UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F

(Mark One)
o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
		or
x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2008
		or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from               to
		or
o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		Date of event requiring this shell company report

(Exact name of Registrant as specified in its charter)

GUANGSHEN RAILWAY COMPANY LIMITED

People’s Republic of China
(Jurisdiction of incorporation or organization)

No. 1052 Heping Road, Shenzhen, People’s Republic of China 518010
(Address of Principal Executive Offices)

Mr. Guo Xiangdong
Telephone: (86-755) 2558-7920 or (86-755) 2558-8146
Email: ir@gsrc.com
Facsimile: (86-755) 2559-1480
No. 1052 Heping Road, Shenzhen, People’s Republic of China 518010
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on which Listed
American Depositary Shares, each representing 50 Class H ordinary shares		New York Stock Exchange, Inc.
Class H ordinary shares, nominal value RMB 1.00 per share		The Stock Exchange of Hong Kong Limited

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the Registrant’s classes of capital or common stock as of December 31, 2008:

Domestic shares (A shares), par value RMB 1.00 per share			5,652,237,000
H shares, par value RMB 1.00 per share			1,431,300,000

(including 204,457,100 H shares in the form of American Depositary Shares)

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ               No o

     If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o               No þ

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ               No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o               No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ     Accelerated Filer o     Non-Accelerated Filer o

     Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP o

International Financial Reporting Standards as issued by the International Accounting Standards Board þ

Other o

     If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o               Item 18 o

     If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o               No þ

 

 

Table of Contents

				Pages
Forward-Looking Statements					1
Certain Terms and Conventions					1
PART I
		ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS			4
		ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE			4
		ITEM 3. KEY INFORMATION			4
		Item 3A. Selected Consolidated Financial and Other Data			4
		Item 3B. Capitalization and Indebtedness			7
		Item 3C. Reasons for the Offer and Use of Proceeds			7
		Item 3D. Risk Factors			7
		ITEM 4. INFORMATION ON THE COMPANY			15
		Item 4A. History and Development of the Company			16
		Item 4B. Business Overview			19
		Item 4C. Organizational Structure			35
		Item 4D. Property, Plant and Equipment			35
		ITEM 4A. UNRESOLVED STAFF COMMENTS			37
		ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS			38
		Item 5A. Operating Results			39
		Item 5B. Liquidity and Capital Resources			50
		Item 5C. Research and Development, Patents and Licenses, etc.			53
		Item 5D. Trend Information			53
		Item 5E. Off-Balance Sheet Arrangements			54
		Item 5F. Tabular Disclosure of Contractual Obligations			54
		Item 5G. Safe Harbor			55
		ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			55
		Item 6A. Directors and Senior Management			55
		Item 6B. Board Compensation			61
		Item 6C. Board Practices			63
		Item 6D. Employees			65
		Item 6E. Share Ownership			67
		ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			67
		Item 7A. Major Shareholders			67
		Item 7B. Related Party Transactions			68
		Item 7C. Interests of Experts and Counsel			76
		ITEM 8. FINANCIAL INFORMATION			76
		Item 8A. Consolidated Statements and Other Financial Information			76
		Item 8B. Significant Changes			78
		ITEM 9. THE OFFER AND LISTING			79
		Item 9A. Offer and Listing Details			79
		Item 9B. Plan of Distribution			80
		Item 9C. Markets			80

				Pages
		Item 9D. Selling Shareholders			80
		Item 9E. Dilution			80
		Item 9F. Expenses of the Issue			80
		ITEM 10. ADDITIONAL INFORMATION			81
		Item 10A. Share Capital			81
		Item 10B. Memorandum and Articles of Association			81
		Item 10C. Material Contracts			92
		Item 10D. Exchange Controls			92
		Item 10E. Taxation			93
		Item 10F. Dividends and Paying Agents			101
		Item 10G. Statement by Experts			101
		Item 10H. Documents on Display			101
		Item 10I. Subsidiary Information			102
		ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			103
		ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			106
PART II
		ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			107
		ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			107
		ITEM 15. CONTROLS AND PROCEDURES			107
		ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT			108
		ITEM 16B. CODE OF ETHICS			108
		ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES			108
		ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			109
		ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			109
		ITEM 16F. CHANGE IN OUR CERTIFYING ACCOUNTANT			109
		ITEM 16G. CORPORATE GOVERNANCE			109
		ITEM 17. FINANCIAL STATEMENTS			111
		ITEM 18. FINANCIAL STATEMENTS			111
		ITEM 19. EXHIBITS			111
EX-1.1
EX-7.1
EX-8.1
EX-11.1
EX-12.1
EX-13.1

Forward-Looking Statements

     Certain information contained in this annual report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. These forward-looking statements can be identified by the use of words or phrases such as “is expected to”, “will”, “is anticipated”, “plan to”, “estimate”, “believe”, “may”, “intend”, “should” or similar expressions, or the negative forms of these words, phrases or expressions, or by discussions of strategy. Such statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from our historical results and those presently anticipated or projected. You are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date on which such statements were made. Among the factors that could cause our actual results in the future to differ materially from any opinions or statements expressed with respect to future periods include changes in the economic policies of the PRC government, an economic slowdown in the Pearl River Delta region and elsewhere in mainland China, increased competition from other means of transportation, delays in major development projects, a recurrence of the Severe Acute Respiratory Syndrome, or SARS, epidemic or other similar health epidemics or outbreaks, such as avian flu and H1N1 influenza, in Hong Kong or China, foreign currency fluctuations and other factors beyond our control.

     When considering such forward-looking statements, you should keep in mind the factors described in “Item 3D. Risk Factors” and other cautionary statements appearing in “ITEM 5. Operating and Financial Review and Prospects” of this annual report. Such risk factors and statements describe circumstances which could cause actual results to differ materially from those contained in any forward-looking statement.

Certain Terms and Conventions

     Solely for the convenience of the reader, this annual report contains translations of amounts from RMB into U.S. dollars and vice versa at the rate of RMB 6.82 to US$ 1.00, which is rounded from 6.8225, which was the noon buying rate in New York City for cable transfers in RMB per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2008, except where we specify that a different rate has been used. You should not construe these translations as representations that the RMB amounts actually represent U.S. dollar amounts or could be converted into U.S. dollars at that rate or at all. See “Item 3A. Selected Consolidated Financial and Other Data—Exchange Rate Information” for information regarding the certified exchange rates for U.S. dollar/RMB conversions from January 1, 2004 through June 19, 2009.

     We prepare and publish our consolidated financial statements in RMB.

     Various amounts and percentages set out in this document have been rounded and, accordingly, may account for apparent discrepancies in the tables appearing herein.

     Unless the context otherwise requires or otherwise specified:

•

“Acquisition” means our acquisition of the railway transportation business between Guangzhou and Pingshi and the related assets and liabilities from Yangcheng Railway Company according to the asset purchase agreement dated November 15, 2004 between Yangcheng Railway Company and us.

	•		“China” or “PRC” means the People’s Republic of China.
	•		“CEPA” means the Closer Economic Partnership Arrangement between Hong Kong and Chinese Mainland entered into on October 27, 2004, as amended.
	•		“GEDC” means Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company, a wholly owned subsidiary of GRGC.
	•		“GRGC” means Guangzhou Railway (Group) Company, our largest shareholder.
	•		“Guangshen Railway”, “Company”, “we”, “our”, “our Company” or “us” means Guangshen Railway Company Limited, a joint stock limited company incorporated in China with limited liability, and its subsidiaries on a consolidated basis.
	•		“HKSE” means the Stock Exchange of Hong Kong Limited.
	•		“Hong Kong” means the Hong Kong Special Administrative Region of the PRC.
	•		“Hong Kong dollars” or “HKD” means Hong Kong dollars, the lawful currency of Hong Kong.
	•		“Macau” means the Macau Special Administrative Region of the PRC.
	•		“MOR” means the Ministry of Railways.
	•		“Pearl River Delta” means the area in and adjacent to the southern part of Guangdong Province, PRC, surrounding the mouth of the Pearl River and its lower reaches.
	•		“RMB” means Renminbi Yuan, the lawful currency of the PRC.
	•		“Restructuring” means the restructuring conducted in connection with our initial public offering in 1996 during which we succeeded to the railroad and certain other businesses of our predecessor company and certain assets and liabilities of GRGC.
	•		“SEC” means the U.S. Securities and Exchange Commission.
	•		“tonne” means metric tonne; and one tonne is approximately 2,205 pounds in weight.
	•		“US$”, “USD” or “U.S. dollars” means U.S. dollars, the lawful currency of the United States.

•

“Yangcheng Railway Company” means Guangzhou Railway Group Yangcheng Railway Enterprise Development Company, a wholly owned subsidiary of GRGC or its predecessor, Guangzhou Railway Group Yangcheng Railway Company.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

     Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3. KEY INFORMATION

Item 3A. Selected Consolidated Financial and Other Data

     The following selected consolidated data relating to our consolidated balance sheets as of December 31, 2007 and 2008, and our consolidated statements of income, changes in equity and cash flows for each of the years ended December 31, 2006, 2007 and 2008 are derived from and are qualified by reference to our audited consolidated financial statements included elsewhere in this annual report and should be read in conjunction with “ITEM 5. Operating and Financial Review and Prospects”. The following selected consolidated data relating to our consolidated balance sheets as of December 31, 2004, 2005 and 2006, and our consolidated statements of income, changes in equity and cash flows for each of the years ended December 31, 2004 and 2005 are derived from our previously published audited consolidated financial statements that are not included in this annual report.

     The audited consolidated financial statements from which the selected consolidated financial data set forth below have been derived were prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

		Year ended December 31,
		2004				2005				2006				2007(2)				2008(2)				2008
		RMB				RMB				RMB				RMB				RMB				US$ (1)
		(in thousands except for per share data)
Income Statement Data:
Revenues from railroad businesses
— Passenger			2,076,272				2,253,335				2,608,838				5,833,538				6,759,229				991,089
— Freight			611,807				540,341				565,557				1,326,450				1,324,701				194,238
— Railway network usage and services			183,399				305,790				291,489				2,659,529				2,738,425				401,529
Subtotal			2,871,478				3,099,466				3,465,884				9,819,517				10,822,355				1,586,856
Revenues from other businesses			166,671				177,462				128,590				688,987				866,300				127,023
Total revenues			3,038,149				3,276,928				3,594,474				10,508,504				11,688,655				1,713,879
Railroad operating expenses			(2,203,273	)			(2,339,384	)			(2,527,907	)			(8,334,293	)			(9,162,278	)			(1,343,443	)
Other businesses operating expenses			(166,155	)			(190,347	)			(166,011	)			(458,819	)			(829,077	)			(121,566	)
Other income			48,193				51,628				64,648				49,816				17,703				2,596
Profit from operations			716,914				798,825				965,204				1,765,208				1,715,003				251,467
Profit attributable to shareholders of the Company			600,250				646,960				771,513				1,431,415				1,224,129				179,491
Profit from operations per share			0.17				0.18				0.22				0.25				0.24				0.04
Earnings per share for profit attributable to shareholders of the Company

		Year ended December 31,
		2004				2005				2006				2007(2)				2008(2)				2008
		RMB				RMB				RMB				RMB				RMB				US$ (1)
		(in thousands except for per share data)
— Basic and diluted			0.14				0.15				0.17				0.20				0.17				0.02
Dividends declared per share			0.105				0.12				0.08				0.08				0.08				0.01
Earnings per ADS for profit attributable to shareholders of the Company			6.93				7.46				8.73				10.10				8.64				1.27
Balance Sheet Data (at year end):
Working capital			2,051,590				467,124				4,249,117				433,615				(616,158	)			(90,346	)
Fixed assets			5,889,074				6,346,822				6,738,477				19,995,286				23,903,846				3,504,963
Leasehold land payments			636,379				620,798				625,628				607,971				592,368				86,857
Total assets			10,362,851				11,683,057				24,139,331				26,689,929				28,221,826				4,138,098
Equity attributable to shareholders of the Company			9,499,000				9,796,076				20,169,008				21,125,761				21,783,207				3,194,019
Share capital, issued and outstanding, RMB 1.00 per value,
domestic shares			2,904,250				2,904,250				5,652,237				5,652,237				5,652,237				828,774
H shares			1,431,300				1,431,300				1,431,300				1,431,300				1,431,300				209,868
Cash Flow Statement Data:
Net cash generated from operating activities			1,236,579				1,380,147				1,112,004				1,957,645				1,641,069				240,626
Net cash used in investing activities			(1,000,639	)			(820,915	)			(7,833,331	)			(5,585,414	)			(2,915,785	)			(427,534	)
Net cash (used in)/generated from financing activities			(469,044	)			(491,733	)			11,461,030				128,289				483,317				70,868
Purchase of fixed assets and payment for construction-in-progress			(310,179	)			(1,588,374	)			(3,202,670	)			(1,107,320	)			(2,947,804	)			(432,229	)
Dividends paid to shareholders of the Company			(455,009	)			(476,904	)			(520,655	)			(566,711	)			(566,683	)			(83,091	)
Other Data:
Railroad transportation operating income			715,230				808,613				999,968				1,538,053				1,660,077				243,413
Other businesses operating income/(loss)			1,684				(9,788	)			(34,764	)			277,155				37,223				5,458

Exchange Rate Information

     We derive a majority of our revenue and incur most of our expenses in RMB. In addition, we maintain our books and records in RMB and our financial statements are prepared and expressed in RMB. Solely for the convenience of the reader, this annual report contains translations of certain RMB amounts into U.S. dollars and vice versa at RMB 6.82 = USD 1.00, which is rounded from 6.8225, the noon buying rate in New York City on December 31, 2008.

