Chairman Qin Xiao

The year 2004 continued to be a substantially challenging year for the banking industry in China. The government firmly adopted a series of measures to tighten macroeconomic control, and the regulatory authorities enforced a series of polices of raising the deposit reserve rate and the deposit and loan benchmark rate of financial institutions and strengthened the capital adequacy ratio management of commercial banks. As a result, the competition among domestic banks was intensified and the external operation environment of banking sector was significantly changed.

Faced with the pressures and challenges, the Bank kept adhering to the strategic guideline of balanced development of profitability, quality and scale, and strictly executed the principle of enhancing the innovations, deepening the management, adjusting the structure and ensuring balanced development. The financial risks has been effectively under control. The Bank has successively fulfilled its annual work plan and marked record high in terms of business results, through the well-performed guidance of the Board of Directors, the diligence of our directors, and the vigorous and aggressive dedication of employees under the unified leadership of the management team.  Besides, the Bank successfully issued convertible bonds of Rmb6.5 billion and subordinated debts of Rmb3.5 billion, both of which were effectively and timely used to supplement the capital basis. Our brand advantages, social recognition, public influence and the improvement of our competitiveness have been further seen. Our excellent performance was widely recognized and appraised by regulators and the society, which also enhanced our reputation and image at home and abroad. The Bank should attribute all its achievements of 2004 to the aggressive and diligent work of the whole bank's staff and to the supports from all parties of the society. I hereby would very much like to, on behalf of the Board of Directors of the Bank, express our sincere gratitude to the government at all levels, all parties from the society, shareholders and other financial institutions who have been continuously caring and supporting the Bank's development!

In 2005, the national economy will keep in growing at faster speed and the industry structure will be continuously optimized and upgraded. The regulatory policies encourage innovations and the market environment with fair competition is being formed. All those factors will provide a sound economic foundation and external environment for rapid development of the Bank. On the other hand, facing up with such challenges as ever-changing financial environment, capital restrain and interest-rate liberalization. The Bank will, by sticking to the objective of 'creating a blue chip for the market and building a century-lasting bank', continue to implement the strategy of balanced development. Besides, by adhering to the guideline of "accelerating its reforms, optimizing its structure, upgrading its management and controlling risks", the Bank will make great efforts to build up an operation model with lower capital consumption and high operating efficiency by encouraging risk-controlled culture, steadily pushing forward the operation strategic adjustment, improving its management to meet international standards and upgrading its management quality on an overall basis. I do strongly believe that through all of the unified efforts, the Bank will, by making best use of its strength and advantages in technology, products and services and by enriching the content of our brand, provide better products and services to our clients in the coming year, and shape a better image in capital market and deliver long-term value and steady return for our shareholders and the society.