---

REPRESENTING 941,386,000 SHARES

 

PROSPECTUS SUMMARY

      Because this is only a summary, it does not contain all the information that may be important to you. You should read this entire document, including “Risk Factors” and our consolidated financial statements and unaudited pro forma consolidated financial statements and notes to those statements included in this document, before making an investment decision. Unless the context otherwise indicates, in the following summary financial data for periods prior to July 1, 2004 and as of any date prior to June 30, 2004 include financial data related to businesses retained by China Netcom Group as part of Our Included Businesses, as that term is defined and explained in “Restructuring”. See “Restructuring” for further information.

Our Company

      We are a leading fixed-line telecommunications operator in China and a leading international data communications operator in the Asia-Pacific region. Our northern service region in China consists of Beijing Municipality, Tianjin Municipality, Hebei Province, Henan Province, Shandong Province and Liaoning Province. Our southern service region in China consists of Shanghai Municipality and Guangdong Province. We are the dominant provider of fixed-line telephone services, broadband and other Internet-related services, and business and data communications services in our northern service region in China. We primarily target business and residential customers in selected high-density areas in our southern service region in China. We are also the only telecommunications company in China that operates an extensive network and offers international data services in the Asia-Pacific region.

      We offer a full range of fixed-line telecommunications services, including:

	•	fixed-line telephone services (including Personal Handyphone System, or PHS, service), consisting of local, domestic long distance and international long distance services;
	•	broadband and other Internet-related services, including DSL and LAN services;
	•	business and data communications services, including managed data and leased line services; and
	•	international telecommunications services, including international voice, managed data and leased line services.

      We own and operate extensive local networks in our northern service region, including the “last mile” infrastructure, which is costly for our competitors to replicate. We also own and operate limited local networks in selected major cities in our southern service region. We operate a high-speed and reliable intra- and inter-provincial transport network in our northern and southern service regions. We also operate an advanced fiber-optic network connecting major cities in the Asia-Pacific region. This network infrastructure enables us to provide a wide range of fixed-line telecommunications services.

      We have an extensive customer base in our northern service region in China, with a total of 77.6 million fixed-line subscribers as of June 30, 2004. As of June 30, 2004, our market share in our northern service region in China was 94.6% in terms of numbers of fixed-line subscribers. We are capitalizing on this large customer base and extensive fixed-line network to develop our fast growing broadband and PHS services in China. The number of our broadband subscribers grew from approximately 116,900 at the end of 2001 to approximately 4.2 million as of June 30, 2004. Our broadband market share in our northern service region increased from 75.3% at the end of 2001 to 92.9% as of June 30, 2004. However, we are facing increasing competition in many aspects of our business, which has reduced our average realized tariffs, usage volume per subscriber and revenue growth rate. Our regional connectivity, combined with our dominant position in Beijing, which serves as headquarters for many large Chinese corporations and the China operations of many large multinationals, provides us with a strong base for further expanding our corporate and international telecommunications businesses.

Our Restructuring

      Our current principal operating subsidiary, China Netcom (Group) Company Limited, or CNC China, was incorporated as a domestic limited liability company in August 1999 as a facilities-based

      In November 2001, China’s State Council approved a comprehensive restructuring plan relating to the fixed-line telecommunications sector. Pursuant to the restructuring plan, the telecommunications assets of the former China Telecommunications Group Corporation, or China Telecom Group, in ten northern provinces in China were combined with China Netcom (Holdings) Company Limited, or China Netcom Holdings and Jitong Communications Company Limited to form China Network Communications Group Corporation, or China Netcom Group. China Telecom Group retained the telecommunications assets in the remaining 21 provinces. Under the restructuring plan, both China Netcom Group and China Telecom Group were permitted to operate nationwide fixed-line telecommunications networks and provide nationwide fixed-line telecommunications services.

      As a result of a series of asset and share transfers and ownership restructurings in anticipation of the global offering, our business is now comprised of China Netcom Group’s and China Netcom Holdings’ former operations in Beijing Municipality, Tianjin Municipality, Hebei Province, Henan Province, Shandong Province, Liaoning Province, Shanghai Municipality and Guangdong Province and their international operations (including most of those of Asia Netcom Corporation Limited, or Asia Netcom).

