Growth Of Garment Industry In The PRC
In recent years, we have witnessed the trend of reputable international garment brands moving their manufacturing operations to the PRC to take advantage of the relatively low cost of production and the expanding PRC market. This has resulted in the demand for manufacturing services for high-end fabrics such as spun silk.

The PRC's garment industry will also benefit from the lifting of the quota on the PRC's garment exports in 2005 pursuant to the PRC's entry to the WTO. We believe that this will spur production by garment manufacturers, as there will be more opportunities to penetrate into foreign markets. As we supply spun silk yarn and spun silk fabrics to the garment industry in the PRC, the increase in garment manufacturing activities will benefit us. Barring any unforeseen circumstances, we believe we are well positioned to benefit from growth opportunities arising from these trends with our advanced and established spun silk manufacturing facilities in the PRC.

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Growth In The Export Of Silk Products To Overseas Markets
Most silk textile products manufactured in the PRC are exported and such exports have shown an increasing trend for the past 3 years. Based on statistics from the State Customs Bureau , between January and June 2004, the PRC exported a total of approximately US$1,437,000,000 worth of silk products.⁽¹⁾ This represents an increase of approximately 24.35% in value of silk textile exports over the same period last year.⁽¹⁾

From January to June 2004, there was an increase in the amount of exports of silk textile varieties, silk woven products and other silk products exported compared with the same period last year. In particular, 82,880,000 m of gray fabrics , worth approximately US$164,000,000 were exported, representing an increase of approximately 25.49% in volume and approximately 39.53% in value.⁽¹⁾

In addition, approximately 98,470,000 sets of silk garments totalling approximately US$835,000,000 were exported between January and June 2004, which represents an increase in export volume and export value of approximately 16.73% and 22.07%⁽¹⁾ respectively, as compared to the same period last year.
Notes:
* The exchange rate between US$ and RMB was US$1.00 to RMB8.28.

Information and statistics were obtained from the China Silk Journal (2004, Issue 16)published by the China Silk Information Center , which attributed the source to the China Textile Products Import and Export Chamber of Commerce Silk Office based on statistics from the State Customs Bureau
Statistics in the table were obtained from the China Silk Journal (2004, Issue 16), China Silk Journal (2004, Issue 6) and China Silk Journal (2002, Issue 6), published by the China Silk Information Center, which attributed the source to the China Textile Products Import and Export Chamber of Commerce Silk Office based on statistics from the State Customs Bureau.

The China Silk Information Center, China Textile Products Import and Export Chamber of Commerce Silk Office and the State Customs Bureau have not provided their respective consents to the inclusion of the relevant information and are thereby not liable for the above information under sections 253 and 254 of the Securities and Futures Act.

The Company has included the relevant information in their proper form and context in this Prospectus and has not verified the accuracy of the contents of the relevant information.

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Trend Of "One-Stop Services" Required By International Apparel Brands
Previously, international apparel brands would undertake all stages of manufacture themselves, from the procurement of suitable fabrics to the sourcing for dyeing and printing factories and garment manufacturers. Currently, these international apparel brands will usually appoint PRC garment manufacturers to oversee the entire manufacturing process and deliver the finished goods to the international apparel brands for sale.

As we have integrated manufacturing capabilities, we are able to undertake such manufacturing assignments and fulfil all their needs along different parts of the value chain. Hence, we are better positioned to capitalise on the above-mentioned trend.

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Rising Affluence Of PRC Consumers
The opening up of the PRC economy has led to strong economic growth and continued rise in standards of living. This has led to an increase in disposable income and an increase in consumer spending, including clothing. With growing affluence, the demand for apparels in the PRC domestic market is poised to grow.

This trend will benefit us as it will result in increased demand for our products in the future. Furthermore, we believe that with our advanced technology and innovation, we will be able to produce better quality products to meet the demands of the changing market trends.

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