These translations should not be construed as representations that the RMB amounts could have been or could be converted into U.S. dollars at such rate or at all.

     Effective January 1, 2009, the Federal Reserve Bank of New York discontinued publication of foreign exchange rates certified for customs purposes. Effective January 5, 2009, the Federal Reserve Board of the United States reinstituted the publication of the daily exchange rate data in a weekly version of the H.10 release. The certified exchange rate for RMB published by the Federal Reserve Board of the United States was RMB 6.8360 = US$ 1.00 on June 19, 2009.

     The following table sets forth information for the RMB concerning (i) the noon buying rate in New York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York for the period from January 1, 2004 to December 31, 2008 and (ii) the certified exchange rates as published by the Federal Reserve Board of the United States for the period subsequent to and including January 5, 2009, expressed in RMB per U.S. dollar, for the periods indicated:

		Noon Buying Rate
Period		Average (1)				High				Low
		(RMB per U.S. dollar)
2004			8.2768				8.2774				8.2764
2005			8.1826				8.2765				8.0702
2006			7.9723				8.0702				7.8041
2007			7.5806				7.8127				7.2946
2008			6.9477				7.2946				6.7800
December			6.8539				6.8842				6.8225
2009
January			6.8360				6.8403				6.8225
February			6.8363				6.8470				6.8241
March			6.8362				6.8438				6.8240
April			6.8306				6.8350				6.8180
May			6.8235				6.8278				6.8176
June (through June 19)			6.8337				6.8371				6.8264

Dividends

     At a meeting of the directors held on April 29, 2009, the directors proposed a final dividend of RMB 0.08 per ordinary share for the year ended December 31, 2008, which was approved at our annual general meeting of shareholders held on June 25, 2009. This proposed dividend has not been reflected as a dividend payable in the financial statements, but instead as equity attributable to equity holders of the Company.

     In accordance with our Articles of Association, dividends for our domestic shares will be paid in RMB while dividends for our H shares will be calculated in RMB and paid in Hong Kong dollars. Hong Kong dollar dividend payments will then be converted by the depositary and distributed to holders of ADSs in U.S. dollars. The exchange rate was based on the average of the closing exchange rates for RMB to Hong Kong dollars as announced by the People’s Bank of China during the calendar week preceding the date on which the dividend was declared, which was June 25, 2009.

Item 3B. Capitalization and Indebtedness

     Not applicable.

Item 3C. Reasons for the Offer and Use of Proceeds

     Not applicable.

Item 3D. Risk Factors

Risks Relating to Our Business

     The current global financial crisis and economic downturn may have a material and adverse effect on our businesses, results of operations and financial condition.

     The current global financial crisis and economic downturn have adversely affected economies and businesses around the world, including in China. Due to the global economic downturn, the economic situation in China has been severe since the second half of 2008. This change in the macro-economic conditions may have an adverse impact on our business and operations by causing a decrease in the number of passengers and the volume of freight that we transport. We may also experience pricing pressure on our services, which could have an adverse effect on our profitability.

     If the current economic downturn continues, our businesses, results of operations and financial condition could be materially and adversely affected.

     We face competition, which may adversely affect our business growth and results of operations.

     Our passenger and freight transportation businesses face competition from other means of transportation, such as road, air and water transportation. In our passenger transportation business, we compete with the bus and ferry services operating within Hong Kong, Guangzhou, Shenzhen and elsewhere in our service region. We compete for passengers with bus and ferry services in terms of price, speed, comfort, reliability, convenience, service quality, frequency of service and safety. In our freight transportation business, we primarily compete with water, truck and air transportation services operating within our service region. We increasingly compete for freight business with truck operators, shipping companies and airline companies on the basis of price, reliability, capacity, convenience, service quality, and safety. In addition, as the PRC government has lifted certain restrictions and control over foreign investments in China following China’s entry into the World Trade Organization, or the WTO, for example, by allowing foreign participation and investment in railway freight operations, we may lose our current status of sole railway service provider we currently enjoy in our service territory. Furthermore, the completion of the Wuhan-Guangzhou passenger transportation railway and the Guangzhou-Shenzhen section of the Guangzhou-Shenzhen-Hong Kong passenger transportation express railway, which are both under construction and are expected to be completed by the end of 2009 and June 2010, respectively, may further increase the competition we face. Increased

competition against us may adversely affect our revenues and results of operations. See “Item 4B. Business Overview—Competition” for additional information regarding our competition.

     Any significant decrease in the overall levels of business, industrial, manufacturing and tourism activities within the Pearl River Delta region and elsewhere in China may have a material adverse effect on our revenues and results of operations.

     The volume of freight and the number of passengers we transport are affected by the overall levels of business, industrial, manufacturing and tourism activities within the Pearl River Delta region, which is our main service region, and elsewhere in China, which is in turn affected by many factors beyond our control, such as applicable policies and regulations of the PRC government, perceptions regarding the attractiveness of investing or operating a business within our service region, consumer confidence levels and interest rate levels. Any significant decrease in the overall levels of passenger travel or freight transportation, whether due to an economic slowdown or other reasons, such as freezing weather, floods, earthquake and other natural disasters or a recurrence of the SARS epidemic or outbreaks of avian flu or H1N1 influenza or other similar health epidemics, may have a material adverse effect on our revenues and results of operations. Following China’s accession to the WTO, the policy advantages that Shenzhen currently enjoys due to its status as a special economic zone may be phased out, and its economic growth rate may not be sustained in the long run. Other coastal regions and ports in China may develop at a faster pace and become more competitive than Shenzhen. As a result, part of the freight currently imported or exported through ports in Hong Kong, Shenzhen or Guangzhou may be shipped through other ports in China, which may adversely affect our freight transportation business.

     Changes in freight composition in our freight transportation business may adversely affect our results of operations.

     Historically, our freight transportation revenue was derived mainly from the transportation of construction materials, coal, iron ore, oil, steel and chemicals, in which our railroad transportation services have an advantage over other means of transportation, such as road transportation services. With the economic and technological development and the restructuring of the industries’ structure in our service areas, commodities, such as advanced technological products, which tend to be compact, may be chosen to be shipped by road or air. We face significant competition in the transportation of such low-volume, high-value products. For example, in 2008, the aggregate weight of goods we transported decreased by 1.3% from 2007. Changes in freight composition may affect the usage volume and pricing of our freight transportation services and adversely affect our results of operations.

     Our railroads connect with the railroads of other operators and any disruption in the operation of those railroads, or our cooperation with other operators, could have a material adverse effect on our business and operations.

     Our railroads are an integral part of the PRC national railway network. Our railroads connect with the Beijing-Guangzhou line in the north, the Shenzhen-Kowloon rail line in the south, the Guangzhou-Maoming rail line in the west, and the Guangzhou-Meizhou-Shantou rail

line in the east, all of which are owned and operated by other operators. See “Item 4A. History and Development of the Company — Service Territory” for additional information. Our train services use these other railroads to carry passengers and freight to locations outside of our service territory. The performance of our domestic long distance trains services and our Hong Kong Through Trains depends on the smooth operation of these railroads and our cooperation with the operators of these railroads. Any disruption in the operation of these railroads, or our cooperation with any one of these railroad operators for any reason, could have a material adverse effect on our business and results of operations.

     A change to our preferential income tax status as a result of a change of law could have a material adverse effect on our results of operations.

     Before January 1, 2008, as a company located in the Shenzhen Special Economic Zone, we had enjoyed a preferential income tax rate of 15%, rather than the 33% income tax rate then generally applicable to domestic companies in the PRC.

     On March 16, 2007, the National People’s Congress of the PRC promulgated the PRC Enterprise Income Tax Law, or the new EIT Law, which has taken effect from January 1, 2008. According to the new EIT Law, the preferential income tax rate of 15% that was previously applicable to companies incorporated in Shenzhen (like us) and other special economic zones is being gradually phased out in five years beginning from January 1, 2008, and effective from January 1, 2012, the applicable tax rate applicable to us will become 25%, i.e., the unified income tax rate applicable to all domestic companies in the PRC with some minor exceptions. According to the Notice Regarding Implementation of Preferential Enterprise Income Tax in the Transition Period issued by the State Council of the PRC, or the State Council, companies which used to enjoy a preferential tax rate of 15% are being subject to the following tax rates from 2008 through 2012:

	•		18% for 2008;
	•		20% for 2009;
	•		22% for 2010;
	•		24% for 2011; and
	•		25% for 2012.

     The increase in our effective tax rate as a result of the above and any subsequent changes to the tax laws and regulations in the PRC may adversely affect our operating results.

     Any changes in our right to own and operate our business and assets, our right to profit and our right of asset disposal as previously granted by the MOR and the State Council may have a material adverse effect on our business and results of operations.

     We have been granted certain rights by the MOR and the State Council, with respect to certain aspects of our railroad businesses and operations, and also received legal clarification and confirmation of our asset ownership, corporate powers and relationships with service providers

and other entities in the national railway system, in connection with our Restructuring. These rights include the right to own and operate our business and assets, the right to profit and the right of asset disposal. Although these rights were granted to us indefinitely, we cannot assure you that these rights will not be affected by future changes in PRC governmental policies or regulations or that other railway operators will not be granted similar rights within our service region. If another railway operator is granted similar rights within our service region, the level of competition we face will increase significantly.

     Guangzhou Railway (Group) Company as our largest shareholder and one of our major service providers may have interests that conflict with the best interests of our other shareholders and our Company.

     Before the initial public offering of our class A ordinary shares (the “A shares”), or A Share Offering, in December 2006, Guangzhou Railway (Group) Company, or GRGC, held 67% of our issued share capital and was our controlling shareholder. Upon the completion of our A Share Offering, the percentage of shares held by GRGC was reduced to approximately 41%, but GRGC remained our largest shareholder. GRGC’s ownership percentage enables it to exercise substantial influence over (i) our policies, management and affairs; (ii) our determinations on the timing and amount of dividend payments and our adoption of amendments to certain of the provisions of our Articles of Association and (iii) the outcome of most corporate actions. Subject to the requirements of the HKSE Listing Rules, GRGC may also cause us to effect certain corporate transactions.

     GRGC’s interests may sometimes conflict with the interests of the other shareholders. We cannot assure you that GRGC, as our largest shareholder, will always vote its shares in a way that benefits the other shareholders of our Company. In addition to its relationship with us as our largest shareholder, GRGC, by itself or through its affiliates, such as GEDC and Guangmeishan Railway Co., Ltd., also provides us with certain services, for which we have limited alternative sources of supply. The interests of GRGC and its affiliates as providers of these services may also conflict with our interests. We have entered into service agreements, and our transactions with GRGC and its affiliates have been conducted on open, fair and competitive commercial terms. However, we only have limited leverage in negotiating with GRGC and its affiliates over the specific terms of the agreements for the provision of these services as there are no alternate suppliers. See “Item 4B. Business Overview—Suppliers and Service Providers” and “Item 7B. Related Party Transactions” for additional information regarding the services provided to us by GRGC and its subsidiaries.

     We have very limited insurance coverage.

     We do not maintain any insurance coverage against third party liabilities, except compulsory automobile liability insurance. In addition, we do not maintain any insurance coverage for most of our property, for business interruption or for environmental damage arising from accidents that occur in the course of our operations. As a result, we have to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond our control, out of our own funds, which could have a material adverse effect on our results of operations and financial condition.

     We could incur significant costs for violations of applicable environmental laws and regulations.

     Our railroad operations and real estate ownership are subject to extensive national and local environmental laws and regulations concerning, among other things, gaseous emissions, wastewater discharge, disposal of solid waste and noise control. In addition, environmental liabilities may arise from claims asserted by adjacent landowners or other third parties. As of December 31, 2008, we had not incurred any such liabilities and therefore, had not made any provision for such liabilities. We may also be required to incur significant expenses to remediate any violation of applicable environmental laws and regulations. In 2008, our environmental protection-related expenses were approximately RMB 1.0 million.

     Technological problems attributable to accidents, human error, severe weather or natural disasters could affect the performance or perception of our railway and result in decreases in customers and revenues, unexpected expenses and loss of market share.

     Our operations may be affected from time to time by equipment failures, delays, collisions and derailments attributable to accidents, human error or natural disasters, such as typhoons or floods.

     As our high-speed train service becomes technologically more complex, it may become more difficult for us to upkeep and repair our equipment and facilities as well as to maintain our service and safety standards. Furthermore, as we heavily rely on third parties for technical upgrades and support with regard to certain equipment and facilities, in case of any problems arising during our operation, our own staff may lack the technical expertise to identify and fix the problems in time. Moreover, the newly upgraded equipment may not be fully compatible with our existing operation system and may not meet our safety, security or other standards. The use of such equipment and facilities could result in malfunctions or defects in our services. In addition to potential technical complications, natural disasters could interrupt our rail services, thus leading to decreased revenues, increased maintenance and higher engineering costs.

