<PAGE>

                                                                    EXHIBIT 10.4

                             RESTRUCTURING AGREEMENT

                                  BY AND AMONG

                 CHINA NETWORK COMMUNICATIONS GROUP CORPORATION

               CHINA NETCOM GROUP CORPORATION (HONG KONG) LIMITED

                                       AND

                      CHINA NETCOM (GROUP) COMPANY LIMITED

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                                    CONTENTS
<TABLE>
<S>                                                                                                      <C>
1     Definitions                                                                                         2

2     Restructuring                                                                                       6

3     Assets Injection                                                                                    8

4     Representations and Warranties                                                                      8

5     Implementation of the Restructuring                                                                11

6     Indemnification                                                                                    15

7     Survival                                                                                           18

8     Dispute Resolution                                                                                 19

9     Public Announcement                                                                                19

10    Notices                                                                                            19

11    Conflicts                                                                                          19

12    Non-Assignment                                                                                     19

13    Severability                                                                                       20

14    Non-waiver                                                                                         20

15    Governing Laws                                                                                     20

16    Languages and Copies                                                                               20

17    Appendices to this Agreement                                                                       20

18    Fees and Expenses                                                                                  21

19    Effectiveness of this Agreement                                                                    21

Appendix [ ] The Warranties                                                                              23

Appendix [ ] Related Agreements                                                                          45

Appendix [ ] Restructuring Approvals                                                                     46

Appendix [ ] Asset Valuation Report                                                                      47

Appendix [ ] Accountant's Report                                                                         48

Appendix [ ] Letter of Undertaking by the Group Corporation                                              49
</TABLE>

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                             RESTRUCTURING AGREEMENT

This Restructuring Agreement ("THIS AGREEMENT") is made and entered into on [-],
2004 in Beijing, People's Republic of China ( "PRC") by and among the following
parties:

CHINA NETWORK COMMUNICATIONS GROUP CORPORATION (the "GROUP CORPORATION"), a
state-owned enterprise established under the laws of PRC (Business License
Number of Legal Enterprise Person: 1000001003669), with its registered address
at: No.156, Fuxingmennei Avenue, Xicheng District, Beijing, PRC.

CHINA NETCOM GROUP CORPORATION (HONG KONG) LIMITED ("CNC (HK)"), a company duly
incorporated and validly existing under the laws of Hong Kong Special
Administrative Region ("Hong Kong") with limited liability, with its registered
address at: 59/F, Bank of China Tower, Garden Road, Hong Kong.

CHINA NETCOM (GROUP) COMPANY LIMITED ("NEW CNC"), a company duly incorporated
and validly existing under the laws of PRC with limited liability as a wholly
foreign-owned enterprise ("WFOE") (Business License Number of Legal Enterprise
Person: [-]), with its registered address at: Building C, No.156, Fuxingmennei
Avenue, Xicheng District, Beijing, PRC.

WHEREAS:

      (1)   As an institution authorized for investments by the state and a
            designated trial of state ownership, the Group Corporation lawfully
            holds or obtains through transfer/assignment major
            telecommunications assets located in Beijing Municipality, Tianjin
            Municipality, Hebei Province, Liaoning Province, Henan Province,
            Shandong Province, Shanghai Municipality and Guangdong Province and
            such telecommunications assets relating to international businesses
            (the "INJECTED ASSETS") as set forth in the Asset Evaluation Report
            (see below for the definition).

      (2)   Upon approval of relevant government authorities and in accordance
            with the Asset Injection

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            Agreement (see below for the definition), the Group Corporation will
            inject the evaluated and SASAC verified Injected Assets into China
            Netcom Corporation Limited, a company wholly-owned by CNC (HK) and
            registered in mainland China as a wholly foreign-owned enterprise
            registered in mainland China, through CNC BVI (see below for the
            definition) and CNC (HK).

      (3)   Based on the above Asset Injection, China Netcom Corporation Limited
            will convert correspondingly into China Netcom (Group) Company
            Limited (namely the "New CNC").

            (For the purpose of this Agreement, the above (1), (2) and (3) are
            collectively referred to as the "RESTRUCTURING".)

      (4)   Prior to the Restructuring, China Netcom Corporation Limited has
            transferred all of its assets, liabilities, interests and businesses
            to the Group Corporation and/or its Subsidiaries.

      (5)   After the Restructuring, CNC (HK) will issue red chip shares and
            American Depository Receipts (ADSs) in both Hong Kong and overseas
            markets (collectively the "Shares") and apply for listings on both
            The Hong Kong Stock Exchange Limited and New York Stock Exchange,
            Inc..

      (6)   In order to ensure that the Restructuring is carried out per its
            purpose and to protect the respective interests of New CNC, CNC (HK)
            and the Group Corporation, these three parties have agreed to enter
            into this Agreement so as to make proper arrangements for the
            Restructuring and the related issues.

The Parties hereby agree as follows:

1     DEFINITIONS

1.1   Unless otherwise stipulated by this Agreement, the following terms have
      the meanings set out below in this Agreement:

                                       2
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CNC BVI                         China Netcom Holdings (BVI) Limited, a company
                            incorporated in the British Virgin Islands.

Asset Injection Agreement   The Asset Injection Agreement entered into among the
                            Group Corporation, CNC BVI, CNC (HK) and China
                            Netcom Corporation Limited on June 29, 2004,
                            outlining Asset Injections into New CNC through CNC
                            BVI and CNC (HK) from the Group Corporation.

Evaluation Base Date             December 31, 2003.

the New CNC Conversion      The date on which China Netcom Corporation Limited
Registration Date           completed the following conversion registrations or
                            filings:

                            (i)   The Ministry of Commerce has approved the
                                  Articles of Association of China Netcom
                                  (Group) Company Limited, which has been filed
                                  at the State Administration for Industry and
                                  Commerce ("SAIC").

                            (ii)  The Ministry of Commerce has approved the
                                  issuance of Certificate of Approval for
                                  Establishment of Enterprises with Foreign
                                  Investments for the China Netcom (Group)
                                  Company Limited.

                            (iii) SAIC has approved the issuance of Business
                                  License for the China Netcom (Group) Company
                                  Limited, outlining information as follows:

                                  (a) Registered capital, changes incorporated
                                      according to the Evaluated Value.

                                  (b) Business scope, changes incorporated
                                      according to authorization from the Group
                                      Corporation and approval from the Ministry
                                      of Information Industry.

                                  (c) Company name changed from China Netcom
                                      Corporation Limited to China Netcom
                                      (Group) Company Limited.

                                       3
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Restructuring Effective Date   December 31, 2003

Relevant Period                Namely the period from the Evaluation Base Date
                               (exclusive) to the New CNC Conversion
                               Registration Date (exclusive).

Evaluated Value                The net asset value approved by the State-owned
                               Assets Supervision and Administration Commission
                               of the State Council (SASAC) and injected into
                               New CNC pursuant to the Restructuring, namely RMB
                               43.0115756 billion.

Restructured Enterprises       CNC Beijing Communications Corporation, CNC
                               Tianjin Communications Corporation, CNC Hebei
                               Communications Corporation, CNC Liaoning
                               Communications Corporation, CNC Henan
                               Communications Corporation, CNC Shandong
                               Communications Corporation and CNC Guangdong
                               Communications Corporation prior to the New CNC
                               Conversion Registration Date (exclusive). For the
                               purpose of this Agreement, China Netcom
                               Corporation Limited is not included in
                               enterprises to be restructured.

Surviving Enterprises          CNC Beijing Communications Corporation, CNC
                               Tianjin Communications Corporation, CNC Hebei
                               Communications Corporation, CNC Liaoning
                               Communications Corporation, CNC Henan
                               Communications Corporation, CNC Shandong
                               Communications Corporation and CNC Guangdong
                               Communications Corporation after the New CNC
                               Conversion Registration Date (inclusive).

Related Agreements             Various Restructuring-Related Agreements listed
                               in Appendix II to this Agreement.

Restructuring Approvals        Approval documents relating to the Restructuring
                               such as the agreements, authorizations, approvals
                               and waivers and other approval documents, as
                               listed in Appendix III.

                                       4
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Warranty                       Terms of presentations, warranties and
                               undertakings as listed in Appendix I to
                               this Agreement, made by the Group Corporation to
                               New CNC.

Asset Evaluation Report        The Asset Evaluation Report compiled by China
                               Enterprise Appraisals, Beijing Branch, submitted
                               to the SASAC and approved on July 3, 2004, as set
                               forth in Appendix IV to this Agreement.

Accountant's Report            The consolidated income statement, consolidated
                               balance sheet and consolidated statement of cash
                               flow for each of these consecutive year as of
                               December 31st, 2003, which have been compiled in
                               line with the Chinese "Enterprise Accounting
                               Standard" and "Enterprise Accounting System" and
                               audited by PricewaterhouseCoopers Zhong Tian CPAs
                               Limited Company.

Subsidiaries                   Any company, enterprise or other entity with
                               legal person qualification directly or indirectly
                               controlled by any party to this Agreement, if (1)
                               over 50% of the voting power is directly or
                               indirectly controlled by this party; or (2) over
                               50% of the distributable profits is directly or
                               indirectly enjoyed by this party; or (3) the
                               constitution of the board of directors is
                               directly or indirectly controlled by this party;
                               or (4) over 50% of the registered capital is
                               directly or indirectly held by this party.

Injected Assets                All assets listed in the Asset Evaluation Report,
                               including telecommunications assets located in
                               Beijing Municipally, Tianjin Municipality, Hebei
                               Province, Liaoning Province, Henan Province,
                               Shandong Province, Shanghai Municipality and
                               Guangdong Province, as well as telecommunications
                               assets related to international business.

Restructuring Documents        This Agreement, Asset Injection Agreement, all
                               Related Agreements, Restructuring approvals,
                               Accountant's Report and Asset Evaluation Report.

Prospectus                     Any prospectus issued by CNC (HK) in relation to
                               Initial Public Offering.

