CHINA EASTERN AIRLINES CORP LTD (Form: 20-F, Received: 06/24/2008 14:03:02)

Valuation of property, plant and equipment

Our property, plant and equipment is subsequently stated at revalued amounts less accumulated depreciation in accordance with the accounting policy stated in Note 2(m) to the financial statements. Revaluations of property, plant and equipment will be performed at sufficiently regular intervals, at least every five years, by independent professional valuers. In each of the intervening years valuations will be undertaken by our Directors. If the subsequent revalued amounts differ materially from carrying amounts, the carrying amounts will be adjusted to the revalued amounts. Their recorded value is impacted by management judgment, including valuations performed by management and/or independent professional valuers, estimates of useful lives, residual values and impairment charges. If different judgments or estimates had been utilized, material differences could have resulted in the amount of revaluation and related depreciation charges. Our Directors have reviewed the carrying value of our fixed assets as of December 31, 2007 and concluded that there is RMB131 million valuation deficit relating to certain aircraft and related equipment. With the exception of those assets giving rise to the valuation deficit referred to above, the revalued amounts of the other assets are not materially different from their carrying amounts.

Revenue recognition

We recognize passenger, cargo and mail revenues in accordance with the accounting policy stated in Note 2(f) to the financial statements. Unused tickets are recognized in traffic revenues based on current estimates. Management annually evaluates the balance in the Sales in advance of carriage account (“SIAC”) and records any adjustments, which can be material, in the period the evaluation is completed. These adjustments result from differences between the estimates of certain revenue transactions and the timing of recognising revenue for any unused air tickets and the related sales price, and are impacted by various factors, including a complex pricing structure and interline agreements throughout the industry, which affect the timing of revenue recognition.

Overhaul costs

The overhaul costs in relation to return condition checks for aircraft and engines under operating leases is provided on a straight line basis over the term of the leases. Overhaul costs for aircraft and engines owned by us or held under finance leases are capitalized as a component of property, plant and equipment and are depreciated over the appropriate maintenance cycles. All other repairs and maintenance costs are charged to the income statements as and when incurred. The amount of overhaul costs charged/amortized to operating profits is impacted by management’s estimates of the expected flying hours and overhaul costs, which are largely based on past experience of overhauls of the same or similar models of aircraft. Different judgments or estimates could significantly affect the estimated overhaul expense and materially impact the results of operations. During the year ended December 31, 2007, we reviewed the way we account for certain aircraft maintenance activities and decided to change our accounting policy with respect to the cost of major overhauls of airframes and engines held under operating leases. The review of our accounting policy was, in part, initiated in response to recent changes in generally accepted accounting practice in the United States which have eliminated the use of the accrual method for overhauls. See Note 2(b)(i) for details.

Retirement benefits

We operate and maintain defined retirement benefit plans which provide retirees with benefits including transportation subsidies, social activity subsidies as well as other welfare. The cost of providing the aforementioned benefits in the defined retirement benefit plan is actuarially determined and recognized over the employees’ service period by utilizing various actuarial assumptions and using the projected unit credit method in accordance with the accounting policy stated in Note 2(w) to the financial statements. These assumptions include, without limitation, the selection of discount rate, annual rate of increase of per capita benefit payment and employees’ turnover rate. The discount rate is based on management’s review of local high quality corporate bonds. The annual rate of increase of benefit payments is based on the general local economic conditions. The employees’ turnover rate is based on historical trends of the Group. Additional information regarding the retirement benefit plans is disclosed in Note 32 to the financial statements.

Deferred income tax

In assessing the amount of deferred tax assets that need to be recognized in accordance with the accounting policy stated in Note 2(k) to the financial statements, we consider future taxable income and ongoing prudent and feasible tax planning strategies. In the event that our estimates of projected future taxable income and benefits from available tax strategies are changed, or changes in current tax regulations are enacted that would impact the timing or extent of our ability to utilize the tax benefits of net operating loss carry forwards in the future, adjustments to the recorded amount of net deferred tax assets and taxation expense would be made.

Foreign Currency Transactions

We have debts denominated in U.S. dollars, Japanese yen or Euro in addition to our debts denominated in Renminbi. We generate a significant amount of foreign currency revenues, including U.S. dollar, Japanese yen, Euro, Korean won, Hong Kong dollar, Singapore dollar, Australian dollar, and Thailand baht revenues, from ticket sales made in overseas offices. Pursuant to current foreign exchange regulations in China, we may retain our foreign currency earnings subject to the approval of SAFE. We have also designated certain personnel to manage the foreign currency risks through derivative financial products such as forward foreign exchange contracts and interest rate swaps. We use interest rate swaps to reduce risks related to changes in market interest rates. As of December 31, 2007, the notional amount of outstanding interest rate swap agreements was approximately US$624 million, compared to US$631 million as of December 31, 2006. These interest rate swap agreements will expire between 2008 and 2016. In addition, we use currency forward contracts to reduce risks related to changes in currency exchange rates in respect of ticket sales and expenses denominated in foreign currencies. As of December 31, 2007, the notional amount of the outstanding currency forward contracts was approximately US$33 million, which was the same as of December 31, 2006. These currency forward contracts will expire between 2008 and 2010.

Pursuant to IFRS, our monetary assets and liabilities denominated in foreign currencies are required to be translated into Renminbi at the year end at exchange rates announced by the People’s Bank of China. The net exchange gains or losses are recognized and reflected in the income statement for the relevant year. Any fluctuation of the exchange rates between Renminbi and foreign currencies may materially and adversely affect our financial condition and results of operations. Primarily due to an appreciation of Renminbi against certain foreign currencies (including the U.S. dollar and the Japanese yen) following the measures introduced by the PRC Government in July 2005 to reform the Renminbi exchange rate regime, we recognized a net exchange gain of RMB2,023 million in 2007, compared to a net exchange gain of RMB888 million in 2006.

Taxation

Since we changed our registered address to Pudong district in Shanghai on July 1, 2001, we have been subject to income tax at the rate of 15%. Our effective tax rate, however, may be higher than the rate of 15% because some of our subsidiaries are incorporated in jurisdictions where the applicable income tax rate is 33% rather than 15%. We had carried forward tax losses of approximately RMB5,849 million and RMB5,380 million as of December 31, 2006 and 2007, respectively, which can be used to set off against future taxable income before 2008 and 2012, respectively.

On March 16, 2007, the National People’s Congress approved the Enterprise Income Tax Law (the “EIT Law”), which took effect on January 1, 2008. The PRC enterprise income tax rate for the Company and all its subsidiaries, except those registered in Hong Kong, has been changed to a standard tax rate of 25%. However, the tax bureau in which the Company and certain of its subsidiaries are registered has not yet announced the detailed transitional provisions from the old rate to the new CIT rate. For the purposes of deferred tax calculations, the Company and its subsidiaries apply a 25% tax rate effective since January 1, 2008. The net deferred tax position of the Company and its subsidiaries as of December 31, 2007 is insignificant and management considers that the change in tax rate will not have a material impact on our deferred tax position. Further detailed measures and regulations on the determination of taxable profit, tax incentives and grandfathering provisions will be issued by the tax authorities. As and when the tax authorities announce the additional regulations, we will assess their impact, if any, and the corresponding change in accounting estimate will be accounted for prospectively.

Inflation

In recent years, China has not experienced significant inflation and in 2006, inflation did not have a significant effect on our business. According to the National Bureau of Statistics of China, China’s overall national inflation rate, as represented by the general consumer price index, was approximately 1.5% and 4.8% in 2006 and 2007, respectively. Although neither inflation nor deflation in the past had any material adverse impact on our results of operations, we cannot assure you that the deflation or inflation of the Chinese economy in the future would not materially and adversely affect our financial condition and results of operations.

New Pronouncements

The following standards, amendments and interpretations to existing standards, which have been published and are relevant to our Company’s operations, are mandatory for accounting periods beginning on or after January 1, 2008 or later periods. We are still assessing the impact of these new/revised standards and interpretations in detail.

IFRIC 13, “Customer loyalty programmes” (effective from July 1, 2008)

IFRIC 14, “IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction” (effective from January 1, 2008)

IAS 1 (Revised), “Presentation of Financial Statements” (effective from January 1, 2009)

IFRS 8, “Operating segments” (effective from January 1, 2009)

IAS 27 (Revised) “Consolidated and Separate Financial Statements” (effective from annual period beginning on or after July 1, 2009)

IFRS 3 (Revised) “Business Combinations” (effective for business combinations with acquisition date on or after the beginning of the first annual reporting period beginning on or after July 1, 2009)

G. Safe Harbor

See the section headed “CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS”.

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

The following table sets forth certain information concerning our Directors, executive officers and supervisors during this reporting period. None of our Directors, supervisors or members of our senior management was selected or chosen as a result of any arrangement or understanding with customers, suppliers or others. There is no family relationship between any Director, supervisor or executive officer and any other Director, supervisor or executive officer of our Company.

Name	Age	Shares Owned	Position

Li Fenghua	58	6,600 A Shares	Chairman of the Board of Directors
Li Jun ⁽¹⁾	55	0	Vice Chairman
Luo Chaogeng ⁽²⁾	58	6,600	Non-executive Director
Cao Jianxiong ⁽³⁾	49	7,656 A Shares	Director and President
Luo Zhuping	55	11,616 A Shares	Director and Secretary of the Board
Hu Honggao	54	0	Independent Non-executive Director
Peter Lok	71	0	Independent Non-executive Director
Wu Baiwang	65	0	Independent Non-executive Director
Zhou Ruijin	69	0	Independent Non-executive Director
Xie Rong	56	0	Independent Non-executive Director
Liu Jiangbo ⁽⁴⁾	58	0	Chairman of the Supervisory Committee
Xu Zhao ⁽⁵⁾	39	0	Supervisor
Wang Taoying ⁽⁶⁾	55	0	Supervisor
Yang Jie	38	6,600 A Shares	Supervisor
Liu Jiashun	51	3,960 A Shares	Supervisor
Zhang Jianzhong	53	0	Vice President
Li Yangmin	45	3,960 A Shares	Vice President
Fan Ru ⁽⁷⁾	59	3,696 A Shares	Vice President
Luo Weide	52	3,960 A Shares	Chief Financial Officer

(1)	Mr. Li Jun has served as Vice Chairman of our Company since June 29, 2007.

(2)	Mr. Luo Chaogeng has served as Non-executive Director of our Company since June 29, 2007.

(3)	Mr. Cao Jianxiong has served as President of our Company since October 12, 2006.

(4)	Ms. Liu Jiangbo has served as Chairman of the Supervisory Committee since Company as of June 29, 2007.

(5)	Mr. Xu Zhao has served as Supervisor of our Company since June 29, 2007.

(6)	Ms. Wang Taoying has served as Supervisor of our Company since June 29, 2007.

(7)	Mr. Fan Ru has served as a Vice President of our Company since November 21, 2006.

On June 29, 2007, during the 2006 annual general meeting, the shareholders of the Company approved the termination of office for the entire fourth session of the Board of the Company and approved the appointment of Mr. Li Fenghua, Mr. Li Jun, Mr. Luo Chaogeng, Mr. Cao Jianxiong, Mr. Luo Zhuping, Mr. Hu Honggao, Mr. Peter Lok, Mr. Wu Baiwang, Mr. Zhou Ruijin and Mr. Xie Rong as directors to the fifth session of the Board of the Company. The shareholders of the Company also approved the termination of office as a whole for the fourth session of the Supervisory Committee, and approved the appointment of Mr. Liu Jiashun, Ms. Liu Jiangbo and Mr. Xu Zhao as supervisors nominated by shareholders to the fifth session of the Supervisory Committee. Pursuant to an employees’ representatives meeting of the Company, Ms. Wang Taoying and Ms. Yang Jie were nominated as supervisors by the employees of the Company with effect from June 29, 2007.

On June 29, 2007, the fifth session of the Board of the Company convened its first meeting for 2007 and elected Mr. Li Fenghua as the Chairman of the Board of the Company and Mr. Li Jun as the Vice Chairman of the Board of the Company. In addition, Mr. Xie Rong, Mr. Hu Honggao and Mr. Zhou Ruijin were appointed as the members of the Audit Committee and Mr. Xie Rong as the chairman of the Audit Committee. Mr. Wu Baiwang, Mr. Luo Chaogeng and Mr. Luo Zhuping were appointed as the members of the planning and development committee of the Company (the “Planning and Development Committee”) and Mr. Wu Baiwang as the chairman of the Planning and Development Committee. Mr. Zhou Ruijin, Mr. Luo Chaogeng and Mr. Wu Baiwang were appointed as members of the remuneration and assessment committee of the Company (the “Remuneration and Assessment Committee”), and Mr. Zhou Ruijin as the chairman of the Remuneration and Assessment Committee. Based on the nomination by the Chairman of the Board of the Company, Mr. Cao Jianxiong was appointed as the President of the Company, and based on the nomination by the President of the Company, Mr. Zhang Jianzhong, Mr. Li Yangmin and Mr. Fan Ru were appointed as the Vice Presidents of the Company and Mr. Luo Weide as the Chief Financial Officer of the Company. Based on the nomination by the Chairman of the Board of the Company, Mr. Luo Zhuping was appointed as the secretary to the Board of the Company. Ms. Liu Jiangbo was elected as the chairman of the supervisory committee of the Company

Directors and Executive Officers

Mr. Li Fenghua is the incumbent Chairman of our Board of Directors, president and deputy party secretary of CEA Holding. Mr. Li joined the civil aviation industry in 1968 and was deputy head, and subsequently became head, of the 26th Fleet of the CAAC from 1987 to 1992. From 1992 to 1996, Mr. Li served as vice-president, and then became president, of the Hubei branch of China Southern Airlines (Group). Since 1996, he became vice-president of China Southern Airlines Company Limited and vice-president of China Southern Airlines (Group). In 2000, Mr. Li became party secretary and vice-president of China Southern Airlines Company Limited. From October 2002 to September 2004, he served as the President of our Company and vice-president of CEA Holding. In September 2004, he became president and deputy party secretary of CEA Holding. Mr. Li graduated from the China Civil Aviation Senior Aviation School and holds the title of First Class Pilot.

Mr. Li Jun is currently the Vice Chairman of the Board of the Company and the party secretary of CEA Holding. Mr. Li joined the civil aviation industry in 1972. Since 1977, Mr. Li served as officer in the Political Department and office secretary of CAAC. Mr. Li served as person-in charge of Policy Research Department in the Civil Aviation Bureau in 1984, deputy director of Policy Research Department in the Civil Aviation Bureau in 1986, deputy manager of Planning Department in CAAC in 1989, manager of Planning Department in CAAC in 1994, director of the General Office in CAAC in 1996, manager of Personnel Education Department in CAAC in 2000, and deputy head and party committee member of CAAC in 2001. Since 2006, Mr. Li has served as party secretary of CEA holding. Mr. Li graduated from the Party School of the Central Committee of the C.P.C. He holds a bachelor degree in Economic Management and is a qualified Economist.

Mr. Luo Chaogeng is currently an executive Director of our Company. Mr. Luo joined the civil aviation industry in 1970. Mr. Luo was a flight mechanic of the instructing team of the Lanzhou Civil Aviation Administration Bureau from August 1970 to August 1972. From August 1972 to March 1989, he was the flight mechanic of the 8th Civil Aviation Flight Team. From March 1989 to August 1994, he was the deputy commissar, commissar and party secretary of the Xian Flight Team of China Northwest Airlines. From August 1994 to October 1997, he was the party secretary of the aircraft maintenance plant of China Northwest Airlines. From October 1996 to March 1997, he was the party secretary and deputy general manager of the aircraft maintenance base of China Northwest Airlines. From March 1996 to December 2000, he was the deputy director of the Civil Aviation Administration Bureau of China Northwest Airlines. From December 2000 to November 2001, Mr. Luo was the general manager of Yunnan Airlines and the director and deputy party secretary of Civil Aviation Administration Bureau of Yunnan. From November 2001 to September 2002, he was the general manager and deputy party secretary of Yunnan Airlines. From September 2002 to September 2004, he also served concurrently as the general manager of Yunnan Airlines. From September 2004 to the present, he has been the party constitution member and vice president of China Airlines Group Company, and from September 2004 to October 2006, he served as president and deputy party secretary of China Airlines Corporation Limited. From September 1998 to June 2001, Mr. Luo studied a postgraduate course for incumbent leading cadres in professional economics and management at the Central Party School of Shaanxi. Mr. Luo has obtained first class competency in flight mechanics.

Mr. Cao Jianxiong is currently an executive Director of our Company. Mr. Cao joined the civil aviation industry in 1982. From 1992, he served as president of Shanghai Eastern Airlines Development Company and in 1994 he became president of Eastern Airlines Futures Brokerage Company. In early 1996 he served as assistant President of our Company. From 1997, he served as Vice President and Chief Financial Officer of our Company. Since December 1999, he has served as vice president of EA Group. Since October 2002, he served as vice president of CEA Holding, and he also was the party secretary of China Eastern Air Northwest Company from December 2002 to September 2004. Since October 2006, he has served as President of our Company. Mr. Cao graduated from the Civil Aviation Management Institute with a major in labor economics. Mr. Cao also received a Master’s degree in global economics from Eastern China Normal University’s Department of International Finance. Mr. Cao holds the title of Economist.

Mr. Luo Zhuping is an executive Director of our Company, the secretary of our Board of Directors and the head of the secretariat of our Board of Directors. Mr. Luo joined CEA in 1988. He was deputy chief and then chief of the enterprise management department of China Eastern Airlines from 1992 to 1997. He was deputy head of the share system office from 1993 to 1996. In 1997, he became the secretary of our Board of Directors and the head of the secretariat of our Board of Directors. He became a Director of our Company in June 2004. Mr. Luo graduated from the Faculty of Philosophy and the Faculty of Law of Anhui University in 1979 and 1985, respectively. In 1994, Mr. Luo received a Master’s degree from the Economics Department of Eastern China Normal University, majoring in global economics. In 1998, he participated in the training program for senior managers of large state-owned enterprises organized in the U.S.A. by the State Economic and Trade Commission and Morgan Stanley.

Mr. Hu Honggao has served as an independent non-executive Director of our Company since 1996. He is the vice-dean and professor of law at Fudan University School of Law as well as the head of the Civil and Commercial Law Research Centre of Fudan University, supervising doctoral students majoring in civil and commercial law at Fudan University. He is also a senior lawyer at the Shanghai Shen Yang Law Office. Mr. Hu is a managing director of China Commercial Law Research Society, a managing director of China Economic Law Research Society, a member of the Legislative Consultation Committee of the Shanghai Municipal Government, a member of the Legislative Profession Consultation Committee of the Shanghai Standing Committee of the People’s Congress, vice-chairman of the Shanghai Economic Law Research Society and an arbitrator of the Shanghai Arbitration Committee.

Mr. Peter Lok has been an independent non-executive Director of our Company since 1998. Mr. Lok went to the College of Air Traffic Control in England for further studies after joining the Hong Kong Civil Aviation Department in December 1956. He studied air transport, air accident investigation and administration and management of civil aviation in England from 1968 to 1973. In 1982, he became assistant director of the Hong Kong Civil Aviation Department. From 1985, during his time in office at the air services division of the Hong Kong Civil Aviation Department, he participated in negotiations with various countries regarding air traffic rights. He became deputy director in 1988, and subsequently became director in 1990 of the Hong Kong Civil Aviation Department. Mr. Lok retired in 1996 and has served as a consultant at the Flights Standards Department of the CAAC. Mr. Lok is the first Chinese director of the Hong Kong Civil Aviation Department and was at one time an instructor of the College of Air Traffic Control of Hong Kong.

Mr. Wu Baiwang has served as an independent non-executive Director of our Company since 1998. Mr. Wu joined the civil aviation industry in 1959 and was deputy fleet leader and subsequently became fleet leader of the 12th Fleet of the CAAC from 1976 to 1984. From 1984 to 1992, Mr. Wu was deputy head and subsequently became head of the CAAC Jilin Bureau. From 1992 to 1995, Mr. Wu was head and party secretary of the CAAC Northeastern Bureau. From September 1995 to 1998, he became president of China General Aviation Corporation. He was the party secretary and vice-president of Guangzhou Baiyun International Airport Group Company and the Chairman of the board of directors of Guangzhou Baiyun International Airport Company Limited from 1998 to September 2003. Mr. Wu graduated from Chinese Civil Aviation School in 1965 and holds the title of First Class Pilot.

Mr. Zhou Ruijin has served as an independent non-executive Director of our Company since 2000. Mr. Zhou was deputy editor-in-chief and the East China regional director of the People’s Daily. From 1988 to 1993, Mr. Zhou was party secretary and deputy editor-in-chief of the Liberation Daily. From April 1993 to 1996 he was deputy editor-in-chief of the People’s Daily and from 1996 to 2000 he was deputy editor-in-chief and the East China regional director of the People’s Daily. After he retired, he became vice-chairman of the China Productivity Council and Chairman of the Shanghai Productivity Council. Mr. Zhou graduated from the journalism department of Fudan University in 1962.

Mr. Xie Rong has served as an independent non-executive Director of our Company since 2003. Mr. Xie is a certified accountant in the People’s Republic of China and the deputy head of Shanghai National Accounting Institute. He taught at the faculty of accounting of Shanghai University of Finance and Economics from December 1985 to March 1997, and had been an assistant professor, a professor, a doctorate-tutor and the deputy dean of the faculty. Mr. Xie was a partner of KPMG Huazhen from December 1997 to October 2002, and has been the deputy head of Shanghai National Accounting Institute since October 2002. Mr. Xie graduated from Shanghai University of Finance and Economics and has a doctorate degree in Economics.

Mr. Zhang Jianzhong has served as a Vice President of our Company since June 2004. Mr. Zhang joined the civil aviation industry in 1982. From April 1982 to December 1987, he was an assistant of the Shanghai Civil Aviation Planning Bureau. From December 1987 to April 1990, he was the deputy director of the planning department of Shanghai Hongqiao Airport. From April 1990 to January 1996, he was the director of the planning department of China Eastern Airlines. From January 1996 to April 1999, he was the manager of the sales and marketing department of our Company. From April 1999 to April 2003, he was the Assistant to the President of our Company. From September 2000 to December 2001, he served concurrently as the director of the office of strategic study of our Company. From December 2001 to May 2003, he served concurrently as the general manager of the computer information centre of our Company. From April 2003 to June 2004, he was the chief economic official of our Company. From May 2003 to June 2004, he served concurrently as the general manager of the sales and marketing department of our Company. Mr. Zhang graduated from the Faculty of Mechanical Engineering of Zhejiang University and Professional Study in Economics and Management at Fudan University, where he obtained his master’s degree.

Mr. Li Yangmin has served as a Vice President and deputy general manager of our Company since October 2005. Mr. Li joined the civil aviation industry in 1985. From July 1985 to October 1996, he was the deputy head of the aircraft maintenance workshop, head of technology office and secretary of the workshop branch of Northwest Company. From October 1996 to June 2002, he was the deputy general manager of the aircraft maintenance base and the manager of air route department of Northwest Company. From June 2002 to March 2004, he was the general manager of the aircraft maintenance base of China Eastern Air Northwest Company. From March 2004 to October 2005, he was the vice president and a member of the standing committee to the party committee of China Eastern Air Northwest Company. Mr. Li graduated from China Civil Aviation Academy. He is a qualified senior engineer.

Mr. Fan Ru has served as Vice President of our Company since November 2006. Mr. Fan started his civil aviation career in 1966. He was a deputy fleet leader of China Eastern Airlines’ Shanghai Fleet since 1988 and was the head of aviation technology management office of China Eastern Airlines since 1995. He was appointed as the deputy chief pilot and the head of aviation technology management office of the Company in 1997. He was the chief pilot of our Company from 1999 to November 2006. Mr. Fan graduated from Advanced Aviation School for professional flying. He has received tertiary education and has obtained first class technical qualifications for pilots.