     If we experience any equipment failures, delays, temporary cancellations of schedules, collisions and derailments, or any deterioration in the performance or quality of any of our services, it could result in personal injuries, damage of goods, customer claims of damages, customer refunds and loss of goodwill. These problems may lead to decreases in customers and revenues, damage to our reputation, unexpected expenses, loss of passengers and freight customers, incurrence of significant warranty and repair costs, diversion of our attention from our transportation service efforts or strained customer relations, any one of which could materially adversely affect our business. In January and February 2008, certain regions in southern China experienced extraordinary harsh winter weather, which caused equipment failures and delays and cancellations of some of our scheduled trains. As a result, during such period of freezing weather, our cost for repair of equipment increased and our revenues decreased. We cannot assure you that such events will not happen again in the future.

     Extensive government regulation of the railway transportation industry may limit our flexibility in responding to market conditions, competition or changes in our cost structure.

     We are subject to extensive PRC laws and regulations relating to the railway transportation industry. The MOR and other Chinese governmental authorities regulate pricing, speed, train routes, new railway construction projects, and foreign investment in the railway transportation industry. Any significant change in the relevant regulations of the PRC government is likely to have a material impact on our business and results of operations. In addition, our ability to respond to changes in our market conditions may be limited by those regulations set by the MOR and other Chinese governmental authorities.

     The revenues or charges settled by the MOR for certain long distance passenger train and freight transportation businesses are finally determined by the MOR.

     As described in “Item 7B Related Party Transactions” and Note 37 to our audited consolidated financial statements included elsewhere in this annual report, due to the fact that the railway business is centrally managed by the MOR within the PRC, we work in cooperation with the MOR and other railway companies owned and controlled by the MOR for the operation of certain long distance passenger train and freight transportation businesses within the PRC. The revenues generated from these long-distance passenger and freight transportation businesses are collected and settled by the MOR according to its settlement systems. The charges for the use of the rail lines and services provided by other railway companies are also settled by the MOR based on its systems. Although we can, to certain extent, calculate the revenues and charges settled by the MOR based on our own data and information, the amount of settlement is finally determined by the MOR.

     We may encounter difficulties in complying with the Sarbanes-Oxley Act of 2002.

     The United States Securities and Exchange Commission, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company in the United States to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the Company’s internal control over financial reporting. In addition, an independent registered public accounting firm must report on the effectiveness of the Company’s internal control over financial reporting. These requirements first applied partially to our annual report on Form 20-F for the fiscal year ended December 31, 2006 by requiring our management to provide a report regarding the assessment of the effectiveness of our internal control over financial reporting. Although we successfully remediated in 2007 the two material weaknesses identified in 2006 and have concluded that we maintained effective internal control over financial reporting for each of the years ended December 31, 2007 and 2008, we may not be able to conclude in future years that we have effective internal control over financial reporting, in accordance with the Sarbanes-Oxley Act of 2002. See “Item 15. Controls and Procedures.”

     Moreover, in future years, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may disagree. If our independent registered public accounting firm is not satisfied with our internal control over financial reporting or the level at which our internal control over financial reporting is designed or operated, or if the independent registered public accounting firm interprets the requirements, rules or regulations differently than we do, then they may issue an adverse opinion. Any of these possible outcomes could result in an adverse reaction in the financial

marketplace due to a loss of investor confidence in the reliability of our reporting processes, which could adversely impact the market price of our H shares and ADSs. In addition, we will continue to incur significant costs and use significant management and other resources in order to comply with Section 404 of the Sarbanes-Oxley Act of 2002.

     We cannot assure you that the Acquisition will benefit our business and results of operations as we expect.

     On November 15, 2004, we entered into an asset purchase agreement with Yangcheng Railway Company to acquire the railway transportation business between Guangzhou and Pingshi and related assets and liabilities, or the Acquisition. In order to finance such Acquisition, on December 13, 2006, we issued 2,747,987,000 A shares which are now listed for trading on the Shanghai Stock Exchange and raised approximately RMB 10.0 billion from the A Share Offering. On December 28, 2006, we paid RMB 5.27 billion out of the proceeds raised from the A Share Offering to Yangcheng Railway Company. On January 1, 2007, the railway transportation business of the Guangzhou-Pingshi Railway came under our control. Accordingly, the Company considers January 1, 2007 as the effective date of the Acquisition for accounting purposes. We paid the remaining balance in the amount of RMB 4.87 billion on June 29, 2007.

     We cannot assure you that the Acquisition will benefit our business and results of operations as we expect. As a result of the Acquisition, our railway has been extended from 152 kilometers to 481.2 kilometers. The Acquisition therefore results in a significant increase in our administrative burdens and operating costs. We cannot assure you that we will be able to manage or integrate the acquired business successfully. The process of combining railway transportation business between Guangzhou and Pingshi into our operations may cause an interruption of, or a loss of momentum in, our business as a result of the following factors, among others:

	•		loss of key employees or customers of the acquired business;
	•		failure to maintain the quality of services that we have historically provided;
	•		the need to coordinate geographically diverse organizations; and
	•		the diversion of management’s attention from our day-to-day business as a result of the need to deal with any disruptions and difficulties and the need to add management resources to do so.

     In addition, in order to ensure the success of the integration, we have restructured and adapted our business management system to reflect the expanded operations. However, we may fail to realize the cost savings, revenue enhancement and other benefits that we currently expect to result from the Acquisition and the integration and may cause material adverse short- and long-term effects on our operating results and financial conditions.

     The Company has recognized goodwill associated with such Acquisition amounting to approximately RMB 281.3 million upon the acquisition date as at January 1, 2007. According to

relevant accounting rules under IFRS, the goodwill is tested both annually and whenever there is an indication of impairment. Although, after assessment, we did not recognize any impairment loss against such goodwill for the year ended December 31, 2008, we may have to do so in the future if any future assessment indicates that such recognition is necessary.

Risks Relating to the People’s Republic of China

     Substantially all of our assets are located in China and substantially all of our revenue is derived from our operations in China. Accordingly, our results of operations and prospects are subject, to a significant extent, to the economic, political and legal developments in China.

     China’s economic, political and social conditions, as well as government policies, could affect our business.

     As we are established, and operate substantially all of our businesses, in China, any changes in the political, economic and social conditions of the PRC or any changes in PRC governmental policies or regulations, including a change in the PRC government’s economic or monetary policies or railway or other transportation regulations, may have a material adverse effect on our business and operations and our results of operations. The economic environment in the PRC differs significantly from the United States and many Western European countries in terms of its structure, stage of development, capital reinvestment, growth rate, level of government involvement, resource allocation, self-sufficiency, rate of inflation and balance of payments position. The PRC government’s economic reform policies since 1978 have resulted in a gradual reduction in state planning in the allocation of resources, pricing and management of assets, and a shift towards the utilization of market forces. The PRC government is expected to continue its reforms, and many of its economic and monetary policies still need to be developed and refined. We cannot assure you that future changes in governmental policies or regulation will not have a material adverse effect on our business, operations or results of operations.

     Government control of currency conversion may adversely affect our operations and financial results.

     Our books and records are maintained and our financial statements are prepared and presented in RMB, which is not a freely convertible currency. All foreign exchange transactions involving RMB must be transacted through banks and other institutions authorized by the People’s Bank of China, or PBOC. We receive substantially all of our revenues in RMB. We need to convert a portion of our revenues into other currencies to meet our foreign currency obligations, such as payment of cash dividends on our H shares and equipment purchases from overseas regions. In addition, the existing foreign exchange limitations under PRC law could affect our ability to obtain foreign currencies through debt financing, or to obtain foreign currencies for capital expenditures or for distribution of cash dividends on our H shares.

     Fluctuation of the RMB could adversely affect our financial condition and results of operations.

     The value of the RMB fluctuates and is subject to changes in market conditions as well as China’s political and economic conditions. Since 1994, the conversion of RMB into foreign currencies, including Hong Kong and U.S. dollars, has been based on rates set by the PBOC, which are set daily based on the previous day’s inter-bank foreign exchange market rates and current exchange rates on the world financial markets. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. As of June 19, 2009, this change in policy has resulted in a more than 20% appreciation of the RMB against the U.S. dollar ever since July 2005. While the international reaction to the RMB 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 the RMB against the U.S. dollar. We have certain U.S. dollar-denominated and HK dollar-denominated assets and the appreciation of RMB could result in a decrease of the value of these assets. For further information on our foreign exchange risks and certain exchange rates, see “Item 3A. Selected Consolidated Financial and Other Data” and “ITEM 11. Quantitative and Qualitative Disclosures About Market Risk — Currency Risks.” We cannot assure you that any future movements in the exchange rate of RMB against the United States dollar or other foreign currencies will not adversely affect our results of operations and financial condition.

     The differences with respect to the PRC legal system could limit the legal protections available to you.

     As the PRC and the U.S. have different legal systems and the court decisions in China do not have binding force on subsequent cases, there are significant differences between the PRC legal system and the U.S. legal system. In addition, because the PRC Company Law is different in certain important aspects from company laws in Hong Kong, United States and other common law countries and regions and because the PRC securities laws are still at a relatively early stage of development and PRC laws and regulations dealing with business and economic matters are relatively new and still evolving, you may not enjoy shareholder protections to which you may be entitled in Hong Kong, the United States or other jurisdictions.

     We face risks related to health epidemics and other outbreaks.

     Our business could be adversely affected by the effects of avian flu, H1N1 influenza, SARS or other epidemics or outbreaks. China reported a number of cases of SARS in April 2004. In 2005 and 2006, there have been reports on the occurrences of avian flu in various parts of China, including a few confirmed human cases. In 2009, China reported a few occurrences of H1N1 influenza in several provinces. Any prolonged recurrence of avian flu, H1N1 influenza, SARS or other adverse public health developments in China may have a material adverse effect on our business operations, including our ability to travel or ship products in Southern China, as well as temporary closure of our business. Such closures or travel or shipment restrictions would severely disrupt our business operations and adversely affect our results of operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of avian flu, H1N1 influenza, SARS or any other epidemic.

ITEM 4. INFORMATION ON THE COMPANY

Item 4A. History and Development of the Company

Overview

     We were established as a joint stock limited company under the Company Law of the PRC on March 6, 1996, and have conducted our business for thirteen years. Our legal name is , and its English translation is Guangshen Railway Company Limited. Our registered office is located at No. 1052 Heping Road, Shenzhen, Guangdong Province, The People’s Republic of China, 518010. Our telephone number is (86-755) 2558-7920 or 2558-8146 and our fax number is (86-755) 2559-1480.

     Our H shares (share code: 0525) and American Depositary Shares, or ADSs (ticker symbol: GSH), were listed on the HKSE, and the New York Stock Exchange, Inc., or the NYSE, respectively, in May 1996. Our A shares (share code: 601333) were listed on the Shanghai Stock Exchange in December 2006. We are currently the only PRC railway enterprise with shares concurrently listed in Shanghai, Hong Kong and New York.

     We are mainly engaged in passenger and freight transportation businesses on the Shenzhen-Guangzhou-Pingshi Railway, which is 481.2 kilometers long, running vertically through Guangdong Province. The Guangzhou-Pingshi Railway is the southern part of Beijing-Guangzhou Railway, which connects the Northern and Southern railways of China. The Guangzhou-Shenzhen Railway is strategically located and links with major railway networks in China, including the Beijing-Guangzhou, Beijing-Kowloon, Sanshui-Maoming, Pinghu-Nantou, and Pinghu-Yantian lines, as well as to the Kowloon-Canton Railway in Hong Kong, which is an important component of the transportation network of southern China, as well as the only railway channel linking Hong Kong with Mainland China. The Guangzhou-Shenzhen Railway is currently one of the most modern railways in the PRC as well as the first wholly fenced railway with four parallel lines in the PRC that allows passenger trains and freight trains to run on separate lines.

     Passenger transportation is our principal business. As of December 31, 2008, we operated 239.5 pairs of passenger trains in accordance with our daily train schedule, including 120 pairs of inter-city high-speed passenger trains between Guangzhou and Shenzhen (including 34 pairs of standby trains), 13 pairs of Hong Kong Through Trains and 106.5 pairs of long-distance passenger trains. With our efforts to promote the development of high-speed passenger trains, our domestically manufactured electric multiple units trains, or EMUs (also known as “Concords” or “CRHs”), with a top speed of 200 kilometers per hour, transported most of our passengers between Guangzhou and Shenzhen. One pair of EMUs between Guangzhou and Shenzhen is dispatched every 10 minutes on average during peak hours, as part of our “As-Frequent-As-Buses” inter-city operations.

     Freight transportation is another important segment of our business. Our railways are closely linked with, and we have developed business partnerships with, neighbouring ports, logistic bases, building materials markets, large factories and mines. We are also well-equipped with various freight facilities and can efficiently transport full load cargo, single load cargo, containers, bulky and overweight cargo, dangerous cargo, fresh and live cargo and oversized cargo. Our partnerships and facilities provide us with competitive advantages in transporting

freight for medium to long distances in the PRC.