                                       5
<PAGE>

Tax Items                      All tax items, costs or related funds collected
                               by either state and local level tax
                               administrations, or state and local level
                               people's governments, as well as tax items, costs
                               or related funds payable pursuant to other laws
                               and regulations, including but not limited to:
                               income tax, value-added tax, sales tax, resource
                               tax, interest tax, consumption tax, stamp tax,
                               contract tax, tariff, telecommunication resource
                               tax, cost compensation for telecommunication
                               universal service and any additional or added tax
                               expenses, regardless whether such tax expenses
                               result from insufficiency of tax already
                               collected or paid, inappropriate exemptions or
                               discounts enjoyed during the collection or
                               payment process, or any possible penalties, late
                               fees, interests or other payables related to
                               taxation. The word "tax" should also be
                               interpreted as such.

1.2   In this Agreement:

      1.2.1 Agreements or other documentation herein should refer to Related
            Agreements or the Restructuring Documents, as well as amendments,
            supplements, substitutions or successions from other agreements as
            occurred from time to time in accordance with relevant terms and
            conditions.

      1.2.2 Unless specifically stated otherwise, all Articles and Appendices
            mentioned herein all refer to those contained in this Agreement; all
            clauses mentioned herein refer to those contained in their
            respective Articles and all Paragraphs mentioned herein refer to
            those contained in their Respective clause.

      1.2.3 The captions for the Articles and Appendices are used for reading
            convenience only and are not to be considered in construing or
            interpreting this Agreement.

2     RESTRUCTURING

2.1   The Group Corporation hereby confirms that the Restructuring has been
      approved by relevant

                                       6
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      Chinese regulatory authorities on the date this Agreement is executed. All
      such approvals have been listed in APPENDIX III to this Agreement. Each
      party hereto agrees that the Restructuring shall come into force on the
      Restructuring Effective Date.

2.2   Unless otherwise specified in this Agreement, the Group Corporation and
      New CNC agree that New CNC shall obtain all rights and interests under the
      Injected Assets from the Restructuring Effective Date (exclusive), and
      undertake all debts, liabilities and obligations under the Injected
      Assets, which have been disclosed to New CNC in writing in the Asset
      Evaluation Report. The New CNC shall not be entitled to any other assets,
      interests, debts, liabilities and obligations (including but not limited
      to potential debts, liabilities and obligations) retained by the Group
      pursuant to the Restructuring Documents, nor shall it undertake any debts,
      liabilities and obligations thereof. The Group Corporation shall continue
      to enjoy the rights as well as undertake the obligations with respect to
      other related assets, interests, debts, liabilities, obligations and
      relevant businesses.

2.3   Each party hereto hereby confirms to implement the Restructuring according
      to relevant requirements in the Restructuring Documents and enter into
      agreements in connection with the Restructuring.

2.4   The Group Corporation will enter into the following agreements and/or take
      the following actions in connection with the Restructuring with CNC (HK)
      and/or New CNC:

      2.4.1 Unless otherwise specified in this Agreement, the Group Corporation
            will, according to the requirements of the Restructuring Documents,
            transfer and deliver the Injected Assets to New CNC as they are,
            legally, effectively and completely through CNC BVI and then CNC
            (HK) on the New CNC Conversion Registration Date;

      2.4.2 Obtain each Restructuring Approval as listed in APPENDIX III to this
            Agreement;

      2.4.3 Enter into each agreement listed in the APPENDIX II to this
            Agreement in connection with various transactions between New CNC
            and/or CNC (HK) and the Group;

      2.4.4 Finalize other issues in connection with the Restructuring according
            to the requirements of

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            the Restructuring Documents.

3     ASSET INJECTION

3.1   The value of the assets eventually injected into New CNC through CNC BVI
      and CNC (HK) by the Group according to the Asset Injection Agreement shall
      be a sum equivalent to the Evaluated Value.

3.2   The Group Corporation and New CNC confirm that the Injected Assets with a
      net asset value of RMB 43,011,575,600 will be injected into New CNC on the
      New CNC Conversion Registration Date pursuant to the Restructuring
      Documents.

3.3   Except otherwise specified in Section 5 herein, the Injected Assets have
      been transferred and delivered to New CNC legally and effectively as they
      are on the New CNC Conversion Registration Date.

4     REPRESENTATIONS AND WARRANTIES

4.1   The Group Corporation hereby makes to New CNC the Warranties as listed in
      the APPENDIX [ ] to this Agreement and the following representations,
      warranties and undertakings:

      As of the New CNC Conversion Registration Date (inclusive),

      4.1.1 The Group Corporation shall be entitled to eventually inject the
            Injected Assets into New CNC through CNC BVI and CNC (HK) according
            to the laws of PRC;

      4.1.2 Unless otherwise disclosed in the prospectus and/or specified in
            this Agreement, the Group has obtained or completed all approvals,
            permissions, authorizations, consents, confirmations, exemptions and
            registrations that are necessary for injecting assets into New CNC,
            and such approvals, permissions, authorizations, consents,
            confirmations, exemptions and registrations are valid;

      4.1.3 Except for the liabilities disclosed in the Asset Evaluation Report
            and the liabilities

                                       8
<PAGE>

            occurring in the ordinary course of business relating to the assets
            injected during the Relevant Period, New CNC has no other
            liabilities on the Restructuring Effective Date (including
            contingent liabilities);

      4.1.4 The Group Corporation and/or the Restructured Enterprises have no
            behaviors seriously in violation of laws or regulations, which may
            cause New CNC to suffer significant economic losses;

      4.1.5 The Group Corporation and/or the Restructured Enterprises have no
            behaviors infringing any third-party patents, copy rights,
            proprietary technologies, designs, trade marks, domains, goodwill or
            any other intellectual properties protected by laws , which may
            cause New CNC to suffer significant economic losses;

      4.1.6 Except for those disclosed in the prospectus, there are no any
            ongoing or pending or threatened material or major suits,
            arbitrations, claims or other legal proceedings against the Group
            and/or the Restructured Enterprises (as plaintiff or defendant or
            others) in connection with the businesses or assets of New CNC,
            which may have material adverse effects on the operations of New CNC
            and/or Asset Injection, nor are there any claims that may have
            material adverse effects on the operations and/or Asset Injection of
            New CNC, or any facts that may cause such claims;

      4.1.7 Unless otherwise disclosed in the prospectus or disclosed to New CNC
            in writing by the Group prior to the execution of this Agreement,
            all representations, warranties and undertakings under this section
            and the Warranties listed in Appendix II to this Agreement are true,
            complete and accurate without any misleading contents in all
            aspects;

      4.1.8 Provided relevant approvals (if necessary) have been obtained on and
            after the New CNC Conversion Registration Date, the Group shall
            ensure that all operation licenses, consents, permissions and
            approvals (herein and hereinafter including the Group's license for
            relevant telecommunications businesses) in connection with the
            businesses of New CNC and/or its Subsidiaries that the Group is
            obtaining and will obtain from national telecommunication regulatory
            authorities such as Ministry of Information Industry and

                                       9
<PAGE>

            other authorities and its assigned and/or obtained telecommunication
            resources and other resources (herein and hereinafter including but
            not limited to spectrums, frequencies and numbers) shall be applied
            to New CNC and/or its Subsidiaries; the Group shall obtain, hold,
            retain and update such operation licenses, consents, permissions and
            approvals and telecommunication resources and other resources in
            accordance with laws without implementing act or omission that may
            adversely affect the legality, validity and extensibility of such
            licenses, consents, permissions and approvals and telecommunication
            resources and other resources or the ability of New CNC and/or its
            Subsidiaries to carry out businesses in accordance with laws and
            regulations of PRC; and shall implement all acts and omissions to
            obtain, maintain, retain, update or extend the legality, validity
            and extensibility of such licenses, consents, permissions and
            approvals and telecommunications resources and other resources and
            the ability of New CNC and/or its Subsidiaries to carry out
            businesses in accordance with laws and regulations of PRC;

4.2   The Group Corporation agrees to compensate New CNC and/or its
      Subsidiaries, upon request by New CNC and in accordance with provisions of
      section 6 herein, in a complete, full, timely and effective manner for all
      losses, costs and expenses (including but not limited to expenses on legal
      service) arisen, suffered or incurred by New CNC as a result of infidelity
      or misleading of any the above representations and warranties and any part
      thereof.

4.3   The Group Corporation agrees that the claimed amount against New CNC shall
      not be compromised for the reason that New CNC or any of its agents or
      professional consultants may have been informed of the information about
      the Injected Assets in any time (excluding the information detailed and
      explicitly listed in this Agreement, the Accountant's Report or the
      Restructuring Documents); also, the Group shall not defend against
      relevant claims for the reason that New CNC has known or should have known
      or is concluded to have known any situations or relevant information
      (excluding foregoing information) that cause the said claim.

4.4   The Group Corporation agrees that the above representations and warranties
      and each clause of the Warranties shall not compromise any other clauses
      of the above representations and warranties; and this Agreement has no
      provision restricting the scope or application of the above
      representations and

                                       10
<PAGE>

      warranties and each clause of the Warranties, except those explicitly
      otherwise specified in this Agreement.

4.5   The Group Corporation agrees that, unless New CNC signs an explicit and
      duly authorized written exemption or relief document, (1) the completion
      of Restructuring, or (2) any investigation against the Injected Assets by
      New CNC or through any third party, or (3) New CNC terminates (or not)
      this Agreement, or (4) New CNC has not or delays the exercise of any
      rights or remedies, or (5) any other things or matters (regardless their
      natures) shall not affect New CNC's exercise of relevant rights and
      remedies against the Group's breaches of such representations and
      warranties. The exercise of any rights or remedies, solely or partly,
      shall not eliminate the exercise of any further or other rights or
      remedies. Any written exemption or relief documents signed by New CNC
      shall not constitute waiver of New CNC for any other rights, authorities
      or remedies.

4.6   The Group Corporation agrees that the above representations and warranties
      and the Warranties shall remain in full force upon completion of all
      arrangements under this Agreement and relevant agreements.

4.7   The Group Corporation agrees that the above representations and warranties
      and the Warranties shall not affect or compromise the representations and
      warranties under relevant agreements, which shall be valid for the Group
      and/or the Surviving Enterprises pursuant to the clauses of relevant
      agreements..