Mr. Luo Weide has served as Chief Financial Officer of our Company since 2000. In 1976 Mr. Luo began his military service at the Air Force in Liuan Airport. From 1979 to 1991 he successively served as department head and deputy head of the Putuo branch of the Shanghai Municipal Tax Bureau. From 1991 to 1993 he concurrently served as head of the finance bureau and the state asset bureau of Putuo District, Shanghai. From 1993 to 1998 he successively served as deputy chief accountant, chief accountant and executive deputy president of Shanghai Jinqiao (Group) Co., Ltd. From 1998 to 2000, he was vice president of Shanghai Pudong Development (Group) Co., Ltd. and chairman of the board and president of Pudong Finance Company. Mr. Luo graduated from the Sino-European International Business School in 1999 with a Master’s degree in business administration. He holds the titles of Senior Accountant and Senior Economist.

Supervisory Committee

As required by the PRC Company Law and our articles of association, our Company has a supervisory committee, or the Supervisory Committee, whose primary duty is the supervision of our senior management, including our Board of Directors, managers and senior officers. The Supervisory Committee consists of five supervisors.

Ms. Liu Jiangbo is currently the chairman of the supervisory committee of the Company (the “Supervisory Committee”), and a party member, vice president, and the head of disciplinary inspection group of CEA holding. Ms. Liu Jiangbo joined the civil aviation industry in 1979. Since then, Ms. Liu had been an officer in the Beijing Administrative Bureau of Civil Aviation of China and the deputy secretary of the committee of C.P.C. of the transportation business division. Ms. Liu served as secretary of the committee of the Communist Youth League of the National Civil Aviation in 1985, deputy director of the personnel department of the Traffic Control Bureau of the Aviation of China in 1987, supervisor to the Civil Aviation Administration of China appointed by the Supervisory Bureau of China in 1990, deputy director of the transportation division of CAAC in 1994, secretary of the committee of C.P.C. and vice president of Yunnan Airlines Corporation Limited in 2000, and the party member, vice president and head of the disciplinary examination committee of CEA holding in 2002. Ms. Liu graduated from the Graduate School of Chinese Academy of Social Sciences, majoring in business management of industrial economics, having the qualification of post-graduate and senior political work instructor.

Mr. Xu Zhao is currently a Supervisor of the Company, and the chief accountant of CEA holding. Mr. Xu joined the civil aviation industry in 2007. Mr. Xu served as engineer and accountant in Dongfeng Motor Group Company Limited in 1991 and 1997 respectively, Mr. Xu joined Shanghai Yanhua High Technology Limited Company as a manager in finance department in 2000, and joined Shaanxi Heavy Duty Automobile Co. Limited as a chief financial officer in 2002. Since January 2007, Mr. Xu has served as the chief accountant in CEA holding. Mr. Xu graduated from Chongxing University, majoring in moulding, and The Chinese University of Hong Kong, majoring in accounting, and holds a master degree. Mr. Xu is qualified as an engineer and an accountant, and is a certified public accountant in the PRC.

Ms. Wang Taoying, is currently a Supervisor, the assistant to the president, and the general manager of the auditing department of the Company. Ms. Wang joined the civil aviation industry in 1972, was the deputy director of the supervisory and auditing department and the deputy manager of the disciplinary committee office of China Eastern Airlines Company from March 1993 to August 1995. Ms. Wang was the head of the auditing department of China Eastern Airlines Company from August 1995 to March 1997, the supervisor in the first session of the Supervisory Committee from January 1995 to March 1998, the cabin service manager of the Company from March 1997 to April 1999, and the deputy general manager of security department in Pudong, Shanghai of the Company taking charge of the servicing safety in the production procedure from April 1999 to August 2000. Ms. Wang also acted as chief officer of the auditing department of the Company from August 2000 to August 2004. From August 2004 to August 2006, she served as the general manager of the auditing department of the Company and has been the assistant to the president of the Company and the general manager of the auditing department since August 2006. Ms. Wang graduated from the Shanghai Second Polytechnic University, majoring in sociopolitics, and holds a Master of Business Administration degree from the Open University of Macau.

Ms. Yang Jie has served as a supervisor of our Company since June 2001. Ms. Yang joined the civil aviation industry in 1992. From 1996 to 1998 she was electronic technology supervisor of the technology office and Communist Youth League secretary of the overhaul department at the aircraft maintenance base of our Company. From 1998 to September 2000 she was Communist Youth League deputy secretary of the aircraft maintenance base of our Company. She was the deputy secretary of our Company’s Communist Youth League from September 2000 to July 2002, and the secretary of our Company’s Communist Youth League from August 2002 to January 2003. Since January 2003, she has been the secretary of the Communist Youth League of CEA Holding, as well as the secretary of the Communist Youth League of our Company. Ms. Yang graduated with a major in aviation electronics from the China Civil Aviation Academy and a major in Business Administration from Sunny Management Academy at Donghua University and she received a master degree in Business Administration. She is also a qualified engineer.

Mr. Liu Jiashun has served as a supervisor of our Company since June 2000. From 1993 to 1999 Mr. Liu was party secretary, deputy president and secretary of the disciplinary committee secretary of China Aviation Fuel Hainan Company, as well as chairman of the board and president of Hainan Nanyang Air Transport Co., Ltd. From 1997 to 1999 he was also in charge of fuel supply engineering at Haikou’s Meilan Airport and served as director of Meilan Airport Co., Ltd. and vice chairman of the board and president of Meilan Industrial Co., Ltd. From 1999 to 2000 he was deputy party secretary of China Aviation Fuel East China Company and he is currently deputy party secretary and secretary of the disciplinary committee of the East China branch of China Aviation Fuel Company. Mr. Liu received post-graduate education and has qualifications as a political work instructor.

B. Compensation

The aggregate amount of cash compensation paid by us to our Directors, supervisors and the senior management during 2007 for services performed as Directors, supervisors and officers or employees of our Company was approximately RMB2,402,000. In addition, Directors and supervisors who are also officers or employees of our Company receive certain other in-kind benefits which are provided to all of our employees. Our Company does not have any bonus or profit sharing plan or any stock option plan.

Details of the emoluments paid to our Directors, supervisors and senior management are as follows:

	2007
Name and Principal Position	Salaries and allowances		Bonus		Total
	RMB’000		RMB’000		RMB’000

Executive Directors
Li Fenghua*		—		—		—
Luo Chaogeng*		—		—		—
Cao Jainxiong*		—		—		—
Li Jun*		—		—		—
Luo Zhuping		187				187

Independent non-executive Directors
Hu Honggao		120		—		120
Peter Lok		117		—		117
Wu Baiwang		120		—		120
Zhou Ruijin		120		—		120
Xie Rong		120		—		120

Supervisors
Liu Jiangbo*		—		—		—
Yang Jie		144		—		144
Wang Taoying		169		—		169
Liu Jiashun		—		—		—

Vice executive Directors
Zhang Jianzhong		220		—		220
Li Yangmin		202		—		202
Fan Ru		676		—		676

Finance controller
Luo Weide		207		—		207

Total		2,402		—		2,402

Certain Directors of our Company received emoluments from CEA Holding, our parent company, part of which is in respect of their services to our Company and our subsidiaries. No apportionment has been made as it is impracticable to apportion this amount between their services to our Company and their services to CEA Holding.

During the year ended December 31, 2007, no Directors and supervisors waived their compensation.

C. Board Practices

All of our Directors and supervisors serve a term of three years or until such later date as their successors are elected or appointed. Directors and supervisors may serve consecutive terms. Two of the supervisors are employee representatives appointed by our employees, and the rest are appointed by the shareholders. The following table sets forth the number of years our Directors, executive officers and supervisors have held their positions and the expiration of their current term.

Name	Held Position Since	Expiration of Term

Li Fenghua	June 29, 2007	June 29, 2010
Li Jun	June 29,2007	June 29, 2010
Luo Chaogeng	June 29, 2007	June 29, 2010
Cao Jianxiong	June 29, 2007	June 29, 2010
Luo Zhuping	June 29, 2007	June 29, 2010
Hu Honggao	June 29, 2007	June 29, 2010
Peter Lok	June 29, 2007	June 29, 2010
Wu Baiwang	June 29, 2007	June 29, 2010
Zhou Ruijin	June 29, 2007	June 29, 2010
Xie Rong	June 29, 2007	June 29, 2010
Liu Jiangbo	June 29, 2007	June 29, 2010
Xu Zhao	June 29, 2007	June 29, 2010
Wang Taoying	June 29, 2007	June 29, 2010
Yang Jie	June 29, 2007	June 29, 2010
Liu Jiashun	June 29, 2007	June 29, 2010
Zhang Jianzhong	June 29, 2007	June 29, 2010
Li Yangmin	June 29, 2007	June 29, 2010
Fan Ru	June 29, 2007	June 29, 2010
Luo Weide	June 29, 2007	June 29, 2010

None of our Directors, supervisors or members of our senior management has entered into any agreement or reached any understanding with us requiring our Company to pay any benefits as a result of termination of their services.

Our Board of Directors established the audit committee in August 2000 in accordance with the listing rules of the Hong Kong Stock Exchange. On June 29, 2007, the fifth session of the Board of the Company held the first meeting for 2007 and elected Mr. Xie Rong, Mr. Hu Honggao and Mr. Zhou Ruijin as the members of the Audit Committee and appointed Mr. Xie Rong as the chairman of the Audit Committee. The audit committee is authorized to, among other things, examine our internal control system and review auditing procedures and financial reports with our auditors. Subject to the approval of the shareholders’ meeting, the audit committee of our Company is also directly responsible for the appointment, compensation, retention and oversight of our external auditors, including resolving disagreements between management and the auditor regarding financial reporting. The external auditors report directly to the audit committee. The audit committee holds at least four meetings each year. The audit committee has established procedures for the receipt, retention and treatment of complaints received by our Company regarding accounting, internal controls or auditing matters, and procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The audit committee has the authority to engage independent counsel and other advisors, as it determines necessary, to carry out its duties. Our Company provides appropriate funding, as determined by the audit committee, for payment of compensation to the external auditors, advisors employed by the audit committee, if any, and ordinary administrative expenses of the audit committee that are necessary or appropriate in carrying out its duties.

On June 29, 2007, the fifth session of the Board of the Company held the first meeting for 2007 and appointed Mr. Zhou Ruijin, Mr. Luo Chaogeng and Mr. Wu Baiwang as the remuneration and assessment committee of the Company (the “Remuneration and Assessment Committee”), and Mr. Zhou Ruijin was elected as the chairman of the Remuneration and Assessment Committee. The remuneration and assessment committee is authorized to review the performance of our Directors, supervisors and management as well as determine their annual compensation level. The remuneration and assessment committee shall submit to our Board of Directors or shareholders’ meeting for approval compensation plans and oversee the implementation of approved compensation plans. The remuneration and assessment committee may consult financial, legal or other outside professional firms in carrying out its duties. The remuneration and assessment committee shall meet once a year, within twenty days after the announcement of annual results.

D. Employees

Through arrangements with CEA Holding and others, we provide certain benefits to our employees, including housing, retirement benefits and hospital, maternity, disability and dependent medical care benefits. Our Company does not have any bonus or profit sharing plan or any stock option plan. See Notes 30 and 31 to our audited consolidated financial statements. Our employees are members of a labor association which represents employees with respect to labor disputes and certain other employee matters. We believe that we maintain good relations with our employees and with their labor association. The table below sets forth the number of our employees as of December 31, 2005, 2006 and 2007, respectively:

	As of December 31,
	2005		2006		2007

Pilots		2,154		2,696		2,873
Flight attendants		3,752		5,069		5,851
Maintenance personal		4,480		5,595		6,043
Sales and marketing		3,658		2,863		2,483
Other		15,257		22,169		23,227
Total		29,301		38,392		40,477

E. Share Ownership

See Item 6.A and Item 6.B above.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table sets forth certain information regarding ownership of our capital stock as of December 31, 2007 by all persons who were known to us to be the beneficial owners of 5% or more of our capital stock:

Title of Class	Identity of Person or Group		Amount Owned		Percent of Class			Percent of Total Shares

Domestic Shares		CEA Holding		2,904,,000,000		88	%		59.67	%
H Shares		HKSCC Nominees Limited ⁽¹⁾		1,544,484,799		98.57	%		31.73	%

(1)	As custodian of the Depositary for American Depositary Shares representing H Shares.

CEA Holding has held 59.67% of our issued and outstanding capital stock since its establishment in October 2002, and neither it nor HKSCC Nominees Limited has any voting rights different from those of other shareholders. We are not aware of any arrangement which may at a subsequent date result in a change of control of our Company.

As of December 31, 2007 and June 18, 2008, there were 1,566,950,000 H Shares issued and outstanding. As of December 31, 2007 and June 18, 2008, there were, respectively, 55 and 52 registered holders of American depositary receipts evidencing 1,496,150 and 1,281,898 ADSs. Since certain of the ADSs are held by nominees, the above number may not be representative of the actual number of U.S. beneficial holders of ADSs or the number of ADSs beneficially held by U.S. persons.

Our Company is currently a majority-owned subsidiary of CEA Holding. CEA Holding itself is a wholly state-owned enterprise under the administrative control of China State-owned Assets Supervision and Administration Commission, or SASAC. CEA Holding’s shareholding in our Company is in the form of ordinary domestic shares, through which it, under the supervision of the SASAC, enjoys shareholders’ rights and benefits on behalf of the PRC Government.

B. Related Party Transactions

Relationship with CEA Holding and Associated Companies

We enter into transactions from time to time with CEA Holding and its subsidiaries. For a description of such transactions, see Note 40 to our audited consolidated financial statements.

Related Business Transactions

As our Company and EA Group and its subsidiaries were a single group prior to the restructuring in 2002, certain arrangements among us have continued after the restructuring and the establishment of CEA Holding. Each of these arrangements is non-exclusive, although we do not currently intend to enter into any equivalent contracts with third parties.

Eastern Aviation Import and Export Corporation, or EAIEC, a 55% owned subsidiary of CEA Holding.

Our Company and EAIEC have entered into an import/export agency agreement dated May 12, 2005 to supersede our agreement dated January 7, 1997, regarding the import and export of aircraft-related accessories, machinery and equipment for a term of three years commencing from July 1, 1999. The agreement is subject to renewal. For the year ended December 31, 2007, the handling charges paid to EAIEC were approximately RMB35 million in total.

We have certain balances with EAIEC, which are unsecured, interest-free and have no fixed term of repayment. See Note 40(b) to our audited consolidated financial statements for more details.

On April 29, 2008, we entered into an agreement to renew our agreement dated May 12, 2005 regarding the import and export of aircraft-related accessories, machinery and equipment in substantially the same terms for an additional term of three years commencing from July 1, 2008.

Shanghai Eastern Aviation Advertising Service Co., Ltd., or Eastern Advertising, a 55% owned subsidiary of CEA Holding.

Our Company and Eastern Advertising have entered into an advertising service agreement dated May 12, 2005 to supersede our agreement dated December 30, 1996, regarding the provision of advertising services for a term of three years commencing from July 1, 2005. The agreement is subject to renewal. For the year ended December 31, 2007, the aggregate amount we paid to Eastern Advertising for advertising services was approximately RMB14 million .

On April 29, 2008, we entered into an agreement to renew our agreement dated May 12, 2005 regarding the provision of advertising services in substantially the same terms, for an additional term of three years commencing from July 1, 2008.

China Eastern Air Catering Investment Co., Ltd., or CEA Catering, a 55% subsidiary of CEA Holding. The remaining 45% is owned by our Company.

On May 12, 2005, our Company entered into certain catering service agreements with a number of subsidiaries of CEA Catering (including Shanghai Eastern Air Catering Co., Ltd.) regarding the provision of in-flight catering services (including the supply of in-flight meals and beverages, cutlery and tableware) and related storage and complementary services required in our Company’s daily airline operations and civil aviation business. For the year ended December 31, 2007, the aggregate amount we paid to the subsidiaries of CEA Catering for the supply of in-flight meals and other services was approximately RMB331 million.

On April 29, 2008, we entered into a service agreement with CEA Catering in substantially the same terms to supercede our agreements dated May 12, 2005. The agreement, regarding the provision of in-flight catering services (including the supply of in-flight meals and beverages, cutlery and tableware) and related storage and complementary services required in our Company’s daily airline operations and civil aviation business, is for a term of three years commencing from July 1, 2008.

Eastern Air Group Finance Co., Ltd., or Eastern Finance, which is 46.3% owned and controlled by CEA Holding and other subsidiaries of CEA Holding.

Our Company and Eastern Finance have entered into a financial services agreement dated May 12, 2005 to supersede our agreement with Eastern Finance dated January 8, 1997, regarding the provision of deposit services, loan and financing services and certain other financial services such as the provision of trust loans, financial guarantees and credit facilities and credit references for a term of three years commencing from July 1, 2005. The agreement is subject to renewal. Pursuant to this agreement, we may place deposits with, and obtain loans from, Eastern Finance. As of December 31, 2007, we had short-term deposits amounting to RMB408 million placed with Eastern Finance, which paid interest to us at 0.7% per annum. In addition, our Company had short-term loans of RMB260 million from Eastern Finance. During the year ended December 31, 2007, the weighted average interest rate on the loan was 5.3% per annum.

Pursuant to the financial services agreement, Eastern Finance shall deposit all moneys deposited by our Company under the agreement with commercial bank(s) in China, including, for example, Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Bank of Agriculture and Bank of Communications. Eastern Finance has also undertaken under the financial services agreement that all outstanding loans it provides to CEA Holding and its subsidiaries (other than our Company) will not at any time and from time to time exceed the aggregate amount of its equity capital, surplus reserves and deposits received from other parties.

On April 29, 2008, we entered into a financial services agreement to renew our agreement dated May 12, 2005 regarding the provision of deposit services, loan and financing services and certain other financial services such as the provision of trust loans, financial guarantees and credit facilities and credit references, in substantially the same terms, for an additional term of three years commencing from July 1, 2008. The new financial services agreement is subject to approval by independent shareholders at our upcoming Annual General Meeting scheduled for June 30, 2008.

TravelSky Technology Ltd., which is 33% owned by CEA Holding.

We pay ticket reservation service charges to TravelSky, which is 33% owned by CEA Holding, in connection with our use of its computer reservation system. For the year ended December 31, 2007, we paid ticket reservation service charges to TravelSky of approximately RMB241 million.

Shanghai Eastern Aviation Equipment Manufacturing Corporation, or SEAEMC, a wholly-owned subsidiary of CEA Holding.

Our Company and SEAEMC have entered into a service agreement dated May 12, 2005 to supersede our agreement dated December 31, 1996 regarding the provision of comprehensive services in relation to maintenance, repair and overhaul of aircraft and aviation equipment, and procurement of related equipment and materials required in our Company’s daily operations for a term of three years commencing from July 1, 2005. The agreement is subject to renewal. SEAEMC was established in 1996. SEAEMC’s predecessor was Shanghai Civil Aviation Maintenance and Engineering Company. For the year ended December 31, 2006, we paid RMB11 million to SEAEMC for the purchase by our Company of certain aviation equipment from SEAEMC .

On April 29, 2008, we entered into a service agreement to renew our agreement dated May 12, 2005, in substantially the same terms. The agreement regarding the provision of comprehensive services in relation to maintenance, repair and overhaul of aircraft and aviation equipment, and procurement of related equipment and materials required in our Company’s daily operations extends for an additional term of three years commencing from July 1, 2008.

Ticket Sales

On May 12, 2005, our Company entered into certain sales agency services agreements with several subsidiaries of CEA Holdings regarding the sales of our air tickets by such subsidiaries of CEA Holding as our sales agents and the provision of complementary services for a term of three years commencing from July 1, 2005. The agreement is subject to renewal. Under such agreements, the sales agents charge commissions at rates with reference to those prescribed by the CAAC and the International Aviation Transportation Association, as determined following arm’s length negotiations. Such commissions are payable monthly in arrears. The parties will perform an annual review of the then prevailing commission rate before the 31st of December in each calendar year, and agree on any required adjustments to such commission rate in respect of the next calendar year. For the year ended December 31, 2007, the aggregate amount of commissions we paid to those sales agents for the sales agency services was approximately RMB9 million.

On April 29, 2008, we entered into certain sales agency service agreements to renew our agreements dated May 12, 2005 regarding the sales of our air tickets by certain subsidiaries of CEA Holding as our sales agents and the provision of complementary services, in substantially the same terms, for an additional term of three years commencing from July 1, 2008.

Property Leases

Our Company and EA Group had entered into an office lease agreement dated January 7, 1997 in respect of office premises located at 2550 Hongqiao Road, Shanghai, China. The lease term is one year and renewable by the parties, subject to mutual agreement with respect to rental terms. The total rental payment is approximately RMB158,342 per month. In addition, our Company and EA Group had entered into a staff dormitory lease agreement dated December 31, 1996, pursuant to which EA Group had agreed to enter into lease arrangements with our employees for dormitories in Shanghai, Anhui Province, Shandong Province and Jiangxi Province. The term of the lease and the rental payments are set in accordance with Chinese regulations and the rate prescribed by the Shanghai Municipal Government. CEA Holding has assumed EA Group’s rights and liabilities under those lease agreements after its establishment.

On May 12, 2005, we entered into a property leasing agreement with CEA Holding, CEA Northwest and CEA Yunnan for a term of three years, subject to renewal of another three years. Pursuant to this property leasing agreement, we leased from CEA Holding, for our use in daily airlines and other business operations: (i) a maximum of altogether 33 land properties owned by CEA Holding through, and registered in the name of, CEA Northwest, covering an aggregate site area of approximately 692,539 square meters located primarily in Xi’an, Xianyang and Yongdeng, together with a total of 225 building properties and related construction, infrastructure and facilities occupying an aggregate floor area of approximately 269,148 square meters; and (ii) a maximum of altogether seven land properties owned by CEA Holding through, and registered in the name of, CEA Yunnan, covering an aggregate site area of approximately 420,768 square meters primarily located in Kunming, together with a total of 81 building properties and related construction, infrastructure and facilities occupying an aggregate floor area of approximately 457,722 square meters. Under the property leasing agreement, our Company shall pay annual rentals to CEA Holding. The rentals are payable half-yearly in advance, and are subject to review and adjustments provided that the adjustments shall not exceed the applicable inflation rates published by the relevant local PRC authorities. In 2007, we paid a rental of RMB55 million under this property leasing agreement.

On April 29, 2008, we entered into an agreement to renew the property leasing agreement dated May 12, 2005 for an additional term of three years commencing July 1, 2008. Pursuant to the agreement, we will renew our lease on all properties covered by the previous property leasing agreement entered into on May 12, 2005, except that where we previously leased 81 building properties and related construction, infrastructure and facilities, we will instead lease 77 building properties and related construction, infrastructure and facilities covering an aggregate floor area of approximately 452,949 square meters. In addition, CEA Holding will be the only counterparty in the property leasing renewal agreement. Under the property leasing renewal agreement, our Company will pay annual rentals of approximately RMB55.14 million. The rental payments will be payable half-yearly in advance, and are subject to review and adjustments provided that the adjustments shall not exceed the applicable inflation rates published by the relevant local PRC authorities. The property leasing renewal agreement is subject to approval by independent shareholders at our upcoming Annual General Meeting scheduled for June 30, 2008.

Guarantee by CEA Holding

As of December 31, 2007, certain unsecured long-term bank loans of the Group with an aggregate amount of RMB1,008 million were guaranteed by CEA Holding (see Note 29 to our audited consolidated financial statements).