Background, Restructuring and Acquisition

     The railroad system between Guangzhou and Shenzhen was part of the original “Canton-Kowloon” railroad, which began operations in 1911. In 1949, following the establishment of the PRC, the railroad was divided into two sections, with the first linking Guangzhou and Shenzhen, and the second, across the Hong Kong border and separately owned, linking Luohu and the Kowloon peninsula in Hong Kong. The Guangzhou to Shenzhen railroad has been operated since 1949 by a sub-division of the Guangzhou Railway Administration, a predecessor to GRGC.

     In 1979, Guangshen Railway Company, our predecessor, in conjunction with KCR which has been merged into the MTR Corporation, or MTR, was engaged in the joint operation of Hong Kong Through Train passenger services between Guangzhou and Hong Kong.

     In 1984, to exploit the rapid growth in the Pearl River Delta, Guangshen Railway Company, our predecessor, was established pursuant to the approval of the State Council as a state-owned enterprise administered by the Guangzhou Railway Administration. At that time, Guangshen Railway Company had only a single-line railroad. Since then, large capital expenditures have been made to expand and upgrade its facilities and services. In 1987, construction of the second line was completed. In 1991, Guangshen Railway Company began the construction of a semi- high-speed rail line and purchased high-speed locomotives and passenger coaches, which can provide passenger train services at speeds of more than 160 kilometers per hour. Our high-speed line was the first of its kind in China. Commercial operation of the high-speed trains commenced in December 1994.

     We were established as a joint stock limited company on March 6, 1996 following the Restructuring, which was carried out to reorganize the railroad assets and related businesses of Guangshen Railway Company and certain of its subsidiaries. As part of the Restructuring, 2,904,250,000 state legal person shares, par value RMB 1.00 per share, of our Company were issued to GRGC, a state-owned enterprise controlled by the MOR of the PRC. Guangshen Railway Company retained the assets, liabilities and businesses not assumed by us, including units providing staff quarters and social services such as health care, education, public security and other ancillary services, as well as subsidiaries or joint ventures whose businesses do not relate to railroad operations and do not compete with our businesses. As part of our Restructuring, Guangshen Railway Company was renamed Guangzhou Railway (Group) Guangshen Railway Enterprise Development Company, or GEDC.

     Since April 1, 1996, we have been able to set our own prices for our high-speed train services and charge a premium over average national prices for our other passenger and freight train services. See “Item 4B. Business Overview — Regulatory Overview — Pricing” for a more detailed description of our pricing scheme.

     We completed our initial public offering of class H ordinary shares, or H shares, and our American depositary shares, or ADSs, in May 1996. In that offering, we issued a total of 1,431,300,000 H shares, par value RMB 1.00 per share. Our H shares are listed for trading on the HKSE and our American depositary shares, or ADSs, each representing 50 H shares, are

listed for trading on the NYSE. Our H shares or ADSs may not be purchased or owned by domestic investors in the PRC.

     On November 15, 2004, we entered into an asset purchase agreement with Yangcheng Railway Company to acquire the railway transportation business between Guangzhou and Pingshi and related assets and liabilities, or the Acquisition. In order to finance such Acquisition, on December 13, 2006, we issued 2,747,987,000 A shares (stock code: 601333) that are now listed for trading on the Shanghai Stock Exchange and raised approximately RMB 10.0 billion from the A Share Offering. After the A Share Offering, approximately 41% of our issued and outstanding shares were owned by GRGC, while institutional and public shareholders own approximately 59% of our issued and outstanding common shares, including A shares, H shares and ADSs.

     On December 28, 2006, we paid RMB 5.27 billion out of the proceeds raised from the A Share Offering to Yangcheng Railway Company. On January 1, 2007, the railway transportation business of the Guangzhou-Pingshi Railway came under our control as a result of the Acquisition. As a result, our operations expanded from a regional railway to a national trunk line network and our operating railway distance extended from 152 kilometers to 481.2 kilometers, running vertically through the entire Guangdong Province. In June 2007, we paid the remaining balance in the amount of RMB 4.87 billion to Yangcheng Railway Company.

     In March 2006 and July 2007, we conducted organizational reforms to streamline our organization and improve efficiency. Through these reforms, we restructured, and reallocated the responsibilities of our administrative and functional departments and made the following departments the functional departments under the supervision of our general manager: the General Administrative Department, Finance Department, Human Resources Department, Transportation Administrative Department, Security Supervisory Department, Diversified Business Management Department and Audit Department. Our frontline production and operational departments were generally not affected by this organizational reform. In October 2007, we adjusted our overall railway transportation business units into 13 units.

Service Territory

     Our rail lines traverse the Pearl River Delta and also run vertically through Guangdong Province, an area which benefited early from the PRC economic reform policies that began in the late 1970s. Throughout the 1980s and early 1990s, the economy of the Pearl River Delta, fueled by foreign investments, grew rapidly. The Pearl River Delta is currently one of the most affluent and fastest growing areas in China.

     As of June 8, 2009, we had 48 stations situated on our rail lines, providing passenger and freight transportation services for cities, towns and ports situated along the Shenzhen-Guangzhou-Pingshi corridors and Hong Kong (which we serve in conjunction with MTR). In addition to our Hong Kong Through Train passenger service in conjunction with the MTR, we also allow Hong Kong-bound freight trains to use our railroad.

     The Shenzhen-Guangzhou-Pingshi railroad is an integral component of the PRC national railway network, and provides nationwide access to passenger and freight traffic from southern

China to other regions of mainland China as described below:

     Northbound. At Pingshi, our rail line connects with the Beijing-Guangzhou line, which is one of the major trunk lines linking southern China with Beijing and northern China. Another trunk line connecting northern and southern China, the Beijing-Hong Kong rail line, includes the section of our line from Dongguan to Shenzhen.

     Southbound. Our line connects at Shenzhen with the rail line owned by the MTR that runs to Kowloon, Hong Kong.

     Westbound. Our line connects with the Guangzhou-Maoming rail line operated by Sanmao Railway Company, a company in which GRGC holds a 49.12% equity interest, that runs through the western part of Guangdong Province, connecting with other rail lines that continue on into the Guangxi Zhuang Autonomous Region, which provides access to southwestern China.

     Eastbound. Our rail line intersects at Dongguan with the Guangzhou-Meizhou- Shantou rail line operated by Guangmeishan Railway Company, a company jointly established by GRGC, the Guangdong Provincial Railway Company and other public investors. A section of this line forms, along with our Dongguan to Shenzhen segment, a part of the Beijing-Hong Kong rail line, which terminates in Kowloon, Hong Kong.

     At Pinghu, our rail line connects with two local port lines: one of them, Pingnan Railway, principally serves three ports located in western Shenzhen—Shekou, Chiwan and Mawan — and the other, Pingyan Railway, serves Yantian port, an international deepwater port located in eastern Shenzhen. At the Huangpu and Xiayuan stations in Guangzhou, our line connects with Huangpu port and Xinsha port. Our rail line also connects with certain industrial districts, commercial districts and the facilities of many of our customers through spur lines, which are rail lines running off the main line that are used and typically financed by a freight customer or a group of freight customers and maintained by us for a fee. We believe that the customers connected to these spur lines and customers with goods that must be shipped through these regional ports are likely to use our services on a long-term basis.

Item 4B. Business Overview

Business Operations

     Our principal businesses are railroad passenger and freight transportation and railway network usage and services, which collectively generated 92.5% of our total revenues in 2008.

     On January 1, 2007, we acquired the railway transportation business of Guangzhou-Pingshi Railway. The Acquisition was financed with the proceeds from the A Share Offering. The acquired business has contributed approximately RMB 5,993.2 million to our revenues and RMB 900.3 million to our net profit for the year ended December 31, 2007.

     On April 18, 2007, after the national railway system of China implemented its sixth large-scale railway speed-up project of the national railway system, we commenced operation of the Fourth Rail Line between Guangzhou and Shenzhen. The Guangzhou-Shenzhen Railway is

the first wholly fenced four-line railway in China that enables passenger trains and freight trains to run on separate lines. The start-up of the Fourth Rail Line has enhanced our transportation capacity.

     In 2007, we also put our domestically manufactured high-speed electric train sets into operation, which has been popular with our passengers. In addition, we continued to implement our “As-Frequent-As-Buses” Train Project and improved our passenger service equipment. We have also focused on improving our corporate governance and safety procedures.

     In 2008, we further increased the frequency of our inter-city passenger trains between Guangzhou and Shenzhen and operated up to 120 pairs of such inter-city passenger trains on a daily basis. At the same time, we made great efforts to increase the number of domestic long-distance trains we operated. For example, we commenced the operation of the long-distance passenger trains between Shenzhen and Shaoguan and between Guangzhou and Zhengzhou in March 2008 and July 2008, respectively.

     In 2008, our total revenues were RMB 11,688.7 million, representing an increase of 11.2% from RMB 10,508.5 million in 2007. Our revenues from railroad passenger transportation service, freight transportation service, railway network usage and services and other businesses were RMB 6,759.2 million, RMB 1,324.7 million, RMB 2,738.4 and RMB 866.3 million, respectively, accounting for 57.8%, 11.3%, 23.4% and 7.5%, respectively, of our total revenues in 2008. Our profit attributable to shareholders was RMB 1,224.1 million, representing a decrease of 14.5% from RMB 1,431.4 million in 2007. The revenue from our other businesses was RMB 866.3 million, representing an increase of 25.8% from RMB 689.0 million in 2007.

     The table below summarizes our railroad transportation revenues and traffic volume in each of the five years ended December 31, 2004, 2005, 2006, 2007 and 2008.

		Year ended December 31,
		2004				2005				2006				2007(7)				2008(7)
Passenger Transportation
Total passenger revenues (RMB millions)			2,076.27				2,253.34				2,608.84				5,833.54				6,759.23
Total passengers (millions)(1)			31.56				33.00				35.98				73.05				83.82
Revenues per passenger (RMB)(2)			65.79				68.28				72.51				79.86				80.64
Total passenger—kilometers (millions)			4,200.20				4,539.10				4,842.7				26,278.2				27,923.70
Revenues per passenger—kilometer (RMB)(3)			0.49				0.50				0.54				0.22				0.24
Freight Transportation
Total freight revenues (RMB millions)			611.81				540.34				565.56				1,326.45				1,324.70
Total freight tonnes (millions)			34.20				31.89				30.71				71.01				70.14
Revenues per tonne (RMB)(4)			17.89				16.94				18.42				18.68				18.89
Total tonne—kilometers (millions)			2,489.50				2,294.80				2,276.3				15,306.9				15,557.37
Revenues per tonne—kilometer (RMB)(5)			0.25				0.24				0.25				0.09				0.09
Railway Network Usage and Services (RMB millions)(6)			183.40				305.79				291.49				2,659.53				2,738.43

Passenger Transportation

     Passenger transportation is our largest business segment, and accounted for 57.8% of our total revenues, and 62.5% of our railroad transportation revenues, in 2008. Our passenger train services can be categorized as follows:

	•		intercity high-speed express trains between Guangzhou and Shenzhen;
	•		Hong Kong Through Trains between Hong Kong and Guangzhou; and
	•		domestic long-distance trains.

     As of December 31, 2008, we operated 239.5 pairs of passenger trains per day (each pair of trains meaning trains making one round-trip between two points), representing an increase of 44.5 pairs from 195 pairs as of December 31, 2007, of which:

	•		120 pairs were high-speed express passenger trains operating between Guangzhou and Shenzhen (including 34 stand-by pairs), representing an increase of 40 pairs;
	•		13 pairs were Hong Kong Through Trains; (including 11 pairs of Hong Kong Through Trains, one pair of through train between Zhaoqing and Kowloon, and

one through train that operates on alternating days either on the Beijing-Kowloon line or the Shanghai-Kowloon line); and

•

106.5 pairs were domestic long-distance passenger trains, representing an increase of 4.5 pairs from 102 pairs as of December 31, 2007, which includes 24 pairs of long-distance passenger trains operated by us between Shenzhen and Yueyang, between Shenzhen and Shanghai South, between Shenzhen and Beijing West, between Kowloon and Beijing West, between Shenzhen and Shaoguan, between Guangzhou and Chongqing North, between Guangzhou and Wanzhou, between Guangzhou and Liuzhou, between Guangzhou and Wuchang, between Guangzhou and Xi’an, between Guangzhou and Taizhou, between Guangzhou and Shanghai South, between Guangzhou and Jiujiang, between Guangzhou and Changsha, between Yueyang and Guangzhou, between Chenzhou and Foshan, between Guangzhou and Zhangjiajie, between Guangzhou and Pingshi (two pairs), between Guangzhou and Shaoguan (two pairs), between Yueyang and Changsha, between Guangzhou and Lhasa and between Sanya and Beijing West, and 82.5 pairs of domestic long-distance trains, operated by other operators but originating or terminating on, or passing through, our railroad.