4.8   The Group Corporation agrees that the above representations and warranties
      and the Warranties shall be binding upon the successors of the Group and
      have been made for the benefits of the successors and assignees of each
      party.

5     IMPLEMENTATION OF THE RESTRUCTURING

5.1   Without affecting the Group's representations and warranties under section
      4 herein and the Warranties, each party hereto shall make all efforts to
      complete any Restructuring affairs, procedures and processes that are not
      finished on the New CNC Conversion Registration Date, so as to make the
      Restructuring fully effective and completed.

                                       11
<PAGE>

5.2   Each party hereto agrees to take all efforts and actions (including but
      not limited to signing or urging a third party to sign any documents,
      applying to governmental authorities or a third party to obtain any
      relevant approvals, consents or permissions, authorizations, confirmations
      or exemptions, enabling New CNC and its Subsidiaries to obtain all
      relevant permissions and licenses necessary for their business operation
      or in connection with Asset Injection, or completing any relevant
      registration, enrollment and filing procedures) to ensure that the
      Restructuring and the provisions of the Restructuring Documents and this
      Agreement will be performed effectively and completely.

5.3   Each Restructured Enterprise shall own some trademarks with trademark
      registration certificates issued by Trademark Office of State
      Administration for Industry and Commerce ("TRADEMARK OFFICE") and the
      logos under registration with the Trademark Office but pending for
      trademark registration certificates (collectively the "LOCAL BUSINESS
      BRANDS"). The Group Corporation and New CNC agree that New CNC may obtain
      non-exclusive license for use of such Local Business Brands free of
      charge. For this purpose, the Group shall make explicit arrangements on
      the license for such Local Business Brands in its Trademark License
      Agreement with CNC (HK) and New CNC, and procure each Restructured
      Enterprise (the Surviving Enterprise) to duly sign necessary execution
      documents with New CNC.

5.4   Each party hereto agrees that the Group shall be responsible for the
      investment and construction of necessary telecommunication network
      facilities for relevant universal Telecommunications Service obligations
      that should be undertaken by the Group and/or CNC (HK)(or its
      Subsidiaries) pursuant to regulations of Rural Universal
      Telecommunications Service-Implementation Program for Village Connection
      Project and other transitional measures on universal Telecommunications
      Service. As for the telecommunication network facilities invested and
      constructed by the Group for the above purpose in the operation regions of
      New CNC, the Group Corporation agrees to lease them to New CNC and allow
      it to operate relevant businesses with all business incomes therefrom
      attributable to New CNC. the Group Corporation shall provide reasonable
      compensation at market price for all relevant expenses of New CNC for
      operating and maintaining such telecommunication network facilities in its
      operation regions.

5.5   Each party hereto agrees that all incomes and expenses arising from the
      settlement of long distance

                                       12
<PAGE>

      networks in southern/northern service regions between the Group
      Corporation and China Telecommunications Group Corporation, (regardless
      whether or not the operation regions of New CNC is involved), which has
      been carried over from the separation of the Group from China
      Telecommunications Group Corporation during telecommunication reform,
      shall be enjoyed or borne by the Group.

5.6   Each party hereto agrees to resort to sincere negotiations for fair and
      proper arrangements for matters that are not covered by this Agreement but
      are necessary for proper and full Implementation of the Restructuring
      and/or performance of this Agreement, thus to satisfy all parties hereto.

5.7   To implement the Restructuring, the Group and New CNC agree that:

      5.7.1 Without affecting relevant provisions under section 4 herein, New
            CNC shall participate in relevant suits and arbitrations in
            connection with Asset Injection after the Restructuring Effective
            Date (excluding that day) as litigant to exercise relevant rights
            and perform relevant obligations; the Group shall provide timely
            assistance upon request of New CNC, including but not limited to
            providing documents required by New CNC and signing or procuring
            third party to sign relevant documents, so that New CNC may become
            an valid litigant in such suits or arbitrations and exercise its due
            rights as litigant;

      5.7.2 If the properties of New CNC and its Subsidiaries are arrested or
            detained or threatened to be arrested or detained for such debts and
            liabilities, the Group shall undertake to provide necessary guaranty
            or other security for New CNC and its Subsidiaries in a timely
            manner to ensure the interests of New CNC and its Subsidiaries stay
            unharmed; in addition, regardless the above arrest or detention is
            reasonable or not, the Group shall commit itself to undertake any
            resultant losses and relevant expenses suffered by New CNC and its
            Subsidiaries. The Group Corporation undertakes to pay off all
            expenses within seven (7) days after receipt of losses and expenses
            list from New CNC and its Subsidiaries;

      5.7.3 Except for the debts and liabilities that should be undertaken by
            New CNC under this Agreement, all other debts and liabilities shall
            still be undertaken by the Group. Any adjudications, verdicts and/or
            arbitration liabilities arising out of these affairs and all suits,

                                       13
<PAGE>

            arbitrations and other costs and expenses incurred by New CNC shall
            be at the expense of the Group;

      5.7.4 In case the prior authorizations, approvals, permissions,
            confirmations or exemptions from any third parties that are
            necessary for injection of any assets, interests or liabilities
            under the Injected Assets into New CNC are not obtained before the
            New CNC Conversion Registration Date, in addition to taking actions
            in accordance with this section, the Group and/or the Surviving
            Enterprises shall continue to hold such assets, interests and
            liabilities on behalf of and for the benefit of New CNC until such
            assets, interests and liabilities may be legally, effectively and
            completely injected into New CNC in accordance with this Agreement;

      5.7.5 During the period in which the Group and/or the Surviving
            Enterprises continue to hold the assets, interests and liabilities
            under the Injected Assets on behalf of and for the benefit of New
            CNC in accordance with section 5.7.4, all rights, interests, profits
            and all obligations, losses and claims (excluding the obligations,
            losses and claims due to the Group and/or the Surviving Enterprises'
            nonperformance of the obligations under section 5.7.4) arising from
            or in connection with such assets, interests and liabilities shall
            be attributed to or undertaken by New CNC. However, the Group and/or
            the Surviving Enterprises shall be held liable for any losses and
            claims due to their own negligence or misconduct;

      5.7.6 For the period from the Evaluation Base Date to Jun 30, 2004, all
            profits generated by the Injected Assets shall be attributable to
            the Group.

      5.7.7 During the Implementation of the Restructuring, the specific
            assets/liabilities listed in the Asset Evaluation Report and the
            Accountant's Report and the provisions of this Agreement shall
            prevail if there is any uncertainty in division of
            assets/liabilities between the Group and New CNC. If necessary, the
            assets/liabilities adjustment calculation formula used in the
            preparation of Asset Evaluation Report and Accountant's Report and
            other working documents may be taken into account;

      5.7.8 The Group Corporation and New CNC undertakes to each other that if
            either party receives

                                       14
<PAGE>

            any accounts receivable by another party after the Restructuring
            Effective Date, it will pay the account to another party within
            seven (7) days after it receives and acknowledges such accounts;

      5.7.9 The Group Corporation shall transfer all business information,
            accounting records, operation records, operation data, operation
            statistical data, user manuals, maintenance manuals, training
            manuals, technical information, records, data, drawings and manuals
            and information of R & D projects that are necessary for normal
            operation of New CNC or in connection with Injected Assets to New
            CNC. In case such information is not delivered before the New CNC
            Conversion Registration Date, in addition to that the Group and New
            CNC shall take all necessary measures and actions to procure such
            delivery to be completed as soon as possible, the Group shall
            continue to hold and properly keep such information under security
            and confidentiality on behalf of and for the benefit of New CNC
            until such information is legally and safely transferred to New CNC.
            During the period the Group holds and keeps such information
            pursuant to this section, New CNC may have access to such
            information free of charge and the Group shall provide all
            convenience for New CNC's access.

     5.7.10 The Group Corporation is committed to undertake all taxes in
            connection with Injected Assets occurred before the Restructuring
            Effective Date, regardless whether such taxes are imposed or paid on
            or before or after the Restructuring Effective Date. In addition,
            the Group will undertake all taxes in connection with or arising
            from the assets, interests, liabilities and relevant businesses
            retained in the Group in accordance with the Restructuring
            Documents;

     5.7.11 The Group Corporation is committed to undertake all taxes arising
            from appraisal increment of Injected Assets that should be
            undertaken by the Group as stipulated by laws;

     5.7.12 Unless otherwise specified in this Agreement, New CNC shall
            undertake all taxes occurred after the Restructuring Effective Date
            in connection with the holding, management or operation of Injected
            Assets;

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<PAGE>

     5.7.13 Unless otherwise specified in this Agreement, all taxes arising
            from or in connection with the Asset Injection into New CNC by the
            Group in accordance with the Restructuring Documents shall be
            undertaken by the Group and New CNC respectively in accordance with
            the law.