Subscription Agreement with CEA Holding

Our Company and CEA Holding entered into a subscription agreement on November 9, 2007 for CEA Holding to subscribe in cash for 1,100,418,000 new H Shares, which would represent approximately 23% of our existing H shares, for an aggregate consideration of HK$4.2 million. The subscription agreement was part of a proposed investment by SIA and Temasek. See the section headed “Item 4. Information on the Company – History and Development of the Company”.

Disposal of interests in China Eastern Air Investment Company Limited

On November 16, 2007, our Company, CEA Holding and East China Care System Co., Ltd. entered into an equity transfer agreement regarding our interests in China Eastern Air Investment Company Limited. Our Company agreed to dispose our entire interest of 98.8% in China Eastern Air Investment Company Limited for the consideration of RMB461.9 million, while East China Care System Co., Ltd. also agreed to dispose of its entire 1.2% interest in China Eastern Air Investment Company Limited for the consideration of RMB5.7 million.

C. Interests of Experts & Counsel

Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

Financial Statements

You should read “Item 18. Financial Statements” for information regarding our audited consolidated financial statements and other financial information.

Legal Proceedings

We are involved in routine litigation and other proceedings in the ordinary course of our business. We do not believe that any of these proceedings are likely to be material to our business operations, financial condition or results of operations. In 2005, the family members of certain victims in the aircraft accident (the aircraft was then owned and operated by China Eastern Air Yunnan Company), which occurred in Baotou city in the Inner Mongolia Autonomous Region on November 21, 2004, sued, among other defendants, our Company in a U.S. court for compensation, the amount of which has not been determined. As of December 31, 2006, we had filed a motion to contest the claim in the U.S. court because we expressly did not assume the legal liability of such incident in our acquisition of certain selected assets relating to the aviation business of CEA Yunnan. On July 5, 2007, pursuant to several conditions with which our Company has complied, the Superior Court of the State of California ordered the action stayed on the grounds of forum non conveniens for the purpose of permitting proceedings in the PRC. Moreover, the Superior Court scheduled and held a status conference on December 10, 2007, and intends to schedule subsequent status conferences every six months until the litigation in the PRC is resolved or until the Superior Court determines otherwise. On February 20, 2008, the plaintiff filed a motion with the Superior Court of the State of California to lift the stay. The motion was denied by the Superior Court on May 6, 2008. We believe, based on professional advice, that it is unlikely that there will be any material adverse effect on our financial position.

Save for the above-mentioned, we were not involved in any other new material litigation in the period of this report.

Dividends and Dividend Policy

For the fiscal year ended December 31, 2004, our shareholder’s meeting approved the payment of a cash dividend of RMB0.02 per share. For the fiscal year ended December 31, 2005, our Board of Directors did not recommend any dividend payout. For the fiscal year ended December 31, 2006, our Board of Directors did not recommend any dividend payout due to our operating results in 2006. For the fiscal year ended December 31, 2007, our Board of Directors also did not recommend any dividend payout due to our total accumulated losses of RMB2,699 million in the year 2007. The balance of retained profits will be carried forward to next year. We will not convert funds from the common reserve to increase our share capital during this period. The declaration and payment of dividends for years following 2007 will depend upon our financial results, our shareholders’ interests, general business conditions and strategies, our capital requirements, contractual restrictions on the payment of dividends by us to our shareholders, and other factors our Directors may deem relevant. Holders of our H Shares will receive the equivalent amount of cash dividend as that declared in Renminbi, if any, based on the foreign exchange conversion rate published by the People’s Bank of China, or PBOC, on the date of the distribution of the cash dividend.

B. Significant Changes

Significant Post Financial Statements Events

The newly enacted Enterprise Income Tax Law, or EIT Law, became effective on January 1, 2008, and superseded the Income Tax Law for Foreign Invested Enterprises and Foreign Enterprises of the PRC and the Provisional Regulations on Enterprise Income Tax of the PRC. The EIT Law imposes a uniform income tax rate of 25% for domestic enterprises and foreign invested enterprises. Therefore, while we were subject to a 33% income tax rate prior to January 1, 2008, we have been subject to a lower tax rate of 25% starting from January 1, 2008. Although the State Council of the PRC promulgated the implementing rules of the EIT Law in December 2007, a number of detailed implementing rules are still in the process of promulgation and we are currently unable to fully and accurately evaluate its impact on us.

Item 9. The Offer and Listing

A. Offer and Listing Details

The principal trading market for our H Shares is the Hong Kong Stock Exchange. The ADSs, each representing 100 H Shares, have been issued by The Bank of New York as the Depositary and are listed on the New York Stock Exchange. Prior to our initial public offering and subsequent listings on the New York Stock Exchange and the Hong Kong Stock Exchange on February 4 and 5, 1997, respectively, there was no market for our H Shares or ADSs. Our publicly traded domestic shares, or A shares, have been listed on the Shanghai Stock Exchange since November 5, 1997.

The table below sets forth certain market information relating to our H Shares and ADSs in respect of the period from 2002 to June 18, 2008.

	Price Per H Share (HK$)				Price Per ADS (US$)
	High		Low		High		Low

2003		1.39		0.88		18.33		9.60
2004		1.85		1.28		23.22		17.03
2005		1.70		0.95		22.48		12.52
2006		1.70		0.95		22.48		12.52
First Quarter 2006		1.44		1.19		18.24		15.50
Second Quarter 2006		1.29		1.03		16.88		13.07
Third Quarter 2006		1.36		0.99		17.25		13.00
Fourth Quarter 2006		1.73		1.30		22.54		16.91
2007		1.73		1.42		22.54		18.65
First Quarter 2007		2.83		1.68		41.54		24.02
Second Quarter 2007		3.78		2.17		48.52		28.00
Third Quarter 2007		10.50		3.73		147.30		48.05
Fourth Quarter 2007		9.00		5.21		111.58		68.00
December 2007		8.18		6.00		107.00		76.73
January 2008		8.11		5.00		102.99		62.60
February 2008		5.92		4.90		74.25		62.50
March 2008		4.95		3.29		63.14		43.61
April 2008		4.12		2.81		53.19		36.45
May 2008		4.00		3.19		50.93		40.44
June 2008 (up to June 18, 2008)		3.56		2.68		45.45		34.20

B. Plan of Distribution

Not applicable.

C. Markets

Our H shares are listed for trading on the Hong Kong Stock Exchange (Code: 00670), our ADSs are listed for trading on the New York Stock Exchange under the symbol “CEA” and our A shares are listed for trading on the Shanghai Stock Exchange (Code: 600115).

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

Item 10. Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

The following is a brief summary of certain provisions of our Articles of Association, as amended. Such summary does not purport to be complete. For further information, you and your advisors should refer to the text of our Articles of Association, as amended, and to the texts of applicable laws and regulations.

A copy of the English translation of our Articles of Association, as amended on June 29, 2007, is attached as an exhibit to this Annual Report on Form 20-F. We also received shareholder approval at the January 9, 2008 extraordinary general meeting for proposed amendments to the Articles of Association that are conditional upon the completion of the Investor Subscription Agreement between SIA, Temasek and our Company and the completion of the CEA Holding Subscription Agreement between CEA Holding and our Company. As the completion of both the Investor Subscription Agreement between SIA, Temasek and our Company and the CEA Holding Subscription Agreement between CEA Holding and our Company has not yet occurred, we have not included the related proposed amendments in our current Articles of Association as they are not currently in effect.

Selected Summary of the Articles of Association

We are a joint stock limited company established in accordance with the "Company Law of the People's Republic of China" (the "Company Law"), the "State Council's Special Regulations Regarding the Issue of Shares Overseas and the Listing of Shares Overseas by Companies Limited by Share" (the "Special Regulations") and other relevant laws and regulations of the State. We were established by way of promotion with the approval under the document "Ti Gai Sheng" [1994] No.140 of the People's Republic of China's State Commission for Restructuring the Economic System. We are registered with and have obtained a business license from China's State Administration Bureau of Industry and Commerce on April 14, 1995. Our business license number is: 10001767-8. We changed our registration with Shanghai Administration for Industry and Commerce on October 18, 2002. The number of our Company’s business license is: Qi Gu Hu Zong Zi No. 032138.

We were incorporated in the People’s Republic of China for the purpose of providing the public with safe, punctual, comfortable, fast and convenient air transport services and other ancillary services, to enhance the cost-effectiveness of the services and to protect the lawful rights and interests of shareholders.

Board of Directors

The Board of Directors shall consist of eleven (11) directors, who are to be elected at the shareholders’ general meeting and will hold a term of office for three (3) years. At least one-third of the members of the Board of Directors shall be independent directors. The Directors are not required to hold shares of our Company.

Directors who are directly or indirectly materially interested in a contract, transaction or arrangement or proposed contract, transaction or arrangement with our Company (other than his contract of service with our Company) shall declare the nature and extent of his interests to the Board of Directors at the earliest opportunity, whether or not the contract, transaction or arrangement or proposal therefore is otherwise subject to the approval of the Board of Directors.

In accordance with our Articles, a director shall abstain from voting at a board meeting the purpose of which is to approve contracts, transactions or arrangements that such director or any of his or her associates (as defined in the relevant rules governing the listing of securities) has a material interest. Such director shall not be counted in the quorum for the relevant board meeting.

Unless the interested director discloses his interests in accordance with our Articles of Association and the contract, transaction or arrangement is approved by the Board of Directors at a meeting in which the interested director is not counted in the quorum and refrains from voting, a contract, transaction or arrangement in which that director is materially interested is voidable at the instance of our Company except as against a bona fide party thereto acting without notice of the breach of duty by the interested director. A director is also deemed to be interested in a contract, transaction or arrangement in which an associate of the director is interested.

Our Articles provide that our Company shall not in any manner pay taxes for or on behalf of a director or make directly or indirectly a loan to or provide any guarantee in connection with the making of a loan to a director of our Company or of our Company's holding company or any of their respective associates. However, the following transactions are not subject to such prohibition: (1) the provision by our Company of a loan or a guarantee of a loan to a company which is a subsidiary of our Company; (2) the provision by our Company of a loan or a guarantee in connection with the making of a loan or any other funds to any of its directors, administrative officers to meet expenditure incurred or to be incurred by him for the purposes of our Company or for the purpose of enabling him to perform his duties properly, in accordance with the terms of a service contract approved by the shareholders in general meeting; (3) our Company may make a loan to or provide a guarantee in connection with the making of a loan to any of the relevant directors or their respective associates in the ordinary course of its business on normal commercial terms, provided that the ordinary course of business of our Company includes the lending of money or the giving of guarantees.

Our Articles do not contain any requirements for (i) the directors’ power to vote compensation to themselves or any members of their body, in the absence of an independent quorum or (ii) the directors to retire by a specified age.

Description of the Shares

As of December 31, 2007, our share capital structure was as follows: 4,866,950,000 ordinary shares, of which (a) 2,904,000,000 A shares were issued upon the establishment of the Company and all subscribed for by the promoter of the Company, which represent 59.7% of our share capital, were held by Eastern Air Group Company; (b) 1,566,950,000 H shares, which represent 32.2% of our share capital, were issued to and purchased by foreign investors in an initial public offering; and (c) 396,000,000 A shares, which represent 8.1% of our share capital, were issued to investors in China.

Our ordinary shareholders shall enjoy the following rights:

(i)

the right to dividends and other distributions in proportion to the number of shares held;

(ii)

the right to attend or appoint a proxy to attend Shareholders’ general meetings and to vote thereat;

(iii)

the right of supervisory management over the Company’s business operations, and the right to present proposals or enquiries;

(iv)

the right to transfer shares in accordance with laws, administrative regulations and provisions of these Articles of Association;

(v)

the right to obtain relevant information in accordance with the provisions of these Articles of Association, including:

(1) the right to obtain a copy of these Articles of Association, subject to payment of the cost of such copy;

(2) the right to inspect and copy, subject to payment of a reasonable charge;

(a) all parts of the register of shareholders;

(b) personal particulars of each of the Company’s directors, supervisors, general manager, deputy general managers and other senior administrative officers, including:

(aa) present name and alias and any former name or alias;

(bb) principal address (residence);

(cc) nationality;

(dd) primary and all other part-time occupations and duties;

(ee) identification documents and their relevant numbers;

(d) reports showing the aggregate par value, quantity, highest and lowest price paid in respect of each class of shares repurchased by the Company since the end of the last accounting year and the aggregate amount paid by the Company for this purpose;

(e) minutes of Shareholders’ general meetings and the accountant’s report,

(vi)

in the event of the termination or liquidation of the Company, to participate in the distribution of surplus assets of the Company in accordance with the number of shares held;

(vii)

other rights conferred by laws, administrative regulations and these Articles of Association.

A shareholder (including a proxy), when voting at a Shareholders’ general meeting, may exercise such voting rights in accordance with the number of shares carrying the right to vote and each share shall have one vote. Resolutions of shareholders’ general meetings shall be divided into ordinary resolutions and special resolutions. To adopt an ordinary resolution, votes representing more than one half of the voting rights represented by the shareholders (including proxies) present at the meeting must be exercised in favor of the resolution in order for it to be passed. To adopt a special resolution, votes representing more than two-thirds of the voting rights represented by the shareholders (including proxies) present at the meeting must be exercised in favor of the resolution in order for it to be passed. Our ordinary shareholders are entitled to the right to dividends and other distributions in proportion to the number of shares held, and they are not liable for making any further contribution to the share capital other than as agreed by the subscriber of the relevant shares on subscription. Our Articles provide that a controlling shareholder (as defined in the Articles) shall not approve certain matters which will be prejudicial to the interests of all or some of other shareholders by exercising his/her voting rights.

The Listing Agreement between us and the Hong Kong Stock Exchange further provides that we may not permit amendments to certain sections of the Articles of Association subject to the Mandatory Provisions for the Articles of Association of Companies Listed Overseas promulgated by the State Council Securities Commission and the State Restructuring Commission on August 27, 1994 (the “Mandatory Provisions”). These sections include provisions relating to (i) varying the rights of existing classes of shares; (ii) voting rights; (iii) our power to purchase our own shares; (iv) rights of minority shareholders; and (v) procedures upon liquidation. In addition, certain amendments to the Articles of Association require the approval and assent of relevant PRC authorities.

Shareholders’ Meetings

Shareholders’ general meetings are divided into annual general meetings and extraordinary general meetings. Shareholders’ general meetings shall be convened by the Board of Directors. Annual general meetings are held once every year and within six (6) months from the end of the preceding financial year. The Board of Directors shall convene an extraordinary general meeting within two (2) months of the occurrence of any one of the following events:

(i)

where the number of Directors is less than the number of Directors required by the Company Law or two-thirds of the number of Directors specified in these Articles of Association;

(ii)

where the unrecovered losses of the Company amount to one-third of the total amount of its share capital;

(iii)

where shareholder(s) holding 10 per cent or more of the Company’s issued and outstanding shares carrying voting rights request(s) in writing the convening of an extraordinary general meeting;

(iv)

when deemed necessary by the Board of Directors or as requested by the supervisory committee.

When we convene a shareholders’ general meeting, written notice of the meeting shall be given forty five (45) days before the date of the meeting to notify all of the shareholders in the share register of the matters to be considered and the date and place of the meeting. A shareholder who intends to attend the meeting shall deliver his written reply concerning the attendance of the meeting to us twenty (20) days before the date of the meeting. When we convene a shareholders’ annual general meeting, shareholders holding 5 per cent or more of the total voting shares of the Company shall have the right to propose new motions in writing, and we shall place those matters in the proposed motions within the scope of functions and powers of the Shareholders’ general meeting on the agenda.

Shareholders’ Rights

Set forth below is certain information relating to the H Shares, including a brief summary of certain provisions of the Articles, and selected laws and regulations applicable to us.

Sources of Shareholders’ Rights

The rights and obligations of holders of H Shares and other provisions relating to shareholder protection are principally provided in the Articles of Association and the PRC Company Law. The Articles of Association incorporate mandatory provisions in accordance with the Mandatory Provisions. We are further subject to management ordinances applicable to the listed companies in Hong Kong SAR and the United States, as our H Shares are listed on the Hong Kong Stock Exchange and the New York Stock Exchange (in the form of ADSs).

In addition, for so long as the H Shares are listed on The Hong Kong Stock Exchange, we are subject to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “HKSE Rules”), the Securities and Futures Ordinance of Hong Kong (the “SFO”) and the Hong Kong Code on Takeovers and Mergers and Share Repurchases.

Unless otherwise specified, all rights, obligations and protections discussed below derived from the Articles of Association, the PRC Company Law and abovementioned laws and regulations.

Significant Differences in the H Shares and A Shares

Holders of H Shares and A Shares, with minor exceptions, are entitled to the same economic and voting rights. The Articles of Association provide that dividends or other payments payable to H Share holders shall be declared and calculated in Renminbi and paid in Renminbi, while those to A Share holders shall be declared and calculated in Renminbi and paid in the local currency at the place where such A Shares are listed ( if there is more than one place of listing, then the principal place of listing as determined by the Board of Directors). In addition, the H Shares can only be traded by investors of Taiwan, Hong Kong, Macau and any country other than the PRC, while A Shares may be traded only by investors within the territory of the PRC.

Restrictions on Transferability and the Share Register

H Shares may be traded only among investors who are not PRC persons, and may not be sold to PRC investors. There are no restrictions on the ability of investors who are not PRC residents to hold H Shares.

Pursuant to the Articles of Association, we may refuse to register a transfer of H Shares unless

(1)

a fee (for each instrument of transfer) of two dollars and fifty cents Hong Kong dollars or any higher fee as agreed by the Stock Exchange has been paid to us for registration of any transfer or any other document which is related to or will affect ownership of or change of ownership of the shares;

(2)

the instrument of transfer only involves H Shares;

(3)

the stamp duty chargeable on the instrument of transfer has been paid;

(4)

the relevant share certificate and upon the reasonable request of the Board of Directors any evidence in relation to the right of the transferor to transfer the shares have been submitted;

(5)

if it is intended to transfer the shares to joint owners, then the maximum number of joint owners shall not exceed four (4);

(6)

we do not have any lien on the relevant shares.

If we refuse to register any transfer of shares, we shall within two months of the formal application for the transfer provide the transferor and the transferee with a notice of refusal to register such transfer. No changes in the shareholders' register due to the transfer of shares may be made within thirty (30) days before the date of a Shareholders' general meeting or within five (5) days before the record date established for the purpose of distributing a dividend.

Merger and Acquisitions

In the event of the merger or division of our Company, a plan shall be presented by our Board of Directors and shall be approved in accordance with the procedures stipulated in our Articles of Association and then the relevant examining and approving formalities shall be processed as required by law. A shareholder who objects to the plan of merger or division shall have the right to demand that we or the shareholders who consent to the plan of merger or division acquire such dissenting shareholders’ shareholding at a fair price. The contents of the resolution of merger or division of our Company shall be made into special documents for shareholders’ inspection.

Repurchase of Shares

We may, with approval according to the procedures provided in these Articles of Association and subject to the approval of the relevant governing authority of the State, repurchase its issued shares under the following circumstances:

(i) cancellation of shares for the reduction of its capital;

(ii) merging with another company that holds shares in our Company;

(iii) other circumstances permitted by relevant laws and administrative regulations.

We shall not repurchase its issued shares except under the circumstances stated above.

We may, with the approval of the relevant State governing authority for repurchasing its shares, conduct the repurchase in one of the following ways:

(i) making a pro rata general offer of repurchase to all our shareholders;

(ii) repurchasing shares through public dealing on a stock exchange;

(iii) repurchase by an off-market agreement outside a stock exchange.

Interested Shareholders

Articles 88 and 89 of our Articles of Associations provide the following:

Article 88 :

The following circumstances shall be deemed to be a variation or abrogation of the class rights of a class:

(i) to increase or decrease the number of shares of such class, or increase or decrease the number of shares of a class having voting or equity rights or privileges equal or superior to those of the shares of that class;

(ii) to effect an exchange of all or part of the shares of such class into shares of another class or to effect an exchange or create a right of exchange of all or part of the shares of another class into the shares of such class;

(iii) to remove or reduce rights to accrued dividends or rights to cumulative dividends attached to shares of such class;

(iv) to reduce or remove a dividend preference or a liquidation preference attached to shares of such class;

(v) to add, remove or reduce conversion privileges, options, voting rights, transfer or pre-emptive rights, or rights to acquire securities of the Company attached to shares of such class;

(vi) to remove or reduce rights to receive payment payable by the Company in particular currencies attached to shares of such class;

(vii) to create a new class of shares having voting or equity rights or privileges equal or superior to those of the shares of such class;

(viii) to restrict the transfer or ownership of the shares of such class or add to such restrictions;

(ix) to allot and issue rights to subscribe for, or convert into, shares in the Company of such class or another class;

(x) to increase the rights or privileges of shares of another class;

(xi) to restructure the Company where the proposed restructuring will result in different classes of shareholders bearing a disproportionate burden of such proposed restructuring;

(xii) to vary or abrogate the provisions of this Chapter.

Article 89:

Shareholders of the affected class, whether or not otherwise having the right to vote at Shareholders’ general meetings, shall nevertheless have the right to vote at class meetings in respect of matters concerning sub-paragraphs (2) to (8), (11) and (12) of Article 88, but interested shareholder(s) shall not be entitled to vote at class meetings.

The meaning of “interested shareholder(s)” as mentioned in the preceding paragraph is:

(i) in the case of a repurchase of shares by offers to all shareholders or public dealing on a stock exchange under Article 30, a “controlling shareholder” within the meaning of Article 33;

(ii) in the case of a repurchase of shares by an off-market contract under Article 30, a holder of the shares to which the proposed contract relates;

(iii) in the case of a restructuring of the Company, a shareholder within a class who bears less than a proportionate obligation imposed on that class under the proposed restructuring or who has an interest in the proposed restructuring different from the interest of shareholders of that class .

Ownership Threshold

There are no ownership thresholds above which shareholder ownership is required to be disclosed.

Changes in Capital

Article 78(1) provides that any increase or reduction in share capital shall be resolved by a special resolution at a shareholders’ general meeting.

Changes in Registered Capital

The Company may reduce its registered share capital. It shall do so in accordance with the Company Law, any other relevant regulatory provisions and these Articles of Association.

Recent Amendments to the Articles of Association

On June 29, 2007, our shareholders approved an amendment to Article 21 of the Articles of Association. The Articles were amended by adding the following new paragraph after the first paragraph of Article 21 :

“On 18th December, 2006, the share reform plan of the Company was approved in the relevant shareholders’ meeting of the A share market. Upon the implementation of the share reform, the total share capital of the Company remained unchanged and still comprised 4,866,950,000 shares, of which 2,904,000,000 A shares, representing 59.67% of the total share capital of the Company, were held by China Eastern Air Holding Company. The 1,566,950,000 shares, representing 32.20% of the total share capital of the Company, were overseas listed H shares, and the 396,000,000 shares, representing 8.13% of the total share capital of the Company, were domestic listed A shares.”

C. Material Contracts

For a summary of any material contracts entered into by our Company or any of its consolidated subsidiaries outside of the ordinary course of business during the last two years, see “Item 4. Information on the Company”, “Item 5. Operating and Financial Review and Prospects” and “Item 7. Major Shareholders and Related Party Transactions”.