Relationship with China Netcom Group

      We are a subsidiary of, and are controlled by, China Netcom Group, a wholly state-owned enterprise. Upon completion of the global offering, China Netcom Group will indirectly own 72.3% of our issued share capital (or 70.5% if the underwriters exercise the over-allotment option in full). In addition, a number of our senior management members and directors also serve as officers of China Netcom Group. The PRC government controls China Netcom Group, and exercises control over us through China Netcom Group, as our ultimate controlling shareholder primarily by appointing members of our board, subject to our articles of association.

      Following our restructuring, China Netcom Group has retained the ownership, and continues to control most aspects of the operation, of the fixed-line telecommunications networks outside our northern and southern service regions and provides telecommunications services using those networks. In connection with our restructuring, we have entered into various agreements with China Netcom Group relating to the provision of ongoing telecommunications and other services, including agreements for interconnection settlement, engineering and information technology services, materials procurement, telecommunications facilities leasing and property leasing.

General Information

      Our principal executive offices are located at Building C, No. 156 Fuxingmennei Avenue, Xicheng District, Beijing, PRC 100031. Our telephone number is (86-10) 6642-9253.

THE GLOBAL OFFERING

      Unless otherwise indicated, information in this document assumes that the underwriters will not exercise the over-allotment option to purchase additional ADSs. See “Underwriting”.

Offering by us (including 104,598,000 shares offered to the public in Hong Kong)		950,895,000 shares.
Offering by the selling shareholders		China Netcom Group Corporation (BVI) Limited; the Chinese Academy of Sciences; Information and Network Center of the State Administration of Radio, Film and Television; China Railways Telecommunications Center; Shanghai Alliance Investment Limited; and Shandong Provincial State-owned Assets Supervision and Administration Commission are selling an aggregate of 95,089,000 shares in the global offering. As a result of the global offering, the selling shareholders’ aggregate ownership interest in us will be reduced from 91.9% to 76.9%, or 75.0% if the underwriters’ over-allotment option is exercised in full.
Global offering		The global offering consists of a U.S. offering, an international offering and a Hong Kong public offering of an aggregate of 1,045,984,000 shares, accounting for approximately 16.2% of the total number of shares outstanding immediately after the completion of the global offering.
U.S. offering		470,693,000 shares in the form of shares or ADSs in a public offering in the United States and on a private placement basis in Canada.
International offering		470,693,000 shares in the form of shares or ADSs offered outside of the United States and Canada, and to professional and institutional investors in Hong Kong.
Hong Kong public offering		104,598,000 shares offered for public subscription in Hong Kong. The Hong Kong public offering is conditional upon the listing committee of the Hong Kong Stock Exchange granting the listing of and permission to trade in the shares offered in the global offering. If the number of shares validly applied for in the Hong Kong public offering represents a multiple of: (1) 15 times or more but less than 50 times, (2) 50 times or more but less than 100 times, or (3) 100 times or more, of the number of shares initially available in such offering, then an additional 209,196,000 shares, 313,794,000 shares or 418,392,000 shares, respectively, will be reallocated to the Hong Kong public offering, such that the additional shares, when aggregated with the shares initially available in the Hong Kong public offering, will represent approximately 30% in the case of (1) above, approximately 40% in the case of (2) above and approximately 50% in the case of (3) above, respectively, of the total number of shares initially available in the global offering, without giving effect to the underwriters’ over-allotment option. In such case, the number of ADSs allocated to the U.S. offering and/or the international offering will be correspondingly reduced in such manner as the joint global coordinators deem appropriate. Any unsold shares in the Hong Kong public offering may be reallocated to the