6     INDEMNIFICATION

6.1   The Group Corporation hereby warrants to indemnify New CNC, per the
      request of New CNC, and at any time hold New CNC completely, sufficiently,
      timely, effectively and adequately indemnified against the following:

      6.1.1  unless otherwise specified herein, any prosecution, claim,
             litigation, loss, indemnity, disbursement, expense and fee
             (including but without limitation to specialty service fee and
             expense) that New CNC may incur or suffer as a result of the assets
             transfer into New CNC and any event before the Restructuring
             Effective Date in relation to the transferred assets (including but
             without limitation to penalties imposed by relevant governmental
             authorities);

      6.1.2. After the Restructuring Effective Date, in the event that the Group
             Corporation - and/or the Surviving Enterprises hold the assets of
             New CNC on behalf of and in the interests of New CNC pursuant to
             Sections 5.7.4. and 5.7.5. above, any prosecution, claim,
             litigation, loss, indemnity, disbursement, expense and fee
             (including but without limitation to specialty service fee and
             expense) that New CNC may incur or suffer as a result of the errors
             or mistakes of the Group Corporation and/or the Surviving
             Enterprises ;

      6.1.3. Any prosecution, claim, litigation, loss, indemnity, disbursement,
             expense and fee (including but without limitation to specialty
             service fee and expense) that New CNC may incur or suffer before
             the Restructuring Effective Date as a result of any interest,
             liability or obligation of the Group Corporation or its
             Subsidiaries (excluding New CNC and its Subsidiaries);

      6.1.4. Any prosecution, claim, litigation, loss, indemnity, disbursement,
             expense and fee(including but without limitation to specialty
             service fee and expense)that New CNC may incur or

                                       16
<PAGE>

             suffer at any time as a result of the breach of any provision
             (including but without limitation to this warranty ) set forth
             herein by the Group Corporation or its Subsidiaries ( excluding New
             CNC and its Subsidiaries);

      6.1.6  Any prosecution, claim, litigation, loss, indemnity, disbursement,
             expense and fee(including but without limitation to specialty
             service fee and expense)that New CNC may incur or suffer after the
             Restructuring Effective Date (inclusive) as a result of the assets
             that the Group Corporation continues to retain of hold;

      6.1.6  Interests, penalties and other expenses incurred before the
             Restructuring Effective Date, arising out of the liabilities
             contained in the assets which are transferred to New CNC by the
             Group Corporation, shall be borne by the Group Corporation. In the
             event that New CNC incurs losses as a result of these interests,
             penalties and other expenses, the Group Corporation shall hold New
             CNC adequately indemnified;

      6.1.7  Except for those listed in the Accountant's Report, New CNC will
             have no obligations whatsoever to any compensation, benefit,
             allowance and any other form of rights and interests pursuant to
             laws, contracts, judgments, decisions and other binding documents
             (including but without limitation to once-off housing allowances,
             early retirees expenses, and additional allowances to retirees in
             addition to social pension insurance) which were enjoyed by all its
             employees who were formerly employed by the Group Corporation
             within their duration of employment prior to the Restructuring
             Effective Date, and. In the event that New CNC incurs losses as a
             result of claims brought against it by any such employee in
             relation to the above rights and interests, the Group Corporation
             shall hold New CNC adequately indemnified against such losses; if
             the final amount New CNC pays for once-off housing allowances and
             early retirement expenses is lower than the amount provided, New
             CNC shall return the balance to the Group Corporation;

      6.1.7  Unless otherwise specified by applicable laws, except for those
             listed in the Accountant's Report, New CNC will have no liabilities
             under any circumstance to any obligation and/or expense of the
             employees of the Group Corporation employed on or before the
             Restructuring Effective Date but not employed by New CNC (including
             but without

                                       17
<PAGE>



             limitation to employees who were employed by the Group Corporation
             on or before the Restructuring Effective Date but have retired
             early than, been laid off, or retired on the execution date of this
             Agreement) . In the event that New CNC incurs losses as a result of
             claims brought against New CNC by any such employee based on the
             fact that they had been employed by the Group Corporation, the
             Group Corporation shall hold New CNC adequately indemnified against
             such losses, as if such claims had never been brought against New
             CNC;

      6.1.9  Any claim New CNC may incur before, on or after the Restructuring
             Effective Date, arising out of or in relation to the Group
             Corporation's failure to transfer assets into New CNC pursuant to
             the Accountant's Report, the Restructuring Documents and this
             Agreement.

6.2   The Group Corporation hereby warrants to CNC (HK) that: (1) In the event
      that CNC (HK) or its Subsidiaries suffer any litigation or other claim as
      a result of events or circumstances occurred or existed before the listing
      of CNC(HK) but not disclosed in the Accountant's Report as of June 30,
      2004,upon the request by CNC (HK), the Group Corporation will indemnify
      CNC (HK) against any such loss, expense, or liability resulted
      hereof; (2) In the event that CNC (HK) suffers any penalty, loss or
      other obligation as a result of the auditing result of the National Audit
      Office with regard to the accounting periods prior to the Prospectus
      Issuance, upon the request by CNC (HK), the Group Corporation will assume
      such obligations.

6.3   The Parties to this Agreement agree that, notwithstanding the provision
      set forth in Section 6.2 above, in the event that the Group Corporation
      has already indemnified New CNC because of the same matter pursuant to
      other provisions of this Agreement, the obligations of the Group
      Corporation to indemnify CNC (HK) pursuant to Section 6.2 above shall be
      offset accordingly, i.e., the indemnity amount by the Group Corporation to
      CNC (HK) shall only be limited to the amount of the actual losses or
      expenses which is in excess of the amount which has already been
      indemnified to New CNC.

6.4   The New CNC hereby warrants to indemnifying any actual loss the Group
      Corporation may incur as a result of any breach of the provisions set
      forth herein by New CNC.

                                       18
<PAGE>

6.5   Any indemnity claim by any party to the other parties pursuant to this
      Agreement shall be made in writing, and shall describe in reasonable
      detail the facts and circumstances in relation to such claim. However, the
      failure of any party to bring claims in writing pursuant to this section
      shall not affect its rights in relation to such claims.

7     SURVIVAL

      Any representations, warranties, agreements and indemnities set forth in
this Agreement shall survive the completion of the Restructuring arrangement.

8     DISPUTE RESOLUTION

      If any disputes develop among the parties in respect of the validity,
interpretations or performance of this Agreement, the parties should resolve the
disputes in question through friendly negotiation first. If the negotiation in
respect of the disputes fails within thirty (30) days as from the date when such
dispute arose, any party shall have the right resort to litigations to the
People's Court with proper jurisdiction.

9     PUBLIC ANNOUNCEMENT

      Apart from required by the PRC laws or the laws and listing rules of the
listing place of CNC (HK) or the Stock Exchange of Hong Kong Limited or any
other regulatory body, any party to this Agreement cannot make or permit others
to make any public announcement about matters pertaining to or contained in this
Agreement without prior written consent by the other parties (and such consent
shall not be unreasonably withheld).

10    NOTICES

10.1  All notices required to be delivered pursuant to this Agreement shall be
      in writing, and delivered to the address as stated at the beginning part
      of this Agreement, or to addresses or facsimile numbers designated by one
      party to the other parties in writing from time to time.

10.2  Any notice above shall be delivered either by hand, registered mail, or
      facsimile. Any notice shall be deemed to have been delivered at the time
      of actual receipt if delivered by hand; on the date of

                                       19
<PAGE>

      return receipt if delivered by registered mail; and at the time of
      transmission if delivered by facsimile.

11    CONFLICTS

      In case of any obvious inconsistencies among the provisions of the
Restructuring Documents, subject to PRC laws, the provisions in the
Restructuring Documents shall be interpreted with appropriate references to the
provisions herein.

12    NON-ASSIGNMENT

      Without prior written consent of the other parties to this Agreement, no
party is permitted to assign, transfer by other means or proclaim to assign all
or any of its rights, interests, liabilities or obligations under this
Agreement.

13    SEVERABILITY

      If one or more provisions of this Agreement are held to be void, illegal,
or unenforceable under any applicable law in any regard, validity, legality and
enforceability of remaining regulations shall not be affected or impaired in any
form.

14    NON-WAIVER

      The omission, failure or delay of exercising any rights, powers, or
remedies pursuant to or bestowed by this Agreement by any party shall not
constitute waiver of such or any or other rights, powers or remedies by such
party.

15    GOVERNING LAWS

      This Agreement shall be governed, interpreted and enforced in accordance
with the laws of the PRC.

                                       20
<PAGE>

16    LANGUAGES AND COPIES

      This Agreement is made in Chinese. It is made into twelve (12) duplicate
originals. Each party holds four (4) copies, and each original shall have the
same legal binding effect.

17    APPENDICES TO THIS AGREEMENT

17.1  Appendices to this Agreement are part of this Agreement, and have the same
      legal binding force as the main body, as if they were incorporated into
      main body of this Agreement.

17.2  Any amendment to this Agreement or its appendixes shall only be made
      through written agreement, which shall be executed by the legal
      representatives or authorized representatives of the parties, affixed with
      their official seals, and with required approvals in accordance with the
      constitutive documents of the parties.

18    FEES AND EXPENSES

      Unless otherwise specified herein, all fees and expenses incurred in
connection with the negotiation, drafting, and fulfillment of this Agreement
shall be borne by the party incurring such expenses.

19    EFFECTIVENESS OF THIS AGREEMENT

      This Agreement shall come into effect once signed by the legal
representatives or authorized representatives of the parties or affixed with
their official seals.

      IN WITNESS WHEREOF, the authorized representatives of the parties hereto
have executed this Agreement as of the date first written above.

                                       21
<PAGE>

Signature page:

CHINA NETWORK COMMUNICATIONS GROUP CORPORATION

By: __________________________________
Legal Representative or Authorized Representative

CHINA NETCOM GROUP CORPORATION (HONG KONG) LIMITED

By: __________________________________
Legal Representative or Authorized Representative

CHINA NETCOM (GROUP) COMPANY LIMITED

By: __________________________________
Legal Representative or Authorized Representative

                                       22
<PAGE>

                                   APPENDIX I

                                 THE WARRANTIES

      The Group Corporation as the ultimate controlling shareholder of New CNC
hereby makes the following presentations, warranties and undertakings to New CNC
in relation to the conditions of the Restructuring and Injected Assets on the
Restructuring Effective Date, the execution date of this Agreement and the New
CNC Conversion Registration Date:

1.    GENERAL MATTERS

1.1   The Group Corporation is an enterprise as a legal person that is duly
      incorporated and validly existing under the laws of PRC (a State-owned
      enterprise), while New CNC is a foreign invested enterprise duly
      incorporated and validly existing under the laws of PRC and it is wholly
      owned by CNC (HK).

1.2   Pursuant to China's laws and regulations, and Articles of Associations
      and/or other constitutive documents of the two parties, the Group
      Corporation and New CNC have the right, power and capability to lawfully
      and effectively conclude this Agreement and fulfill all the obligations
      under its clauses. Once signed, this Agreement will constitute a lawful
      and effective obligation that is binding on the Group Corporation and New
      CNC in accordance with the respective terms.