In addition, we entered into the following agreements to purchase aircraft, which are filed with this Annual Report as exhibits:

an amendment to an aircraft purchase agreement, dated as of April 21, 2005, between our Company and Airbus SAS regarding the purchase of 15 Airbus A320 series aircraft;

an aircraft purchase agreement, dated as of August 8, 2005, between our Company and The Boeing Company regarding the purchase of 15 Boeing 787 aircraft (with engines);

an aircraft purchase agreement, dated as of December 20, 2005, as amended by a supplemental agreement dated as of April 10, 2006, between our Company and The Boeing Company regarding the purchase of 20 Boeing 737 NG series aircraft (with engines);

an amendment to an aircraft purchase agreement, dated as of June 26, 2006, between our Company and Airbus SAS regarding the purchase of 30 Airbus A320 aircraft (with engines); and

an aircraft purchase agreement, dated January 30, 2008, between our Company and Boeing regarding the purchase of 30 737 NG aircraft (with engines).

D. Exchange Controls

The Renminbi is not currently a freely convertible currency. SAFE, under the authority of PBOC, controls the conversion of Renminbi into foreign currency. Prior to January 1, 1994, Renminbi could be converted to foreign currency through the Bank of China or other authorized institutions at official rates fixed daily by SAFE. Renminbi could also be converted at swap centers open to Chinese enterprises and foreign invested enterprises, or FIEs, subject to SAFE approval of each foreign currency trade, at exchange rates negotiated by the parties for each transaction. Effective January 1, 1994, a unitary exchange rate system was introduced in China, replacing the dual-rate system previously in effect. In connection with the creation of a unitary exchange rate, the PRC Government announced the establishment of an inter-bank foreign exchange market, the China Foreign Exchange Trading System, or CFETS, and the phasing out of the swap centers. Effective December 1, 1998, the swap centers were abolished by the PRC Government.

On July 21, 2005, the PRC Government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in a significant appreciation of the Renminbi against the U.S. dollar. While the international reaction to Renminbi revaluation has generally been positive, there remains significant international pressure on the PRC Government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of Renminbi against the U.S. dollar.

In general, under existing foreign exchange regulations, domestic enterprises operating in China must price and sell their goods and services in China in Renminbi. Any foreign exchange received by such enterprises must be sold to authorized foreign exchange banks in China. A significant portion of our revenue and operating expenses are denominated in Renminbi, while a portion of our revenue, capital expenditures and debts are denominated in U.S. dollars and other foreign currencies. Renminbi is currently freely convertible under the current account, which includes dividends, trade and service-related foreign currency transactions, but not under the capital account, which includes foreign direct investment, unless the prior approval of the SAFE, is obtained. As a foreign investment enterprise approved by the MOC, we can purchase foreign currency without the approval of SAFE for settlement of current account transactions, including payment of dividends, by providing commercial documents evidencing these transactions. We can also retain foreign exchange in our current accounts, subject to a maximum amount approved by SAFE, to satisfy foreign currency liabilities or to pay dividends. However, the relevant PRC Government authorities may limit or eliminate our ability to purchase and retain foreign currencies in the future. Foreign currency transactions under the capital account are still subject to limitations and require approvals from SAFE. This may affect our ability to obtain foreign exchange through debt or equity financing, including by means of loans or capital contributions. We cannot assure you that we will be able to obtain sufficient foreign exchange to pay dividends or satisfy our foreign exchange liabilities.

E. Taxation

The taxation of income and capital gains of holders of H Shares or ADSs is subject to the laws and practices of China and of jurisdictions in which holders of H Shares or ADSs are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions is based on current law and practice, is subject to change and does not constitute legal or tax advice. The discussion does not deal with all possible tax consequences relating to an investment in the H Shares or ADSs. In particular, the discussion does not address the tax consequences under state, local and other laws, such as non-U.S. federal laws. Accordingly, you should consult your own tax adviser regarding the tax consequences of an investment in the H Shares and ADSs. The discussion is based upon laws and relevant interpretations in effect as of the date of this Annual Report, all of which are subject to change.

Taxation — Hong Kong

The following discussion summarizes the material Hong Kong tax provisions relating to the ownership of H shares or ADSs purchased in connection with the global offering and held by you.

Dividends

Under current Hong Kong Inland Revenue Department practice, no Hong Kong tax is payable by the recipient in respect of dividends paid by us.

Taxation of Capital Gains

No Hong Kong tax is imposed on capital gains arising from the sale of property (such as H shares) acquired and held as investment assets. However, if a person carries on a trade, profession or business in Hong Kong (e.g., trading and dealing in securities) and derives trading gains from that trade, profession or business in or from Hong Kong, Hong Kong profits tax will be payable. Gains from sales of H shares effected on or off the Hong Kong Stock Exchange are considered to derive from or arise in Hong Kong for this purpose. Hong Kong profits tax is currently charged at the rate of 16.5% for corporations and at the rate of 15% for individuals.

No Hong Kong tax liability will arise on capital or trading gains arising from the sale of ADSs where the purchase and sale is effected outside Hong Kong, e.g. on the NYSE.

Hong Kong Stamp Duty

Hong Kong stamp duty is payable by each of the seller and the purchaser for every sold note and every bought note created for every sale and purchase of the H shares. Stamp duty is charged at the total rate of 0.2% of the value of the H shares transferred (the buyer and seller each paying 0.1% of such stamp duty). In addition, a fixed duty of HK$5 is currently payable on an instrument of transfer of H shares. If one of the parties to a sale is a non-resident of Hong Kong and does not pay the required stamp duty, the stamp duty not paid will be assessed on the instrument of transfer (if any), and the transferee will be liable for payment of such stamp duty.

If the withdrawal of H shares when ADSs are surrendered or the issuance of ADSs when H shares are deposited results in a change of beneficial ownership in the H shares under Hong Kong law, Hong Kong stamp duty at the rate described above for sale and purchase transaction will apply. The issuance of ADSs for deposited H shares issued directly to the depositary or for the account of the depositary should not lead to a Hong Kong stamp duty liability. Holders of the ADSs are not liable for the Hong Kong stamp duty on transfers of ADSs outside of Hong Kong so long as the transfers do not result in a change of beneficial interest in the H shares under Hong Kong law.

Hong Kong Estate Duty

Hong Kong estate duty was abolished with respect to persons passing away on or after February 11, 2006.

Taxation — China

The following is a general summary of certain Chinese tax consequences of the acquisition, ownership and disposition of the H Shares and ADSs. This summary does not purport to address all material tax consequences of the ownership of Shares or ADSs, and does not take into account the specific circumstances of any particular investors. This summary is based on the tax laws of China as in effect on the date of this Annual Report, as well as on the U.S.-China Treaty, all of which are subject to change (or changes in interpretation), possibly with retroactive effect.

In general, and taking into account the earlier assumptions, for Chinese tax purposes, holders of ADRs evidencing ADSs will be treated as the owners of the H Shares represented by those ADSs, and exchanges of H Shares for ADSs, and ADSs for H Shares, will not be subject to Chinese tax.

Taxation of Dividends by China

Individual Investors

The Provisional Regulations of China Concerning Questions of Taxation on Enterprises Experimenting with the Share System, or the Provisional Regulations, provide that dividends from Chinese companies are ordinarily subject to a Chinese withholding tax levied at a flat rate of 20%. However, the Chinese State Tax Bureau issued, on July 21, 1993, a Notice Concerning the Taxation of Gains on Transfer and Dividends from Shares (Equities) Received by Foreign Investment Enterprises, Foreign Enterprises and Foreign Individuals, or the Tax Notice, which provides that dividends from a Chinese company on shares listed on an overseas stock exchange, or Overseas Shares, such as H Shares (including H Shares represented by ADSs), would not be subject to Chinese withholding tax. The relevant tax authority has not collected withholding tax on dividend payments on Overseas Shares.

Amendments to the individual Income Tax Law of the PRC, or the Amendments, were promulgated on October 31, 1993 and became effective on January 1, 1994. The Amendments provide that any provisions of prior administrative regulations concerning individual income tax which contradict the Amendments are superseded by the Amendments. The Amendments and the amended Individual Income Tax Law can be interpreted to mean that foreign individuals are subject to a withholding tax on dividends received from a Chinese company at a rate of 20% unless such income is specifically exempted from individual income tax by the financial authority of the State Council. However, in a letter dated July 26, 1994 to the State Commission for Restructuring the Economic System, the State Securities Commission and the China Securities Regulatory Commission, the State Tax Bureau confirmed the temporary tax exemption set forth in the Tax Notice for dividends received from a Chinese company listed overseas. In the event this letter is withdrawn, a 20% tax may be withheld on dividends in accordance with the Provisional Regulations, the Amendments, and the Individual Income Tax law of China. Such withholding tax may be reduced pursuant to an applicable double taxation treaty.

Enterprises

Under the newly enacted PRC Enterprise Income Tax Law, or the EIT Law, and the implementation regulations to the EIT Law, effective January 1, 2008, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are “non-resident enterprises”, which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business. The rate could be reduced or eliminated pursuant to an applicable double taxation treaty.

Tax Treaties

Non-Chinese investors resident in countries which have entered into double-taxation treaties with China may be entitled to a reduction of the withholding tax imposed on the payment of dividends to non-Chinese investors of our Company. China currently has double-taxation treaties with a number of other countries, including Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States.

Under the U.S.-China Treaty, China may tax a dividend paid by our Company to a U.S. holder of H Shares or ADSs only up to a maximum of 10% of the gross amount of such dividend.

Taxation of Capital Gains by China

Individual Investors

The Tax Notice provides that gains realized upon the sale of Overseas Shares are not subject to taxes on capital gains. Although the Ministry of Finance has been empowered to collect a tax of 20% on gains derived from the sale of equity shares, a joint notice issued in February 1996 by the Ministry of Finance and the State Tax Bureau indicated that no capital gains tax would be imposed on gains from the sale of shares until the Ministry of Finance and the State Tax Bureau promulgate new rules. Therefore, holders of H Shares or ADSs have not been subject to taxation on gains realized upon the sale or disposition of such shares currently. However, holders of H Shares or ADSs could become subject to a 20% capital gains tax in the future, unless reduced or eliminated pursuant to an applicable double taxation treaty.

Under the U.S.-China Treaty, China may only tax gains from the sale or disposition by a U.S. holder of H Shares or ADSs representing an interest in the company of 25% or more.

Enterprises

Under the EIT Law and the implementation regulations to the EIT Law, gains realized upon the sale of Overseas Shares by “non-resident enterprises” may be subject to PRC taxation at the rate of 10% (or lower treaty rate).

Chinese Stamp Tax

Chinese stamp tax imposed on the transfer of shares of Chinese publicly traded companies under the Share System Tax Regulations should not apply to the acquisition or disposition by non-Chinese investors of H Shares or ADSs outside of China by virtue of the Provisional Regulations of The People’s Republic of China Concerning Stamp Tax, which provides that Chinese stamp tax is imposed only on documents executed or received within China or that should be considered as having been executed or received within China.

United States Federal Income Taxation

You should consult your own tax advisor regarding the United States federal, state and local and other tax consequences of acquiring, owning and disposing of H shares or ADSs in your particular circumstances.

United States Federal Income Taxation

This section describes the material United States federal income tax consequences of the ownership and disposition of H shares or ADSs. This section applies to you only if you are a U.S. holder, as defined below, and you hold your H shares or ADSs as capital assets for United States federal income tax purposes. This section does not address all of the tax consequences relating to the purchase, ownership and disposition of the H shares or ADSs, and does not apply to you if you are a member of a special class of holders subject to special rules, including:

a dealer in securities;

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

a partnership or other entity treated as a partnership for U.S. federal income tax purposes;

a tax-exempt organization;

a bank, financial institution, or insurance company;

a real estate investment trust, a regulated investment company, or a grantor trust;

a person liable for alternative minimum tax;

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

a person who receives the H shares or ADSs as compensation for services;

certain U.S. expatriates;

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

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

Moreover, this description does not address United States federal estate and gift taxes or any state or local tax consequences of the acquisition, ownership and disposition of the H shares or ADSs.

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

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

an individual citizen or resident of the United States;

a corporation or other entity treated as a corporation for United States federal income tax purposes created or organized under the laws of the United States or any political subdivision thereof;

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

a trust

–

subject to the primary supervision of a United States court and the control of one or more United States persons; or

–

that has elected to be treated as a United States person under applicable United States Treasury regulations.

If a partnership (including any entity treated as a partnership for United States federal tax purposes) is a beneficial owner of the H shares or ADSs, the treatment of the partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. If an investor is a partner in a partnership that holds H shares or ADSs, such investor should consult its tax advisor.

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

Taxation of Dividends

Subject to the discussions below under “-PFIC Rules,” the gross amount of any distribution (without reduction for any Chinese tax withheld) we make on the H shares or ADSs out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) will be includible in your gross income as ordinary dividend income when the distribution is actually or constructively received by you, or by the depositary in the case of ADSs. Distributions that exceed our current and accumulated earnings and profits will be treated as a return of capital to you to the extent of your basis in the H shares or ADSs and thereafter as capital gain. We, however, may not calculate earnings and profits in accordance with U.S. tax principles. In this case, all distributions by us to U.S. Holders will generally be treated as dividends. Any dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from United States corporations. The amount of any distribution of property other than cash will be the fair market value of such property on the date of such distribution.

Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual, trust or estate prior to January 1, 2011 with respect to the H shares or ADSs will be subject to taxation at a maximum rate of 15% if the dividends are “qualified dividends.” Dividends paid on H shares or ADSs will be treated as qualified dividends if either (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the Internal Revenue Service, or IRS, has approved for the purposes of the qualified dividend rules, or (ii) the dividends are with respect to ADSs readily tradable on a U.S. securities market, provided that we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company (a “PFIC”). The Agreement Between the Government of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income (the “Treaty”) has been approved for the purposes of the qualified dividend rules, and we expect to qualify for benefits under the Treaty. We are considered a qualified foreign corporation with respect to the ADSs because our ADSs are listed on the New York Stock Exchange. Finally, based on our audited financial statements and relevant market data, we believe that we did not satisfy the definition for PFIC status for U.S. federal income tax purposes with respect to our 2007 taxable year. In addition, based on our audited financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market data, we do not anticipate becoming a PFIC in our 2008 taxable year or any future year. However, our PFIC status in future years will depend on the composition of our income and assets (which for this purpose depends in part on the market value of the H shares or ADSs) in those years. See the discussion of the PFIC rules below.

The U.S. Treasury has announced its intention to promulgate rules pursuant to which holders of common stock and intermediaries through whom such stock is held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends. Because such procedures have not yet been issued, it is not clear whether we will be able to comply with them. Holders of H shares or ADSs should consult their own tax advisers regarding the availability of the reduced dividend tax rate in light of their own particular circumstances.

If we make a distribution paid in Hong Kong dollars (or other foreign currency), you will be considered to receive the U.S. dollar value of the distribution determined at the spot Hong Kong dollar (or such other foreign currency)/U.S. dollar rate on the date such distribution is received by you or by the depositary, regardless of whether you or the depositary convert the distribution into U.S. dollars. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in your income to the date you or the depositary convert the distribution into U.S. dollars will be treated as ordinary income or loss from U.S. sources.

Subject to various limitations, any Chinese tax withheld from distributions in accordance with the Treaty will be deductible or creditable against your United States federal income tax liability. Dividends paid by us generally will constitute income from sources outside the United States for U.S. foreign tax credit limitation purposes and will be categorized as “passive income” or, in the case of certain U.S. Holders as “general category income” for U.S. foreign tax credit purposes.

In the event we are required to withhold PRC income tax on dividends paid to U.S. Holders on the H Shares or ADSs (see discussion under “Taxation — China”), you may be able to claim a reduced 10% rate of PRC withholding tax if you are eligible for the benefits under the Treaty. You should consult your own tax advisor about the eligibility for reduction of PRC withholding tax.

You may not be able to claim a foreign tax credit (and instead may claim a deduction) for non-United States taxes imposed on dividends paid on the H Shares or ADSs if you (i) have held the H shares or ADSs for less than a specified minimum period during which you are not protected from risk of loss with respect to such shares, (ii) are obligated to make payments related to the dividends (for example, pursuant to a short sale) or (iii) hold the H shares or ADSs in an arrangement in which your expected economic return, after non-United States taxes, is insubstantial. The rules relating to the foreign tax credit are complex. You should consult your own tax advisors regarding the effect of these rules in your particular circumstances.

Taxation of Capital Gains

Subject to the discussions below under “-PFIC Rules,” upon a sale, exchange or other disposition of the H shares or ADSs, you will generally recognize capital gain or loss for United States federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized and your tax basis, determined in U.S. dollars, in such H shares or ADSs. Any gain or loss will generally be United States source gain or loss for foreign tax credit limitation purposes and as a result of the U.S. foreign tax credit limitation, foreign taxes, if any, imposed upon capital gains in respect of H shares or ADSs may not be currently creditable. Capital gain of certain non-corporate U.S. holders, including individuals, is generally taxed at a maximum rate of 15 percent where the property has been held more than one year. Your ability to deduct capital losses is subject to significant limitations.

If you are paid in a currency other than U.S. dollars, any gain or loss resulting from currency exchange fluctuations during the period from the date of the payment resulting from sale, exchange or other disposition is made to the date you convert the payment into U.S. dollars will be treated as United States source ordinary income or loss.

PFIC Rules

In general, a foreign corporation is a PFIC for any taxable year in which, after applying relevant look-through rules with respect to the income and assets of subsidiaries:

75% or more of its gross income consists of passive income, such as dividends, interest, rents, royalties, and gains from the sale of assets that give rise to such income; or

50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income.

We believe that we will not meet either of the PFIC tests in the current or subsequent taxable years and therefore will not be treated as a PFIC for such periods. However, because the determination of the PFIC status is a factual determination that must be made at the close of each taxable year, there can be no assurance that we will not be a PFIC in the current or subsequent taxable years.

If we were a PFIC in any taxable year that you held the H shares or ADSs, you generally would be subject to special rules with respect to “excess distributions” made by us on the H shares or ADSs and with respect to gain from your disposition of the H shares or ADSs. An “excess distribution” generally is defined as the excess of the distributions you receive with respect to the H shares or ADSs in any taxable year over 125% of the average annual distributions you have received from us during the shorter of the three preceding years, or your holding period for the H shares or ADSs. Generally, you would be required to allocate any excess distribution or gain from the disposition of the H shares or ADSs rateably over your holding period for the H shares or ADSs. The portion of the excess distribution or gain allocated to a prior taxable year, other than a year prior to the first year in which we became a PFIC, would be taxed at the highest United States federal income tax rate on ordinary income in effect for such taxable year, and you would be subject to an interest charge on the resulting tax liability, determined as if the tax liability had been due with respect to such particular taxable years. The portion of the excess distribution or gain that is not allocated to prior taxable years, together with the portion allocated to the years prior to the first year in which we became a PFIC, would be included in your gross income for the taxable year of the excess distribution or disposition and taxed as ordinary income.

The foregoing rules with respect to excess distributions and dispositions may be avoided or reduced if you are eligible for and timely make a valid “mark-to-market” election. If your H shares or ADSs were treated as shares regularly traded on a “qualified exchange” for United States federal income tax purposes and a valid mark-to-market election was made, in calculating your taxable income for each taxable year you generally would be required to take into account as ordinary income or loss the difference, if any, between the fair market value and the adjusted tax basis of your H shares or ADSs at the end of your taxable year. However, the amount of loss you would be allowed is limited to the extent of the net amount of previously included income as a result of the mark-to-market election. The New York Stock Exchange in which the ADSs will be traded is a qualified exchange for United States federal income tax purposes.

Alternatively, a timely election to treat us as a qualified electing fund under Section 1295 of the Code could be made to avoid the foregoing rules with respect to excess distributions and dispositions. You should be aware, however, that if we become a PFIC, we do not intend to satisfy record keeping requirements that would permit you to make a qualified electing fund election.

If you own the H shares or ADSs during any year that we are a PFIC, you must file IRS Form 8621. We encourage you to consult your own tax advisor concerning the United States federal income tax consequences of holding the H shares or ADSs that would arise if we were considered a PFIC.

Backup Withholding and Information Reporting

In general, information reporting requirements will apply to dividends in respect of the H shares or ADSs or the proceeds of the sale, exchange, or redemption of the H shares or ADSs paid within the United States, and in some cases, outside of the United States, other than to various exempt recipients, including corporations. In addition, you may, under some circumstances, be subject to “backup withholding” with respect to dividends paid on the H shares or ADSs or the proceeds of any sale, exchange or transfer of the H shares or ADSs, unless you

are a corporation or fall within various other exempt categories, and, when required, demonstrate this fact; or

provide a correct taxpayer identification number on a properly completed IRS Form W-9 or a substitute form, certify that you are exempt from backup withholding and otherwise comply with applicable requirements of the backup withholding rules.

Any amount withheld under the backup withholding rules generally will be creditable against your United States federal income tax liability provided that you furnish the required information to the IRS in a timely manner. If you do not provide a correct taxpayer identification number you may be subject to penalties imposed by the IRS.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

You may read and copy documents referred to in this Annual Report on Form 20-F that have been filed with the U.S. Securities and Exchange Commission at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC.

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

I. Subsidiary Information

Not applicable.

J. Comparison of NYSE Corporate Governance Rules and PRC Corporate Governance Rules for Listed Companies

Under the amended Corporate Governance Rules of NYSE, foreign issuers (including our Company) listed on the NYSE are required to disclose a summary of the significant differences between their domestic governance rules and NYSE corporate governance rules that would apply to a U.S. domestic issuer. We have posted a description of such differences under the section entitled “Report of Directors” of our 2007 Hong Kong Annual Report, which can be accessed through the following link on our website:

http://www.ce-air.com/upload/zh_CN/eastern/investor/finance/PDF1209446086066.pdf

Item 11. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Our debts include both fixed-rate and variable-rate long-term loans and other loans. As a result, we are subject to the market risk of fluctuation of interest rates which may affect the estimated fair value of our debt liabilities or result in losses in cash flow. We use interest rate swaps to reduce risks related to changes in market interest rates. As of December 31, 2007, the notional amount of the outstanding interest rate swap agreements was approximately US$624 million. These interest rate swap agreements will expire between 2008 and 2016. The carrying amounts, the estimated fair value and the effect as a result of the change of the average interest rate on our long-term and other loans as of December 31, 2007 are set forth as follows:

	RMB’000

Carrying amounts		14,674,826
Estimated fair value		14,111,199
Decrease in the estimated fair value resulting from an increase of the average interest rate by 1%		188,577
Increase in the estimated fair value resulting from a decrease of the average interest rate by 1%		207,115

Foreign Currency Exchange Rate Risk

Although we derive most of our income from China in Renminbi, our financial lease obligations as well as certain bank loans are denominated in U.S. dollars, Japanese yen, Euro or Renminbi. Pursuant to current foreign exchange regulations in China, we may retain our foreign currency earnings generated from ticket sales made in our overseas offices subject to the approval of SAFE. We use forward contracts to reduce risks related to changes in currency exchange rates in respect of ticket sales and expenses denominated in foreign currencies. These currency forward contracts will expire between 2008 and 2010.

Pursuant to IFRS, our monetary assets and liabilities denominated in foreign currencies are required to be translated into Renminbi at the year end at exchange rates announced by PBOC. Any fluctuation of the exchange rates between Renminbi and foreign currencies may materially and adversely affect our financial condition and results of operations. Following the measures introduced by the PRC Government in July 2005 to reform the Renminbi exchange rate regime, Renminbi has appreciated significantly against certain foreign currencies, including U.S. dollar and Japanese yen. The following table shows the effect on our profit and loss account as a result of the impact on our non-Renminbi denominated monetary assets and liabilities as of December 31, 2007 as a consequence of a fluctuation in value of the following major foreign currencies.

	Profit and Loss Account Decrease/Increase by RMB’000

U.S. dollar appreciates/ (depreciates) by 5%		1,555,851

Japanese yen appreciates/ (depreciates) by 5%		27,139

Item 12. Description of Securities Other than Equity Securities

Not applicable.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

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

Not applicable.