		U.S. offering and the international offering. The joint global coordinators also have discretion to reallocate additional shares to the Hong Kong public offering from the U.S. offering and/or the international offering.
Joint global coordinators and joint global bookrunners		China International Capital Corporation Limited, Citigroup Global Markets Asia Limited and Goldman Sachs (Asia) L.L.C. (in alphabetical order).
Over-allotment option		We and the selling shareholders have granted an option to the U.S. and international underwriters to purchase an aggregate of                 additional ADSs representing 156,897,000 shares, at the initial public offering price, exercisable in whole or in part by the joint global coordinators on behalf of the U.S. and international underwriters.
Shares		Our ordinary shares, par value US$0.04 per share, which will be listed on the Hong Kong Stock Exchange.
ADSs		Each ADS represents                                 shares. To understand the terms of the ADSs, you should carefully read the section in this document entitled “Description of American Depositary Shares”. We also encourage you to read the deposit agreement, which is on file with the United States Securities and Exchange Commission.
Price per ADS or share in the U.S. and international offerings		The initial public offering price per ADS is expected to be between US$                 and US$                 , equivalent to between HK$                 and HK$                 per share at the exchange rate of HK$                 to US$1.00, the noon buying rate on                  , 2004. The initial public offering price for ADSs in the U.S. and international offerings is payable in U.S. dollars and the initial public offering price for shares in the Hong Kong public offering is payable in Hong Kong dollars. The price per ADS and price per share will include any brokerage fees, Hong Kong Securities and Futures Commission transaction levies, investor compensation levies and Hong Kong Stock Exchange trading fees payable in connection with the initial sale and purchase of the shares and ADSs. These fees and levies will be paid to the relevant authorities or brokers by us and the selling shareholders.
Price per share in the Hong Kong public offering		The initial public offering price per share in the Hong Kong public offering, when increased by a 1% brokerage fee, a 0.005% Hong Kong Securities and Futures Commission transaction levy, a 0.002% investor compensation levy and a 0.005% Hong Kong Stock Exchange trading fee payable by purchasers, is effectively equivalent to the initial public offering price per ADS in the U.S. and international offerings, based on an exchange rate of HK$                 to US$1.00, the noon buying rate on                  , 2004, and adjusted for the ratio of                  shares per ADS.

Shares outstanding immediately after this global offering		shares, including shares represented by ADSs, or                  shares if the underwriters’ over-allotment option is exercised in full.
Timing of global offering		The following is a tentative timetable of key events in the global offering:

		Hong Kong public offering commences		November 4, 2004 (Hong Kong Time)
		Hong Kong public offering closes		November 9, 2004 (Hong Kong Time)
		Pricing of global offering		November 9, 2004 (New York Time)
		Final allocation of shares		November   , 2004 (New York Time)
		Trading of ADSs commences on the New York Stock Exchange		November 16, 2004 (New York Time)
		Trading of shares commences on the Hong Kong Stock Exchange		November 17, 2004 (Hong Kong Time)

Business day gap between pricing and trading of shares		The shares offered in the global offering will not commence trading on the Hong Kong Stock Exchange until all of the conditions contained in the underwriting agreement for the Hong Kong public offering have been satisfied, which is expected to be five Hong Kong business days after the date of pricing of the shares. The ADSs offered in the global offering are expected to commence trading on the New York Stock Exchange on the business day in New York immediately preceding the day when trading of the shares commences on the Hong Kong Stock Exchange. You will not be able to sell or otherwise deal in the shares or ADSs prior to the commencement of their trading on the Hong Kong Stock Exchange or the New York Stock Exchange.
Payment and delivery		The underwriters expect to deliver the ADSs in New York, New York to purchasers on                    , 2004.
Use of proceeds		We estimate that the net proceeds received by us from the global offering will be approximately US$                    million, after deducting the underwriting discounts and expenses payable by us in the global offering and assuming an initial public offering price of US$                    per ADS, the midpoint of the range set forth on the cover page of this document. Of the net proceeds, we expect up to 50% of the net proceeds, or US$                    million, will be used for expansion and upgrading of our telecommunications network infrastructure, including support and information systems; 30% of the net proceeds, or up to US$                    million, will be used for repayment of debt; 10% of the net proceeds, or up to US$                   million, will be used for development of new applications and services; and the remaining net proceeds will be used for general corporate purposes, such as working capital and business expansion. We estimate that the net proceeds received by the selling shareholders from the global offering will be approximately US$                    million, after deducting

