1. Market Prospects:

Polyvinyl alcohol (PVA) is widely used in chemical fibre, textile, and chemical industry. At present, the annual production capacity in China is about 200,000 tons, but the actual output is 237,000 tons. The demand is increasing at the rate of 5% annually, so the market demand is great. The annual output of vinylon in China is about 48,000 tons and 10,000 tons should be imported; annual output of vinyl cyanide is 267,000 tons and 61,000 tons should be imported; annual output of polyacrylonitrile is 296,000 tons and 478,000 tons should be imported; annual output of duprene rubber is 29,000 tons and about 10,000 tons have to be imported. The market gap for the above products is quite big and they are in short supply.

2. Construction Scale and Contents of the Project:

Output of polyvinyl alcohol will be increased from 20,000 tons to 30,000 tons; vinylon fibre will be increased from 10,000 tons to 30,000 tons; output of the new product of polyacrylonitrile will be 10,000 tons and that of the new product of duprene rubber will be 10,000 tons. Calcium carbide as the ancillary raw material for the production of the above-mentioned products will be increased from 75,000 tons to 250,000 tons.

3. Construction Conditions:

Calcium carbide will be produced by making use of the rich limestone, water and power resources in the locality, and various products will be made from calcium carbide, so resources can be guaranteed. Water supply, power supply, telecommunications, and transportation are ensured. The existing bases of technology, management and talents are favorable. The open factory space provides very good conditions for the expansion. Since highway and railroad are available, the factory has good transportation facilities.

4. Total Investment: USD 80,500,000.00, of which USD 56,310,000.00 is foreign capital to be used.

5. Mode of Cooperation: Equity joint venture

6. Expected Returns:

--- Construction time: construction to be carried out by 3 phases and 2 years for each phase

--- Internal returns on investment: 20%

--- Period for recovery of investment: 6.5 years

7. Construction Place: Yizhou City, Guangxi

8. Progress of the Project Preparations: The written project proposals having been completed.

9. The Local Government's Preferential Policy Applied to the Project:

9.1 As stipulated by the country, the enterprise with foreign investment scheduled to operate for more than 10 years will be exempted from the enterprise income tax for 2 years and enjoy a reduction of income tax for another 3 years, or a reduction of half of the income tax if its annual export value reaches 70% of the total output value, and the enterprise with advanced technology can enjoy an extension of 3 years in which half of the income tax will be reduced. For other enterprises, 30% of the income tax paid from the 6th year to the 8th year will be refunded by the local financial department.

9.2 An exemption from the local income tax, the regulation tax of fixed assets investment orientation, the additional tax of education and the urban maintenance and construction tax is given.

9.3 Priority is given in providing water, power, and gas.

10. Project Sponsor's Conditions in Brief:

Project sponsor: Guangxi Vinylon Plant

--- Original value of fixed assets (USD): 45,500,000.00

--- Net value of fixed assets (USD): 31,900,000.00

--- Factory area coverage (m2): 1,100,000

--- Factory building floorage (m2): 750,000

--- Number of worker (person): 3,120

--- Number of technical personnel (person): 650

--- Present staple products: Calcium carbide, vinylacetate, polyvinyl alcohol and vinylon.