses                                  263             586             233
       Rate differential on PRC operations                     (385)           (688)           (591)
       Rate differential on Hong Kong operations                (46)             32             165
       Reversal of deferred taxation due to
         change of income tax rate                               84              --              84
       Tax losses not recognized for deferred tax                --              --             203
       Others                                                   (54)             60              33
                                                              -----          ------          ------

       Income tax                                             3,617          11,097          14,296
                                                              =====          ======          ======
</TABLE>



                                      F-87
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30     ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

       INCOME TAX (CONTINUED)

       The tax effects of temporary differences that give rise to significant
       portions of the deferred tax assets and deferred tax liabilities are
       presented below.


<TABLE>
<CAPTION>

                                                                                           December 31,
                                                                                     -----------------------

                                                                                     2000            2001
                                                                                      RMB             RMB
       <S>                                                                           <C>             <C>
       Deferred tax assets:
          Provision for obsolete inventories                                             12                4
          Provision for doubtful accounts                                             1,264            1,204
          Revaluation of fixed assets                                                 3,799            1,466
          Amortization of deferred items                                                501              475
          Income recognition on prepaid service fees                                    872            1,161
                                                                                      -----            -----

       Gross deferred tax assets                                                      6,448            4,310

       Deferred tax liabilities:
          Capitalized interest                                                         (153)            (178)
                                                                                      -----            -----

       Net deferred tax assets                                                        6,295            4,132
                                                                                      =====            =====
</TABLE>



       ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                    ------------------------

                                                                                     2000            2001
                                                                                      RMB             RMB
       <S>                                                                           <C>             <C>
       Accounts receivable                                                           11,312            9,701

       Less: Allowance for doubtful accounts                                         (4,060)          (3,973)
                                                                                     ------           ------

                                                                                      7,252            5,728
                                                                                     ======           ======
</TABLE>



                                      F-88
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30     ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

       ACCOUNTS RECEIVABLE (CONTINUED)

       Allowance for doubtful accounts is analyzed as follows:

<TABLE>
<CAPTION>

                                                                          RMB
       <S>                                                            <C>
       At January 1, 1999                                                3,333
       Provision for the year                                            2,073
       Written-off                                                      (2,022)
                                                                      --------

       At December 31, 1999                                              3,384
       Provision for the year                                            1,985
       Written-off                                                      (1,309)
                                                                      --------

       At December 31, 2000                                              4,060
       Provision for the year                                            1,737
       Written-off                                                      (1,824)
                                                                      --------

       At December 31, 2001                                              3,973
                                                                      ========
</TABLE>


FIXED ASSETS

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                    ------------------------

                                                                                     2000            2001
                                                                                      RMB             RMB
       <S>                                                                          <C>              <C>
       Land use rights and buildings                                                  6,612            9,233
       Telecommunication transceivers, switching
         centers and other network equipment                                        113,511          131,644
       Office equipment, furniture and fixtures and others                            3,835            6,256
                                                                                    -------          -------

                                                                                    123,958          147,133

       Less: accumulated depreciation                                               (41,735)         (46,070)
                                                                                    -------          -------

                                                                                     82,223          101,063
                                                                                    =======          =======
</TABLE>



                                      F-89
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30     ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

       DEFERRED REVENUE AND OTHER ITEMS


<TABLE>
<CAPTION>

                                                                                     Year ended December 31,
                                                                                    ------------------------

                                                                                     2000            2001
                                                                                      RMB             RMB
       <S>                                                                          <C>             <C>
       Balance at beginning of year                                                   3,912            7,854
       Addition during the year                                                      13,692           23,842
       Recognized in the condensed consolidated statements
          of income                                                                  (9,750)         (24,491)
                                                                                    -------         --------

       Balance at end of year                                                         7,854            7,205
                                                                                    =======         ========
</TABLE>


       Deferred revenue comprises:

       (i)    the unamortized portion of proceeds received by Guangdong Mobile
              from certain distributors of telecommunications services which are
              amortized over a period of seven years;

       (ii)   the unamortized portion of connection fees and telephone number
              selection fees received which are recognized over the estimated
              subscriber usage period for the related services;

       (iii)  the prepaid services fee received from subscribers which is
              recognized as income when the cellular telephone services are
              rendered upon actual usage by subscribers; and

       (iv)   the unamortized portion of net savings attributable to the Group
              as a result of the provincial interconnection, roaming and leased
              line agreements.