		the underwriting discounts and expenses payable by the selling shareholders. We will not receive any of the proceeds from the sale of shares by the selling shareholders.
Dividend policy		We intend to declare and pay annual dividends to shareholders in 2004 and in future periods. The dividend payment to the public shareholders for 2004 will be pro rated based on the period from the date of listing to December 31, 2004. Our decision to pay any dividend will depend on our results of operations, cash flows, financial condition, future prospects, statutory and regulatory restrictions on the payment of dividends by us and other factors that our board of directors deems relevant. See “Dividend Policy”.
Lock-ups		We, China Netcom Group and China Netcom Group Corporation (BVI) Limited have, subject to certain limited exceptions, agreed to a lock-up of our securities for a period of 180 days after the date of commencement of trading. CNC Fund, L.P. has also separately agreed with us to a similar 180-day lock-up.
		In addition, each of the Chinese Academy of Sciences, Information and Network Center of the State Administration of Radio, Film and Television, China Railways Telecommunications Center, Shanghai Alliance Investment Limited and Shandong Provincial State-owned Assets Supervision and Administration Commission has agreed with China Netcom Group:
		• not to sell, transfer or otherwise dispose of any of our shares during the two-year period after the commencement of trading; and
		• following the expiration of the two-year period after the commencement of trading, not to sell or transfer any of such shares without:
		• necessary approvals from the relevant government authorities; and
		• consent from China Netcom Group Corporation (BVI) Limited, which has a right of first refusal to purchase such shares.
		See “Underwriting” for further details of these and other lock-up arrangements relating to our shares.
Listings		We have applied to list our ADSs on the New York Stock Exchange under the symbol “CN” and our shares on the Hong Kong Stock Exchange under the stock code “                   ”.

CONVENTIONS

Definitions

      References in this document to “we”, “us”, the “company” or “CNC Hong Kong” mean China Netcom Group Corporation (Hong Kong) Limited and, as the context may require, its subsidiaries. References to “China Netcom Group” mean China Network Communications Group Corporation and, as the context may require, its subsidiaries, other than us and our subsidiaries.

As used in this document:

	•	references to “China” or “PRC” mean the People’s Republic of China, excluding, for purposes of this document, Hong Kong, Macau and Taiwan, and references to the “central government” mean the central government of the PRC;
	•	references to “State Council” mean the State Council of the PRC;
	•	references to “our northern service region” mean the six municipalities and provinces where we operate in northern China, consisting of Beijing and Tianjin Municipalities, and Hebei, Henan, Shandong and Liaoning Provinces, and references to “our southern service region” mean Shanghai Municipality and Guangdong Province;
	•	references to “Ministry of Information Industry” and “MII” mean the Ministry of Information Industry of the PRC government and references to the “National Development and Reform Commission” and the “NDRC” mean the National Development and Reform Commission of the PRC government;
	•	references to “HKSE” or “Hong Kong Stock Exchange” mean The Stock Exchange of Hong Kong Limited, and references to “NYSE” or “New York Stock Exchange” mean New York Stock Exchange, Inc;
	•	references to “Renminbi” or “RMB” are to the currency of the PRC, references to “U.S. dollars” or “US$” are to the currency of the United States of America, and references to “HK dollars” or “HK$” are to the currency of the Hong Kong Special Administrative Region of the PRC; and
	•	references to “U.S. GAAP” mean the generally accepted accounting principles in the United States, references to “Hong Kong GAAP” mean the generally accepted accounting principles in Hong Kong, and references to “PRC GAAP” mean the PRC Accounting Standards for Business Enterprises and the implementing rules thereof.

Presentation of Information Relating to Assets Retained or Held by China Netcom Group

      Unless the text otherwise indicates, all financial information prior to and for the year ended December 31, 2003 includes Our Restructured Assets and Liabilities and the Distributed Assets and Liabilities and the related operations, as those terms are defined and explained in “Restructuring”. However, the Distributed Assets and Liabilities have been distributed to China Netcom Group, which was reflected as a net distribution of RMB 6,047 million to China Netcom Group on June 30, 2004. These assets and liabilities and associated operations are not ours and will not be available to generate revenues for us in the current or future periods except to the extent we have leased or otherwise acquired the right to use these distributed assets. Therefore, to more accurately reflect our operations and businesses going forward, other than the company data presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, or unless the context otherwise indicates or requires, all company data provided in this document including, among other things, usage, number of access lines, market share and number of subscribers, reflects Our Included Businesses, as the term is defined and explained in “Restructuring”, and does not include those assets and businesses distributed to China Netcom Group on June 30, 2004.

