Simon Fu, CFO of China Expert Technology

Interactive Q&A: Simon Fu, CFO of China Expert Technology (CXTI.OB)

Philip,

Thanks for your comment and it's our pleasure to participate in this forum also.

One of our business development strategy is to focus on exploring 2nd or 3rd tier cities which have not invested too much (time and money wise) on their existing systems or platforms, as we always promote a whole new platform rather than integrating their existing systems (which are separately developed and isolated with each other). However, these greenfields may be reduced as time goes by and we may have to shift to systems integrations, where most of the smaller competitors are doing.

In China, there are thousands of IT service providers, most of them are small in scale and larger ones like Digital China, Chinasoft and Beida Jade Bird, etc. At the moment, we do not have any acquisition plan but we will not rule this out in future.

Regarding US based IT consultancy and service providers' business development in China, unfortunately we do not have much information on this aspect.

Thanks & regards,

Simon

Interactive Q&A: Simon Fu, CFO of China Expert Technology (CXTI.OB)

As usual, we do not make comment on the stock price, especially on those short term fluctuations. We put our focus on exploring new business opportunities and executing the existing backlog contracts, at the moment we have no plan for stock buyback.

Thanks for your questions.

Simon

Interactive Q&A: Simon Fu, CFO of China Expert Technology (CXTI.OB)

BH,

We are building up our cash level for the future commencement of new projects in later part of this year. Hopefully, we will have sufficient working capital and if not, we will consider various ways to obtain additional financing, maybe through short term bank loan if possible.

Though we do not have a specific stock price at which we will not issue stock for compensation, we do aware of the dilution effect of granting excessive stock when the stock price is on the low side.

The lock up of the insider or affiliated shares under the convertible debentures will be lifted once the debentures matured or converted to the company's common stock. As all debentures have been converted before maturity (April 30, 2007), such lock up has been released.

Thanks & regards,

Simon

Interactive Q&A: Simon Fu, CFO of China Expert Technology (CXTI.OB)

Michael,

Unfortunately we do not have this figure, but different cities may have different levels of e-government applications and automation.

Thanks & regards,

Simon

Interactive Q&A: Simon Fu, CFO of China Expert Technology (CXTI.OB)

Thanks for your comment.

1. In Fujian, there are 82 cities and counties, and approximately 30% of these cities and counties are our target customers. At the moment, we have contracts with 12 of them and we believe there are substantial business opportunities in Fujian, in addition to possible future system upgrades and maintenance services opportunities.

2. Recently, we have adopted a balanced business development strategy and we will explore new business within and outside Fujian province. In three to five years time, we expect at least half of our revenues generated outside Fujian. We will work with different consultants to explore new prospects but hopefully we can have less reliance on them in future once we have more credible references and successful cases.

3. We have make an application to Nasdaq for listing on GM recently but it takes time and subject to their approval. We are working on getting an effective registration statement and several compliance issues to facilitate such listing.

4. At the moment, we are subject to PRC corporation income tax at 15% on the net income derived in China. According to the latest PRC tax reform, such tax rate will be raised to 25% with effective from January 2008 though some kind of transitional arrangement is generally expected, but no details have been released by the State Council of PRC government yet.

Thanks & regards,

Simon

Interactive Q&A: Simon Fu, CFO of China Expert Technology (CXTI.OB)

Ryan,

In the past, China Expert is not quite accessible to the capital market and we have to preserve our cash for future project commencement, that's why we issued stock as compensation instead of paying cash.

Recently, the situation changed and we have built up a substantial cash balance for future working capital requirement. We also aware of the dilution effect of granting stock as compensation. In future, cash will prevail over stock compensation. Nevertheless, the payment method of compensation is subject to negotiation and agreement with the consultants.

Thanks & regards,

Simon

Interactive Q&A: Simon Fu, CFO of China Expert Technology (CXTI.OB)

Hi Ken,

We do expect to encounter more competitions as we move outside Fujian province. As what we have done in Fujian, we will try our best to establish a reference site in these new provinces through successful implementations.

Thanks & regards,

Simon

Interactive Q&A: Simon Fu, CFO of China Expert Technology (CXTI.OB)

Eli,

According to external source, the e-government market in China reached US$6 billion in 2005 and expected to grow by 16% annually for the next few years. As for China Expert, our revenues for 2006 reached US$66 million and it was comparatively small to the overall market.

Recently, we have explored to other provinces outside Fujian where we have a strong foothold, and such move will diversify our customer base and further expand our business opportunities.

Thanks & regards,

Simon

Interactive Q&A: Simon Fu, CFO of China Expert Technology (CXTI.OB)

Darren,

The deployment of e-government systems is under the Chinese central government's directives. According to the plan, central government expects by 2010, 50% of the government administrative work will be processed on-line and electronically. We believe this is a mid term target and eventually all such work will be required to be processed through e-government systems.

China Expert is fully focused on the implementation of e-government systems and solutions for city and county governments in China, and we believe such policy will be an important driver for our business in future.

Thanks & regards,

Simon