                                      F-90
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30     ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

       DEFERRED EXPENSES


<TABLE>
<CAPTION>

                                                                                     Year ended December 31,
                                                                                    ------------------------

                                                                                     2000            2001
                                                                                      RMB             RMB
       <S>                                                                          <C>             <C>
       Balance at beginning of year                                                     960            1,765
       Addition during the year                                                       1,695              738
       Recognized in the condensed consolidated statements
          of income                                                                    (890)          (1,205)
                                                                                    -------         --------

       Balance at end of year                                                         1,765            1,298
                                                                                    =======         ========
</TABLE>

       Deferred expenses comprises:

       (i)    the unamortized portion of issuance costs in respect of the fixed
              rate notes, convertible notes and bonds; and

       (ii)   the unamortized portion of direct costs related to connection fees
              and telephone number selection fees received.

       STOCK OPTION PLAN

       Details of the Company's stock option plan and options granted under the
       plan are contained in Note 26. The fair value of each option grant is
       estimated on the date of grant using the Black-Scholes option-pricing
       model with the following assumptions used for grants: no dividend yield
       for all years; expected volatility of 75.0%, 89.97% and 65.92% for the
       share option granted during 1999, 2000 and 2001 respectively; risk-free
       interest rate of 9.5%, 9.5% and 5.5% during 1999, 2000 and 2001
       respectively; and expected life of 8 years, 8 years and 6 years during
       1999, 2000 and 2001 respectively. The per share fair value of stock
       options granted during 1999, 2000 and 2001 were HK$31.48, HK$48.92 and
       HK$29.46 on the date of grant, respectively.



                                      F-91
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30     ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

       STOCK OPTION PLAN (CONTINUED)

       The Company applies the intrinsic value-based method of accounting
       prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
       Stock Issued to Employees", and related interpretations, in accounting
       for its plan. As such, compensation expense is recorded on the date of
       grant only if the current market price of the underlying stock exceeds
       the exercise price. The compensation cost that has been charged against
       income for US GAAP for the Company's stock option plan was RMB22 for
       1999, RMB99 for 2000 and RMB277 for 2001. Had compensation cost for the
       Company's stock option plan been determined based on the fair value at
       the grant date for its stock options under Statement of Financial
       Accounting Standards No. 123, "Accounting for Stock-Based Compensation",
       the Company's net profit and net profit per share would have been reduced
       to the pro forma amounts indicated below:


<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                             -------------------------
                                                                               2000              2001
                                                                                RMB               RMB
       <S>                                      <C>                          <C>                <C>
       Net profit                               As reported                  24,280             29,075
                                                Pro forma                    23,941             28,274

       Basic net profit per share               As reported                    1.37              1.56
                                                Pro forma                      1.36              1.52

       Diluted net profit per share             As reported                    1.37              1.56
                                                Pro forma                      1.35              1.51
</TABLE>



                                      F-92
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30       ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

NET PROFIT PER SHARE

The following is a reconciliation of the numerators and denominators of the
basic and diluted net profit per share computations prepared under US GAAP.