Translations for Convenience

      Unless otherwise indicated, translations of Renminbi and Hong Kong dollar amounts into U.S. dollars in this document are for convenience of the reader only and were made at the rate of US$1.00 to RMB 8.2766 and US$1.00 to HK$7.8000, the noon buying rates in The City of New York for cable transfers payable in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York on June 30, 2004. No representation is made that Renminbi or Hong Kong dollar amounts could have been, or could be, converted into U.S. dollars at that rate on June 30, 2004, on any other date or at all.

Market Share Data Convention

      The statistical and market share information contained in this document has been derived from government and private sources, including the information published by the MII. Unless otherwise indicated, the information has not been verified by us independently. This statistical information may not be consistent with other statistical information from other sources within or outside China.

SUMMARY CONSOLIDATED FINANCIAL DATA

      The following tables present our summary consolidated financial data as of and for the years ended December 31, 2001, 2002 and 2003 and as of and for the six months ended June 30, 2003 and 2004.

      You should read the summary consolidated financial data below together with our consolidated financial statements, including the notes thereto, included elsewhere in this document, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

      Our consolidated financial statements report our results as if (1) Our Restructured Assets and Liabilities and the Distributed Assets and Liabilities, as defined and explained in “Restructuring”, and related operations had been transferred to us as of January 1, 2001, and (2) we had owned those assets and liabilities and conducted those operations throughout the relevant periods. See “Restructuring” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting Our Results of Operations” for a further discussion of our restructuring. We publish our financial statements in Renminbi. We have derived the summary consolidated income statement data for the years ended December 31, 2001, 2002 and 2003 and for the six months ended June 30, 2003 and 2004, the summary consolidated balance sheet data as of December 31, 2001, 2002 and 2003 and as of June 30, 2004 and the summary consolidated cash flow statement data for the years ended December 31, 2001, 2002 and 2003 and for the six months ended June 30, 2003 and 2004 from our consolidated financial statements. Our consolidated financial statements have been prepared in accordance with Hong Kong GAAP, which differ in significant respects from U.S. GAAP. For a discussion of material differences between Hong Kong GAAP and U.S. GAAP, see Note 36 to our consolidated financial statements included elsewhere in this document.

Summary Consolidated Financial Information

																				For the Six Months Ended
				For the Year Ended December 31,																June 30,
				2001				2002				2003				2003				2003				2004				2004
				RMB				RMB				RMB				US$				RMB				RMB				US$
				(in millions, except per share and per ADS information)
Consolidated Income Statement Data:
Hong Kong GAAP
Revenues:
	Domestic telecommunications services:
		Fixed-line telephone services (1)			42,545				47,135				50,533				6,104				24,768				26,714				3,228
		Broadband and other Internet-related services			1,384				2,189				3,493				423				1,619				2,428				293
		Business and data communications services (2)			2,986				3,373				3,661				442				1,724				1,567				189
		Other services			1,539				1,174				832				101				350				514				62
	International telecommunications services				178				572				1,379				167				601				1,275				154
		Total			48,632				54,443				59,898				7,237				29,062				32,498				3,926
Operating expenses:
	Depreciation and amortization				(16,153	)			(18,808	)			(20,483	)			(2,475	)			(9,967	)			(9,552	)			(1,154	)
	Network, operations and support				(9,313	)			(10,578	)			(11,990	)			(1,448	)			(4,827	)			(5,167	)			(624	)
	Staff costs				(5,030	)			(6,433	)			(7,547	)			(912	)			(3,563	)			(4,294	)			(519	)
	Selling, general and administrative				(4,997	)			(5,682	)			(7,053	)			(852	)			(2,907	)			(4,199	)			(507	)
	Other operating expenses				(1,536	)			(1,521	)			(1,660	)			(201	)			(599	)			(724	)			(88	)
Operating profit before interest income, dividend income and deficit on revaluation of fixed assets					11,603				11,421				11,165				1,349				7,199				8,562				1,034
Interest and dividend income					339				160				124				15				70				39				5
Deficit on revaluation of fixed assets (3)					—				—				(25,778	)			(3,114	)			—				—				—
Profit/(loss) from operations					11,942				11,581				(14,489	)			(1,750	)			7,269				8,601				1,039
Finance costs					(1,979	)			(2,848	)			(3,026	)			(366	)			(1,548	)			(1,604	)			(194	)
Share of profit/(loss) of associated companies and jointly controlled entity					4				(1	)			(416	)			(50	)			(87	)			(1	)			—
Profit/(loss) before taxation					9,967				8,732				(17,931	)			(2,166	)			5,634				6,996				845
Taxation					(2,568	)			(2,212	)			6,819				824				(1,362	)			(2,121	)			(256	)
Profit/(loss) after taxation					7,399				6,520				(11,112	)			(1,342	)			4,272				4,875				589
Minority interests					1				—				1				—				—				—				—
Profit/(loss) for the year/period					7,400				6,520				(11,111	)			(1,342	)			4,272				4,875				589
Basic earnings/(losses) per share (4)					1.35				1.19				(2.02	)			(0.24	)			0.78				0.89				0.11
Basic earnings/(losses) per ADS (5)
U.S. GAAP
Profit for the year/period					7,272				6,474				6,160				744				4,258				3,754				454
Basic earnings per share (4)					1.32				1.18				1.12				0.14				0.78				0.68				0.08
Basic earnings per ADS (5)