     The table below sets out passenger revenues and volumes for our Hong Kong Through Trains and domestic trains in each of 2006, 2007 and 2008:

		Total passenger revenues												Total passengers												Revenue per passenger
		2006				2007				2008				2006				2007				2008				2006				2007				2008
		(RMB millions)												(millions)												(RMB)
Guangzhou-Shenzhen Trains			1,341.7				1,494.2				1,973.1				22.2				24.7				32.1				60.3				60.5				61.5
Hong Kong Through Trains			454.2				430.5				380.3				3.2				3.2				3.1				141.9				134.5				122.1
Long-distance Trains			812.9				3,908.8				4,405.8				10.5				45.1				48.6				77.4				86.7				90.6
Combined passenger operations			2,608.8				5,833.5				6,759.2				36.0				73.0				83.8				72.5				79.9				80.6

     Guangzhou-Shenzhen Trains. In 2008, our passenger transportation services on the trains between Guangzhou and Shenzhen contributed most to our railroad passenger transportation revenues. In 2008, we did not operate any regular speed inter-city train between Guangzhou and Shenzhen. As of December 31, 2008, we operated, on average, a total of more than 80 pairs of EMU high-speed passenger trains between Guangzhou and Shenzhen daily. Such EMU high-speed trains are capable of running at about 200 kilometers per hour. The number of passengers traveling on our Guangzhou-Shenzhen trains increased by 29.8% from 24.7 million in 2007 to 32.1 million in 2008. The revenues from our Guangzhou-Shenzhen trains increased by 32.1% from RMB 1,494.2 million in 2007 to RMB 1,973.1 million in 2008. The increase in business volume of Guangzhou-Shenzhen trains was primarily due to (i) the Guangzhou-Shenzhen express train service gaining more regular customers since the commencement of commercial operations of CRHs (China Railway High-speed) on April 18, 2007; (ii) the optimization and consolidation of transportation resources of our railways and the improvement of co-ordination between Guangzhou-Shenzhen inter-city express trains and long-distance trains and (iii) the increase in short-distance two-way passenger traffic during the Qingming Festival Holidays, the May Day Holidays and the Dragon Boat Festival Holidays.

     Hong Kong Through Trains. We currently operate jointly with the MTR, 13 pairs of high-speed Hong Kong Through Trains between Hong Kong and Guangzhou. We provide the trains and personnel for ten pairs of these train services, while MTR provides for three pairs. The Hong Kong Through Train services beyond Guangzhou to Foshan, Zhaoqing, Beijing and Shanghai are provided by GRGC and Shanghai Railway Administration. Revenues from these Hong Kong Through Trains on the Guangzhou-Hong Kong section are shared between MTR and us, in proportion to our track mileage for the Hong Kong Through Train services, with 81.2% accruing to us and 18.8% to MTR. In addition, we share all related costs with MTR at the same rate for the Hong Kong Through Train services.

     Most of the passengers taking our Hong Kong Through Trains are from Hong Kong, Macau, Taiwan and foreign countries, and many are business travelers. As the prices for our Hong Kong Through Train services are higher than the prices we charge for our domestic train services, these Hong Kong Through Train services produce higher per-passenger revenues than our other passenger train services.

     In 2008, the volume of passengers who traveled on the Hong Kong Through Trains decreased by 2.4% from 3.192 million in 2007 to 3.115 million in 2008. The decrease was mainly due to (i) the operation of Guangzhou-Shenzhen intercity trains which has diverted a portion of the Hong Kong Through Train passengers; (ii) the decrease in the number of business travelers and tourists traveling between Guangdong and Hong Kong as a result of the global financial crisis and economic downturn and (iii) the depreciation of the Hong Kong Dollar, the main currency in which our revenue from Hong Kong Through Trains is denominated, against RMB in 2008.

     Domestic Long-distance Trains. As of December 31, 2008, we operated on a daily basis 106.5 pairs of domestic long-distance passenger trains on our rail lines to cities in Guangdong, Hunan, Hubei, Jiangxi, Anhui, Jiangsu, Liaoning, Shanxi, Fujian, Heilongjiang, Jilin, Zhejiang, Hebei, Henan, Sichuan, Yunnan, Shandong provinces, Chongqing, Shanghai, Beijing, Tianjin, Guangxi Autonomous Region and Tibet Autonomous Region. In 2008, the number of passengers traveling on our long-distance trains was 48.6 million, representing an increase of 7.7% from 45.1 million in 2007. The increase in business volume of the long-distance trains was mainly due to (i) the commencement of operation of trains from Shenzhen to Shaoguan and from Guangzhou to Zhengzhou in March and July 2008, respectively; (ii) the full-year inclusion in 2008 of the operation of the trains from Guangzhou to Shanghai and from Guangzhou to Xi’an, which started operation in April and August 2007, respectively and (iii) the increase in the number of migrant workers returning home earlier than in previous years primarily as a result of the reduction in output, and closures or bankruptcies of certain enterprises in the Pearl River Delta as a result of the global financial crisis and economic downturn and the upgrading of the industrial structure of the region.

     Major Stations. The following are the major train stations owned and operated by us as of December 31, 2008:

     Guangzhou East Station. Our Guangzhou East Station provides services for our railway transportation services between Guangzhou and Shenzhen and between Guangzhou and Hong Kong and provides a hub for long-distance trains to different locations within China. Our

Guangzhou East Station is connected to Lines 1 and 3 of the Guangzhou municipal subway. As of December 31, 2008, the Guangzhou East Station handled on a daily basis 12 pairs of Hong Kong Through Trains, more than 80 pairs of Guangzhou-Shenzhen trains, 17 pairs of long-distance passenger trains between the Guangzhou East Station and other locations in China, including Wuchang, Shantou, Nanchang, Hefei, Macheng, Shenyang North, Xiangfan, Tsingtao, Yingtan, Harbin, Xiamen, Taiyuan and Beijing West (one train every two days), Shanghai (one train every two days), Shaoguan, Chenzhou, Shanghai South, and five pairs of passenger trains passing through the Guangzhou East Station. In 2008, the number of passengers traveling from Guangdong East Station was 17.8 million.

     Dongguan Station. Our intermediate station at Dongguan is the point of connection between our line and the neighboring Dongguan-Meizhou-Shantou rail line, and is also the point where our line intersects with the Beijing-Hong Kong rail line. Dongguan Station, by connecting our rail line to the Beijing-Hong Kong line, also facilitates passenger service between Kowloon and Zhaoqing. As of December 31, 2008, this station handled on a daily basis the transfer service for ten pairs of domestic long-distance passenger trains, 68.5 pairs of Guangzhou-Shenzhen high-speed passenger trains and 10.5 pairs of Hong Kong Through Trains. In 2008, the number of passengers traveling from Dongguan Station was 4.0 million.

     Shenzhen Station. Our Shenzhen Station is located in the Shenzhen Special Economic Zone, close to the Luohu Station on the Guangzhou-Kowloon rail line and connected to Line 1 of Shenzhen’s subway system. In 2002, we introduced China’s first computerized ticket hall in our Shenzhen Station. As of December 31, 2008, our Shenzhen Station handled on a daily basis more than 80 pairs of Guangzhou-Shenzhen passenger trains and 16 pairs of domestic long-distance passenger trains between Shenzhen and other locations in China, including Beijing (two pairs), Changsha, Shaoguan, Wuchang (three pairs), Shantou, Zhengzhou, Fuzhou, Shenyang, Changde, Jiujiang, Yueyang, Guilin, and Shanghai. In 2008, the number of passengers traveling from Shenzhen Station was 18.9 million.

     Shaoguan Station. Our Shaoguan Station is an important transportation hub in the north part of Guangdong Province, which handles both passengers and freight transportation. In the year ended December 31, 2008, our Shaoguan Station handled on a daily basis 66 pairs of passenger trains, including four pairs which originally depart from and ultimately arrive at our Shaoguan Station. In 2008, the number of passengers traveling from Shaoguan Station was 3.7 million.

     Guangzhou Station. Guangzhou Station is the largest passenger station in South China and is connected with the Beijing-Guangzhou Railway, Guangzhou-Maoming Railway, Guangzhou-Shenzhen Railway and Guangmeishan Railway. Our Guangzhou Station is also indirectly connected with the Beijing-Kowloon Railway via the Guangzhou-Shenzhen Railway. In the year ended December 31, 2008, our Guangzhou Station handled on a daily basis 98 pairs of passenger trains and 156 pairs during the Chinese New Year holiday period. In 2008, the number of passengers traveling from Guangzhou Station was 31.7 million. During the Chinese New Year holiday period, the number of daily passengers traveling from our Guangzhou Station exceeded 220,000.

Freight Transportation

     Revenue from our freight transportation accounted for 11.3% of our total revenues and 12.2% of our railroad transportation revenues in 2008. Our principal market for freight is domestic medium and long-haul freight, originating and/or terminating outside the Shenzhen-Guangzhou-Pingshi corridor. We are well equipped with various freight facilities and can efficiently transport full load cargo, single load cargo and containers. We have established business cooperation with ports, logistics bases and specialized building materials markets in our service region.

     The majority of the freight we transport is high-volume, medium to long-distance freight received from and/or transferred to other rail lines. A portion of the freight we transport both originates and terminates in the Shenzhen-Guangzhou-Pingshi corridor. We classify our freight business into three categories:

	•		inbound freight, which is primarily freight unloaded at freight stations and spur lines connected to ports on our rail line or in Hong Kong;
	•		outbound freight, which is primarily freight bound for other regions in Mainland China as well as foreign countries loaded at our train stations and spur lines connected to ports on our rail line or in Hong Kong; and
	•		pass-through freight, which refers to freight that travels on our rail line, but which does not originate from or terminate at our rail line.

     The total tonnage of freight we transported in 2008 was 70.1 million tonnes, representing a decrease of 1.3% from 71.0 million tonnes in 2007. Revenues from freight transportation business in 2008 were RMB 1,324.7 million, representing a decrease of 0.1% from RMB 1,326.4 million in 2007. This decrease is primarily due to the freezing weather at the beginning of the year, the upgrading of the industrial structure in the Pearl River Delta region and the global financial crisis and economic downturn.

     We serve a broad customer base and ship a wide range of goods in our freight transportation business. We are not dependent upon any particular customers or industries.

     We transport a broad range of goods, which can generally be classified as follows: metal ores, coal, containers, construction materials, steel, petroleum, and other goods. The majority of our inbound freight consists of raw materials and essential production materials for manufacturing, industrial and construction activities, while the majority of our outbound freight consists of imported mineral ores as well as coal and goods produced or processed within our service territory, for customers throughout China and abroad.

     The following table shows the composition of our freight volume by percentage for the three years ended December 31, 2006, 2007 and 2008 (based on tonnes transported):

		Outbound Freight												Inbound (and Pass-through) Freight
		2006				2007				2008				2006				2007				2008
		As a Percentage of Total Outbound Freight												As a Percentage of Total Inbound
														(and Pass-through) Freight
Construction materials			21.8	%			44.9	%			40.6	%			42.8	%			36.5	%			34.7	%
Energy products			53.2	%			27.3	%			26.0	%			8.4	%			24.7	%			22.9	%
Food products			2.8	%			2.8	%			3.1	%			18.7	%			14.9	%			15.3	%
Chemicals			4.2	%			3.2	%			3.3	%			12.4	%			9.3	%			10.1	%
Manufactured goods			1.2	%			2.1	%			3.0	%			2.8	%			1.3	%			1.7	%
Containers			11.9	%			13.2	%			17.5	%			11.1	%			9.6	%			11.8	%
Other goods			4.9	%			6.5	%			6.5	%			3.8	%			3.7	%			3.5	%
Total			100	%			100	%			100	%			100	%			100	%			100	%

Railway Network Usage and Services Business

     Revenue from our railway network usage and services accounted for 23.4% of our total revenues and 25.3% of our railroad transportation revenues in 2008. Railway network usage and services mainly include the locomotive traction, track usage, electric catenaries (overhead wires used to transmit electrical energy to trains), vehicle coupling and other services. In 2008, our revenue from railway network usage and services was RMB 2,738.4 million, representing an increase of 3.0% from RMB 2,659.5 million in 2007. The increase was mainly due to: (i) the increase in the number of long-distance trains operated by other railway companies (bureaus) that use our tracks and services, which led to the increase in related revenues and (ii) the change in electric locomotive routing, which resulted in a decrease in revenues from locomotive traction and an increase in revenues from use of electric catenaries.

     The following table shows the composition of our revenues from railway network usage and services for the three years ended December 31, 2006, 2007 and 2008:

		2006				2007				2008
		(RMB millions)
Locomotive traction			4.0				1,155.3				1,114.3
Track usage			154.8				919.7				953.5
Electric catenaries			24.0				211.2				281.8
Vehicle coupling			46.5				216.6				224.0
Other services			62.2				156.7				164.9
Total			291.5				2,659.5				2,738.4

Other Businesses

     We engage in other businesses principally related to our railroad transportation business. Revenue from our other businesses accounted for 7.4% of our total revenues in 2008. Our other businesses mainly consist of sale of materials and supplies, maintenance of trains, on-board catering services, labor services, operation of restaurants, hotels and warehouses, and other businesses related to railway transportation.