<TABLE>
<CAPTION>
                  For the year ended December 31, 1999  For the year ended December 31, 2000  For the year ended December 31, 2001
                  ------------------------------------  ------------------------------------  -------------------------------------
                    Income       Shares     Per share     Income        Shares     Per share    Income        Shares      Per share
                  (Numerator) (Denominator)   amount    (Numerator)  (Denominator)   amount   (Numerator)  (Denominator)    amount
                                                               (in millions)
<S>               <C>         <C>           <C>         <C>          <C>           <C>        <C>          <C>            <C>
BASIC NET
 PROFIT PER
 SHARE              10,993        16,944      0.65        24,280        17,666       1.37       29,075        18,605         1.56
                                              ====                                   ====                                    ====
EFFECT OF
 DILUTIVE
 SECURITIES

Convertible notes       --            --                      --            --                     129            91
Stock options           --             3                      --            16                      --             2
                    ------        ------                  ------        ------                  ------        ------
DILUTED NET
 PROFIT PER
 SHARE              10,993        16,947      0.65        24,280        17,682       1.37       29,204        18,698         1.56
                    ======        ======      ====        ======        ======       ====       ======        ======         ====
</TABLE>


       FAIR VALUE

       Financial assets of the Group include cash and cash equivalents, deposits
       with banks, accounts receivable, other receivables and amounts due from
       related parties. Financial liabilities of the Group include accounts
       payable, bank and other loans, other payables and due to related parties.
       It is not practicable to estimate the fair value of the amounts due from
       and due to related parties without incurring excessive cost.

       The following table presents the carrying amounts and fair values of the
       Group's bank and other loans as of December 31, 2000 and 2001:

<TABLE>
<CAPTION>
                                                  December 31, 2000           December 31, 2001
                                                ---------------------       ---------------------
                                                Carrying        Fair        Carrying        Fair
                                                 amount         Value        amount         value
                                                  RMB            RMB           RMB           RMB
       <S>                                      <C>            <C>          <C>            <C>
       Fixed rate bank and other loans           14,630        14,700         5,472         5,553

       Variable rate bank and other loans         8,314         8,314         4,986         4,986
       Fixed rate notes                           4,953         5,134         4,956         5,375
       Convertible notes                          5,708         5,709         5,708         5,400
       Bonds                                         --            --         5,000         5,045
                                                 ------        ------        ------        ------

       Total                                     33,605        33,857        26,122        26,359
                                                 ======        ======        ======        ======
</TABLE>

       The fair values of all other financial instruments approximate their
       carrying amounts due to the nature or short maturity of these
       instruments.



                                      F-93
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30     ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

       RELATED PARTY TRANSACTIONS


<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                              -------------------------------------
                                                              1999            2000             2001
                                                               RMB             RMB             RMB
       <S>                                                    <C>             <C>             <C>
       Interconnection revenue                                2,477           4,681           4,109
       Interconnection charges                                9,516           9,586           7,717
       Leased line charges                                    7,999           8,090           4,449
       Roaming revenue                                        3,396           4,038           4,688
       Roaming expenses                                       3,033           3,503           4,559
       Spectrum fees                                             28              27              18
       Operating lease charges                                  540             617             508
       Sales commission                                         426             398              84
       Debt collection service fees                             181             216             120
       Billing service fees                                      23              17              18
       Roaming billing processing fees                           --             150             201
       Equipment maintenance service fees                         2               8              48
       Rental charges of synchronized clock ports                 5              12              15
       Construction and related services                         --              38             161
       Purchases of transmission tower and
         transmission tower-related service
         and antenna maintenance service fees                    --              27              55
       Prepaid card sales commission income                      --             129             241
       Prepaid card sales commission expenses                    --             131             315
       Interest paid/payable                                     23              --              --
       Capital contributions                                    604              --              --
       Distributions                                            849              --              --
</TABLE>

       Descriptions of the nature of the related party transactions are set
       forth in Note 25.

       SEGMENT REPORTING

       Statement of Financial Accounting Standards No. 131, "Disclosures about
       Segments of an Enterprise and Related Information", established standards
       for reporting information about operating segments in financial
       statements. Operating segments are defined as components of an enterprise
       about which separate financial information is available that is evaluated
       regularly by the chief operating decision maker, or decision making
       group, in deciding how to allocate resources and in assessing
       performance.