Item 15. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our President and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of December 31, 2007, the end of the fiscal year covered by this Annual Report. Our President and Chief Financial Officer , after evaluating the effectiveness of our disclosure controls and procedures , have concluded that as of the end of the period covered by this Form 20-F, our disclosure controls and procedures were effective to ensure that material information required to be disclosed in the reports that we file and furnish under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and regulations.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f) and have designed internal control over financial reporting or caused internal control over financial reporting to be designed under our supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, as applicable. Under the supervision and with the participation of our President and our Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2007 based upon the criteria in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2007 in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

The effectiveness of the Company's internal control over financial reporting as of December 31, 2007 has been audited by PricewaterhouseCoopers, an independent registered public accounting firm, as stated in their report.

Changes in Internal Control over Financial Reporting

For the year ended December 31, 2006, we identified the following material weaknesses in our internal control over financial reporting:

(i)

We did not maintain effective controls over the financial reporting process to ensure the completeness and accuracy of the preparation and review of our consolidated financial statements. Specifically, our Company did not have effective controls over the process for identifying, accumulating and reviewing all required supporting information, including the review of certain spreadsheets, to ensure the completeness and accuracy of our consolidated financial statements and disclosures, including the processes required to ensure complete and accurate recording and disclosure relating to deferred income tax accounting, the consolidated statement of cash flows, and certain property, plant and equipment disclosures. This control deficiency resulted in audit adjustments and additional disclosures to the 2006 consolidated financial statements.

(ii)

We did not maintain effective controls over the completeness and accuracy of our Company’s deferred income tax assets and liabilities and our related provision for income taxes account. Specifically, our Company did not maintain effective controls over the accuracy and completeness of the components of the income tax provision calculations and related deferred income taxes, and over the monitoring of the differences between the income tax basis and the financial reporting basis of assets and liabilities to effectively reconcile the differences to the reported deferred income tax balances. In addition, our Company did not maintain effective controls to ensure that the appropriate factors were used in estimating the valuation allowance for our deferred income tax assets. This control deficiency resulted in audit adjustments to income tax expense and deferred income tax asset and liability accounts in the 2006 annual consolidated financial statements.

During 2007, we implemented the following remediation measures to address the weaknesses described above:

(i)

We launched a risk management project and hired professional consultants to revise our risk management framework and refine our future plans for risk management.

(ii)

We hired additional accounting personnel to increase the number of staff members familiar with IFRS accounting standards. We also improved our training programs for finance employees in relation to IFRS and the preparation of financial statements as well as enhanced our control over spreadsheets.

(iii)

We specifically assigned personnel to calculate our deferred income tax assets and liabilities. Moreover, we improved the training resources for our employees in relation to deferred tax calculation and related review and monitoring procedures.

As of December 31, 2007, our management determined that applicable controls were effectively designed and operating so as to enable our management to conclude that the material weaknesses described above have been remediated.

In addition to the remediation measures above which were designed to address specifically the material weaknesses we identified in 2006 , we made the following additional material changes to our internal control over financial reporting during the period covered by this Annual Report:

(i)

We established a complete set of procedures to track and control rotables , a type of re-usable component in our aircraft, that were subject to repair. In addition, we maintained a list of rotables under repair the value attributed to and summarized those being scrapped during the year. We also established procedures to ensure that our estimation and calculation of the value attributed to rotables are in compliance with both PRC GAAP and IFRS.

(ii)

We increased the use of electronic tickets (90% for domestic routes and 80% for international routes), which has improved our ability to reconcile the balances in the settlement system and the accounting system. On a monthly basis, we assigned employees in our Settlement Department to reconcile and analyze discrepancies between these balances.

(iii)

On a monthly basis, our Accounting Department analyzed and assessed the reasonableness of the provisions for fuel, food and beverage and take-off and landing expenses. We conducted an aging analysis of our provisions on a monthly basis and reconciled balances with our main suppliers on a semi-annual basis.

(iv)

In order to prevent fraud, our Accounting System Management Department disabled the function within our ORACLE system that previously allowed the same individual to both record and review accounting entries.

(v)

Our Information Technology Management Department has implemented technology management policies at our headquarters and all branches, which included the strengthening of the controls over access to information on our Company’s intranet.

Item 16A. Audit Committee Financial Expert

Our Board of Directors has determined that Mr. Xie Rong, the chairman of our audit committee, is an independent financial expert serving on our audit committee.

Item 16B. Code of Ethics

We have adopted a code of ethics that applies to our Directors, supervisors, President, Chief Financial Officer and other senior managers of our Company. We have filed this code of ethics as Exhibit 11.1 to this Annual Report. Our code of ethics can also be found on our corporate website, http://www.ce-air.com/cea2/en_US/cea2_enUS_news_detail/0,15275,200,00.html?newsId=200 . A copy of our code of ethics will be provided to any person free of charge upon written request to Zhuping Luo, Secretary Office of the Board of Directors, Eastern Airlines Corporation Limited at 2550 Hongqiao Road, Hongqiao Airport, Shanghai 200335, the People’s Republic of China.

Item 16C. Principal Accountant Fees and Services

The following table sets forth the aggregate audit fees, audit-related fees and tax fees of our principal accountants and all other fees billed for products and services provided by our principal accountants other than the audit fees, audit-related fees and tax fees for each of the two years ended December 31, 2007:

	Audit Fees		Audit-Related Fees		Tax Fees		All Other Fees
	(RMB)		(RMB)		(RMB)		(RMB)

2006		20,000,000		0		120,000		0
2007		18,380,000		0		60,000		0

Before our principal accountants were engaged by our Company or our subsidiaries to render audit or non-audit services, the engagement was approved by our audit committee.

Audit Fees

Audit fees primarily consist of fees for the audit of the consolidated financial statements as of and for the years ended December 31, 2006 and 2007 and services provided in connection with regulatory filings.

Audit-Related Fees

Audit-related fees primarily consist of fees for assurance and related services which are reasonably related to the performance of audit or review and generally include advisory services regarding specific regulatory filings and reporting procedures and other agreed-upon services related to accounting and billing records. No audit-related services were performed by Pricewaterhouse Coopers for the fiscal years ended December 31, 2006 and 2007.

Tax Fees

Tax fees primarily consist of fees for tax compliance services.

All Other Fees

No other services were performed by PricewaterhouseCoopers for the fiscal years ended December 31, 2006 and 2007.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

PART III

Item 17. Financial Statements

We have elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.

Item 18. Financial Statements

Reference is made to pages F-1 to F-102.

Item 19. Exhibits

(a)

See Item 18 for a list of the financial statements filed as part of this Annual Report.

(b)

Exhibits to this Annual Report:

Exhibit Index

Exhibits		Description

1.1		Articles of Association as amended on June 29, 2007 (English translation).

2.1		Specimen Certificate for the H Shares. ⁽¹⁾

2.2		Form of Deposit Agreement among the Registrant, The Bank of New York, as depositary, and Owners and Beneficial Owners from time to time of American Depositary Receipts. ⁽²⁾

4.1		Office Space Lease Agreement between our Company and Eastern Air Group Company (together with English translation). ⁽¹⁾

4.10		Amendment No. 9 to the A320 Purchase Agreement, dated as of April 21, 2005, between our Company and Airbus SAS. ^{(3) (5)}

4.11		Assets Transfer Agreement, dated as of May 12, 2005, between our Company, CEA Holding, CEA Northwest and CEA Yunnan (English translation). ⁽³⁾

4.12		Aircraft Purchase Agreement, dated as of August 8, 2005, between our Company and The Boeing Company. ⁽⁴⁾ ⁽⁵⁾

4.13		Aircraft Purchase Agreement, dated as of December 20, 2005, as amended by a supplemental agreement dated as of April 10, 2006, between our Company and The Boeing Company. ⁽⁴⁾ ⁽⁵⁾

4.14		Amendment No. 10 to the A320 Purchase Agreement, dated as of June 26, 2006, between our Company and Airbus SAS. ⁽⁴⁾ ⁽⁵⁾

4.15		Aircraft Purchase Agreement, dated as of January 30, 2008, between our Company and The Boeing Company. ⁽⁵⁾

8.1		List of Subsidiaries (as of June 18, 2008).

11.1		Code of Ethics (English translation).

12.1		Certification of President pursuant to Rule 13a-14(a).

12.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a).

13.1		Certification of President pursuant to Rule 13a-14(b).

13.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(b).

⁽¹⁾	Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-6260), filed with the Securities and Exchange Commission on January 9, 1997.

⁽²⁾	Incorporated by reference to our Registration Statement on Form F-6 (File No. 333-6284), filed with the Securities and Exchange Commission with respect to American Depositary Shares representing our H Shares.

⁽³⁾	Incorporated by reference to our annual report on Form 20-F (File No. 001-14550), filed with the Securities and Exchange Commission on June 24, 2005.

⁽⁴⁾	Incorporated by reference to our annual report on Form 20-F (File No. 001-14550), filed with the Securities and Exchange Commission on July 7, 2006.

⁽⁵⁾	Portions of this document have been omitted pursuant to a confidential treatment request, and the full, unredacted document has been separately submitted to the Securities and Exchange Commission with a confidential treatment request.

SIGNATURES

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

CHINA EASTERN AIRLINES CORPORATION LIMITED

By:	/s/ Li Fenghua
	Name: Li Fenghua
	Title: Chairman of the Board of Directors

Date: June 24, 2008

Article 94.	The Company shall have a board of directors. The board of directors shall consist of eleven (11) directors. The board of directors shall have one Chairman and one Vice-chairman.

Article 95.	Directors shall be elected at the Shareholders' general meeting. The term of office of the directors is three (3) years. At the expiry of a director's term, the term is renewable upon re-election.

	The director candidates shall be nominated by the board of directors or shareholders. The notice of nomination of directors and the notice by a director candidate of his or her willingness to be elected shall be given to and lodged with the Company on, at the earliest, the day after the despatch of the relevant notice of Shareholders' general meeting appointed for the election and seven days before the date of the Shareholders' general meeting.

	Notice in writing of the intention to propose a person for election as a director and notice in writing by that person of his willingness to be elected shall have been given to the Company seven (7) days before the date of such Shareholders' general meeting.

	The Chairman and the Vice-chairman shall be elected and removed by more than one half of all the members of the board of directors. The term of office of each of the chairman and the Vice-chairman is three (3) years, renewable upon re-election.

	The Shareholders' general meeting may by ordinary resolution remove any director before the expiration of his term of office (but without prejudice to such director's right to claim damages based on any contract) on the condition that all the relevant laws and administrative regulations are fully complied with.

	The Directors shall not be required to hold shares of the Company.

Article 96.	The board of directors is responsible to the Shareholders' general meeting and exercises the following powers:

	(1)	to be responsible for the convening of the Shareholders' general meeting and to report on its work to the Shareholders' general meeting;

	(2)	to implement the resolutions of the Shareholders' general meetings;

	(3)	to decide on the Company's business plans and investment plans;

	(4)	to formulate the Company's annual preliminary and final financial budgets;

	(5)	to formulate the Company's profit distribution plan and plan for making up losses;

	(6)	to formulate proposals for increases or reductions in the Company's registered capital and the issue of debentures of the Company;

	(7)	to draw up plans for the merger, division or dissolution of the Company;

	(8)	to decide on the establishment of the Company's internal management structure;

	(9)	to appoint or dismiss the Company's general manager, and pursuant to the general manager's nominations to appoint or dismiss the deputy general manager and the financial controller of the Company and decide on their remuneration;

	(10)	to establish the Company's basic management system;

	(11)	to formulate proposals for any amendments of the Company's articles of association;

	(12)	to exercise any other powers conferred by the Shareholders' general meetings.

	Except the board of directors' resolutions in respect of the matters specified in sub-paragraphs (6), (7) and (11) of this Article which shall be passed by more than two-thirds of all the directors, the board of directors' resolutions in respect of all other matters may be passed by more than one half of all the directors.

Article 97.	The board of directors shall not, without the prior approval of shareholders in a general meeting, dispose or agree to dispose of any fixed assets of the Company where the aggregate of the amount or value of the consideration for the proposed disposition, and the amount or value of the consideration for any such disposition of any fixed assets of the Company that has been completed in the period of four (4) months immediately preceding the proposed disposition, exceeds 33 per cent of the value of the Company's fixed assets as shown in the last balance sheet placed before the shareholders in general meeting.

	For the purposes of this Article, disposition includes an act involving the transfer of an interest in assets but does not include the provision of fixed asset by way of security.

	The validity of a disposition by the Company shall not be affected by the breach of the first paragraph of this Article.

Article 97 (A)	Any provision of guarantee by the Company for the benefit of any other person:

	(1)	must comply with and satisfy these articles of association, all applicable laws and administrative regulations and any other rules or requirements that may be promulgated by relevant authorities from time to time; and

	(2)	requires approvals by the audit committee of the board of directors, at least two-thirds of the board of directors and the shareholders at the Shareholders' general meeting.

Article 98.	The board of directors shall carry out its duties in compliance with the laws, administrative regulations, these articles of association and resolutions of the Shareholders' general meetings.

Article 99.	The Chairman of the board of directors shall exercise the following powers:

	(1)	to preside over Shareholders' general meetings and to convene and preside over meetings of the board of directors;

	(2)	to check on the implementation of resolutions of the board of directors;

	(3)	to sign the securities certificates issued by the Company;

	(4)	to exercise other powers conferred by the board of directors.

	When the Chairman is unable to exercise his powers, the Chairman may designate the Vice-chairman to exercise such powers on the Chairman's behalf.

Article 100.	Meetings of the board of directors shall be held at least twice every year and convened by the Chairman of the board of directors. Notice of the meeting shall be served on all of the directors ten (10) days before the date of the meeting. In case of any urgent matters, the Chairman may convene an extraordinary meeting of the board of directors; upon requisition by more than one half of the directors, an extraordinary meeting of the board of directors must be held; upon requisition by more than one third of the directors or by the general manager, an extraordinary meeting of the board of directors may be held.

Article 101.	Meetings and extraordinary meetings of the board of directors shall be notified in the following ways:

	(1)	No notice of directors' regular meeting shall be required, if the time and place of regular meetings of the board of directors have been fixed by the board of directors in advance.

	(2)	Notice of the time and place of a meeting of the board of directors for which the time and place have not otherwise been set in advance by the board of directors shall be sent by the Chairman through the secretary to the board of directors to each of the directors and the chairman of the supervisory committee by telex, telegram, facsimile, express delivery, registered mail or personal delivery not less than ten (10) days before such meeting.

	(3)	Notice shall be in Chinese and, where necessary, in English also and shall include an agenda of the meeting.

Article 102.	Notice of a meeting shall be deemed to have been given to any director who attends the meeting without protesting against, before or at its commencement, any lack of notice.

Article 103.	Any regular or extraordinary meeting of the board of directors may be held by conference telephone or similar communication equipment so long as all directors participating in the meeting can clearly hear and communicate with each other, and all such directors shall be deemed to be present in person at the meeting.

Article 104.	Meetings of the board of directors shall be held only if more than half of the directors (including any director appointed pursuant to Article 105 below) are present.

	A resolution of the board of directors shall be decided on a show of hands.

	Each director shall have one vote. Unless otherwise provided for in these articles of association, a resolution of the board of directors must be passed by more than half of all the directors.

	Where the number of votes cast for and against a resolution are equal, the Chairman of the board of directors shall have a casting vote.

	Where a director or his or her associate(s) (as defined in the relevant rules governing the listing of securities) will benefit from, or has a material interest in, any resolution proposed at a board meeting, such director shall abstain from voting on such resolution at that board meeting. Such director shall not be counted in the quorum for the relevant meeting.

Article 105.	Directors shall attend the meetings of the board of directors in person. Where a director is unable to attend a meeting for any reason, he may appoint another director by a written power of attorney to attend the meeting on his behalf. The power of attorney shall set out the scope of the authorization.

	A Director appointed as a representative of another director to attend the meeting shall exercise the rights of a director within the scope of authority conferred by the appointing director. Where a director is unable to attend a meeting of the board of directors and has not appointed a representative to attend the meeting on his behalf, he shall be deemed to have waived his right to vote at the meeting.

	In respect of any matter requiring the resolution of any extraordinary meeting of the board of directors, a resolution approved in writing by at least such number of directors as may be required pursuant to Article 96 of these Articles after the proposed resolution has been reduced into writing and delivered to all directors, shall be deemed to be a valid resolution and a board meeting shall be dispensed with.

Article 106.	The board of directors shall keep minutes of resolutions on matters discussed at meetings. The minutes shall be signed by the directors present at the meeting and the person who recorded the minutes. The directors shall be liable for the resolutions of the board of directors. If a resolution of the board of directors violates the laws, administrative regulations or these articles of association and results in the Company sustaining serious losses, the directors participating in the resolution are liable to compensate the Company. However, if it can be proven that a director expressly objected to the resolution when the resolution is voted on, and that such objection is recorded in the minutes of the meeting, such director may be released from such liability.

Article 106 (A)	At least one-third and not less than three of the members of the board of directors shall be independent directors, at least one of whom must be an accounting professional. Independent directors shall carry out duties faithfully, safeguard the interests of the Company and pay close attention to the protection of the legal rights and interests of the public shareholders from detriment.

	Independent directors shall carry out duties independently and shall not be influenced by:

	(1)	any substantial shareholder or actual controlling person of the Company; or

	(2)	any interested entity or individual of the Company or any of its substantial shareholders or actual controlling persons.

Article 106 (B)	Except as provided otherwise under relevant laws and administrative regulations, the board of directors, the supervisory committee or any shareholder(s) individually or jointly holding more than 1% of the outstanding shares of the Company may nominate candidates for election at a Shareholders' general meeting as independent directors.

Article 106 (C)	Any material connected transaction of the Company and the retaining or dismissal of an accounting firm shall not be submitted for consideration by the board of directors unless it is approved by more than half of the independent directors. Consent of more than half of the independent directors is required for:

	(1)	any request by the independent directors to the board of directors to convene an extraordinary Shareholders' general meeting or a board meeting; or

	(2)	public solicitation for proxies from the shareholders prior to a Shareholders' general meeting.

	With the consent of all independent directors, the independent directors may retain outside auditors or consultants for audit or consultation with respect to any specific matters of the Company. The Company shall bear the related expenses.

Article 106 (D)	The independent directors shall:

	(1)	attend the meetings of the board of directors as scheduled;

	(2)	familiarize themselves with the business operations of the Company; and

	(3)	make voluntary inquiries and gather the information and materials required for making decisions.

	The independent directors shall submit to the shareholders' annual general meetings annual reports of all independent directors which should discuss the performance by the independent directors of their duties.

Article 106 (E)	The Company shall establish work procedures of independent directors. The secretary of the board of directors shall cooperate with independent directors with respect to the performance of their duties. The Company shall:

	(1)	ensure that the independent directors enjoy the same right of access to information as other directors;

	(2)	furnish the independent directors with relevant materials and information in a timely manner;

	(3)	make available information relating to the operations of the Company periodically; and

	(4)	arrange on-site visits for the independent directors, if necessary.

Article 106 (F)	The term of office of the independent directors shall be the same as that of other directors. Subject to all applicable laws and administrative regulations, at the expiry of an independent director's term, the term is renewable upon re-election. Any independent director shall not be dismissed without due cause prior to the expiration of his/her term of office. The Company shall disclose as a special discloseable matter any dismissal of an independent director prior to expiration of his/her term.

Article 106 (G)	An independent director may resign before his/her term of office expires. An independent director shall submit to the board of directors his/her letter of resignation, in which he/she shall explain any issue that is related to his/her resignation or warrants attention of the shareholders and the creditors of the Company.

	If the resignation of any independent director causes the number of independent directors or directors to be less than the minimum number prescribed by law or these articles of association, the resigning independent director shall carry out his/her duties in accordance with the laws, administrative regulations and these articles of association until election of a successor independent director. The board of director shall convene a Shareholders' general meeting within two months for the election of the successor independent director. A resigning independent director may cease to carry out duties in the case of failure by the board of directors to convene the Shareholders' general meeting within the time limit.

CHAPTER 11: SECRETARY OF THE BOARD OF DIRECTORS

Article 107.	The Company shall have a secretary of the board of directors who shall be a senior administrative officer of the Company.

Article 108.	The secretary of the Company's board of directors shall be a natural person who has the requisite professional knowledge and experience, and shall be appointed by the board of directors. His primary responsibilities are to ensure that:

	(1)	the Company has complete organisational documents and records;

	(2)	the Company prepares and delivers in accordance with law those reports and documents required by competent authorities entitled thereto;

	(3)	the Company's registers of shareholders are properly maintained, and that persons entitled to the Company's records and documents are furnished with such records and documents without delay.

	(4)	the Company has a department of investor relations that is specially responsible for strengthening the communications with the shareholders, especially the public shareholders. The secretary of the board of directors shall be in charge of the department of investor relations.

Article 109.	A director or other senior administrative officer of the Company may hold the office of the secretary of the board of directors concurrently. The accountant(s) of the certified public accountants firm appointed by the Company shall not act as the secretary of the board of directors.

	Provided that where the office of secretary is held concurrently by a director, and an act is required to be done by a director and a secretary separately, the person who holds the office of director and secretary may not perform the act in dual capacity.

CHAPTER 12: GENERAL MANAGER

Article 110.	The Company shall have one general manager, who shall be appointed and dismissed by the board of directors. The Company shall have a number of deputy general managers who should assist the general manager in his work. The term of office of the general manager and deputy general managers is three (3) years and renewable upon re-election and reappointment.

Article 111.	The general manager shall be accountable to the board of directors and exercise the following functions and powers:

	(1)	to be in charge of the Company's production, operation and management and to organize the implementation of the resolutions of the board of directors;

	(2)	to organize the implementation of the Company's annual business plan and investment plan;

	(3)	to draft plans for the establishment of the Company's internal management structure;

	(4)	to establish the Company's basic management system;

	(5)	to formulate basic rules and regulations for the Company;

	(6)	to propose the appointment or dismissal of the Company's deputy general manager(s) and the financial controller;

	(7)	to appoint or dismiss management personnel other than those required to be appointed or dismissed by the board of directors;

	(8)	other powers conferred by these articles of association and the board of directors.

Article 112.	The general manager may be present at meetings of the board of directors. The general manager has no voting rights at the board meetings unless he is also a director.

Article 113.	The general manager and deputy general managers shall not, in exercising their powers, vary the resolutions of Shareholders' general meetings and those of the board of directors or exceed the scope of their authorities.

Article 114.	The general manager and deputy general managers, in performing their functions and powers shall act honestly and diligently and in accordance with laws, administrative regulations and these articles of association.

CHAPTER 13: SUPERVISORY COMMITTEE

Article 115.	The Company shall have a supervisory committee.

Article 116.	The supervisory committee shall be composed of 5 supervisors. The term of office of supervisors shall be three (3) years renewable upon re-election and re-appointment. The supervisory committee shall have one chairman who is subject to election or removal with the consent of two thirds or more of the members of the supervisory committee. The term of office of the chairman shall be three (3) years renewable upon re-election and re-appointment.

Article 117.	The supervisory committee shall comprise of 3 representatives of shareholders who shall be elected or removed by the shareholders in general meeting and 2 representatives of staff and workers of the Company who shall be elected or removed democratically by the staff and workers.

Article 118.	The directors, general manager, deputy general managers and financial controller shall not act concurrently as supervisors.

Article 119.	Meetings of the supervisory committee shall be held at least once a year, and shall be convened by the chairman of the supervisory committee.