     Revenues from our other businesses in 2008 were RMB 866.3 million representing an increase of 25.7% from RMB 687.0 million in 2007. The increase in revenues from other businesses was mainly due to (i) the refueling in our territory by some long-distance trains operated by other railway companies and (ii) our commencement of self-catering services on certain trains.

     The table below sets out the revenues for our other businesses, by categories of activity, in each of 2006, 2007 and 2008:

		Revenues												As a Percentage of Total Revenues
		2006				2007				2008				from Other Businesses
		(RMB millions)												2006				2007				2008
Sale of materials and supplies			—				103.8				227.7				—				15.1	%			26.3	%
Maintenance of trains			—				239.2				225.5				—				34.7	%			26.0	%
On-board catering services			33.9				67.3				97.9				26.3	%			9.8	%			11.3	%
Labor services			29.8				49.7				62.2				23.2	%			7.2	%			7.2	%
Other services related to railway transportation			64.9				229.1				252.9				50.5	%			33.2	%			29.2	%
Total			128.6				689.0				866.3				100	%			100	%			100	%

Seasonality of Our Railway Transportation Business

     There is some seasonality in our businesses. The first quarter of each year typically contributes the highest portion of our annual revenues, mainly because it coincides with the Spring Festival holidays (Chinese New Year holidays) when Chinese people customarily travel from all over the country back to their hometowns. In addition, the New Year holidays, the Qingming Festival Holidays, the Labor Day holidays, the Dragon Boat Festival Holidays, summer holidays and the National Day holidays in China are also high travel seasons. During these holidays, we usually operate additional passenger trains to meet the increased transportation demand.

Sales

Passenger Transportation

     Our passenger tickets are currently sold primarily at ticket counters located in our train stations. Additionally, our tickets are sold in Hong Kong and major cities in the Guangdong Province through ticket agents, travel agents and hotels, at our usual prices plus nominal commissions. Substantially all of our tickets are sold in cash.

     Hong Kong Through Train tickets are sold in Guangdong Province through our own ticket outlets, as well as through various hotels and travel agents. In Hong Kong, these tickets are sold exclusively by the MTR. As MTR’s sales network for these tickets is relatively limited, MTR has engaged the China Travel Service (HK) Ltd., or CTS, as the primary agent for such sales on a non-exclusive basis. In 2003, we established an online ticket sales system with MTR for the Hong Kong Through Trains.

     In 2005, we initiated passenger flows connection between long-distance trains in the Guangzhou area and Guangzhou-Shenzhen trains and in 2006, we succeeded in introducing the IC Card Ticketing System.

     The current settlement method stipulated by the MOR for passenger transportation

provides that all revenues from passenger train services (including revenues generated from luggage and parcel services) are considered passenger transportation revenues and belong to the railway administration that operates that train. The railway administration in turn pays other railway administrations the fees for the use of their rail lines, hauling services, in-station passenger services, water supply, electricity for electric locomotives and contact wire use fees, etc. Under this settlement method, the railway administrations operating the long-distance train services are required to pay us the following fees: (i) the portion of the revenues from the sale of tickets that are higher than the PRC national railway standards due to our special pricing standards and (ii) other fees including those for railroad line usage, in-station passenger service, haulage service, power supply for electric locomotives, usage fees of contact wires and water supply. This settlement method does not apply to the settlement of our revenues from the passenger trains between Guangzhou and Shenzhen, between Beijing and Hong Kong, between Shanghai and Hong Kong, between Zhaoqing and Hong Kong and the Hong Kong Through Trains. See “Item 4B. Business Overview — Regulatory Overview — Pricing”

Freight Transportation

     Generally, we collect payment for our freight service directly from our customers. For inbound freight, we collect transportation fees incurred on our line from the receiving party prior to the release of the freight. For outbound freight, we collect the total transportation fees from the dispatching party, retain the portion allocated to us and remit the remainder to the other railroad operators on a monthly basis either directly or through a national settlement procedure administered by the MOR. These collection procedures also apply to freight transported to or from Hong Kong. Substantially all payments for inbound and outbound freight are settled in cash.

     For pass-through freight, payments are collected at the originating stations, and allocated portions for the use of our rail line are remitted to us through the national settlement procedure administered by the MOR. We generally receive such funds within a month after the service is provided.

     Freight customers in the Guangzhou-Shenzhen area either deal directly with us or use shipping agents. As a practical matter, we have been able to meet demands for outbound freight transportation services on a short notice.

     In January 2005, the MOR modified the settlement method on the income from railway freight transportation. Pursuant to the new settlement methods, starting from January 1, 2005, all freight transportation fees relating to post parcels and luggage, containers and special goods shall be collected by Zhongtie Parcels Courier Company Limited, Zhongtie Container Transportation Company Limited and Zhongtie Special Goods Transportation Company Limited, or collectively the Professional Transportation Companies. The Professional Transportation Companies shall pay railway usage fees to relevant railway administration and companies, including us. Prior to January 1, 2005, we charged freight transportation fees for these post parcels and luggage based on the categories of goods and distance of transportation; while after January 1, 2005, we collect railway usage fees from the Professional Transportation Companies. In order to make itemized revenue from freight match freight volume, and remain comparable with previous years, these railway usage fees have been recorded, as appropriate, as revenues generated from freight

dispatch, as well as freight reception and transit, based on the freight dispatched or received and transited. The modifications in the settlement method have not had a material effect on our revenues from freight transportation.

Competition

     We are the sole railway service provider on the Shenzhen-Guangzhou-Pingshi corridor; therefore, we do not face any direct competition from other railway service providers within our service territory. However, in areas where our railroad connects with lines of other railway companies, such as in the Guangzhou area, where our railroad connects with the Beijing-Guangzhou Line, and in the Dongguan area, where our railroad connects with the Guangzhou-Meizhou-Shantou Line, we face competition from the railway companies operating in these areas. We also face competition from the providers of a variety of other means of transportation within our service territory.

     With respect to passenger transportation, we face competition from bus services, which are available between Guangzhou and Hong Kong and between Guangzhou and Shenzhen. Bus fares are lower than the fares for our high-speed passenger train services. Furthermore, buses can offer added convenience to passengers by departing from or arriving at locations outside their central terminals, such as hotels. However, train services generally offer greater speed, safety and reliability than bus services. In addition, since the implementation of our “As-Frequent-As-Buses” Train Project in October 2001, our high-speed train services and Hong Kong Through Train services have enabled us to compete more effectively with bus operators in terms of speed and frequency. We also compete to a lesser extent with commercial air passenger transportation services and ferry services operating between Guangzhou and Hong Kong.

     With respect to freight transportation, we face increasing competition from truck transportation in the medium- and short-distance freight transportation market as the expressway and highway networks in our service region and neighboring areas have increasingly improved. By comparison, in the long-distance freight transportation market, especially in the areas where water transportation is not well developed, our freight transportation service has many advantages compared to truck transportation due to the higher cost of truck transportation, susceptibility of truck transportation to traffic conditions and a scarcity of heavy duty trucks. Our freight transportation also competes with water transportation as the waterway networks have increasingly improved. Supported by its more extensive network, railway freight transportation is more competitive in terms of speed and safety compared to water transportation, especially in those areas that are far from coasts and main waterways. As air freight is very expensive and attracts a different group of customers, we do not consider that our freight transportation services face significant competition from air freight. In China, a significant portion of the bulky freight with low added-value is still transported by railroad.

Equipment, Tracks and Maintenance

     As of December 31, 2008, we owned 30 high-speed diesel locomotives, 56 regular-speed passenger diesel locomotives, 55 freight diesel locomotives, 50 shunting locomotives, 147 high-speed electric passenger train, one X-2000 high-speed EMU, 1,405 regular-speed passenger coaches and seven trial locomotives. We currently use 19 high speed Bombardier EMUs (also

known as “Concords”) for our passenger transportation business between Guangzhou and Shenzhen.

     The freight cars we use are all leased from the MOR, to which we pay uniform rental fees and depreciation fees based on the national standards set by the MOR. The amounts of such usage fees and depreciation charges we paid to the MOR in 2006, 2007 and 2008 were approximately RMB 40.8 million, RMB 156.6 million and RMB 176.9 million, respectively.

     From September 2000, we began to lease eight “Blue Arrow” high-speed electric train-sets from Guangzhou Zhongche to facilitate the development of our “As-Frequent-As-Buses” Train Project. We paid the lessor RMB 106.6 million and RMB 53.3 million in 2006 and 2007, respectively, under the lease. Given that it was anticipated that the EMUs would be delivered to us at later times in 2007, we renewed the lease agreement for another year with Guangzhou Zhongche on June 22, 2006. All of these lease agreements expired between June 2007 and December 2007 and we did not extend the term of these lease agreements.

     From April 2007, we started the operation of our EMUs, which we bought from Bombardier Sifang Power (Qingdao) Transportation Ltd. and Bombardier Sweden Transportation Ltd. Each EMU has the top speed of 200 kilometers per hour and we believe that the introduction of EMUs has strengthened our capability to deliver safety, speed, comfort and quality in our transport services and increased our efficiency and competitiveness.

     Our repair and maintenance facilities, including our Guangzhou passenger vehicle maintenance facility, Shipai passenger vehicle maintenance facility and Guangzhou North vehicle maintenance facility, provide services for general maintenance and routine repairs on our coaches and locomotives. Major repairs and overhauls are performed by manufacturers or qualified railway administrations or plants. The repair and maintenance services for the EMUs are provided by our Guangzhou East Concord operation department.

     We believe that our existing tracks and equipment meet the needs of our current business and operations. Most of the rails and ties on our main lines have been installed within the last decade, and are maintained and upgraded on an ongoing basis as required. In 2005, we replaced 23,203 pieces of various types of ties, 2.45 kilometers of high-speed wire rod rail, 566 pieces of mainline rails and receiving and dispatching rail, 344 sets of receiving and dispatching center switches and 1.56 kilometers of signal cable. In addition, we also screened certain ballast beds. In 2006 and 2007, as part of our Fourth Rail Line construction, we made improvements to 24.6 kilometers of railroad. In 2008, we made improvements to 73 kilometers of railroad.

     On January 1, 2007, the railway transportation business of the Guangzhou-Pingshi Railway came under our control. As a result of this Acquisition, our operation has expanded from a regional railway to a national trunk line network. Our operating railway distance has been extended from 152 kilometers to 481.2 kilometers, running vertically through the entire Guangdong Province. In addition, the expansion of our operation scale and scope of passenger and freight services as described above will allow us to benefit from greater economics of scale in our operations.

     In 2007, we completed the construction of the Fourth Rail Line. The Fourth Rail Line

allows high-speed passenger trains and other passenger and freight trains to run on separate lines, thus improving the transportation capacity of high-speed passenger trains, domestic long-distance trains and freight trains.

Major Suppliers and Service Providers

     We purchase our locomotives and coaches, as well as most other railway equipment and materials, directly from China Northern Locomotive & Rolling Stock Industry (Group) Corporation, China Southern Locomotive & Rolling Stock Industry (Group) Corporation and China Railway Materials and Supplies Corporation, all of which are state-owned enterprises. In addition, we purchased the EMUs from Bombardier Sifang Power (Qingdao) Transportation Ltd., a Sino-foreign equity joint venture, and Bombardier Sweden Transportation Ltd. We also purchase equipment from foreign vendors or other domestic suppliers. We are not materially dependent upon any overseas suppliers.

     We lease a portion of the locomotives and rolling stock that are used in our transportation operations from GRGC and its subsidiaries, which also provide services for these locomotives and rolling stock under contracts which stipulate fees based on a cost plus profit formula. The profit portion is fixed for a 10-year term of the relevant contract at 8% of costs. Costs include all actual costs related to providing and servicing the locomotives and rolling stock. Because such costs are affected by inflation, we are subject to inflationary risks in connection with our payment obligations under these contracts. GRGC and some of its subsidiaries, such as Guangmeishan Railway Company, have similar agreements with us to provide services and assistance with respect to our railroad operations. GEDC provides public security and housing for our employees and their families under a contract and in exchange for fee payments. In the second half of 2004, all of the hospitals and schools originally vested in GEDC were transferred to the local government pursuant to applicable PRC policies. As a result, GEDC no longer provides any education and hospital services to us as contemplated under the contractual arrangements made upon our Restructuring.