2.    SHARE CAPITAL

2.1   The Group Corporation guarantees that, as of the date when this Agreement
      is signed, except the Group Corporation's rights disclosed under this
      Agreement and in the Prospectus, no third party other than CNC (HK)
      possesses share subscription rights and preemptive rights relating to or
      arising from the share capital of New CNC, and that there are no
      mortgages, pledges, liens, commitments or other third party rights on New
      CNC's share capital. Furthermore, there are no agreements to assume or set
      up any of the above third party rights, and no agreements or other
      arrangements requiring or potentially requiring New CNC to issue
      additional equities exceeding

                                       23
<PAGE>

      the currently issued equities. Nobody who is entitled or claims to be
      entitled to hold any third party rights makes any claims.

2.2   Unless disclosed in the Prospectus, there are no effective agreements in
      relation to the current or future issue, allotment or transfer of New
      CNC's shares or equities or loan capitals, and no rights have been given
      to anyone to request conditionally or unconditionally the current or
      future issue, allotment or transfer of New CNC's shares or equities or
      loan capitals (including any share subscription rights or preemptive
      rights or conversion rights).

3.    THE INJECTED ASSETS

3.1   As of the Restructuring Effective Date (exclusive) and the New CNC
      Conversion Registration Date, the Group Corporation and the Restructured
      Enterprises lawfully possess and have the right to operate the Injected
      Assets according to China's laws, have obtained all the required approvals
      from the relevant governmental authorities, and are entitled to inject the
      assets into New CNC pursuant to the Asset Injection Agreement.

3.2   Starting from the New CNC Conversion Registration Date (inclusive), New
      CNC is entitled to own, use and operate the Injected Assets in accordance
      with China's laws and its Articles of Association.

3.4   The Injected Assets to be possessed by New CNC as specified by this
      Agreement:

      3.3.1 From the Restructuring Effective Date to the date when the Injected
            Assets are actually, lawfully, effectively and completely
            transferred to New CNC in accordance with China's laws, the Group
            Corporation and/or the Restructured Enterprises and/or the Surviving
            Enterprises shall, on behalf of and in the interests of New CNC,
            continue to hold these assets, interests and liabilities until such
            assets, interests and liabilities can be lawfully, effectively and
            completely injected into New CNC in accordance with this Agreement;

      3.3.2 When the Group Corporation and/or the Restructured Enterprises
            and/or the Surviving Enterprises, on behalf of and in the interests
            of New CNC, continue to hold these assets,

                                       24
<PAGE>

            interests and liabilities according to the previous provisions, all
            rights, benefits and interests produced by or arising from or
            relating to such assets, interests and liabilities shall belong to
            New CNC and all the obligations, losses and indemnifications shall
            be assumed by New CNC, unless otherwise specified in this Agreement;

      3.3.3 Unless otherwise specified in this Agreement, or disclosed in the
            Prospectus and recorded in the Accountant's Report, all the
            approvals, licenses, authorizations, consents, confirmations,
            releases, registrations and lodgments required for the Group
            Corporation to inject the Injected Assets into New CNC have been
            obtained or completed, and such approvals, licenses, authorizations,
            consents, confirmations, releases, registrations and lodgments are
            valid;

      3.3.4 Unless otherwise specified in this Agreement, or disclosed in the
            Prospectus and recorded in the Accountant's Report, on the
            Restructuring Effective Date and the date when the Injected Assets
            are actually transferred to New CNC in accordance with China's laws,
            the Injected Assets are subject to no restrictions by any liens,
            mortgages, hypothecation, pledges, leases (including but not limited
            to finance leases), licenses or other third party rights, or
            influences by any mortgages or other burdens or third party rights,
            conditions, instructions, rules or other limits or other unfavorable
            claims that will or may exert adverse impacts on the value of the
            above assets or New CNC's capability to use, transfer, sell or
            otherwise dispose the above assets.

      3.3.5 The Injected Assets provide New CNC with all the necessary and
            sufficient assets, rights, properties, contracts, interests,
            equipment and inventories to effectively and completely engage in
            telecommunications businesses in connection to the Injected Assets.
            All the employees intended to enter New CNC under the Restructuring
            are sufficient to enable New CNC to continue to effectively operate
            in the existing method all the businesses injected into New CNC;

      3.3.6 During the Relevant Period, the Group Corporation and/or the
            Restructured Enterprises operate, manage, use and maintain the
            Injected Assets in the normal way during their normal operational
            activities. The value of the Injected Assets is subject to no
            material

                                       25
<PAGE>

            unfavorable changes starting from the Evaluation Base Date;

      3.3.7 During the Relevant Period and on the New CNC Conversion
            Registration Date, the machine rooms, tools and equipment (including
            various vehicles) of the Injected Assets are under good maintenance
            and operation conditions, and are maintained periodically and
            appropriately.

4.    ACCOUNTS AND BUSINESSES

4.1   Under the assumption that New CNC has been existing since January 1 2001,
      the Accountant's Report (including the attached notes. The complete copies
      of the Accountant's Report have been delivered to New CNC) and it

      4.1.1 have been prepared in accordance with Enterprise Accounting
            Standards and Enterprise Accounting System;

      4.1.2 fairly and justly reflect in the major aspects the assets,
            liabilities and shareholder's equities of New CNC for each of the
            three years ended December 31 2003.

      4.1.3 has made sufficient provisions or reserves or disclosures for all
            the outstanding liabilities and capital commitments (including
            contingent, unquantifiable or disputed liabilities) as of the
            relevant dates in conformity with China's accounting principles.

      4.1.4 , in accordance with the related tax laws and other regulations, has
            made provisions or reserves for all the taxations imposed on New CNC
            or required for payment for each of the three years ended December
            31, 2003. The above provisions or reserves will be sufficient to pay
            all the taxations already or to be imposed on New CNC, or all the
            taxations that New CNC must, may or will bear in connection with
            profits, incomes, earnings, transfers, events and transactions as of
            the related last dates (inclusive);

      4.1.5 are not adversely affected by any undisclosed special or particular
            conditions;

                                       26
<PAGE>

      4.1.6 in all the major aspects fairly reflect New CNC's capitals, assets,
            liabilities (including contingent liabilities) as of the Evaluation
            Base Date and the profits as of the current financial date;

      4.1.7 have not been influenced by any non-operational, special or
            extraordinary items;

      4.1.8 in all the major aspects fairly reflect the financial conditions of
            New CNC as of the Evaluation Base Date;

      4.1.9 disclose various assets and liabilities of New CNC as of the
            preparation date of the Accountant's Report.

4.2   New CNC has established provisions for the depreciations of fixed assets
      in conformity with China's Enterprise Accounting Standards and Enterprise
      Accounting System;

4.3   In comparison with the financial conditions as of December 31, 2003
      disclosed in the Accountant's Report, there is no and will be no material
      adverse changes in New CNC's overall financial conditions on the New CNC
      Conversion Registration Date.

4.4   On the New CNC Conversion Registration Date, all of the accounts, account
      books, ledgers, and financial and any other types of records:

      4.4.1 are possessed by New CNC;

      4.4.2 have been sufficiently, appropriately and accurately recorded and
            completed;

      4.4.3 do not contain any type of any major error and deviation; and

      4.4.4 truly and fairly reflect all the related transactions as well as the
            conditions of finance, agreement and trade.

4.5   Prior to the Restructuring Effective Date, the Group Corporation managed
      its businesses under the

                                       27
<PAGE>

      normal, consistent and continuous environment. No major unfavorable
      changes took place in any of the Group Corporation's businesses.

4.6   Archived Documents

      4.6.1 All the application forms, detailed materials, resolutions and
            documents which are required to be filed by New CNC with any
            governmental agency in any place in accordance with the laws,
            regulations and/or legislations applicable to New CNC have been
            filed appropriately and correctly in conformity with all the related
            laws, regulations and/or legislations applicable to New CNC.

      4.6.2 All the mortgages and pledges (if any) given to or set by New CNC
            have been registered according to the related rules and regulations
            applicable to New CNC.

4.7   All the title proofs in connection with New CNC's assets, all the signed
      copies of agreements in which New CNC is one of the signatories, and the
      originals of all the other documents possessed or should be possessed by
      New CNC shall be possessed by New CNC individually.

4.8   Unless disclosed in the Prospectus, there are no major investigations or
      inquiries initiated by any government or other institutions in connection
      to New CNC's matters which are not yet resolved or still in progress.

5.    CONTRACTS

5.1   While signing this Agreement, the Group Corporation shall send New CNC a
      contract list including the contracts, agreements and arrangements
      relating to the Injected Assets (including loan and insurance agreements):

      5.1.1 The Group Corporation shall continue to update this contract list
            ("THIS CONTRACT LIST", as amended from time to time) , to make sure
            that this contract list is related to the Injected Assets and is a
            complete list of all the contracts to which the Group Corporation
            and/or its Subsidiaries are a party.

                                       28
<PAGE>

      5.1.2 Upon reasonable request of New CNC, the Group Corporation shall take
            related actions to cause the contractors in this contract list (the
            "RENAMED CONTRACT") agree to replace New CNC as one party of these
            contracts (starting from the change registration date). These
            replacements shall be conducted through amendment agreements or
            consent letters concluded between all the contractors in this
            contract list and New CNC.

      5.1.3 From the Restructuring Effective Date to the date when the amendment
            agreements are concluded or letters of agreement are obtained as
            expected in 5.1.2, in terms of the interests of each Renamed
            Contract, the Group Corporation and/or the Restructured Enterprises
            and/or the Surviving Enterprises shall fulfill or cause other
            parties to the contracts to appropriately fulfill the interests
            under these contracts completely for the interests of New CNC.

      5.1.4 The Group Corporation neither violates any Renamed Contract to which
            it is one party, nor assumes any significant responsibility possibly
            arising from any presentations, commitments, compensations
            (explicitly or implicitly) or other matters that it has made.

5.2   Clause 5.1 shall not be interpreted as that New CNC is required to assume
      any obligations under any Renamed Contracts arising from any facts or
      situations taking place prior to the Restructuring Effective Date, and
      such obligations shall not become part of the liabilities of the Injected
      Assets.

5.3   On the date when this Agreement is signed, in connection with the
      contracts to which the Group Corporation and/or the Restructured
      Enterprises are the major party relating to the Injected Assets, the Group
      Corporation has already conducted due diligence, the result of which has
      been sufficiently and accurately disclosed to New CNC.