	A person convening a meeting of the supervisory committee shall notify all supervisors in writing 10 days prior to the meeting. A notice of meeting shall specify:

	(1)	the date and the place of the meeting;

	(2)	the length of the meeting;

	(3)	the matters and topics to be discussed; and

	(4)	the date of the notice.

Article 120.	The supervisory committee shall be accountable to the Shareholders' general meeting and exercise the following functions and powers in accordance with law:

	(1)	to examine the Company's financial situation;

	(2)	to supervise the directors, general manager, deputy general managers and other senior administrative officers to see whether they act in contradiction with the laws, administrative regulations and these articles of association;

	(3)	to demand rectification from a director, the manager or any other senior administrative officer when the acts of such persons are harmful to the Company's interest;

	(4)	to check the financial information such as the financial report, business report and plans for distribution of profits to be submitted by the board of directors to the Shareholders' general meetings and, should any queries arise, to authorize, in the name of the Company, a reexamination by the public certified accountants and practising auditors of the Company for the time being;

	(5)	to propose to convene a shareholders' extraordinary general meeting;

	(6)	to represent the Company in negotiation with or bringing an action against a director;

	(7)	other functions and powers specified in these articles of association.

	Members of the supervisory committee shall be present at meetings of the board of directors.

Article 121.	Meetings of the supervisory committee shall be held only when more than half of the supervisors are present.

	A resolution of the supervisory committee shall be decided on a show of hands. Each supervisor shall have one vote.

	Resolutions of the supervisory committee shall be passed by two thirds or more of all of its members.

Article 122.	All reasonable fees incurred in respect of the employment of professionals such as lawyers, certified public accountants or practising auditors for the time being as are required by the supervisory committee in exercising its functions and powers shall be borne by the Company.

Article 123.	A supervisor shall carry out his duties honestly and faithfully in accordance with laws, administrative regulations and these articles of association.

CHAPTER 14: THE QUALIFICATIONS AND DUTIES OF THE

DIRECTORS, SUPERVISORS, GENERAL MANAGER, DEPUTY

GENERAL MANAGERS AND OTHER SENIOR ADMINISTRATIVE

OFFICERS OF THE COMPANY

Article 124.	A person may not serve as a director, supervisor, general manager, deputy general manager and any other senior administrative officer of the Company if any of the following circumstances apply:

	(1)	a person without capacity for civil conduct or with restricted capacity for civil conduct;

	(2)	a person who has committed an offence of corruption, bribery, infringement of property, misappropriation of property or sabotaging the social economic order and has been punished because of committing such offence; or who has been deprived of his political rights, in each case where less than five (5) years have elapsed since the date of the completion of implementation of his punishment;

	(3)	a person who is a former director, factory manager or manager of a company or enterprise which has entered into insolvent liquidation because of mismanagement and is personally liable for the insolvency of such company or enterprise, where less than three (3) years have elapsed since the date of the completion of the insolvency and liquidation of the company or enterprise;

	(4)	a person who is a former legal representative of a company or enterprise which had its business licence revoked due to a violation of the law and who incurred personal liability, where less than three (3) years has elapsed since the date of the revocation of the business licence;

	(5)	a person who has a relatively large amount of debts due and outstanding;

	(6)	a person who is under criminal investigation or prosecution by judicial organs for violation of the criminal law which is not yet concluded;

	(7)	a person who is not eligible for enterprise leadership according to laws and administrative regulations;

	(8)	a non-natural person;

	(9)	a person who is convicted of contravention of provisions of relevant securities regulations by a relevant competent authority, and such conviction involves a finding that he has acted fraudulently or dishonestly, where less than five (5) years has elapsed since the date of the conviction.

Article 125.	The validity of an act of a director, general manager, deputy general manager or other senior administrative officer on behalf of the Company is not, vis-a-vis a bona fide third party, affected by any irregularity in his office, election or any defect in his qualification.

Article 126.	In addition to the obligations imposed by laws, administrative regulations or required by the listing rules of the stock exchange on which shares of the Company are listed, each of the Company's directors, supervisors, general manager, deputy general managers and other senior administrative officers owes a duty to each shareholder, in the exercise of the functions and powers of the Company entrusted to him:

	(1)	not to cause the Company to exceed the scope of business stipulated in its business licence;

	(2)	to act honestly in the best interests of the Company;

	(3)	not to expropriate in any guise the Company's property, including (without limitation) usurpation of opportunities advantageous to the Company;

	(4)	not to expropriate the individual rights of shareholders, including (without limitation) rights to distribution and voting rights, save pursuant to a restructuring of the Company submitted to shareholders for approval in accordance with these articles of association.

Article 127.	Each of the Company's directors, supervisors, general manager, deputy general managers and other senior administrative officers owes a duty, in the exercise of his powers and discharge of his duties, to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Article 128.	Each of the Company's directors, supervisors, general manager, deputy general managers and other senior administrative officers shall exercise his powers or carry on his duties in accordance with the principle of fiduciary; and shall not put himself in a position where his duty and his interest may conflict. This principle includes (without limitation) discharging the following obligations:

	(1)	to act honestly in the best interests of the Company;

	(2)	to exercise powers within the scope of his powers and not to exceed those powers;

	(3)	to exercise the discretion vested in him personally and not to allow himself to act under the control of another and, unless and to the extent permitted by laws, administrative regulations or with the informed consent of shareholders given in general meeting, not to delegate the exercise of his discretion;

	(4)	to treat shareholders of the same class equally and to treat shareholders of different classes fairly;

	(5)	except in accordance with these articles of association or with the informed consent of shareholders given in general meeting, not to enter into any contract, transaction or arrangement with the Company;

	(6)	without the informed consent of shareholders given in general meeting, not to use the Company's property for his own benefit;

	(7)	not to exploit his position to accept bribes or other illegal income or expropriate the Company's property by any means, including (without limitation) opportunities advantageous to the Company;

	(8)	without the informed consent of shareholders given in general meeting, not to accept commissions in connection with the Company's transactions;

	(9)	to abide by these articles of association, execute his official duties faithfully and protect the Company's interests, and not to exploit his position and power in the Company to advance his own private interests;

	(10)	not to compete with the Company in any way unless with the informed consent of shareholders given in general meeting;

	(11)	not to misappropriate the Company's funds or lend such funds to others, not to open accounts in his own name or other names for the deposit of the Company's assets and not to provide a guarantee for debts of a shareholder of the Company or other individual(s) with the Company's assets;

	(12)	unless otherwise permitted by informed shareholders in general meeting, to keep in confidence information acquired by him in the course of and during his tenure and not to use the information other than in furtherance of the interests of the Company, save that disclosure of such information to the court or other governmental authorities is permitted if

		(i)	disclosure is made under compulsion of law;

		(ii)	the interests of the public require disclosure;

		(iii)	the interests of the relevant director, supervisor, general manager, deputy general manager or other senior administrative officers require disclosure.

Article 129.	Each director, supervisor, general manager, deputy general manager or other senior administrative officer of the Company shall not cause the following persons or institutions ("associates") to do what he is prohibited from doing:

	(1)	the spouse or minor child of that director, supervisor, general manager, deputy general manager or other senior administrative officer;

	(2)	a person acting in the capacity of trustee of that director, supervisor, general manager, deputy general manager or other senior administrative officer or any person referred to in the preceding sub-paragraph (1);

	(3)	a person acting in the capacity of partner of that director, supervisor, general manager, deputy general manager or other senior administrative officer or any person referred to in sub-paragraphs (1) and (2) of this Article;

	(4)	a company in which that director, supervisor, general manager, deputy general manager or other senior administrative officer, alone or jointly with one or more persons referred to in sub-paragraphs (l), (2) and (3) of this Article and other directors, supervisors, general manager, deputy general managers and other senior administrative officers have a de facto controlling interest;

	(5)	the directors, supervisors, general manager, deputy general managers and other senior administrative officers of the controlled company referred to in the preceding sub-paragraph (4).

Article 130.	The fiduciary duties of the directors, supervisors, general manager, deputy general managers and other senior administrative officers of the Company do not necessarily cease with the termination of their tenure. The duty of confidence in relation to trade secrets of the Company survives the termination of their tenure. Other duties may continue for such period as fairness may require depending on the time lapse between the termination and the act concerned and the circumstances under which the relationships between them and the Company are terminated.

Article 131.	Subject to Article 52, a director, supervisor, general manager, deputy general manager or other senior administrative officer of the Company may be relieved of liability for specific breaches of his duty by the informed consent of shareholders given at a general meeting.

Article 132.	Where a director, supervisor, general manager, deputy general manager or other senior administrative officer of the Company is in any way, directly or indirectly, materially interested in a contract, transaction or arrangement or proposed contract, transaction or arrangement with the Company, (other than his contract of service with the Company), he shall declare the nature and extent of his interests to the board of directors at the earliest opportunity, whether or not the contract, transaction or arrangement or proposal therefor is otherwise subject to the approval of the board of directors.

	A director shall abstain from voting at a board meeting the purpose of which is to approve contracts, transactions or arrangements that such director or any of his or her associates (as defined in the relevant rules governing the listing of securities) has a material interest. Such director shall not be counted in the quorum for the relevant board meeting.

	Unless the interested director, supervisor, general manager, deputy general manager or other senior administrative officer discloses his interests in accordance with this Article and the contract, transaction or arrangement is approved by the board of directors at a meeting in which the interested director, supervisor, general manager, deputy general manager or other senior administrative officer is not counted in the quorum and refrains from voting, a contract, transaction or arrangement in which that director, supervisor, general manager, deputy general manager or other senior administrative officer is materially interested is voidable at the instance of the Company except as against a bona fide party thereto acting without notice of the breach of duty by the interested director, supervisor, general manager, deputy general manager or other senior administrative officer.

	For the purposes of this Article, a director, supervisor, general manager, deputy general manager or other senior administrative officer of the Company is deemed to be interested in a contract, transaction or arrangement in which an associate of him is interested.

Article 133.	Where a director, supervisor, general manager, deputy general manager or other senior administrative officer of the Company gives to the board of directors a general notice in writing stating that, by reason of the facts specified in the notice, he is interested in contracts, transactions or arrangements of any description which may subsequently be made by the Company, that notice shall be deemed for the purposes of the preceding Article to be a sufficient declaration of his interests, so far as the content stated in such notice is concerned, provided that such general notice shall have been given before the date on which the question of entering into the relevant contract, transaction or arrangement is first taken into consideration on behalf of the Company.

Article 134.	The Company shall not in any manner pay taxes for or on behalf of a director, supervisor, general manager, deputy general manager or other senior administrative officer.

Article 135.	The Company shall not directly or indirectly make a loan to or provide any guarantee in connection with the making of a loan to a director, supervisor, general manager, deputy general manager or other senior administrative officer of the Company or of the Company's holding company or any of their respective associates. However, the following transactions are not subject to such prohibition:

	(1)	the provision by the Company of a loan or a guarantee of a loan to a company which is a subsidiary of the Company;

	(2)	the provision by the Company of a loan or a guarantee in connection with the making of a loan or any other funds to any of its directors, supervisors, general manager, deputy general managers and other senior administrative officers to meet expenditure incurred or to be incurred by him for the purposes of the Company or for the purpose of enabling him to perform his duties properly, in accordance with the terms of a service contract approved by the shareholders in general meeting;

	(3)	the Company may make a loan to or provide a guarantee in connection with the making of a loan to any of the relevant directors, supervisors, general manager, deputy general managers and other senior administrative officers or their respective associates in the ordinary course of its business on normal commercial terms, provided that the ordinary course of business of the Company includes the lending of money or the giving of guarantees.

Article 136.	A loan made by the Company in breach of the preceding Article shall be forthwith repayable by the recipient of the loan regardless of the terms of the loan.

Article 137.	A guarantee for repayment of loan provided by the Company in breach of Article 135 shall not be enforceable against the Company, unless:

	(1)	the guarantee was provided in connection with a loan to an associate of any of the directors, supervisors, general manager, deputy general managers and other senior administrative officers of the Company or of the Company's holding company and at the time the loan was advanced the lender did not know the relevant circumstances; or

	(2)	the collateral provided by the Company has been lawfully disposed of by the lender to a bona fide purchaser.

Article 138.	For the purposes of the foregoing provisions of this Chapter, a "guarantee" includes an undertaking or property provided to secure the performance of obligations by the obligor.

Article 139.	In addition to any rights and remedies provided by the laws and administrative regulations, where a director, supervisor, general manager, deputy general manager or other senior administrative officer of the Company is in breach of his duties to the Company, the Company has a right to:

	(1)	claim damages from the director, supervisor, general manager, deputy general manager or other senior administrative officer in compensation for losses sustained by the Company as a result of such breach;

	(2)	rescind any contract or transaction entered into by the Company with the director, supervisor, general manager, deputy general manager or other senior administrative officer or with a third party (where such third party knows or should know that there is such a breach of duties by such director, supervisor, general manager, deputy general manager or other senior administrative officer);

	(3)	demand an account of the profits made by the director, supervisor, general manager, deputy general manager or other senior administrative officer in breach of his duties;

	(4)	recover any monies received by the director, supervisor, general manager, deputy general manager or other senior administrative officer to the use of the Company, including (without limitation) commissions; and

	(5)	demand payment of the interest earned or which may have been earned by the director, supervisor, general manager, deputy general manager or other senior administrative officer on the monies that should have been paid to the Company.

Article 140.	The Company shall, with the prior approval of shareholders in general meeting, enter into a contract in writing with a director or supervisor wherein his emoluments are stipulated. The aforesaid emoluments include:

	(1)	emoluments in respect of his service as director, supervisor or senior administrative officer of the Company;

	(2)	emoluments in respect of his service as director, supervisor or senior administrative officer of any subsidiary of the Company;

	(3)	emoluments in respect of the provision of other services in connection with the management of the affairs of the Company and any of its subsidiaries;

	(4)	payment by way of compensation for loss of office, or as consideration for or in connection with his retirement from office.

	Except under a contract entered into in accordance with the foregoing, no proceedings may be brought by a director or supervisor against the Company for anything due to him in respect of the matters mentioned in this Article.

Article 141.	The contract concerning the emoluments between the Company and its directors or supervisors should provide that in the event of a takeover of the Company, the Company's directors and supervisors shall, subject to the prior approval of the shareholders in general meeting, have the right to receive compensation or other payment in respect of his loss of office or retirement. A takeover of the Company referred to in this paragraph means any of the following:

	(1)	an offer made by any person to the general body of shareholders;

	(2)	an offer made by any person with a view to the offeror becoming a "controlling shareholder" within the meaning of Article 53.

	If the relevant director or supervisor does not comply with this Article, any sum so received by him shall belong to those persons who have sold their shares as a result of the said offer made. The expenses incurred in distributing that sum pro rata amongst those persons shall be borne by the relevant director or supervisor and not paid out of that sum.

CHAPTER 15: FINANCIAL AND ACCOUNTING SYSTEMS AND PROFIT DISTRIBUTION

Article 142.	The Company shall establish its financial and accounting systems and internal audit system in accordance with laws, administrative regulations and PRC accounting standards formulated by the finance regulatory department of the State Council.

Article 143.	At the end of each fiscal year, the Company shall prepare a financial report which shall be examined and verified as provided by law.

	The Company's financial reports shall include the following accounting statements and schedules:

	(1)	balance sheet;

	(2)	profit and loss statement;

	(3)	statement of financial changes;

	(4)	explanation of financial conditions;

	(5)	profit distribution statement.

Article 144.	The board of directors of the Company shall place before the shareholders at every annual general meeting such financial reports as are required by any laws, administrative regulations or directives promulgated by competent regional and central governmental authorities to be prepared by the Company.

Article 145.	The Company's financial reports shall be made available for shareholders' inspection at the Company twenty (20) days before the date of every shareholders' annual general meeting. Each shareholder shall be entitled to obtain a copy of the financial reports referred to in this Chapter.

	The Company shall deliver or send to each shareholder of Overseas-Listed Foreign-Invested Shares by prepaid mail at the address registered in the register of shareholders the said reports not later than twenty-one (21) days before the date of every annual general meeting of shareholders.

Article 146.	The financial statements of the Company shall, in addition to being prepared in accordance with PRC accounting standards and regulations, be prepared in accordance with either international accounting standards, or that of the place outside the PRC where the Company's shares are listed. If there is any material difference between the financial statements prepared respectively in accordance with the two accounting standards, such difference shall be stated in the financial statements. When the Company is to distribute its after-tax profits, the lower of the after-tax profits as shown in the two financial statements shall be adopted.

Article 147.	Any interim results or financial information published or disclosed by the Company must also be prepared and presented in accordance with PRC accounting standards and regulations, and also in accordance with either international accounting standards or that of the overseas place where the Company's shares are listed.

Article 148.	The Company shall publish its financial reports twice every fiscal year, that is, the interim financial report shall be published within sixty (60) days after the expiration of the first six (6) months of each fiscal year; the annual financial report shall be published within one hundred and twenty (120) days after the expiration of each fiscal year.

Article 149.	The Company shall not keep accounts other than those provided by law.

Article 150.	The Company shall implement an internal auditing system, and establish an internal auditing organization or provide internal auditing personnel to undertake the internal auditing and supervision over the Company's income and expenses and other economic activities under the leadership of the supervisory committee.

Article 151.	The Company's after-tax profit shall be allocated in accordance with the following order:

	(1)	making up for losses;

	(2)	allocation to the statutory common reserve fund;

	(3)	allocation to the statutory common welfare fund;

	(4)	allocation to the discretionary common reserve fund upon approval by resolution of the Shareholders' general meeting;

	(5)	payment of dividends in respect of ordinary shares.

	The board of directors shall, in accordance with the laws and administrative regulations of the State (if any) and the Company's operation and development requirements, determine the detail proportions of profit distributions in items (2) to (5) above and submit its determination to the Shareholders' general meeting for approval.

Article 152.	Capital common reserve fund includes the following items:

	(1)	premium on shares issued at a premium price;

	(2)	any other income designated for the capital common reserve fund by the regulations of the finance regulatory department of the State Council.

Article 153.	The common reserve fund of the Company shall be applied to the following purposes:

	(1)	making up losses;

	(2)	expansion of the Company's production and operation;

	(3)	transfer or increase of capital.

	When the Company converts its common reserve fund into its capital upon a resolution adopted in Shareholders' general meeting, the Company shall either distribute new shares in proportion to the shareholders' number of shares, or increase the par value of each share, provided, however, that when the statutory common reserve fund is converted to capital, the balance of the statutory common reserve fund may not fall below 25 per cent of the registered capital.

Article 154.	The Company's statutory common welfare fund is used for the collective welfare of the Company's staff and workers.

Article 155.	The Company shall not declare dividend before making up its losses and allocating funds to the statutory common reserve fund and statutory common welfare fund.

Article 156.	Dividends shall be distributed in accordance with the proportion of shares held by shareholders.

	Unless otherwise resolved by the Shareholders' general meeting, the Company apart from distributing annual dividends, may by its board of directors acting under the power conferred by the Shareholders' general meeting, distribute interim dividends. Unless otherwise stipulated by laws or administrative regulations, the amount of interim dividends distributed shall not exceed 50 per cent of the distributable profits as stated in the interim profits statement of the Company.

Article 157.	The Company may distribute dividends in the following manner:

	(1)	cash;

	(2)	shares.

Article 158.	Dividends or other payments declared by the Company to be payable to holders of Domestic-Invested Shares shall be declared and calculated in Renminbi, and paid in Renminbi; and those payable to holders of Foreign-Invested Shares shall be declared and calculated in Renminbi, and paid in the local currency at the place where such Foreign-Invested Shares are listed (if there is more than one place of listing, then the principal place of listing as determined by the board of directors).

	Foreign currency required by the Company for payment of dividends or other sums to holders of Foreign-Invested Shares shall be handled in accordance with the relevant foreign exchange control regulations of the State. If there is no applicable regulation, the applicable exchange rate shall be the average closing rate for the relevant foreign currency announced by the Peoples' Bank of China for the week prior to the announcement of the payment of dividend or other sums.

Article 159.	The Company shall, in accordance with the People's Republic of China's tax law, withhold and make payments on behalf of shareholders in respect of their tax payable on their dividends income.

Article 160.	The Company shall appoint on behalf of the holders of the Overseas-Listed Foreign-Invested Shares receiving agents to receive on behalf of such shareholders dividends declared and all other monies owing by the Company in respect of their shares.

	The receiving agents appointed by the Company shall comply with the relevant requirements of the law of the place and relevant regulations of the stock exchange where the Company's shares are listed.

	The receiving agents appointed on behalf of holders of H Shares shall be a company registered as a trust company under the Trustee Ordinance of Hong Kong.

CHAPTER 16: APPOINTMENT OF ACCOUNTANTS FIRM

Article 161.	The Company shall appoint an independent firm of accountants which is qualified under the relevant regulations of the State to audit the Company's annual report and review the Company's other financial reports.

	The first accountants firm of the Company may be appointed by the inaugural meeting of the Company before the first annual general meeting and the accountants firm so appointed shall hold office until the conclusion of the first annual general meeting.

	If the inaugural meeting fails to exercise its powers under the preceding paragraph, those powers shall be exercised by the board of directors.

Article 162.	The accountants firm appointed by the Company shall hold office from the conclusion of the annual general meeting of shareholders until the conclusion of the next annual general meeting of shareholders.

Article 163.	The accountants firm appointed by the Company shall have the following rights:

	(1)	A right of access at any time to the books and records and vouchers of the Company, and shall be entitled to require from the directors, general manager, deputy general managers and other senior administrative officers of the Company any relevant information and explanation;

	(2)	A right to require the Company to take all reasonable steps to obtain from its subsidiaries such information and explanation as are necessary for the purposes of discharging its duties;

	(3)	A right to attend Shareholders' general meetings and to receive all notices of, and other communications relating to, any Shareholders' general meeting which any shareholder is entitled to receive, and to speak at any Shareholders' general meeting in relation to matters concerning its role as the Company's accountants firm.

Article 164.	Before the convening of the Shareholders' general meeting, the board of directors may fill any casual vacancy in the office of an accountants firm, but while any such vacancy continues, the surviving or continuing firms, if any, may act.

Article 165.	The shareholders in general meeting may by ordinary resolution remove an accountants firm before the expiration of its term of office, notwithstanding the stipulations in the contract between the Company and the firm, but without prejudice to the firm's right to claim, if any, for damages in respect of such removal.

Article 166.	The remuneration of an accountants firm or the manner in which such firm is to be remunerated shall be determined by the shareholders in general meeting. The remuneration of an accountants firm appointed by the board of directors shall be determined by the board of directors.

Article 167.	The Company's appointment of, removal of and non-reappointment of an accountants firm shall be resolved upon by shareholders in general meeting. The resolution of the Shareholders' general meeting shall be filed with the securities governing authority of the State Council.

	Where it is proposed that any resolution be passed at a Shareholders' general meeting concerning the appointment of an accountants firm which is not an incumbent firm to fill a casual vacancy in the office of the accountants firm; re-appointment of a retiring accountants firm which was appointed by the board of directors of the Company to fill a casual vacancy; or removal of the accountants firm before the expiration of its term of office, the following provisions shall apply:

	(1)	A copy of the proposal shall be sent before notice of meeting is given to the shareholders to the firm proposed to be appointed or proposing to leave its post or the firm which has left its post in the relevant fiscal year (leaving includes leaving by removal, resignation and retirement).

	(2)	If the firm leaving its post makes representations in writing and requests the Company to notify such representations to the shareholders, the Company shall (unless the representations are received too late):

		(i)	in any notice of the resolution given to shareholders, state the fact of the representations having been made; and

		(ii)	attach a copy of the representations to the notice and deliver it to the shareholders in the manner stipulated in these Articles.