     Under the Rules Governing the Listing of Securities on the HKSE, or the HKSE Listing Rules, transactions between us and our connected persons constitute connected transactions and such transactions are normally subject to reporting, announcement and/or shareholders’ approval unless otherwise waived by the HKSE. Our independent non-executive directors review and certify annually that these contracts are entered into on normal commercial terms that are fair and reasonable to us. The above transactions are exempted from the strict compliance of the requirements under the HKSE Listing Rules in relation to connected transactions, subject to certain conditions set forth in the waiver letter issued by the HKSE. On January 13, 2006, we entered into a provisional comprehensive services agreement with GRGC, or the GRGC Provisional comprehensive services agreement, and a comprehensive services agreement with GEDC, or the GEDC comprehensive services agreement, both of which became effective on March 3, 2006 after being approved at our shareholders’ general meeting. On April 19, 2007, we and GEDC entered into a supplemental agreement to the GEDC comprehensive services agreement that shortened the term of the GEDC comprehensive services agreement to December 31, 2007 and increased the annual cap on related party transactions from RMB 76.4 million to RMB 139.7 million. On December 27, 2007, the annual cap for the services provided by Yangcheng Railway Company in the year ended December 31, 2007 was approved by our

independent shareholders at the second extraordinary shareholders’ general meeting to be increased from RMB 260 million to RMB 389 million. Meanwhile, the second extraordinary shareholders’ general meeting also approved the new comprehensive service agreements that we entered with GRGC, GEDC and Yangcheng Railway Company on November 5, 2007 and the annual caps for the related-party transactions between us and each of GRGC, GEDC and Yangcheng Railway Company for the years ended December 31, 2008, 2009 and 2010.

     In 2008, the total amount of the payments we made to GRGC and its subsidiaries accounted for 27.9% of our railroad business operating costs for the year. In addition, project management fee of approximately RMB 0.2 million was paid to GRGC for managing the construction of the Fourth Rail Line in 2008. See “Item 7B. Related Party Transactions.”

     The electricity we use, including electricity used for our lines, is supplied through various entities under the jurisdiction of the Guangdong provincial power bureau on normal commercial terms. In 2007 and 2008, we paid approximately RMB 402.6 million and RMB 606.9 million, respectively, in electricity charges.

     In 2008, the PRC National Audit Office, or the NAO, conducted an audit of the railway bureaus and railway companies, including GRGC, our largest shareholder, and certain railway construction projects, including our construction of our Fourth Rail-Line. In addition, as part of its audit of GRGC, the NAO also conducted an audit of our Company, which mainly focuses on our business transactions with GRGC. The NAO has completed the audit of GRGC and our construction of the Fourth Rail-Line. Such audit did not result in material adverse effect on the business of our Company.

     Our five largest customers accounted for less than 30% of our revenue and our five largest suppliers of raw materials accounted for less than 30% of our purchases in 2008.

Regulatory Overview

     As a joint stock limited company with publicly traded shares, we are subject to regulation by the PRC securities regulatory authorities with respect to our compliance with PRC securities laws and regulations. We are also subject to industry regulation by the MOR within the overall framework of the PRC national railway system.

National Railway System

     Railroads in the PRC fall largely into three categories: state-owned railroads, jointly owned railroads and local railroads. State-owned railroads are invested by the central government of the PRC and are managed directly by the MOR. The state-owned railway system comprises over 70% of all rail lines, including all trunk lines. Jointly owned railroads are jointly invested and operated by the central government of the PRC, the local government and other foreign or domestic investors. Local railroads consist of regional lines usually within provincial or municipal boundaries that have been constructed under the sponsorship of local governments or local enterprises to serve local needs. The state-owned railway system operates as a nationwide integrated system under the supervision and management of the MOR. Although the MOR does not operate other railroads, it provides guidance, coordination, supervision and

assistance with respect to industry matters to such other railroads. The MOR’s responsibilities include the centralized coordination of train routing and scheduling nationwide, planning of freight shipments and freight car allocations, overseeing equipment standardization and maintenance requirements, and financial oversight and revenue clearing throughout the national railway system.

     Prior to March 18, 2005, the MOR divided the national railway system into 15 regions, each overseen and operated by a separate railway administration, or group companies. Ten of these 15 administrations were further subdivided on a geographical basis into 41 railway sub-administrations, or general companies. On March 18, 2005, the MOR issued a notice, pursuant to which all general companies were dissolved and three new group companies were established. As a result, the number of group companies increased to 18. Group companies are directly responsible for passenger and freight transportation as well as the coordination and supervision of operations carried out by train stations within their respective service territory.

Transport Operations

     The transport operations of the PRC national railway system are organized under the centralized regulation of the MOR. In order to promote efficient utilization of the railroad network nationwide, the MOR supervises and coordinates traffic flow on national trunk lines and through any connection points, where two rail lines operated by different companies connect to each other, in the system. Based on route capacity, available equipment and national priorities, the MOR allocates to the 18 group companies authority to make routings on trunk lines, allocates numbers and types of freight cars to the group companies and specifies requirements to dispatch empty freight cars to designated locations in order to facilitate freight car circulation within the national railway system. Within the allocations set by the MOR, each group company and administration supervises and coordinates traffic within its own jurisdiction.

     Our passenger and freight operations that involve long-distance routing beyond our own lines, such as the routing of freight trains to Shanghai, are conducted, in general, pursuant to quota allocations from GRGC based on the quota allocations GRGC receives from the MOR. The plans and schedules for our passenger and freight services that are conducted solely on our own lines are determined by ourselves; while our passenger and freight services that run beyond our own lines are subject to overall planning and scheduling of GRGC and/or the MOR.

     Since March 1996, the MOR and GRGC have provided us with substantially greater latitude in our transportation operations. In particular, we were granted sufficient autonomy over passenger services on our own line, including autonomy over speed, frequency and train car mix. Pursuant to this authority, we have implemented a strategy of scheduling more high-speed trains, running shorter passenger trains more frequently, and adjusting the train schedules on our line to meet passenger demand. On October 21, 2001, we successfully launched our “As-Frequent-As-Buses” Train Project, which provides intercity express train services. As of December 31, 2008, the total number of intercity express trains running daily between Guangzhou and Shenzhen was 120 pairs (including 34 pairs of standby trains). We currently have 106.5 pairs of long-distance trains and 13 pairs of Hong Kong Through Trains.

     Where our service runs beyond our own line, clearance by and coordination with GRGC

is necessary. To the extent that we operate long-distance services beyond GRGC’s jurisdiction, they are subject to coordination and clearance by the MOR. In addition, in order to enable GRGC and the MOR to allocate freight cars and control traffic going through connection points, we are required to provide GRGC with prior written notice, on a monthly basis, of the number and types of freight cars we will require, as well as the number of our freight trains that will go through particular connection points. Furthermore, we must still carry out special shipping tasks, such as emergency aid and military and diplomatic transport, as directed by the MOR or GRGC. Revenues from military and diplomatic transport generally account for less than 1% of our total transportation revenues. Emergency aid transport is required only during periods of rare natural disasters declared by the PRC government, and is provided free of charge.

Pricing

     In general, the MOR is responsible for preparing a proposal for the baseline pricing standards for the nationwide railway system with respect to freight and passenger transportation. Such proposed pricing standards will take effect after being approved by and/or filed with relevant PRC government authorities.

     Pursuant to relevant approvals from the MOR and other relevant PRC government authorities, we have some discretion to adjust and determine our service price. With respect to our freight transportation services within our own lines, we may set our prices within a range between 50% and 150% of national price levels. With respect to our passenger transportation services, we may set the prices for our regular speed Guangzhou-Shenzhen trains within a range between 25% and 225% of national price levels, and may freely determine the prices for our high-speed express trains between Guangzhou and Shenzhen. In addition, we set the prices for our Hong Kong Through Trains in consultation with MTR, our business partner and the prices for our Hong Kong Through Trains are higher than the prices we charge for our domestic train services.

Environmental Protection

     We believe that we are in material compliance with all applicable PRC national and local environmental protection laws and regulations. We have not been fined or cited for any activities that have caused environmental damages. We have 14 wastewater treatment facilities used for purposes of treating wastewater generated from cleaning of special cargo freight cars, locomotives, coaches and from residential use of our employees. We pay regular fees to local authorities for the discharge of waste substances. In 2008, our environmental protection-related expenses were approximately RMB 1.0 million as compared to RMB 3.6 million in 2007.

Insurance

     Pursuant to applicable PRC regulations, we are liable for the compensation to passengers for bodily injury arising from accidents up to the limit of RMB 150,000/person and RMB 2,000 for lost baggage and/or carry-on parcels. With respect to loss of or damage to baggage, parcels and freight, our customers may elect to purchase insurance administered by the MOR for up to their declared value. Passengers who do not elect to purchase insurance in respect of their baggage and/or parcels may nevertheless recover up to RMB 15 for each kilogram of damaged

or lost baggage and/or parcels. Freight transport customers who elect not to purchase insurance, may recover up to RMB 100 for each tonne of damaged or lost freight or RMB 2,000 for each package, depending on the methods adopted to calculate such freight.

     We do not currently maintain any insurance coverage with third party carriers against third party liabilities. Consistent with what we believe to be the customary practice among railway operators in the PRC, we do not maintain insurance coverage for our property and facilities (other than for our automobiles), for business interruption or for environmental damage arising from accidents on our property or relating to our operations. As a result, in the event of an accident or other event causing loss, destruction or damage to our property or facilities, causing interruption to our normal operations or causing liability for environmental damage or clean-up, we will have to cover losses and damages out of our own pockets. See “Item 3D. Risk Factors — Risks Relating to Our Business — We have very limited insurance coverage”.

     In addition, we have taken out work-related personal injury insurance policies and child-bearing insurance for our employees.

Item 4C. Organizational Structure

     The following table lists the significant subsidiaries of Guangshen Railway Company Limited as of December 31, 2008:

		Country of		Percentage of Interest held
Name		Incorporation		by Guangshen Railway
Directly held by the Company(1)
Guangshen Railway Dongqun Trade and Commerce Service Company		PRC			100	%
Shenzhen Fu Yuan Enterprise Development Company Limited		PRC			100	%
Shenzhen Guangshen Railway Travel Service Ltd.		PRC			100	%
Shenzhen Longgang Pinghu Qun Yi Railway Store Loading and Unloading Company Limited		PRC			55	%
Dongguan Changsheng Enterprise Company Limited		PRC			51	%
Shenzhen Railway Station Passenger Services Company Limited		PRC			100	%
Guangzhou Tielian Economy Development Company Limited		PRC			50.5	%
Shenzhen Nantie Construction Supervision Company		PRC			100	%
Indirectly held by the Company
Shenzhen Guangshen Railway Economic and Trade Enterprise Company Limited		PRC			100	%
Shenzhen Railway Property Management Company Limited		PRC			100	%

Item 4D. Property, Plant and Equipment

     We occupy a total area of approximately 39.7 million square meters, among which, we own the land use right of approximately 11.7 million square meters on which our buildings and facilities of Guangzhou-Shenzhen railway are located, and we lease approximately 28.0 million

square meters from GRGC for the Guangzhou-Pingshi Railway.

     With respect to the land for which we hold the land use rights, the terms range from 36.5 to 50 years, terminating between 2031 and 2055. Pursuant to relevant PRC regulations currently in effect, these land use rights are renewable at the end of their terms upon execution of relevant documentation and payment of applicable fees. With respect to the land leased from GRGC, the term is 20 years, terminating in 2027.

     As of December 31, 2008, land use right certificates, or Land Certificates, of certain parcels of land of the Company with an aggregate area of approximately 1,448,472 square meters had not been obtained. After consultation made with the Company’s legal counsel, the directors consider that there is no legal restriction for the Company to apply for and obtain the Land Certificates and it should not lead to any material adverse impact on the operations of the Company. The Company is in the process of applying for these certificates. Accordingly, no provision for impairment was considered necessary.

     In addition, as of December 31, 2008, ownership certificates of certain buildings, or Building Ownership Certificates, of the Company with an aggregate area of approximately 305,364 square meters had not been obtained by the Company. After consultation with the Company’s legal counsel, the directors of the Company consider that there is no legal restriction for the Company to apply for and obtain the Building Ownership Certificates and it should not lead to any material adverse impact on the operations of the Company. The Company is in the process of applying for these certificates. Accordingly, no provision for fixed assets impairment was considered necessary.

     Railroad operators typically require substantial land use rights for track, freight and maintenance yards, stations and related facilities. The availability of convenient rail transportation generally enhances the value of land along a rail line. We have not engaged and do not have any current plans to engage in commercial development of any of our land use rights for use other than in connection with our existing businesses. We do not at present intend to contribute capital to engage in any land development projects in the future. However, we may contribute land use rights not otherwise being fully utilized by us for equity stakes in these projects if we believe these opportunities are economically viable. Any development projects will require approval from PRC government authorities responsible for regulating land development.

     As of June 8, 2009, we had 48 stations situated on our rail line, of which the Guangzhou East Station is the largest, occupying an area of 402,438 square meters.

     For additional information regarding our property, plant and equipment, see “Item 4B. Business Overview — Equipment, Tracks and Maintenance” and Notes 6 and 8 to our audited consolidated financial statements included elsewhere in this annual report.

ITEM 4A. UNRESOLVED STAFF COMMENTS

     We do not have any unresolved Staff comments that are required to be disclosed under this item.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This discussion and analysis should be read in conjunction with our audited consolidated financial statements included elsewhere in this annual report. Our audited consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by IASB.

Overview

     Our principal businesses are railroad passenger and freight transportation as well as railway network usage and services on the Shenzhen-Guangzhou-Pingshi railway and certain long-distance passenger transportation services. We also operate the Hong Kong Through Trains under a cooperative arrangement with MTR in Hong Kong. Prior to the Acquisition, our key strategic focus in recent years was to provide high-speed passenger train services in the Guangzhou-Shenzhen corridor. In addition to our core railroad transportation business, we also engage in other businesses that complement our core businesses, including on-board and station sales, restaurant services, as well as advertising and tourism.