      5.3.1 All these contracts are lawful and valid, not cancelled or annulled,
            and will not be terminated or unfavorably influenced because of the
            Restructuring, CNC (HK) share listing and conclusion of this
            Agreement or any other conditions.

                                       29
<PAGE>

      5.3.2 As of the execution date of this Agreement, there is no claim or
            significant obligation against or to be assumed by New CNC arising
            from the breach, violation, negligence, inappropriate execution or
            otherwise of such agreements, documents, or arrangements. After the
            New CNC Conversion Registration Date, there will be neither claim
            nor significant responsibility that may results in connection to
            these agreements, documents or arrangements.

      5.3.3 As of the execution date of this Agreement, the Group Corporation
            receives no breach notice relating to any such agreements sent by
            any other parties to these agreements to New CNC, purporting to
            terminate or otherwise to terminate these agreements, and there is
            no dispute regarding the performance of obligations promised between
            New CNC and any third party.

      5.3.4 On the date when this Agreement is concluded, all the contracts,
            agreements and arrangements transferred to New CNC have been fairly
            concluded or arranged without violating the principle of equity, and
            the earnings and financial conditions prior to the New CNC
            Conversion Registration Date are not materially affected by any
            contracts or arrangements concluded not completely in accordance
            with the principle of equity.

5.4   Unless otherwise specified in this Agreement, any significant contracts,
      transactions or arrangements transferred to New CNC in connection with its
      business:

      5.4.1 are not of abnormal or uncommon nature or beyond the general and
            appropriate business scope;

      5.4.2 do not cost disproportionate or abnormal money, resources or
            manpower to smoothly complete or implement as scheduled;

      5.4.3 do not fall into the situation of long-term nonperformance, i.e.,
            cannot be implemented over 6 months after the agreed or promised
            date specified by relevant terms.

5.5   The Group Corporation warrants and undertakes that on the New CNC
      Conversion Registration

                                       30
<PAGE>

      Date the Surviving Enterprise have already terminated the concluded but
      not fulfilled contracts or agreements with their branches, Subsidiaries
      and other controlled units with respect to engineering design and
      construction and IT service, material procurement, ancillary
      Telecommunications Service and support services.

5.6   On the date when this Agreement is signed, all the contracts concluded
      between New CNC and the Group Corporation are lawful and valid, not
      cancelled or terminated.

6.    EMPLOYEES

6.1   The Group Corporation is required to cause each employee of the former
      Group Corporation or its Restructured Enterprises joining New CNC to meet
      its business demands (the "TRANSFERRED EMPLOYEE") to enter into with New
      CNC an employment agreement containing terms reasonably proposed by New
      CNC (in the event that the Transferred Employee has not signed the
      employment agreement with New CNC before the date of signing of this
      Agreement). Except the provisions in the Accountant's Report, New CNC is
      required neither to assume any responsibility for the provision of
      services by the Transferred Employee to the Group Corporation or its
      Subsidiaries prior to the transfer, nor assume any responsibility for the
      services provided in any previous service periods. The Group Corporation
      shall fully compensate New CNC for any liabilities incurred consequently
      at any time.

6.2   Within the scope permitted by the national laws, regulations or local
      statutes and rules relating to the Restructuring, the Group Corporation
      itself shall or causes the Surviving Enterprise to undertake that the
      Transferred Employees can now and in the future continue to rent, purchase
      or otherwise use the houses rented or used prior to their entry into New
      CNC from the Group Corporation or the Surviving Enterprise in the same
      methods and standards received by the incumbent employees of the Group
      Corporation or the Surviving Enterprises.

6.3   The New CNC has concluded no agreements or other arrangements (whether
      legally binding or not) with any trade unions, or other groups
      representing any employees or members of New CNC.

6.4   The New CNC has no liability or practice to make other payments other than
      normal salaries,

                                       31
<PAGE>

      remunerations, bonuses or wages or other benefits to any senior staff or
      employee.

6.5   The New CNC or any employee is not involved in any labor dispute that
      might subject New CNC to seriously unfavorable influence. Furthermore,
      based on the facts already known to New CNC or its directors or the Group
      Corporation or facts obtainable through reasonable investigation, there is
      no indication that New CNC might get involved in any such dispute, or that
      any agreed provisions or any documents signed in accordance with the
      Restructuring and/or CNC (HK) share listing or any matters expected to
      occur due to the Restructuring or CNC (HK) share listing might result in
      such labor dispute.

6.6   The Group Corporation has no unpaid contributions required by laws and
      regulations to the related government departments or their authorized
      agents in connection with the Transferred Employees, including but not
      limited to various insurances and funds.

7.    Tax items

7.1   Accounts

      The Accountant's Report have made preparations or reserves for all tax
      items that will be levied to New CNC or should be paid by New CNC,
      including deferred taxes as of the Evaluation Base Date. The Group
      Corporation will bear any tax that incurred before the Restructuring
      Effective Date but not listed in the Accountant's Report.

7.2   The Group Corporation and the Restructured Enterprises have fulfilled
      their tax obligations to relevant government authorities and all other
      agencies before the New CNC Conversion Registration Date for all taxes
      that they are obliged to bear or may need to bear as a result of the
      assets received by New CNC in accordance with the Restructuring Documents
      and this Agreement or associated therewith. If there are any taxes that
      have not been paid up on the New CNC Conversion Registration Date causing
      New CNC to bear the liability to pay such taxes, including fines and/or
      interests, then the Group Corporation should hold New CNC timely and
      adequately indemnified.

7.3   All tax declaration statements for the taxes incurred by, or associated
      with the assets received by

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<PAGE>

      New CNC in accordance with the Restructuring Documents and this Agreement
      that should be completed by the Group Corporation and/or the Restructured
      Enterprises before the New CNC Conversion Registration Date have been
      submitted and correctly completed by the Group Corporation and/or the
      Restructured Enterprises, which have not and shall not cause any disputes.
      There have been no events taking place within the specified time frame, to
      the knowledge of the Group Corporation or it should be aware of after
      reasonable inquiries, which may result in the foregoing disputes or any
      claims for taxes, or cause the loss of tax reduction or exemption or
      preferences that originally existed

7.4   On the New CNC Conversion Registration Date, New CNC has complied in all
      aspects with all relevant laws, regulations, rules, statutes or orders
      that are applicable to its taxation situation.

7.5   The Group Corporation and/or Restructured Enterprises have paid up in
      accordance with the law various financial charges that are associated with
      the usage of the Injected Assets by the Group Corporation and/or the
      Restructured Enterprises before the New CNC Conversion Registration Date
      and that should be paid by the Group Corporation and/or the Restructured
      Enterprises to relevant government authorities. Where there is any tax
      delinquency, the Group Corporation shall be responsible to make up in full
      and in a timely manner. In case New CNC suffers any losses from such
      delinquency, the Group Corporation shall hold New CNC or newly established
      enterprise fully and timely indemnified.

7.6   Unusual and Unfair Transactions

      7.6.1 Except for those disclosed in the prospectus and recorded in the
            Accountant's Report, the Group Corporation hasn't caused New CNC to
            own, agree to purchase any of the assets, or agree to accept any of
            the services or equipments whose expenses are or will be higher than
            their market values, or haven't been valued on a fair basis;

      7.6.2 Except for those disclosed in the prospectus and recorded in the
            Accountant's Report, the Group Corporation hasn't caused New CNC to
            own, agree to purchase any of the assets, or agree to accept any of
            the services or equipments whose prices are or will be lower than
            their market values, or haven't been evaluated on a fair basis;

                                       33
<PAGE>

      7.6.3 Except for those disclosed in the prospectus and recorded in the
            Accountant's Report, the Group Corporation hasn't caused New CNC to
            engage in transactions that have substituted for or deviated from
            the actual payables or receivables due to tax duties.

7.7   The signing and fulfillment of this Agreement and any other agreements
      signed pursuant to the Restructuring will not cause New CNC to be deemed
      to have gained earnings or other payments that are taxable from a taxation
      perspective.

8.    FURTHER ASSURANCES

8.1   Compliance with terms and conditions of this Agreement and the
      Restructuring Documents will not and shall not:

      8.1.1 conflict with, cause to violate or constitute a failure to perform
            any terms, conditions or regulations of the Injected Assets related
            agreements or documents, of which the Group Corporation and/or the
            Restructured Enterprises were or currently are one of the parties
            and whose subject has been or shall be changed as a result of the
            Restructuring; and/or

      8.1.2 relieve any one from any obligations under this Agreements or
            documents mentioned in Clause 8.1.1 above or cause anyone to
            terminate obligations under this Agreements or documents mentioned
            in Clause 8.1.1 or terminate New CNC's rights or interests provided
            under this Agreements or documents mentioned in Clause 8.1.1 above.

9.    LAW COMPLIANCE

9.1   Upon changes registration of New CNC, it complies in all aspects with any
      applicable laws, statues and working rules of both China and other
      regions, nor does it commit any violations or offences that may cause
      serious impact on the financial conditions or business prospects of New
      CNC against any acts, regulations, rules, decrees, orders or judgments of
      any courts or government authorities of China or any other countries.

9.2   Upon changes registration of New CNC, all licenses, permits,
      authorizations, consents and exemptions that New CNC has to obtain from
      any individuals, organizations or groups in order

                                       34
<PAGE>

      to operate its various businesses have all been obtained by New CNC and/or
      its appropriate branches, Subsidiaries or authorized units. Such
      authorizations have full efficacy and there are no circumstances,
      including the Restructuring process and signing of this Agreement, will
      cause the cancellation in whole or in part or the inability to renew such
      licenses, permits, authorizations, consents and exemptions.

9.3   Upon changes registration of New CNC, New CNC provides no commitments or
      guarantees to any courts with jurisdictions or government authorities.

10.   LAWSUITS

10.1  The Group Corporation and/or the Restructured Enterprises have no
      activities severely against the laws and regulations that might cause
      significant economic losses to New CNC or impact the operation of New
      CNC's businesses.