	(3)	If the firm's representations are not sent in accordance with the preceding sub-paragraph (2), the relevant firm may (in addition to its right to be heard) require that the representations be read out at the meeting.

	(4)	An accountants firm which is leaving its post shall be entitled to attend:

		(i)	the Shareholders' general meeting at which its term of office would otherwise have expired;

		(ii)	any Shareholders' general meeting at which it is proposed to fill the vacancy caused by its removal; and

		(iii)	any Shareholders' general meeting convened on its resignation; and to receive all notices of, and other communications relating to, any such meetings, and to speak at any such meeting in relation to matters concerning its role as the former accountants firm of the Company.

Article 168.	Prior to the removal or the non-renewal of the appointment of the accountants firm, notice of such removal or non-renewal shall be given to the accountants firm and such firm shall be entitled to make representation at the Shareholders' general meeting. Where the accountants firm resigns its post, it shall make clear to the Shareholders' general meeting whether there has been any impropriety on the part of the Company.

	An accountants firm may resign its office by depositing at the Company's legal address a resignation notice which shall become effective on the date of such deposit or on such later date as may be stipulated in such notice and such notice shall include the following:

	(1)	a statement to the effect that there are no circumstances connected with its resignation which it considers should be brought to the notice of the shareholders or creditors of the Company;

	(2)	a statement of any such circumstances.

	Where a notice is deposited under the preceding subparagraph, the Company shall within fourteen (14) days send a copy of the notice to the relevant governing authority. If the notice contains a statement under the preceding subparagraph (2), a copy of such statement shall be placed at the Company for shareholders' inspection. The Company should also send a copy of such statement by prepaid mail to every holder of Overseas-Listed Foreign-Invested Shares at the address registered in the register of shareholders.

	Where the accountants firm's notice of resignation contains a statement of any circumstance which should be brought to the notice of the shareholders or creditors of the Company, it may require the board of directors to convene a shareholders' extraordinary general meeting for the purpose of receiving an explanation of the circumstances connected with its resignation.

CHAPTER 17: INSURANCE

Article 169.

The types of coverage, the insured amounts and periods of the Company's insurance shall be decided at a meeting of the board of directors based on the circumstances of the Company and the practices of similar industries in other countries and the practice and legal requirements in China.

CHAPTER 18: LABOUR AND PERSONNEL MANAGEMENT

SYSTEMS

Article 170.

The Company shall, in accordance with the relevant provisions of the Labour Law of the People's Republic of China and other relevant laws or regulations of the State, formulate its labour and personnel management systems which shall be appropriate to its particular circumstances.

CHAPTER 19: TRADE UNION

Article 171.	The Company shall establish trade union organizations and organize staff and workers to carry out trade union activities in accordance with the Trade Union Law of the People's Republic of China.

	The Company shall allocate funds to the trade union in accordance with the Trade Union Law of the People's Republic of China. Such fund shall be used by the trade union of the Company in accordance with the "Measures for the Management of Trade Union Funds" formulated by the All China Federation of Trade Unions.

CHAPTER 20: MERGER AND DIVISION OF THE COMPANY

Article 172.	In the event of the merger or division of the Company, a plan shall be presented by the Company's board of directors and shall be approved in accordance with the procedures stipulated in these articles of association and then the relevant examining and approving formalities shall be processed as required by law. A shareholder who objects to the plan of merger or division shall have the right to demand the Company or the shareholders who consent to the plan of merger or division to acquire that dissenting shareholder's shareholding at a fair price. The contents of the resolution of merger or division of the Company shall be made into special documents for shareholders' inspection.

	Such special documents shall be sent by mail to holders of Overseas-Listed Foreign-Invested Shares.

Article 173.	The merger of the Company may take the form of either merger by absorption or merger by the establishment of a new company. In the event of a merger, the merging parties shall execute a merger agreement and prepare a balance sheet and an inventory of assets. The Company shall notify its creditors within ten (10) days of the date of the Company's resolution to merge and shall publish a public notice in a newspaper at least three times within thirty (30) days of the date of the Company's resolution to merge. A creditor has the right within thirty (30) days of receiving such notice from the Company or, for creditors who do not receive the notice, within ninety (90) days of the date of the first public notice, to demand that the Company repay its debts to that creditor or provide a corresponding guarantee for such debt. Where the company fails to repay its debts or provide corresponding guarantees for such debts, it may not be merged.

	At the time of merger, rights in relation to debtors and indebtedness of each of the merged parties shall be assumed by the company which survives the merger or the newly established company.

Article 174.	When the Company is divided, its assets shall be split up accordingly.

	In the event of division of the Company, the parties to such division shall execute a division agreement and prepare a balance sheet and an inventory of assets. The Company shall notify its creditors within ten (10) days of the date of the Company's resolution to divide and shall publish a public notice in a newspaper at least three times within thirty (30) days of the date of the Company's resolution to divide. A creditor has the right within thirty (30) days of receiving such notice from the Company or, for creditors who do not receive the notice, within ninety (90) days of the date of the first public notice to demand that the Company repay its debts to that creditor or provide a corresponding guarantee for such debt. Where the Company fails to repay its debts or provide corresponding guarantees for such debts, it may not be divided.

	Debts of the Company prior to division are assumed by the post-division companies in accordance with the agreements entered into.

Article 175.	When the Company merges or divides and there is a change in any item in its registration, the Company shall change its registration with the companies registration authority in accordance with the law. When the Company dissolves, the Company shall cancel its registration in accordance with the law. When a new company is established, its establishment shall be registered in accordance with the law.

CHAPTER 21: DISSOLUTION AND LIQUIDATION

Article 176.	The Company shall be dissolved and liquidated upon the occurrence of any of the following events:

	(1)	a resolution for dissolution is passed by shareholders at a general meeting;

	(2)	dissolution is necessary due to a merger or division of the Company;

	(3)	the Company is legally declared insolvent due to its failure to repay debts due; and

	(4)	the Company is ordered to close down because of its violation of laws and administrative regulations.

Article 177.	A liquidation group shall be set up within fifteen (15) days of the Company being dissolved pursuant to sub-paragraph (1) of the preceding Article, and the composition of the liquidation group of the Company shall be determined by an ordinary resolution of shareholders in general meeting. If a liquidation group to carry out liquidation procedures is not set up within the specified time limit, the creditors may apply to the People's Court to have it designate relevant persons to form a liquidation group in order to carry out liquidation procedures.

	Where the Company is dissolved under sub-paragraph (3) of the preceding Article, the People's Court shall in accordance with provisions of relevant laws organise the shareholders, relevant organizations and relevant professional personnel to establish a liquidation group to carry out liquidation procedures.

	Where the Company is dissolved under sub-paragraph (4) of the preceding Article, the relevant governing authorities shall organise the shareholders, relevant organisations and professional personnel to establish a liquidation group to carry out liquidation procedures.

Article 178.	Where the board of directors proposes to liquidate the Company due to causes other than where the Company has declared that it is insolvent, the board shall include a statement in its notice convening a Shareholders' general meeting to consider the proposal to the effect that, after making full inquiry into the affairs of the Company, the board of directors is of the opinion that the Company will be able to pay its debts in full within twelve (12) months from the commencement of the liquidation.

	Upon the passing of the resolution by the shareholders in general meeting for the liquidation of the Company, all functions and powers of the board of directors shall cease.

	The liquidation group shall act in accordance with the instructions of the Shareholders' general meeting to make a report at least once every year to the Shareholders' general meeting on the committee's receipts and payments, the business of the Company and the progress of the liquidation; and to present a final report to the Shareholders' general meeting on completion of the liquidation.

Article 179.	The liquidation group shall within ten (10) days of its establishment send notices to creditors, and within sixty (60) days of its establishment publish a public notice in a newspaper at least three times. A creditor shall within thirty (30) days of receiving notice, or for creditors who do not receive notice, within ninety (90) days of the date of the first public notice, report its creditors' rights to the liquidation group.

	When reporting creditors' rights, the creditor shall provide an explanation of matters relevant to the creditor's rights and shall provide materials as evidence. The liquidation group shall carry out registration of creditors' rights.

Article 180.	During the liquidation period, the liquidation group shall exercise the following functions and powers:

	(1)	to sort out the Company's assets and prepare a balance sheet and an inventory of assets respectively;

	(2)	to send notices to creditors or notify them by public notice;

	(3)	to dispose of and liquidate any relevant unfinished business matters of the Company;

	(4)	to pay all outstanding taxes;

	(5)	to settle claims and debts;

	(6)	to deal with the assets remaining after the Company's debts have been repaid;

	(7)	to represent the Company in any civil litigation proceedings.

Article 181.	After sorting out the Company's assets and the preparation of the balance sheet and an inventory of assets, the liquidation group shall formulate a liquidation plan and present it to a Shareholders' general meeting or to the relevant governing authority for confirmation.

	To the extent that the Company is able to repay its debts, it shall, in the following order, pay: the liquidation expenses, wages of staff and workers, labour insurance fees, outstanding taxes, and the Company's debts.

	The assets of the Company remaining after its debts have been repaid in accordance with the provisions of the preceding paragraph shall be distributed to its shareholders according to the proportion of their shareholdings.

	During the liquidation period, the Company shall not commence any new operational activities.

Article 182.	If after putting the Company's assets in order and preparing a balance sheet and an inventory of assets in connection with the liquidation of the Company resulting from dissolution, the liquidation group discovers that the Company's assets are insufficient to repay the Company's debts in full, the liquidation group shall immediately apply to the People's Court for a declaration of insolvency.

Article 183.	After a Company is declared insolvent by a ruling of the People's Court, the liquidation group shall turn over liquidation matters to the People's Court.

	Following the completion of liquidation, the liquidation group shall present a report on liquidation and prepare a statement of the receipts and payments during the period of liquidation and financial books and records which shall be audited by Chinese registered accountants and submitted to the Shareholders' general meeting or the relevant governing authority for confirmation.

	The liquidation group shall also within thirty (30) days after such confirmation, submit the documents referred to in the preceding paragraph to the companies registration authority and apply for cancellation of registration of the Company, and publish a public notice relating to the termination of the Company.

CHAPTER 22: PROCEDURES FOR AMENDMENT OF THE

COMPANY'S ARTICLES OF ASSOCIATION

Article 184.	The Company may amend its articles of association in accordance with the requirements of laws, administrative regulations and the Company's articles of association.

Article 185.	The amendments to the Company's articles of association involving the contents of the Mandatory Provisions shall become effective upon approvals by the Securities Committee of the State Council and the companies approving department authorized by the State Council. If there is any change relating to the registered particulars of the Company, application shall be made for registration of the changes in accordance with law.

CHAPTER 23: SETTLEMENT OF DISPUTES

Article 186.	The Company shall act according to the following principles to settle disputes:

	(1)	Whenever any disputes or claims arising between: holders of the Overseas-Listed Foreign-Invested Shares and the Company; holders of the Overseas-Listed Foreign-Invested Shares and the Company's directors, supervisors, general manager, deputy general managers or other senior administrative officers; or holders of the Overseas-Listed Foreign-Invested Shares and holders of Domestic-Invested Shares, based on these articles of association or any rights or obligations conferred or imposed by the Company Law or any other relevant PRC laws and administrative regulations concerning the affairs of the Company, such disputes or claims shall be referred by the relevant parties to arbitration.

		Where a dispute or claim of rights referred to in the preceding paragraph is referred to arbitration, the entire claim or dispute must be referred to arbitration, and all persons who have a cause of action based on the same facts giving rise to the dispute or claim or whose participation is necessary for the resolution of such dispute or claim, shall abide by the arbitration provided that such person is the Company or the Company's shareholder, director, supervisor, general manager, deputy general manager or other senior administrative officer. Disputes in relation to the definition of shareholders and disputes in relation to the shareholders' register need not be resolved by arbitration.

	(2)	A claimant may elect arbitration at either the China International Economic and Trade Arbitration Commission in accordance with its Rules or the Hong Kong International Arbitration Centre in accordance with its Securities Arbitration Rules. Once a claimant refers a dispute or claim to arbitration, the other party must submit to the arbitral body elected by the claimant.

		If a claimant elects arbitration at Hong Kong International Arbitration Centre, any party to the dispute or claim may apply for a hearing to take place in Shenzhen in accordance with the Securities Arbitration Rules of the Hong Kong International Arbitration Centre.

	(3)	If any disputes or claims of rights are settled by way of arbitration in accordance with sub-paragraph (1) of this Article, the laws of the People's Republic of China shall apply, save as otherwise provided in laws and administrative regulations.

	(4)	The award of an arbitration body shall be final and conclusive and binding on all parties.

CHAPTER 24: SUPPLEMENTARY

Article 187.	Any reference in these articles of association to the publication of public notices in a newspaper shall be interpreted as requiring publication in such newspaper as designated or required in accordance with relevant laws, administrative regulations or rules and, if the relevant notice is required to be given to holder of H Shares, as also requiring the relevant notice to be published in such newspapers as may be required by the term "published in the newspapers" (as defined in the Rules Governing the Listing of Securities on the Stock Exchange).

Article 188.	In these articles of association, the meaning of an accountants firm is the same as that of "auditors".

China Eastern Airlines Corporation Limited		The People’s Republic of China
(Translation of Registrant’s Name Into English)		(Jurisdiction of Incorporation or Organization)

		Name of Each Exchange
Title of Each Class		on Which Registered

American Depositary Shares		The New York Stock Exchange
Ordinary H Shares, par value RMB1.00 per share		The New York Stock Exchange*

Capacity measurements

ATK (available tonne-kilometers)	the number of tonnes of capacity available for the carriage of revenue load (passengers and cargo) multiplied by the distance flown

ASK (available seat kilometers)	the number of seats made available for sale multiplied by the distance flown

AFTK (available freight tonne-kilometers)	the number of tonnes of capacity available for the carriage of cargo and mail multiplied by the distance flown

Traffic measurements

revenue passenger-kilometers or RPK	the number of passengers carried multiplied by the distance flown

revenue freight tonne-kilometers or RFTK	cargo and mail load in tonnes multiplied by the distance flown

revenue passenger tonne-kilometers or RPTK	passenger load in tonnes multiplied by the distance flown

revenue tonne-kilometers or RTK	load (passenger and cargo) in tonnes multiplied by the distance flown

Load factors

overall load factor	tonne-kilometers expressed as a percentage of ATK

passenger load factor	passenger-kilometers expressed as a percentage of ASK

break-even load factor	the load factor required to equate traffic revenue with our operating costs assuming that our total operating surplus is attributable to scheduled traffic operations

Yield and cost measurements

passenger yield (revenue per passenger-kilometer)	revenue from passenger operations divided by passenger-kilometers

cargo yield (revenue per cargo tonne-kilometer)	revenue from cargo operations divided by cargo tonne-kilometers

average yield (revenue per total tonne-kilometer)	revenue from airline operations divided by tonne-kilometers

unit cost	operating expenses divided by ATK

tonne	a metric ton, equivalent to 2,204.6 lbs

	Year Ended December 31,
	2003			2004			2005			2006			2007
	RMB			RMB			RMB			RMB			RMB
	(in millions, except per share or per ADS data)

Consolidated Income Statements Data:
IFRS :
Revenues		14,470			21,386			27,454			37,634			42,521
Other operating income		50			85			245			424			605
Operating expenses		(14,454	)		(20,239	)		(27,685	)		(41,050	)		(43,087	)
Operating profit (loss)		66			1,232			14			(2,991	)		39
Finance costs, net		(775	)		(641	)		(578	)		(757	)		141
Profit (loss) before income tax		(741	)		586			(577	)		(3,616	)		268
Profit (loss) for the year attribute to equity holders of the Company		(1,097	)		321			(467	)		(3,313	)		269
Basic and fully diluted earnings (loss) per share		(0.23	)		0.07			(0.10	)		(0.68	)		0.06
Basic and fully diluted earnings (loss) per ADS		(22.54	)		6.59			(9.60	)		(68.07	)		5.52

	Year Ended December 31,
	2003			2004			2005			2006			2007
	RMB			RMB			RMB			RMB			RMB
	(in millions)

Balance Sheet Data:
IFRS :
Cash and cash equivalents		1,583			2,114			1,864			1,987			1,655
Net current liabilities		(9,982	)		(12,491	)		(25,572	)		(24,616	)		(26,074	)
Non-current assets		33,039			36,812			52,882			52,152			58,227
Long term borrowing, including current portion		(11,223	)		(10,736	)		(12,659	)		(14,932	)		(14,675	)
Obligations under finance lease, including current portion		(7,101	)		(8,662	)		(10,588	)		(11,949	)		(16,452	)
Total share capital and reserves		6,175			6,481			6,096			2,815			3,028

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2007

		Page No.

	PART I

Item 1.	Identity of Directors, Senior Management and Advisers	1
Item 2.	Offer Statistics and Expected Timetable	1
Item 3.	Key Information	1
Item 4.	Information on the Company	9
Item 4A.	Unresolved Staff Comments	30
Item 5.	Operating and Financial Review and Prospects	30
Item 6.	Directors, Senior Management and Employees	47
Item 7.	Major Shareholders and Related Party Transactions	54
Item 8.	Financial Information	59
Item 9.	The Offer and Listing	60
Item 10.	Additional Information	61
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	77
Item 12.	Description of Securities Other than Equity Securities	78

	PART II

Item 13.	Defaults, Dividend Arrearages and Delinquencies	78
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	78
Item 15.	Controls and Procedures	78
Item 16A.	Audit Committee Financial Expert	80
Item 16B.	Code of Ethics	80
Item 16C.	Principal Accountant Fees and Services	81
Item 16D.	Exemptions from the Listing Standards for Audit Committees	81
Item 16E.	Purchase of Equity Securities by the Issuer and Affiliated Purchasers	81

	PART III

Item 17.	Financial Statements	81
Item 18.	Financial Statements	82
Item 19.	Exhibits	82

	RMB per US$1.00				HK$ per US$1.00
	High		Low		High		Low
December 2007		7.4120		7.2946		7.8073		7.7879
January 2008		7.2946		7.1818		7.8107		7.7961
February 2008		7.1973		7.1100		7.8012		7.7807
March 2008		7.1110		7.0105		7.7897		7.7642
April 2008		7.0185		6.9840		7.7963		7.7863
May 2008		7.0000		6.9377		7.8060		7.7931
June 2008 (up to June 18, 2008)		6.9633		6.8821		7.8159		7.8037

	No. of Aircraft Owned and under Finance Leases		No. of Aircraft under Operating Leases		No. of Aircraft Owned and under Finance Leases		No. of Aircraft under Operating Leases		No. of Aircraft Owned and under Finance Leases		No. of Aircraft under Operating Leases		No. of Aircraft Owned and under Finance Leases		No. of Aircraft under Operating Leases		Planned Additions
	2004				2005				2006				2007				2008		2009

A340-600		5		—		5		—		5		—		5		—		—		—
A340-300		5		—		5		—		5		—		5		—		—		—
A330-300		—		—		—		—		—		7		5		7		3		—
A330-200		—		—		—		—		—		3		1		3		1		—
A300-600		7		3		10		3		9		—		8		—		—		—
A310		—		—		3		—		—		—		—		—		—		—
A321		2		—		4		—		6		—		10		—		5		—
A320		25		10		37		26		37		26		39		26		8		10
A319		—		10		—		10		3		10		5		10		—		—
MD-90		9		—		9		—		9		—		9		—		—		—
MD-82		—		3		—		3		—		—		—		—		—		—
B737NG		—		—		—		—		—		—		—		—		—		—
B737-800		—		—		—		3		—		7		—		7		1		3
B737-700		4		7		8		14		14		15		16		15		1		7
B737-300		3		3		13		6		13		10		16		7		—		—
B767-300		—		—		3		—		3		—		3		—		—		—
B787		—		—		—		—		—		—		—		—		—		—
EMB145		—		—		3		—		7		—		10		—		—		—
CRJ-200		—		—		5		—		5		—		5		—		—		—
A300F		—		1		—		2		1		1		2		—		—		—
B747F		—		—		—		2		1		2		2		1		—		—
MD-11F		6		—		6		—		6		—		6		—		—		—
Total	103				180				205					147		76		19		20

	Total Number of Aircraft		Number of Aircraft Owned and under Finance Lease		Aircraft under Operating Lease		Average Number of Seats		Average age (in years) ⁽¹⁾
Jet Passenger Aircraft:
Wide-body:
A340-600		5		5		—		322		4.6
A340-300		5		5		—		289		11.6
A330-300		12		5		7		300		1.6
A330-200		4		1		3		264		1.4
A300-600		8		8		—		269		13.6
B767-300		3		3		—		263		11.7
Narrow-body:
MD-90		9		9		—		157		10.0
A321		10		10		—		185		1.7
A320		65		39		26		158		6.5
A319		15		5		10		122		5.5
Boeing 737-800		7		—		7		158		4.1
Boeing 737-700		31		16		15		122		4.4
Boeing 737-300		23		16		7		138		12.2
EMB 145		10		10		—		50		2.0
CRJ-200		5		5		—		50		6.4
Total Passenger Aircraft:		212		137		75		—		—

Cargo Aircraft:
MD-11F		6		6		—		—		16.0
A300F		2		2		—		—		19.0
B747F		3		2		1		—		1.5
Total Fleet		223		147		76		—		—

	Passenger			Cargo and mail			Unallocated			Total
	RMB			RMB			RMB			RMB
				(in millions)

Traffic revenues		37,537			3,114			—			40,651
Other revenues		1,209			901			208			2,318

Total segment revenue		38,746			4,015			208			42,969
Inter-segment revenue		(349	)		—			(99	)		(448	)

Revenues		38,397			4,015			109			42,521

Operating (loss)/profit - segment results		(182	)		182			39			39
Interest income		2,035			84			1			2,120
Finance costs		(1,800	)		(165	)		(14	)		(1,979	)
Share of results of associates		—			—			58			58
Share of results of jointly controlled entities		—			—			30			30

Profit before income tax		53			101			114			268
Income tax		39			(58	)		(5	)		(24	)

Profit for the year		92			43			109			244

	As of December 31
	2003			2004			2005			2006			2007
	RMB			RMB			RMB			RMB			RMB
	(in millions)
Summary Balance Sheet Data
Cash and cash equivalents		1,583			2,114			1,864			1,987			1,655
Net current liabilities		(9,982	)		(12,491	)		(25,572	)		(24,616	)		(26,074	)
Non-current assets		33,039			36,812			52,882			52,152			58,227
Long term borrowings, including current portion		(11,223	)		(10,736	)		(12,659	)		(14,932	)		(14,675	)
Obligations under finance leases, including current portion		(7,101	)		(8,662	)		(10,588	)		(11,949	)		(16,452	)
Total share capital and reserves		6,175			6,481			6,096			2,815			3,028

	Payments Due by Period
	(RMB millions)
Contractual Obligations	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years

Long-Term Debt		14,675		3,305		5,927		4,217		1,226
Capital Leases		20,608		3,357		2,206		5,714		9,331
Operating Leases		15,400		2,614		2,382		5,033		5,371
Unconditional Purchase Obligations		50,853		17,127		15,057		18,669		–
Other Long-term Obligations ⁽¹⁾		864		–		–		–		–
Post-retirement Benefit Obligations ⁽¹⁾		1,405		–		–		–		–
Deferred Tax Liabilities		50		–		–		–		–
Short-term Bank Loans		15,189		15,189		–		–		–
Interest Obligations		7,389		2,113		1,111		2,336		1,829
Under Finance Lease		4,156		811		639		1,509		1,197
Under Bank Loans		3,233		1,302		472		827		632
Fixed Rate		1,639		869		193		288		289
Variable Rate ⁽²⁾		1,594		433		279		539		343
Total		126,433		43,705		26,683		35,969		17,757