                                      F-94
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30     ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

       SEGMENT REPORTING (CONTINUED)

       The Company's operating segments are comprised of its cellular businesses
       operated within the Guangdong, Zhejiang, Jiangsu, Fujian, Henan, Hainan,
       Hebei, Liaoning and Shandong provinces, Beijing, Shanghai and Tianjin
       municipalities, and Guangxi autonomous region of the PRC. The operating
       segments are managed separately because each operating segment represents
       a strategic business unit that serves different markets. All operating
       segments provide cellular services to individual customers within their
       geographic market. The Company's operating segments have been aggregated
       into a single operating segment as they are expected to exhibit similar
       future economic characteristics.

       BUSINESS RISKS

       The Group conducts its principal operations in the PRC and accordingly is
       subject to special considerations and significant risks not typically
       associated with investments in equity securities of United States and
       Western European companies. These include risks associated with, among
       others, the political, economic and legal environment, extensive
       government regulations and competition in the cellular telephone
       industry.

       NEW TELECOMMUNICATIONS LAW

       In order to provide a uniform regulatory framework for the
       telecommunications industry in the PRC, the MII, pursuant to the
       direction of the PRC State Council, is currently preparing a draft of the
       Telecommunications Law of the PRC (the "Telecommunications Law"). The
       draft law, when formulated, will be submitted to the National People's
       Congress for review and adoption. It is unclear if and when the
       Telecommunications Law will be adopted, and the nature and scope of
       regulation envisaged by the Telecommunications Law are not fully known.
       There can be no assurance that the Telecommunications Law, if adopted,
       would not have a material adverse effect on the Group's business,
       financial condition and results of operations.



                                      F-95
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30     ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

       AMOUNT OF SPECTRUM AVAILABILITY

       The Group's cellular system's subscriber capacity is limited by the
       amount of spectrum available for use by the system. The former State
       Radio Regulatory Commission, now a department within the MII, is
       responsible for the overall allocation of radio frequency spectrum in the
       PRC. There can be no assurance that the Group would be granted additional
       spectrum when and if required, and any resulting levels of system
       congestion could result in subscriber dissatisfaction, decreased system
       usage by subscribers and increased churn rate.

       DEPENDENCE ON THE PSTN AND INTERCONNECTION ARRANGEMENT

       The Group's cellular services depend in large part upon access to the
       fixed line network. Limitations on the fixed line network would lower
       local, long-distance and international call completion rates for the
       Group's subscribers. There can be no assurance that increasing usage of
       the network would not result in additional strain on the fixed line
       network switching capacity, or that the existing quality of the fixed
       line network will remain adequate.

       In addition, the Group's operating revenues and expenses are affected by
       the terms of its interconnection arrangements. A material increase in
       interconnection charges payable by the Group could have a material
       adverse effect on the Group's results of operations. There can be no
       assurance that the commercial terms of future interconnection
       arrangements will be acceptable to the Group.

       SELF INSURANCE RISK

       The Group does not maintain any insurance policies to cover its assets.

       INTEREST RATE RISK

       The interest rates and terms of repayment of the bank and other loans
       payable of the Group are disclosed in Note 19.


                                      F-96
<PAGE>

Notes to Consolidated Financial Statements (Continued)
(Amounts in millions, except share data)


30     ADDITIONAL INFORMATION REQUIRED BY US GAAP (CONTINUED)

       FOREIGN CURRENCY RISK

       The Group has foreign currency risk as certain loans and cash and cash
       equivalents are denominated in foreign currencies, principally US dollars
       and Hong Kong dollars. Depreciation or appreciation of the Renminbi
       against foreign currencies affects the Group's results of operations.

       CREDIT RISK

       Substantially all of the Group's cash and cash equivalents are deposited
       with Hong Kong and PRC financial institutions. The accounts receivable of
       the Group are spread among a number of customers.



                                      F-97