10.2  Except for the associated lawsuits that have been formally disclosed to
      New CNC, there are no significant on-going, pending or potential
      arbitrations, lawsuits, claims or other legal proceedings related to the
      Injected Assets against the Group Corporation and/or the Restructured
      Enterprises whether as a prosecutor, defendant or with other identity, nor
      are there any claim demands that would cause significant adverse impact on
      the operation of New CNC's businesses and/or the Injected Assets, or any
      facts that may lead to such claim demands.

11.   INTELLECTUAL PROPERTY RIGHTS

11.1  The intellectual property rights required or used by New CNC:

      11.1.1 Are effectively existent and enforceable;

      11.1.2 Do not violate any other agreements or infringe on others'
             intellectual property rights;

      11.1.3 Do not have any lawsuits, disputes or other legal proceedings on
             going or impending, concerning or affecting the ownerships,
             utilization or effectiveness of such intellectual property rights;

                                       35
<PAGE>

      11.1.4 Have been granted utilization permissions for New CNC and have no
             liens, mortgage, impawn or other interests of a third party except
             for those disclosed in the prospectus.

11.2  Except for those that have been disclosed, the Group Corporation has not
      permitted others to use or transfer its intellectual property rights

11.3  Except for those that have been disclosed, the Group Corporation has not
      infringed or violated any of intellectual property rights.

11.4  The Group Corporation has not, except in normal and general business
      operations, disclosed to any one or permitted, promised or arranged any
      disclosure of the proprietary technologies, business secrets, confidential
      materials, cost statements, lists of customers or suppliers.

11.5  The Group Corporation has not left out any significant issues that may
      cause the foregoing permits or the permits granted to New CNC to be
      terminated or constitute any violation of the clauses of such permits.

11.6  The Group Corporation has not involved in any agreements that may restrict
      the application of the foregoing New CNC's proprietary technologies,
      business secrets, confidential materials, cost statements, lists of
      customers or suppliers or disclose to the other party.

12.   RESTRUCTURING APPROVALS

12.1  The Restructuring Approvals listed in APPENDIX III to this Agreement are
      all applicable approvals, permits or consents required by this Agreement,
      associated agreements and the Restructuring arrangement thereunder and the
      Restructuring will not be adversely impacted due to the lack of any
      approvals, ratifications, consents or permits.

13.   OPERATING BUSINESSES

13.1  The impact of the IPO and the Restructuring of CNC (HK)

      13.1.1 The Group Corporation believes, after prudent and detailed
             inquiries, that there are no data, except those disclosed, that
             indicate, and it is not aware of or does not

                                       36
<PAGE>

            believe that the Restructuring or the IPO of CNC (HK) or the signing
            of this Agreement, or any other issues contained thereof have
            caused:

            (1)   Any suppliers of New CNC to cease or have the rights to cease
                  or dramatically reduce their supplies;

            (2)   Any clients of New CNC to cease or have the rights to cease or
                  dramatically reduce their business dealings;

            (3)   Any significant changes in the management and/or the Injected
                  Assets of New CNC.

     13.1.2 Except for those disclosed in the prospectus or unless otherwise
            specified in this Agreement, the Restructuring or the IPO of CNC
            (HK), the signing of this Agreement, or any other issues contained
            thereof will not cause:

            (1)   Conflicts, defaults or failure to perform the obligations of
                  any terms and conditions or regulations of any agreements or
                  contracts in which New CNC is a party, or against the Articles
                  of Association of New CNC and/or any regulations of laws,
                  acts, legislations, decrees or orders that are applicable to
                  New CNC, or violate any creditor's rights, impawns, leases,
                  rents, contractual orders, judgments, verdicts, injunctive,
                  rules or other restrictions or responsibilities that have
                  binding or controlling force against any assets of New CNC;

            (2)   To relieve anyone from any obligations to New CNC, authorize
                  anyone to determine any such or any rights or interests
                  enjoyed by New CNC or exercise any rights in accordance with
                  this Agreement reached with New CNC

            (3)   To constitute or exercise the creditor's rights in any form to
                  the setup, imposure or prospects of New CNC; and

            (4)   The New CNC's any existing or future liabilities to become due
                  and payable or to be claimed as due and payable before the
                  specified due date.

13.2  Operating Businesses

     13.2.1 The New CNC has the right and is fully qualified to operate
            businesses in the business operating areas as provided in its
            business license and the international business field;

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<PAGE>

     13.2.2 The New CNC has no ultra vires, unauthorized or invalid activities,
            contracts and rights. All documents with New CNC as the principal
            party or the executing party have been properly signed and stamped
            and retained by New CNC.

13.3  There is absolutely no possibility for New CNC and associated executives,
      representatives and employees, during their tenure, to cause New CNC to
      suffer significant fines, penalties, lawsuits or other liabilities due to
      violation of any laws, regulations, rules or orders.

13.4  Unless otherwise specified in this Agreement and per request of New CNC's
      normal operations, the Group Corporation or New CNC have not authorized
      any individuals (implied or expressed) to sign any contracts or make any
      commitments on behalf of New CNC, nor have they granted any individuals
      any other proxies or power of attorney.

13.5  Unless otherwise disclosed in the prospectus and specified in this
      Agreement, New CNC has obtained the authorization and has been qualified
      to operate in all regions approved by the Restructuring Approvals to
      operates and in international businesses, and has obtained from any
      individuals, organizations or groups all necessary permits and consents
      required to properly operate such businesses in order to legally and
      properly operate its businesses and all such permits and consents are
      valid and continue to be valid as of the New CNC Conversion Registration
      Date. Both the Group Corporation and New CNC have not violated any term or
      condition of the permits or consents it obtained, nor have they any
      factors that suffice to affect the continuity or renewal of such letters
      of permits or consents they hold.

14.   CAPITALIZED COMMITMENTS, DIVIDENDS AND DISTRIBUTION

14.1  Except for those disclosed in the prospectus and the Accountant's Report,
      there are no capitalized commitments in New CNC's capital accounts. During
      the Relevant Period, the Group Corporation has not caused New CNC to bear
      any significant burdens of capital expenditures, endorse any such
      significant capital expenditures, or agree to sell or alter any
      significant capital assets or any related equities.

14.2  Except for those that have been disclosed, starting from the New CNC
      Conversion Registration Date, New CNC has not paid or announced any
      dividends, or distribute any other allocations in

                                       38
<PAGE>

      the form of cash or materials, or distribute the interests, other incomes,
      benefits or rights obtained from the stock or stock equity of New CNC.

15.   BANK AND OTHER LOANS

15.1  Except those disclosed in the Prospectus or recorded in the Accountant's
      Report, the aggregate amount of loans of New CNC does not exceed the
      limits stipulated in its article of association and/or any law,
      regulation, decree, and ordinance or applicable order, or the loan limits
      stipulated in contracts or documents which have binding force over New
      CNC.

15.2  Except those disclosed in the Prospectus or recorded in the Accountant's
      Report, New CNC has no outstanding bonds, and has not agreed upon setting
      up or issuing any bonds.

15.3  Except those disclosed in the Prospectus and recorded in the Accountant's
      Report, as to the date of signing this Agreement, the Group Corporation
      has not received notice from any creditor (no matter formally or not)
      demanding it to repay debts or begin compulsory disposal of any of New
      CNC's assets held by the creditor; Also there is not any situation which
      will result in the above notices.

15.4  Except those disclosed in the Prospectus and recorded in the Accountant's
      Report, since the New CNC Conversion Registration Date, New CNC has not
      repaid or incurred responsibilities to repay any immature major loan or
      other major debts, also there is not any situation that may lead to the
      occurrence of the above situations.

15.5  Except those disclosed in the Prospectus and recorded in the Accountant's
      Report, there is no mortgage, lien or any other kinds of mortgage, rights
      and interests or creditor's rights on the assets transferred to New CNC
      which relate to or affect all or part of New CNC's business, property or
      assets; nor is there any other agreement, arrangement or commitment which
      may cause or lead to the above situations, excluding bank financings
      obtained fairly by New CNC according to normal commercial terms.

15.6  Except those disclosed in the Prospectus and recorded in the Accountant's
      Report, before the execution date of this Agreement, the Group Corporation
      had not exercised or claimed to exercise lien, creditor's rights or other
      rights and interests or demanded any debt on any fixed

                                       39
<PAGE>

      assets, and there is not a direct or indirect dispute related to such
      fixed assets.

15.7  Except those disclosed in the Prospectus and recorded in the Accountant's
      Report, as to the existing bank financing and other financing channels,
      New CNC has the ability to raise sufficient working capital to continue
      its business by current method and business scope in 12 months from the
      New CNC Conversion Registration Date, and to implement, carry out and
      finish, according to the existing clauses and terms, all unfulfilled
      orders, projects and contract responsibility which have binding force over
      New CNC.

15.8  Except those disclosed in the Prospectus and recorded in the Accountant's
      Report, regarding any bond, acceptance credit, overdrawing, loan and
      credit or other financial financing (referred to as "financing" in this
      article) that is outstanding or can be obtained by New CNC:

      15.8.1  there is no stipulation that violates or is inconsistent with any
              documents about such financing;

      15.8.2  there is no practical action or threat for the acceleration of any
              debts;

      15.8.3  no unfavorable situation has occurred which will affect the
              continuing obtaining of the said financing, or may cause
              unfavorable change in any of these financing terms and conditions;

      15.8.4  this financing does not depend on guarantee or warrant by way of
              mortgage provided by a third party; and

      15.8.5  The Restructuring and the public offering of the Shares of CNC
              (HK), or results of other matters included in the Restructuring
              and/or this public offering cannot affect such financing
              adversely, including but not limited to the termination of any of
              such financing or the acceleration of such financing or the
              termination of existing mortgage of any such financing.

15.9  Unless otherwise stipulated in this Agreement, New CNC has no obstacle in
      obtaining or has already obtained third party consent required by the
      Restructuring.

16.   ENVIRONMENTAL PROTECTION

16.1  The Group Corporation and New CNC have abided by all applicable
      environmental laws and

                                       40
<PAGE>

      regulations in China, and there is no serious violation of such laws and
      regulations.