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(1)	Revenues from fixed-line telephone services include local usage fees, monthly fees, upfront installation fees, domestic and international long distance service charges, value-added service charges, interconnection fees from domestic carriers and upfront connection fees.
(2)	Revenues from business and data communications services include fees charged for managed data and leased line services.
(3)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors Affecting Our Results of Operations — Our Recent Restructurings — Revaluation of our fixed assets” for a discussion of this revaluation.
(4)	Basic earnings/(losses) per share for the years ended December 31, 2001, 2002 and 2003 and for the six months ended June 30, 2003 and 2004 set forth above has been computed by dividing profit/(loss) for the year/period by the weighted average number of ordinary shares during the year/period, which was 5,492 million in each of these years/periods.
(5)	Basic earnings/(losses) per ADS for the years ended December 31, 2001, 2002 and 2003 and for the six months ended June 30, 2003 and 2004 set forth above have been computed by multiplying basic earnings/(losses) per share for the year/period by                 , which is the number of shares represented by each ADS.

		As of December 31,																As of June 30,
		2001				2002				2003				2003				2004				2004
		RMB				RMB				RMB				US$				RMB				US$
		(in millions)
Consolidated Balance Sheet Data:
Hong Kong GAAP
Cash and bank deposits			6,952				6,802				6,316				763				3,119				377
Accounts receivable			3,907				4,775				6,343				766				6,732				814
Total current assets			17,692				17,391				17,492				2,113				12,954				1,565
Fixed assets and construction in progress			161,209				163,947				149,614				18,076				131,534				15,892
Total assets			187,039				190,917				179,534				21,691				156,223				18,875
Accounts payable			14,223				13,302				14,786				1,786				13,990				1,690
Short-term bank loans and current portion of long-term bank and other loans			27,243				40,460				47,933				5,791				37,886				4,578
Total current liabilities			57,599				68,829				86,871				10,496				74,879				9,047
Long-term bank and other loans			37,446				29,480				22,309				2,695				20,464				2,473
Deferred revenues			19,355				15,781				14,604				1,764				13,394				1,618
Total liabilities			127,829				128,700				136,155				16,450				113,354				13,695
Owner’s equity			59,206				62,213				43,376				5,241				42,869				5,180
U.S. GAAP
Owner’s equity			56,581				59,562				56,000				6,766				54,538				6,588

																			For the Six Months Ended
			For the Year Ended December 31,																June 30,
			2001				2002				2003				2003				2003				2004				2004
			RMB				RMB				RMB				US$				RMB				RMB				US$
			(in millions)
Consolidated Cash Flow Statement Data:
Hong Kong GAAP
Net cash inflow from operating activities				22,874				23,928				25,332				3,061				14,017				14,075				1,700
Net cash outflow from investing activities				(41,461	)			(25,922	)			(27,001	)			(3,262	)			(10,322	)			(8,128	)			(982	)
	Purchase of fixed assets and construction in progress			(40,163	)			(25,814	)			(28,528	)			(3,446	)			(11,092	)			(8,947	)			(1,081	)
Net cash inflow/(outflow) from financing activities				18,420				1,734				1,262				152				(2,701	)			(9,114	)			(1,101	)

SUMMARY UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA

      The following tables present our summary unaudited pro forma consolidated income statement data under Hong Kong GAAP and U.S. GAAP for the year ended December 31, 2003 and for the six months ended June 30, 2004, which give effect to the adjustments described below.

