<R&D structure>

Facility	Overview
Internal Combustion Engine Institute	- Designing and developing diesel engines, and developing manufacturing facilities to produce them - This facility and Beijing Institute of Technology are jointly operating the Internal Combustion Engine Engineering Center - This facility and Kunming Science & Technology University are jointly operating the Diesel Engine Test & Research Center

<Developing diesel engines for passenger vehicles>
-In November 2005, the Company successfully completed its own development of China's first diesel engines of D16TCI and D19TCI for passenger cars. The new products are global- level. energy saving and environmentally friendly engines conforming to Euro emissions regulations. They can be installed on passenger cars, SUVs, MPVs and high-class passenger cars.  The Company has been engaged in development of such products in view of a future growth of diesel-powered passenger cars in China.

Capital expansion project to build a new diesel engine plant for passenger vehicles
- The Company is constructing a new plant to manufacture diesel engines for passenger vehicles. The total amount of investment in this project is budgeted at 1,796.40 million yuan. When the new production lines are completed, the Company will be able to produce 200,000 diesel engines a year.