	Total Amounts Committed		Amount of Commitment Expiration Per Period (RMB millions)
Other Commercial Commitments	(RMB millions)		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years

Line of Credit		28,478		1,233		27,245		—		—
Standby Letters of Credit		—		—		—		—		—
Guarantees		—		—		—		—		—
Standby Repurchase Obligations		—		—		—		—		—
Other Commercial Commitments		—		—		—		—		—
Total		28,478		1,233		27,245

		Page
CONSOLIDATED FINANCIAL STATEMENTS OF CHINA EASTERN AIRLINES CORPORATION LIMITED
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Income Statements for each of the three years in the period ended December 31, 2007		F-2
Consolidated Balance Sheets as of December 31, 2006 and 2007		F-3
Consolidated Cash flow Statements of Cash Flows for each of the three years in the period ended December 31, 2007		F-5
Consolidated Statements of Changes in Equity for each of the three years in the period ended December 31, 2007		F-7
Notes to the Consolidated Financial Statements		F-8

	Year Ended December 31,
	2003		2004		2005		2006		2007
Selected Airline Operating Data:
Capacity:
ATK (millions)		4,774.5		7,071.2		8,751.5		11,065.6		12,085.9
ASK (millions)		29,780.0		41,599.1		52,427.9		70,468.3		77,717.2
AFTK (millions)		2,094.3		3,327.3		4,033.0		4,723.4		5,091.3
Traffic:
Revenue passenger-kilometers (millions)		18,002.7		27,580.8		36,380.6		50,271.9		57,182.6
Revenue tonne-kilometers (millions)		2,907.7		4,340.7		5,395.2		6,931.0		7,713.9
Revenue passenger tonne-kilometers (millions)		1,611.1		2,466.0		3,243.7		4,487.0		5,099.8
Revenue freight tonne-kilometers (millions)		1,296.6		1,874.7		2,151.5		2,444.0		2,614.1
Kilometers flown (millions)		176.5		242.8		287.7		434.6		478.1
Hours flown (thousands)		259.4		360.4		467.8		678.3		756.0
Number of passengers carried (thousands)		12,040.2		17,711.0		24,290.5		35,039.7		39,161.4
Weight of cargo carried (millions of kilograms)		459.8		663.6		775.5		893.2		940.1

	Year Ended December 31,
	2003		2004		2005		2006		2007

Average distance flown (kilometers per passenger)		1,495.2		1,557.3		1,497.7		1,434.7		1,460.2
Load Factor:
Overall load factor (%)		60.9		61.4		61.7		62.6		63.8
Passenger load factor (%)		60.5		66.3		69.4		71.3		73.6
Break-even load factor (based on ATK) (%)		63.6		62.2		66.0		71.1		67.7
Yield and Cost Statistics (RMB):
Passenger yield (passenger revenue/ passenger-kilometers)		0.57		0.56		0.57		0.61		0.61
Cargo yield (cargo revenue/cargo tonne-kilometers)		2.46		2.36		2.31		2.30		2.10
Average yield (passenger and cargo revenue/tonne-kilometers)		4.62		4.60		4.79		5.20		5.27
Unit cost (operating expenses/ATK)		2.94		2.86		3.16		3.70		3.57

			Year ended December 31,
			2005			2006			2007
	Note		RMB’000			RMB’000			RMB’000

Revenues		5		27,454,443			37,634,132			42,521,226
Other operating income, net		6		245,279			424,265			604,713
Operating expenses
Aircraft fuel				(8,888,873	)		(13,608,793	)		(15,117,147	)
Take-off and landing charges				(3,718,846	)		(4,989,382	)		(5,174,183	)
Depreciation and amortization				(3,936,941	)		(4,597,178	)		(4,811,916	)
Wages, salaries and benefits		8		(2,388,837	)		(3,538,082	)		(4,327,397	)
Aircraft maintenance				(1,383,989	)		(2,647,340	)		(2,392,039	)
Food and beverages				(976,787	)		(1,188,016	)		(1,235,578	)
Aircraft operating lease rentals				(1,785,615	)		(2,954,751	)		(2,850,873	)
Other operating lease rentals				(212,027	)		(276,715	)		(292,844	)
Selling and marketing expenses				(1,261,999	)		(1,734,987	)		(1,805,342	)
Civil aviation infrastructure levies				(466,191	)		(696,428	)		(781,613	)
Ground services and other charges				(115,516	)		(162,104	)		(224,466	)
Office, administrative and other expenses				(2,549,853	)		(3,620,718	)		(3,943,083	)
Deficits on revaluation/impairment loss		17,37		-			(1,035,343	)		(130,921	)
Total operating expenses				(27,685,474	)		(41,049,837	)		(43,087,402	)
Operating profit/(loss)		9		14,248			(2,991,440	)		38,537
Finance income		10		543,340			1,008,563			2,119,881
Finance costs		11		(1,121,690	)		(1,765,981	)		(1,978,550	)
Share of results of associates		20		(9,030	)		103,566			58,312
Share of results of jointly controlled entities		21		(4,300	)		29,595			30,086
Profit/(loss) before income tax				(577,432	)		(3,615,697	)		268,266
Taxation		12(a )		138,704			162,932			(23,763	)
Profit/(loss) for the year				(438,728	)		(3,452,765	)		244,503
Attributable to:
Equity holders of the Company				(467,307	)		(3,313,425	)		268,896
Minority interests				28,579			(139,340	)		(24,393	)
				(438,728	)		(3,452,765	)		244,503
Earning/(loss) per share attributable to the equity holders of the Company during the year
– basic and diluted		15		RMB(0.10	)		RMB (0.68	)		RMB 0.06

			December 31,
			2006			2007
	Note		RMB’000			RMB’000

Non-current assets

Intangible assets		16		1,337,554			1,244,706
Property, plant and equipment		17		40,050,466			47,548,204
Lease prepayments		18		1,054,362			967,497
Advanced payments on acquisition of aircraft		19		7,668,708			6,695,573
Investments in associates		20		623,390			601,119
Investments in jointly controlled entities		21		115,540			336,966
Available-for-sale financial assets				47,554			53,236
Other long-term assets		22		1,099,265			660,751
Deferred tax assets		12		82,146			113,211
Derivative assets		34		73,269			6,077
				52,152,254			58,227,340
Current assets

Flight equipment spare parts				1,198,642			1,124,936
Trade receivables and notes receivable		23		1,719,782			2,096,007
Amounts due from related companies		40		352,719			65,455
Prepayments, deposits and other receivables		24		2,759,065			2,555,649
Cash and cash equivalents		25		1,987,486			1,655,244
Derivative assets		34		113,532			89,470
Non-current assets held for sale		37		882,426			2,262,058
				9,013,652			9,848,819
Current liabilities

Sales in advance of carriage				891,659			1,211,209
Trade payables and notes payable		26		5,026,764			3,137,880
Amounts due to related companies		40		348,477			671,593
Other payables and accrued expenses		27		7,873,603			9,624,491
Current portion of obligations under finance leases		28		2,803,956			2,545,223
Current portion of borrowings		29		16,016,327			18,494,521
Income tax payable				80,483			90,867
Current portion of provision for aircraft overhaul expenses		30		20,900			-
Derivative liabilities		34		124,722			20,238
Liabilities directly associated with non-current assets held for sale		37		442,935			127,239
				33,629,826			35,923,261
Net current liabilities				(24,616,174	)		(26,074,442	)
Total assets less current liabilities				27,536,080			32,152,898

	Attributable to equity holders of the Company
	Share capital		Other reserves			Accumulated losses			Subtotal			Minority interests			Total equity
	RMB’000		RMB’000			RMB’000			RMB’000			RMB’000			RMB’000

Balance at January 1, 2005		4,866,950		1,189,867			466,768			6,523,585			820,835			7,344,420
Cash flow hedges, net of tax		-		136,587			-			136,587			-			136,587
Dividend relating to 2004		-		(97,339	)		-			(97,339	)		-			(97,339	)
Dividend paid to minority interest in subsidiaries		-		-			-			-			(90,000	)		(90,000	)
Loss for the year		-		-			(467,307	)		(467,307	)		28,579			(438,728	)
Contribution from minority interest in subsidiaries		-		-			-			-			63,063			63,063
Balance at December 31, 2005		4,866,950		1,229,115			(539	)		6,095,526			822,477			6,918,003

Balance at January 1, 2006		4,866,950		1,229,115			(539	)		6,095,526			822,477			6,918,003
Cash flow hedges, net of tax		-		8,441			-			8,441			-			8,441
Revaluation reserve, net of tax, arising from the acquisition of a controlling interest in an associate		-		24,355			-			24,355			-			24,355
Dividend paid to minority interests in subsidiaries		-		-			-			-			(42,892	)		(42,892	)
Loss for the year		-		-			(3,313,425	)		(3,313,425	)		(139,340	)		(3,452,765	)
Additions through acquisitions of subsidiaries		-		-			-			-			21,501			21,501
Transfer to other reserve		-		20,966			(20,966	)		-			-			-
Balance at December 31, 2006		4,866,950		1,282,877			(3,334,930	)		2,814,897			661,746			3,476,643

Balance at January 1, 2007		4,866,950		1,282,877			(3,334,930	)		2,814,897			661,746			3,476,643
Cash flow hedges, net of tax				(78,197	)		-			(78,197	)		-			(78,197	)
Dividend paid to minority interest in subsidiaries		-		-			-			-			(46,400	)		(46,400	)
Profit for the year		-		-			268,896			268,896			(24,393	)		244,503
Revaluation of available for sale investments in associates		-		22,167			-			22,167			-			22,167
Disposal of a subsidiary		-		-			-			-			(5,987	)		(5,987	)
Adjustment to statutory and discretionary reserves (Note 36)		-		(428,808	)		428,808			-			-			-
Balance at December 31, 2007		4,866,950		798,039			(2,637,226	)		3,027,763			584,966			3,612,729

Aircraft, engines and flight equipment	10 to 20 years
Buildings	15 to 35 years
Other property, plant and equipment	5 to 20 years

	2006									2007
	USD			Euro			JPY			USD			Euro			JPY
	RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000
Trade and other receivables		712,769			38,698			212,987			1,019,596			54,185			420,927
Cash and cash equivalents		435,944			66,454			68,950			736,951			92,205			70,996
Trade and other payables		(315,560	)		(955	)		(170	)		(317,867	)		(6,017	)		(16	)
Obligation under finance leases		(9,733,992	)		-			(1,615,949	)		(15,417,522	)		-			(1,034,688	)
Borrowings		(16,698,321	)		(100,000	)		-			(17,196,836	)		(130,145	)		-
Currency derivatives at notional value		259,069			-			-			241,052			-			-
Net balance sheet exposure		(25,340,091	)		4,197			(1,334,182	)		(30,934,626	)		10,228			(542,781	)

	2006					2007
	Effect on profit and loss			Effect on other components of equity		Effect on profit and loss			Effect on other components of equity
	RMB’000			RMB’000		RMB’000			RMB’000
US dollars		1,259,358			9,760		1,555,851			1,228

Euro		(210	)		-		(511	)		-

Japanese Yen		66,709			-		27,139			-

	2006								2007
	Increase /(decrease) in interest rates			Effect on profit and loss			Effect on other components of equity		Increase /(decrease) in interest rates			Effect on profit and loss			Effect on other components of equity
				RMB’000			RMB’000					RMB’000			RMB’000
Floating rate instruments		0.25	%		(36,086	)		1,227		0.25	%		(57,681	)		27,872

	2006			2007
	Effect on profit and loss			Effect on profit and loss
	RMB’000			RMB’000
Net increase in fuel price		17,960			8,766
Net decrease in fuel price		(45,290	)		(17,531	)

	Less than 1 year		Between 1 and 2 years		Between 2 and 5 years		Over 5 years
	RMB’000		RMB’000		RMB’000		RMB’000
At December 31, 2006
Bank borrowings		16,016,327		3,053,315		7,560,389		1,477,709
Derivative financial instruments		124,722		13,006		1,090		-
Obligations under finance leases		2,803,956		1,940,937		2,602,151		4,505,554
Trade and other payables		12,137,307		-		448,176		314,884
Total		31,082,312		5,007,258		10,611,806		6,298,147

At December 31, 2007
Borrowings		18,494,521		5,927,098		4,216,517		1,225,692
Derivative financial instruments		20,238		441		5,120		15,997
Obligations under finance leases		2,545,223		1,567,253		4,205,352		8,134,382
Trade and other payables		12,108,423		-		339,064		314,884
Total		33,168,405		7,494,792		8,766,053		9,690,955

	2006			2007
Total borrowings		28,107,740			29,863,828
Less: Cash and cash equivalents		(1,987,486	)		(1,655,244	)
Net debt		26,120,254			28,208,584
Total equity		2,814,897			3,027,763
Total capital		28,935,151			31,236,347

Gearing ratio		0.90			0.90

	Year ended December 31
	2005			2006			2007
	RMB’000			RMB’000			RMB’000

Revenues
Traffic revenues
– Passenger		21,367,747			31,121,718			36,064,642
– Cargo and mail		5,087,244			5,776,671			5,633,117
Ground service income		806,755			893,960			1,001,809
Cargo handling income		292,488			289,530			364,638
Commission income		185,827			125,576			156,713
Rental income from operating subleases of aircraft		183,260			-			-
Others		198,175			403,469			393,166
		28,121,496			38,610,924			43,614,085
Less: Business tax (Note)		(667,053	)		(976,792	)		(1,092,859	)
		27,454,443			37,634,132			42,521,226

	Passenger			Cargo and logistics			Unallocated			Total
	RMB’000			RMB’000			RMB’000			RMB’000

Traffic revenues		37,537,460			3,113,488			-			40,650,948
Other revenues		1,208,760			900,529			208,456			2,317,745

Total segment revenue		38,746,220			4,014,017			208,456			42,968,693
Inter-segment revenue		(348,643	)		-			(98,824	)		(447,467	)

Revenues		38,397,577			4,014,017			109,632			42,521,226

Operating (loss)/profit – segment results		(182,147	)		181,823			38,861			38,537
Finance income		2,034,611			84,481			789			2,119,881
Finance costs		(1,799,454	)		(164,685	)		(14,411	)		(1,978,550	)
Share of results of associates		-			-			58,312			58,312
Share of results of jointly controlled entities		-			-			30,086			30,086

Profit before income tax		53,010			101,619			113,637			268,266
Income tax		38,835			(58,123	)		(4,475	)		(23,763	)

Profit for the year		91,845			43,496			109,162			244,503

	December 31
	2006			2007
	RMB’000			RMB’000

Deferred tax assets
– Deferred tax asset to be utilized after 12 months		81,010			111,874
– Deferred tax asset to be utilized within 12 months		1,136			1,337
		82,146			113,211
Deferred tax liabilities
– Deferred tax liability to be realized after 12 months		(68,459	)		(50,369	)
– Deferred tax liability to be realized within 12 months		-			-
		(68,459	)		(50,369	)
Deferred tax assets/(liabilities), net		13,687			62,842

	Goodwill (Note (a))		Sponsorship fee (Note (b))		Computer software			Total
	RMB’000		RMB’000		RMB’000			RMB’000

Cost
At January 1, 2006		688,311		-		84,964			773,275
Additions through the acquisition of a controlling interest in an associate		304,832		-		28			304,860
Other additions		-		320,000		33,617			353,617
Disposals		-		-		(36	)		(36	)
At December 31, 2006		993,143		320,000		118,573			1,431,716

At January 1, 2007		993,143		320,000		118,573			1,431,716
Other additions		-		-		15,283			15,283
Disposals		-		-		(1,715	)		(1,715	)
At December 31, 2007		993,143		320,000		132,141			1,445,284

Accumulated amortization
At January 1, 2006		-		-		21,432			21,432
Charge for the year		-		52,870		19,867			72,737
Disposals		-		-		(7	)		(7	)
At December 31, 2006		-		52,870		41,292			94,162

At January 1, 2007		-		52,870		41,292			94,162
Charge for the year		-		82,194		24,509			106,703
Disposals		-		-		(287	)		(287	)
At December 31, 2007		-		135,064		65,514			200,578

Net book amount
At December 31, 2006		993,143		267,130		77,281			1,337,554

At December 31, 2007		993,143		184,936		66,627			1,244,706

	Aircraft, engines and flight equipment
	Owned			Held under finance lesses			Buildings			Other property, plant and equipment			Construction in progress			Total
	RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000

Valuation or cost
At January 1, 2006		33,254,963			17,791,313			2,424,989			2,984,531			240,884			56,696,680
Reclassification upon purchase		2,011,940			(2,011,940	)		-			-			-			-
Transfers from construction in progress		-			-			52,832			242,669			(295,501	)		-
Transfers from advanced payments on acquisition of aircraft (Note 19)		3,797,430			2,591,545			-			-			-			6,388,975
Additions through the acquisitions of controlling interests in associates		78,291			305,663			303,064			33,292			2,447			722,757
Other additions		5,612,187			2,724,601			-			384,743			297,979			9,019,510
Valuation deficit		(939,655	)		(95,688	)		-			-			-			(1,035,343	)
Transfers to non-current assets held for sale (Note (b) & 37)		(2,108,763	)		(202,898	)		-			-			-			(2,311,661	)
Disposals by sale and leaseback		(7,940,164	)		-			-			-			-			(7,940,164	)
Other disposals		(314,615	)		-			(41,639	)		(131,322	)		-			(487,576	)
At December 31, 2006		33,451,614			21,102,596			2,739,246			3,513,913			245,809			61,053,178

Accumulated depreciation
At January 1, 2006		11,880,147			4,426,004			479,334			1,386,327			-			18,171,812
Reclassification upon purchase		940,464			(940,464	)		-			-			-			-
Charge for the year		2,600,331			1,418,781			106,441			368,019			-			4,493,572
Transfers to non-current assets held for sale (Note (b) and 37)		(1,346,228	)		(121,049	)		-			-			-			(1,467,277	)
Disposals		(97,146	)		-			(3,703	)		(94,546	)		-			(195,395	)
At December 31, 2006		13,977,568			4,783,272			582,072			1,659,800			-			21,002,712

Net book amount
At December 31, 2007		19,474,046			16,319,324			2,157,174			1,854,113			245,809			40,050,466
At January 1, 2007		21,374,816			13,365,309			1,945,655			1,598,204			240,884			38,524,868

	Aircraft, engines and flight equipment
	Owned			Held under finance lesses			Buildings			Other property, plant and equipment			Construction in progress			Total
	RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000

Valuation or cost
At January 1, 2007		33,451,614			21,102,596			2,739,246			3,513,913			245,809			61,053,178
Reclassification upon purchase		3,756,521			(3,756,521	)		-			-			-			-
Transfers from construction in progress		-			-			84,402			91,269			(175,671	)		-
Transfers from advanced payments on acquisition of aircraft (Note 19)		189,402			4,920,311			-			-			-			5,109,713
Other additions		1,792,499			6,026,343			51,276			380,211			406,350			8,656,679
Disposals to a jointly controlled entity (Note 21)		-			-			(28,489	)		(2,773	)		-			(31,262	)
Transfers to non-current assets held for sale (Note (b) and 37)		(2,945,092	)		-			-			-			-			(2,945,092	)
Other disposals		(788,727	)		(237,973	)		(33,781	)		(99,386	)		-			(1,159,867	)
At December 31, 2007		35,456,217			28,054,756			2,812,654			3,883,234			476,488			70,683,349

Accumulated depreciation
At January 1, 2007		13,977,568			4,783,272			582,072			1,659,800			-			21,002,712
Reclassification upon purchase		1,768,786			(1,768,786	)		-			-			-			-
Charge for the year		2,268,230			1,913,831			103,622			394,683			-			4,680,366
Disposals to a jointly controlled entity (Note 21)		-			-			(5,562	)		(1,426	)		-			(6,988	)
Transfers to non-current assets held for sale (Note (b) and 37)		(1,444,395	)		-			-			-			-			(1,444,395	)
Other disposals		(786,032	)		(237,973	)		(6,240	)		(66,305	)		-			(1,096,550	)
At December 31, 2007		15,784,157			4,690,344			673,892			1,986,752			-			23,135,145

Net book amount
At December 31, 2007		19,672,060			23,364,412			2,138,762			1,896,482			476,488			47,548,204
At January 1, 2007		19,474,046			16,319,324			2,157,174			1,854,113			245,809			40,050,466

Company	Place and date of establishment		Paid-up capital				Attributable Equity interest						Principal activities
			2006		2007		2006			2007
			RMB’000		RMB’000

Eastern Air Group Finance Co., Ltd. (“EAGF”)		PRC December 6, 1995		400,000		400,000		25	%		25	%		Provision of financial services to group companies of CEA Holding

China Eastern Air Catering Investment Co., Ltd.		PRC November 17, 2003		350,000		350,000		45	%		45	%		Provision of air catering services

Jiangsu Huayu General Aviation Co., Ltd.		PRC December 1, 2004		110,000		110,000		27	%		27	%		Provision of aviation support services

Eastern Aviation Import & Export Co., Ltd (“EAIEC”)		PRC June 9, 1993		80,000		80,000		45	%		45	%		Provision of aviation equipment, spare parts and tools trading

Collins Aviation Maintenance Service Shanghai Ltd.		PRC September 27, 2002		57,980		57,980		35	%		35	%		Provision of airline electronic product maintenance services

Shanghai Dongmei Aviation Travel Co., Ltd. (“SDATC”)		PRC October 17, 2004		31,000		31,000		27	%		27	%		Provision of traveling and accommodation agency services

Shanghai Hongpu Civil Airport Communication Co., Ltd.		PRC October 18, 2002		25,000		25,000		30	%		30	%		Provision of cable and wireless communication services

Eastern Aviation Advertising Service Co., Ltd.		PRC 4 March 1986		10,320		10,320		45	%		45	%		Provision of aviation advertising agency services

Qingdao Liuting International Airport Co., Ltd. (Note)		PRC December 1, 2000		450,000		-		25	%		-			Provision of airport operation services

	Assets		Liabilities		Revenues		Profit/(loss)
	RMB’000		RMB’000		RMB’000		RMB’000

2006		1,728,739		1,105,449		1,221,191		103,566
2007		2,194,818		1,593,699		919,495		58,312

	December 31,2006									December 31,2007
	Minimum lease payments			Interest			Present value of minimum lease payments			Minimum lease payments			Interest			Present value of minimum lease payments
	RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000
Within one year		3,447,738			546,904			2,900,834			3,356,665			811,442			2,545,223
In the second year		2,371,076			430,139			1,940,937			2,206,135			638,882			1,567,253
In the third to fifth year inclusive		3,514,758			912,607			2,602,151			5,714,466			1,509,114			4,205,352
After the fifth year		5,173,152			667,598			4,505,554			9,331,048			1,196,666			8,134,382
Total		14,506,724			2,557,248			11,949,476			20,608,314			4,156,104			16,452,210
Less: - amount repayable within one year		(3,348,020	)		(544,064	)		(2,803,956	)		(3,356,665	)		(811,442	)		(2,545,223	)
- amount reclassified to non-current liabilities held for sale		(99,718	)		(2,840	)		(96,878	)		-			-			-
Long-term portion		11,058,986			2,010,344			9,048,642			17,251,649			3,344,662			13,906,987

Currency	Interest rate and final maturities	2006	2007
		RMB’000	RMB’000
RMB denominated	Interest rates ranging from 4.52% to 7.64% per annum with final maturities through to 2017.	5,707,500	6,132,551

U.S. dollar denominated	Interest rates ranging from 5.55% to 6.15% per annum with final maturities through to 2019	9,124,607	8,418,967

EURO denominated	Interest rate is 6 months LIBOR +0.6% with final maturity through 2010.	100,000	123,308

Total long-term bank borrowings		14,932,107	14,674,826