      The summary unaudited pro forma consolidated financial information was prepared by us to illustrate (1) the estimated effects of a reduction in depreciation charges for the year ended December 31, 2003 resulting from the revaluation of our fixed assets as if the revaluation had been recorded on January 1, 2003 (no such pro forma adjustment to the income statement is required for the six months ended June 30, 2004 since the revaluation results on fixed assets were incorporated into the financial statements on December 31, 2003); (2) the exclusion of results of operations attributable to the Distributed Assets and Liabilities for the year ended December 31, 2003 and for the six months ended June 30, 2004, including reductions in the depreciation charges associated with fixed assets that were distributed, the effects of entering into the leases between China Netcom Group and us for those assets that we lease from it after the restructuring, the reductions in income and expenses from the distribution of investments, interests in associated companies and interest-bearing loans, the effects of the Management Services Agreement and our purchases and leases of certain capacity from China Netcom Group; (3) the effects for the year ended December 31, 2003, of the acquisitions of substantially all of the assets and certain liabilities of Asia Global Crossing, or AGC, through Asia Netcom Corporation Limited, or Asia Netcom in transactions on March 10 and December 31, 2003, as if they had occurred on January 1, 2003, except that results from January 1, 2003 through March 9, 2003 are not reflected due to lack of historical data (no such pro forma adjustment to the income statement is required for the six months ended June 30, 2004 since Asia Netcom became our wholly owned subsidiary on December 31, 2003 and the results of Asia Netcom have been fully consolidated since January 1, 2004); and (4) the tax effects of the foregoing adjustments, all as further described in the notes to the unaudited pro forma consolidated financial information included elsewhere in this document as an appendix beginning on page P-1. The unaudited pro forma consolidated income statement data does not purport to represent what our results of operations would have been if such transactions and other changes had in fact occurred on January 1, 2003 or to project our results of operations for any future period. The pro forma adjustments have been made to reflect only the effects of our revaluation and restructurings that are (1) directly attributable to transactions associated with the revaluation and restructurings, (2) expected to have a continuing impact on us; and (3) factually supportable. You should read the unaudited pro forma income statement data set forth below together with the unaudited pro forma consolidated financial information and its notes set forth in this document beginning on page P-1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

		For the Year Ended December 31, 2003
						Pro Forma				Pro				Pro
		Historical				Adjustments				Forma				Forma
		RMB				RMB				RMB				US$
		(in millions, except per share and per ADS
		data)
Consolidated Income Statement Data:
Hong Kong GAAP
Revenues			59,898				123				60,021				7,252
Operating profit before interest income, dividend income and deficit on revaluation of fixed assets			11,165				2,814				13,979				1,689
Profit/(loss) for the year			(11,111	)			2,740				(8,371	)			(1,011	)
Basic loss per share			(2.02	)							(1.52	) (1)			(0.18	)
Basic loss per ADS
U.S. GAAP
Profit for the year			6,160				597				6,757				818
Basic earnings per share			1.12								1.23 (1	)			0.15
Basic earnings per ADS (2)

(1)	The pro forma basic earnings per share for the year ended December 31, 2003 set forth above has been computed by dividing pro forma profit/(loss) for the year by 5,500 million shares, assuming the one-to-one conversion of the redeemable preference shares into 7,741,782 ordinary shares had taken place on January 1, 2003.
(2)	The pro forma basic earnings per ADS for the year ended December 31, 2003 set forth above has been computed by dividing pro forma profit/(loss) for the year by                  million ADSs, assuming the one-to-one conversion of the redeemable preference shares into 7,741,782 ordinary shares had taken place on January 1, 2003.