16.2  The Injected Assets and business are free from any threat of major civil,
      criminal or administrative claims, investigations, complaints or
      litigations related to environmental protection, and also there is not any
      situation that may cause such claims, investigations, complaints or
      litigations.

17.   INSURANCE

17.1  All insurances enjoyed by New CNC are valid, and there are no actions or
      omissions that can make such insurances void, or lead to increase of
      premiums.

17.2  All insurances accepted by New CNC are not restricted by any special,
      abnormal clauses, and New CNC needs not to pay any additional fees except
      the normal premiums.

17.3  Except those disclosed in the Prospectus and other documents, in
      accordance with the above policies, New CNC has not made or is not likely
      to make any claims, and there are no such circumstances that can bring
      about such claims.

18.   LANDS AND PROPERTIES

18.1  The Group Corporation warrants that the right-of-use and ownership of the
      lands and properties included in the transferred assets is legal and
      complete, and that, except those disclosed in this Agreement and the
      Prospectus, there is no mortgage or third party right on the right-of-use
      of the said lands or the ownership of the said properties.

18.2  The Group Corporation warrants that all the lands and properties in the
      Injected Assets can be legally used according to their current usage;
      Properties constructed on the lands that it has the right-of-use are in
      compliance with national laws, regulations and planning programs and usage
      approved by the government.

18.3  As to the land use right of the Injected Assets and the newly transferred
      land use right in this period, the Group Corporation warrants that: within
      6 months after the global offering of CNC (HK) (as to the lands for which
      the Group Corporation has not obtained Land Use Rights

                                       41
<PAGE>

      Certificates yet, but possesses title proofs accepted by the Ministry of
      Land and Resources, it should be within the validity period stipulated in
      relevant title proofs, and in no case later than 6 months after the global
      offering of CNC (HK), the Group Corporation shall make every effort to or
      urge the Surviving Enterprises to make every effort to apply for Land Use
      Rights Certificates from relevant land administrative departments; New CNC
      shall be the user in the said Land Use Rights Certificates; the Group
      Corporation shall bear all fees, expenses, and claims incurred in or
      related to the handling of the above matters, and indemnify New CNC
      against losses, claims, expenses and fees New CNC suffers from the lack of
      Land Use Rights Certificates in which New CNC is the user at the
      completion of the global offering of CNC (HK) . the Group Corporation
      further warrants that, as to the newly transferred land use right
      allocated to New CNC within 2 years after the global offering of CNC (HK),
      the Group Corporation shall help New CNC go through formality to transfer
      allocated land to remised land, and indemnify New CNC against all losses,
      claims, fees and expenses due to land use right of the allocated lands for
      which the formality of transferring allocated land to remised land has not
      been finished by the time of the completion of CNC (HK)'s global offering.

18.4  As to the properties and properties under construction of the Injected
      Assets and the newly transferred properties and properties under
      construction on the remised land in this period, the Group Corporation
      warrants that: within 6 months after the global offering of CNC (HK) (as
      to the properties for which the Group Corporation has not obtained
      property ownership certificates yet, but possesses valid title proofs or
      properties under construction licenses, it should be within the validity
      period stipulated in relevant title proofs, but in no case later than 6
      months after the global offering of CNC (HK), or the completion of the
      constructing project; as to the constructing project for which the Group
      Corporation has not obtained permission, written reply or verification
      document, it should be after the completion of the said constructing
      project), the Group Corporation shall make every effort to or urge the
      Surviving Enterprises to make every effort to apply for property ownership
      certificates from relevant property administrative departments; New CNC
      shall be the user in the said property ownership certificates; the Group
      Corporation shall bear all fees, expenses, and claims incurred in or
      related to the handling of the above matters, and indemnify New CNC
      against losses, claims, expenses and fees suffered from the lack of
      property ownership certificates in which New CNC is the user by the time
      of the completion of the global offering of CNC (HK). As to properties
      under construction in the Injected Assets which have not obtained
      permissions, written replies or verification documents

                                       42
<PAGE>

      from relevant government departments yet, the Group Corporation confirms
      that Land Use Rights Certificates or land authority certificates
      corresponding to the said properties under construction have been
      obtained, that the said properties under construction meet all conditions
      required to obtain relevant permissions, written replies or verification
      documents, and the relevant permissions, written replies or verification
      documents are under processing and free from any legal obstacle, and that
      there is no penalties imposed by relevant government departments due to
      the lack of the said permissions, written replies or verification
      documents of the said constructing projects. The Group Corporation further
      warrants that, as to the newly transferred properties and properties under
      construction on the allocated land of New CNC within 2 years after the
      global offering of CNC (HK), the Group Corporation shall assist New CNC go
      through the formality related to the registration or change registration
      of property ownership certificates, and indemnify New CNC against all
      losses, claims, fees and expenses resulted from the properties and
      properties under construction for which registration or change
      registration of property ownership certificates has not completed by the
      time of the completion of CNC (HK)'s global offering.

18.5  Pursuant to the property leasing agreement separately entered into by the
      Group Corporation and/or the Surviving Enterprises with New CNC in
      APPENDIX TWO to this Agreement, the Group Corporation agrees or urges the
      Surviving Enterprises to lease or sublease all:

      (1)   Properties owned by the Group Corporation;

      (2)   Properties owned by the Surviving Enterprises;

      (3)   Properties under leasing agreements or other effective arrangements
            entered into by the Surviving Enterprises ("SUBLEASED PROPERTIES")

      listed in the said property leasing agreement to New CNC to use.

18.6  The Group Corporation and/or the Surviving Enterprises are the only legal
      user of the Subleased Properties, and have obtained written consent of
      sublease of the said properties from the Lessor of the said leasing
      agreement, or are going through the relevant formality for obtaining
      consent from the original Lessor. The Group Corporation undertakes to urge
      the Surviving Enterprises to get as soon as possible the written consent
      from the Lessor. The Group Corporation shall bear all fees, expenses, and
      claims incurred in or related to the handling of the above matters, and
      indemnify New CNC against losses, claims thereby.

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<PAGE>

18.7  The Group Corporation undertakes that the right-of-use of the above
      properties leased under this Agreement are obtained in accordance with
      laws, and have already finished or are going through registration and
      filing formalities in the relevant real estates administrative
      departments. The Group Corporation undertakes to go through the
      registration and filing formalities of the said leasing agreement and
      property leasing agreement as soon as possible after this Agreement comes
      into force. The Group Corporation shall bear all fees, expenses, and
      claims incurred in or related to the handling of the above matters, and
      indemnify New CNC against losses, claims thereby.

18.8  In the event that New CNC or the Restructuring incurs any loss due to
      property owner's lacking of leasing permission or qualification to the
      said properties, or due to the Group Corporation's failure in maintaining
      the warranties in Clauses 18.1 and 18.2, the Group Corporation is willing
      to assume full indemnification obligations against such loss.

18.9  The Group Corporation warrants that should any party make claim or demand
      indemnity on the bases that the contents in this Article are not true,
      Group the Corporation shall take reasonable measures or actions to protect
      the rights and interests of New CNC, and fully indemnify New CNC against
      losses incurred thereof.

19    MATERIALS

      19.1  All materials in this Agreement and its appendixes are true,
            complete and accurate.

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<PAGE>

                                   APPENDIX II

                               RELATED AGREEMENTS

1.    NON-COMPETITION AGREEMENT

2.    INTERCONNECTION SETTLEMENT AGREEMENT

3.    MASTER SERVICES SHARING AGREEMENT

4.    TRADEMARK LICENSING AGREEMENT WITH

5.    TELECOMMUNICATIONS FACILITIES LEASING AGREEMENT

6.    ENGINEERING & IT SERVICES AGREEMENT

7.    MATERIALS PROCUREMENT AGREEMENT

8.    ANCILLARY TELECOMMUNICATIONS SERVICES AGREEMENT

9.    SUPPORT SERVICES AGREEMENT

10.   PROPERTY LEASING AGREEMENT

11.   PROPERTY SUB-LEASING AGREEMENT

                                       45
<PAGE>

                                  APPENDIX III

                             RESTRUCTURING APPROVALS

1.    "Reply on Approval of the Overall Plan for the Disposal of Land Assets of
      the Restructuring of China Network Communications Group Corporation in the
      Process of Listing" (MLR letter, file no. [2004] 79) by the Ministry of
      Land and Resources on March 23, 2004;

2.    "Reply Regarding the Disposal of Land Assets in the Restructuring and
      Reorganization of China Network Communications Group Corporation" (MLR
      letter, file no. [2004] 172) by the Ministry of Land and Resources on June
      4, 2004;

3.    "Reply on Approval of China Netcom Telecommunications Business
      Authorization and Universal Service Obligations Issues" (MII letter, file
      no. [2004] 273) by the Ministry of Information on June 8, 2004;

4.    "Reply on Approval of the Assets Valuation Projects of the Restructuring
      of China Network Communications Group Corporation for Global Offering"
      (SASAC, file no. [2004] 527) by State-Owned Assets Supervision and
      Administration Commission of the State Council on July 3, 2004;

5.    "Reply on Approval of Asset Injection from China Network Communications
      Group Corporation to China Netcom Communication (Hong Kong) Co., Ltd"
      (MOFCOM reply, file no. [2004] 445) by the Ministry of Commerce on July
      12, 2004;

6.    "Reply on Approval of the Increase of Registered Capital and Other Matters
      Relating to the Conversion of China Network Communications Group
      Corporation" (MOFCOM reply [2004] 1292) by the Ministry of Commerce on
      August 30 , 2004.

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<PAGE>

                                   APPENDIX IV

                             Asset Valuation Report

                                       47
<PAGE>

                                   APPENDIX V

                               ACCOUNTANT'S REPORT

1.    China Netcom (Group) Company Limited [Consolidated Balance Sheet]

2.    China Netcom (Group) Company Limited [Consolidated Profit and Loss
      Account]

3.    China Netcom (Group) Company Limited [Consolidated Statement of Cash
      Flows]

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<PAGE>

                                   APPENDIX VI

                 LETTER OF UNDERTAKINGS BY THE GROUP CORPORATION

                                       49