		For the Six Months Ended June 30, 2004
						Pro Forma				Pro				Pro
		Historical				Adjustments				Forma				Forma
		RMB				RMB				RMB				US$
		(in millions, except per share and per ADS
		data)
Consolidated Income Statement Data:
Hong Kong GAAP
Revenues			32,498				(489	)			32,009				3,867
Operating profit before interest income, dividend income and deficit on revaluation of fixed assets			8,562				312				8,874				1,072
Profit for the period			4,875				753				5,628				680
Basic earnings per share			0.89								1.02	(1)			0.12
Basic earnings per ADS
U.S. GAAP
Profit for the period			3,754				753				4,507				544
Basic earnings per share			0.68								0.82	(1)			0.10
Basic earnings per ADS (2)

(1)	The pro forma basic earnings per share for the six months ended June 30, 2004 set forth above has been computed by dividing pro forma profit for the six months ended June 30, 2004 by 5,500 million shares, assuming the one-to-one conversion of the redeemable preference shares into 7,741,782 ordinary shares had taken place on January 1, 2003.
(2)	The pro forma basic earnings per ADS for the six months ended June 30, 2004 set forth above has been computed by dividing pro forma profit for the six months ended June 30, 2004 by                  million ADSs, assuming the one-to-one conversion of the redeemable preference shares into 7,741,782 ordinary shares had taken place on January 1, 2003.

SUMMARY OPERATING DATA

      The following table sets forth our selected operating data as of and for the years ended December 31, 2001, 2002 and 2003 and for the six months ended June 30, 2004. This operating data only relates to Our Included Businesses, as defined in “Restructuring”.

																As of and For
				As of and For the Year												the Six Months
				Ended December 31,												Ended June 30,
				2001				2002				2003				2004
Fixed-line Telephone Services
	Fixed-line subscribers (in millions) (1)(2)				51.1				58.4				69.6				77.6
		PHS subscribers (in millions) (2)			0.4				1.4				7.4				12.5
	Local telephone usage (in billion pulses) (3)				158.9				173.3				179.0				89.6
	Domestic long distance usage (in billion minutes)				14.9				17.1				20.4				11.7
		Traditional			11.5				12.2				12.1				6.1
		VoIP			3.4				4.9				8.2				5.6
	International long distance usage (in million minutes)				286.5				349.7				419.5				227.9
		Traditional			210.0				191.2				167.2				77.4
		VoIP			76.5				158.6				252.3				150.5
Broadband and other Internet-related Services
	Broadband subscribers (in thousands) (4)(9)				116.9				577.4				2,535.2				4,185.6
		DSL subscribers (in thousands) (4)			33.4				318.2				1,990.0				3,275.4
		LAN subscribers (in thousands) (4)			83.2				258.0				544.5				910.0
	Dial-up online minutes (in billions)				37.2				33.0				25.1				6.7
Business and Data Communications Services
	Domestic DDN leased bandwidth (x64kbps)				101,720				120,634				134,045				136,673
	Domestic frame relay leased bandwidth (x128kbps)				23,079				32,981				46,268				54,839
	Domestic ATM leased bandwidth (x2Mbps)				1,039				1,655				2,537				2,929
	Domestic bandwidth of leased circuits (x2Mbps)				60,434				72,764				78,739				81,169
International Telecommunications Services
	International inbound voice traffic (in million minutes)				N/A				N/A				970				900
	International managed data (points of connection)				N/A				N/A				943				1,432
	International leased line bandwidth (xMbps)				N/A				N/A				12,035				13,336
Market Share
	Fixed-line subscribers market share in our northern service region (5)				99.0%				97.0%				96.0%				94.6%
	Domestic long distance usage market share in our northern service region (6)				58.1%				48.2%				46.3%				44.6%
	International long distance usage market share in our northern service region (7)				67.1%				60.6%				59.6%				62.5%
	Broadband market share in our northern service region (8)				75.3%				86.5%				89.2%				92.9%

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(1)	Including PHS subscribers.
(2)	Fixed-line subscribers consist of all access lines in service as well as PHS subscribers. We calculate PHS subscribers based on the number of active telephone numbers for our PHS services. In cases where a PHS subscriber uses the same telephone number as an access line in service, the designation as a PHS subscriber or access line in service depends on which service is first activated. We increase our total number of fixed-line subscribers as soon as practicable after activation of the service. We remove a fixed-line subscriber from the total number of fixed-line subscribers as soon as practicable after the fixed-line subscriber deactivates the service voluntarily or three months after the date on which the fixed-line subscriber’s bill becomes overdue. Prepaid and postpaid telephone card customers are not counted toward our fixed-line subscribers.
(3)	Pulse is the billing unit for local telephone usage. See “Regulation — Tariff Setting”.