     For the year ended December 31, 2008, our total revenues were RMB 11,688.7 million, profit attributable to shareholders was RMB 1,224.1 million, and earnings per share were RMB 0.17. Railroad business revenues accounted for 96.4%, 93.4% and 92.6% of our total revenues in 2006, 2007 and 2008, respectively.

     In 2007, we acquired the railway transportation business of Guangzhou-Pingshi Railway, which was financed with the proceeds from the A Share Offering. We also commenced operation of our Fourth Rail Line between Guangzhou and Shenzhen, put into operation our domestically manufactured high-speed electric train sets and continued to implement our “As-Frequent-As-Buses” Train Project. In addition, we made improvements to our corporate governance and safety procedures.

     In 2008, we further increased the frequency of our inter-city passenger trains between Guangzhou and Shenzhen and operated up to 120 pairs of such inter-city passenger trains on a daily basis. At the same time, we made great efforts to increase the number of domestic long-distance trains we operated. For example, we commenced the operation of the long-distance passenger trains between Shenzhen and Shaoguan and between Guangzhou and Zhengzhou in March 2008 and July 2008, respectively.

     Passenger transportation is our principal business. In 2008, the total number of passengers was 83.8 million, representing an increase of 14.7% from 2007 and passenger transportation revenues were RMB 6,759.2 million, representing an increase of 15.9% from 2007.

     We transported a total of 70.1 million tonnes of freight in 2008, representing a decrease of 1.3% from 2007. Freight transportation revenues in 2008 were RMB 1,324.7 million, representing a decrease of 0.1% from 2007.

     Revenues from our railway network usages and services business were RMB 2,738.4 million in 2008, representing an increase of 3.0% from 2007.

     Revenues from our other businesses were RMB 866.3 million in 2008, representing an increase of 25.7% from 2007.

     On January 1, 2007, the railway transportation business of the Guangzhou-Pingshi Railway became under the control of the Company. Accordingly, the Company considers January 1, 2007 as the effective date of acquisition for accounting purposes. Prior to the A Share Offering, Yangcheng Railway Company and our Company were both controlled by the MOR, as the MOR indirectly held controlling interests in both companies. Subsequent to the A Share Offering in December 2006, the equity interest of the MOR in the Company reduced to approximately 41%. On January 1, 2007, Yangcheng Railway Company and the Company were no longer under common control. As a result, such transaction does not constitute a business combination under common control because the Company and Yangcheng Railway Company are not ultimately controlled by the same party both before and after the business combination. Accordingly, the transaction has been accounted for using the purchase method of accounting.

     We engaged qualified accountants to conduct an audit of the acquired assets to determine the final consideration for the purpose of determining the remaining amount to be paid to Yangcheng Railway Company. We paid RMB 10.14 billion to Yangcheng Railway Company for the Acquisition, of which RMB 5.27 billion was paid on December 28, 2006 and RMB 4.87 billion was paid on June 29, 2007. We believe that the completion of the Acquisition will have a material impact on the operating scale, financial position and operating results of our Company.

Item 5A. Operating Results

Principal Factors Affecting Our Results of Operations

     Economic Development in the Pearl River Delta Region and the PRC. We are mainly engaged in railway passenger transportation services on the trains between Pingshi, Guangzhou and Shenzhen, certain long-distance trains and Hong Kong Through Trains. Our results of operations relating to passenger transportation are influenced by the economic development in the Pearl River Delta region. The level of economic activities in the Pearl River Delta region, including the economic cooperation among Hong Kong, Macau and mainland China, affects the number of business people traveling in this region. In addition, the average income levels of residents in this region and elsewhere in the PRC affects the number of the tourists departing from or arriving at our train stations. The majority of the freight we transport is large-volume, medium- to long-distance freight received from and/or transferred to other railway lines. Economic development in the PRC, including but not limited to the Pearl River Delta region, determines the market demand for such goods as coal, iron ore, steel and therefore indirectly affects the market demand of freight train transportation service. Furthermore, the current global financial crisis and economic downturn have adversely affected economies and businesses around the world, including in China. Due to the global economic downturn, the economic situation in China has been severe since the second half of 2008. This change in the macro-economic conditions may have an adverse impact on our business and operations by causing a decrease in the number of passengers and the volume of freight that we transport. We may also experience pricing pressure on our services, which could have an adverse effect on our profitability. If the current economic downturn continues, our businesses, results of operations and financial condition could be materially and adversely affected.

     Competitive Pressure from other Means of Transportation. Sales for our passenger transportation services are also affected by the competitive pressure from other means of transportation, such as the automobile, bus, ferry and airplane services. For example, the fast growth in the number of privately owned vehicles and a higher penetration of bus services affect the number of train passengers traveling short distances and any significant decrease in the air transportation prices affects the number of train passengers traveling long distances. Our sales of the freight transportation services are also affected by the competition from other means of transportation, such as water, truck and freight transportation services.

     PRC Policies. We are allowed to be more flexible in setting the prices of both passenger transportation and the freight transportation services as compared to other domestic railroad operators. Material changes in the policies of the PRC government that affect such preferential treatments will affect our results of operations.

Year ended December 31, 2008 compared with year ended December 31, 2007

Revenues

     In 2008, our total revenues were RMB 11,688.7 million, representing an increase of 11.2% from RMB 10,508.5 million in 2007. Our revenues from railroad passenger transportation service, freight transportation service, railway network usage and services and other businesses were RMB 6,759.2 million, RMB 1,324.7 million, RMB 2,738.4 and RMB 866.3 million, respectively, accounting for approximately 57.8%, 11.3%, 23.4% and 7.4%, respectively, of our total revenues in 2008.

     Passenger transportation service. Passenger transportation remains our most important business. As of December 31, 2008, we operated 239.5 pairs of passenger trains daily, representing an increase of 44.5 pairs from the number in operation as of December 31, 2007. There were 120 pairs of high-speed passenger trains between Guangzhou and Shenzhen, an increase of 40 pairs compared to 2007, 13 pairs of Hong Kong Through Trains and 106.5 pairs of long-distance passenger trains, an increase of 4.5 pairs compared to 2007.

     In 2008, our total number of passengers was 83.8 million, representing an increase of 14.7% from 73.1 million in 2007. Our revenue from passenger transportation was RMB 6,759.2 million in 2008, representing an increase of 15.9% from RMB 5,833.5 million in 2007. Such increase in revenues from passenger transportation was primarily due to the increase in our revenues from Guangzhou-Shenzhen trains and long-distance trains, which was partially offset by the decrease in our revenues from Hong Kong Through Trains.

     The following table sets forth our revenues from passenger transportation and the number of passengers for the three years ended December 31, 2008:

		Year ended December 31,												Change in 2008 from
		2006				2007				2008				2007
Revenue from passenger transportation (RMB thousands)			2,608,838				5,833,538				6,759,229				15.9	%
Total passengers (thousands)			35,976				73,053				83,825				14.7	%
Revenue per passenger (RMB)			72.51				79.85				80.64				1.0	%

		Year ended December 31,												Change in 2008 from
		2006				2007				2008				2007
Total passenger-kilometers (millions)			4,842.7				26,278.2				27,923.7				6.3	%
Revenue per passenger-kilometer (RMB)			0.54				0.22				0.24				9.1	%

     In 2008, we did not make any adjustment to the price of our passenger transportation services.

     Freight transportation. Freight transportation is another important business segment for us. The total tonnage of freight we transported in 2008 was 70.1 million tonnes, representing a decrease of 1.3% from 71.0 million tonnes in 2007. Revenues from freight transportation business in 2008 were RMB 1,324.7 million, representing a decrease of 0.1% from RMB 1,326.4 million in 2007.

	•		In 2008, our outbound freight tonnage was 16.8 million tonnes, representing a decrease of 11.6% from 19.1 million tonnes in 2007. Our outbound freight revenues were RMB 186.1 million in 2008, representing an increase of 19.0% from RMB 156.3 million in 2007. The Company’s outbound freight tonnage declined due to the freezing weather at the beginning of the year, the upgrading of the industrial structure in the Pearl River Delta region and the global financial crisis and economic downturn. The increase in outbound freight revenue was primarily due to (i) the increase in railway freight transportation tariffs in 2008 against 2007 as a result of the price adjustment in November 2007 and (ii) an increase in the delivery of higher value-added processed goods.
	•		In 2008, our inbound and pass-through freight tonnages were 53.3 million tonnes, representing an increase of 2.6% from 52.0 million tonnes in 2007. Our inbound and pass-through freight revenues were RMB 1,044.8 million in 2008, representing a decrease of 2.5% from RMB 1,071.2 million in 2007. Our inbound and pass-through freight revenues decreased mainly because of the decrease in the inbound and pass-through freight tonnages.

     The following table sets forth our revenues from freight transportation and the volumes of commodities we shipped for the three years ended December 31, 2008:

		Year ended December 31,												Change in 2008 from
		2006				2007				2008				2007
Revenue from freight transportation (RMB thousands)			565,557				1,326,450				1,324,701				(0.1	%)
— Revenue from outbound freight transportation			144,848				156,348				186,096				19.0	%
— Revenue from inbound and pass-through transportation			331,477				1,071,205				1,044,757				(2.5	%)
Revenue from other freight transportation services			89,232				98,897				93,848				(5.1	%)
Total freight tonnes (thousands of tonnes)			30,708				71,010				70,141				(1.2	)%
— Outbound freight tonnage			7,582				19,056				16,847				(11.6	)%
— Inbound and pass-through freight tonnage			23,125				51,955				53,295				2.6	%
Revenue per tonne (RMB)			18.42				18.68				18.89				1.1	%
Total tonne-kilometers (millions)			2,276.3				15,306.9				15,557.4				1.6	%
Revenue per tonne-kilometer (RMB)			0.25				0.09				0.09				—

     In 2008, we did not make any adjustments to the prices of our freight transportation services.

     Railway Network Usage and Services Business. Revenue from our railway network usage and services accounted for 23.4% of our total revenues and 25.3% of our railroad business revenues in 2008. Railway network usage and services mainly include locomotive traction, track usage, electric catenaries, vehicle coupling and other services. In 2008, our revenue from railway network usage and services was RMB 2,738.4 million, representing an increase of 3.0% from RMB 2,659.5 million in 2007. The increase was mainly due to (i) the increase in the number of long-distance trains operated by other railway companies that use our tracks and services, which led to the increase in related revenues, and (ii) the change in electric locomotive routing, which resulted in a decrease in revenues from locomotive traction and an increase in revenues from use of electric catenaries.

     Other Businesses. Our other businesses mainly consist of the sale of materials and supplies, maintenance of trains, on-board catering services, labor services, operation of restaurants, hotels and warehouses, and other businesses related to railway transportation. Revenues from other businesses in 2008 were RMB 866.3 million, representing an increase of 25.7% from RMB 689.0 million in 2007. The increase in revenues from other businesses was mainly due to (i) the refueling in our territory by some long-distance trains operated by other railway companies, and (ii) our commencement of self-catering services on certain trains.

     The table below sets forth a breakdown of our revenues from the different categories of other businesses for the three years ended December 31, 2008:

		Year ended December 31,
		2006				2007				2008
		(RMB millions)
Revenue from other businesses			128.6				689.0				866.3
— Sale of materials and supplies			—				103.8				227.7
— Maintenance of trains			—				239.2				225.5
— On-board catering services			33.9				67.3				97.9
— Labor services			29.8				49.7				62.2
— Other railway transportation related businesses			64.9				229.1				252.9

Operating Expenses

     In 2008, our total operating expenses were RMB 9,991.4 million, representing an increase of 13.6% from RMB 8,793.1 million in 2007. The following table sets forth the principal operating expenses associated with our railroad businesses, as a percentage of our railroad business revenues, for 2006, 2007 and 2008:

		Year ended December 31,
		2006				2007				2008
Railroad businesses revenues (RMB millions)			3,465.9				9,819.5				10,822.4
Business tax			3	%			2	%			2	%
Labor and benefits			21	%			20	%			20	%
Equipment leases and services			18	%			26	%			25	%

		Year ended December 31,
		2006				2007				2008
Lease of land use right			—				0.51	%			0.46	%
Materials and supplies			8	%			13	%			12	%
Repair costs, excluding materials and supplies			6	%			5	%			6	%
Depreciation and amortization of leasehold land payments			9	%			10	%			11	%
Fee for social services			2	%			4	%			4	%
Utility and office expenses			3	%			1	%			1	%
Others			2	%			3	%			4	%
Operating expenses ratio(1)			73	%			85	%			85	%
Railroad businesses operating margin			27	%			15	%			15	%

     Railway Operating Expenses. Our total railway operating expenses increased by 9.9% from RMB 8,334.3 million in 2007 to RMB 9,162.3 million in 2008. The following sets forth a breakdown of major changes by line item:

	•		Business tax. Our business tax in 2008 was RMB 253.0 million, representing an increase of 14.1% from RMB 221.8 million in 2007. The increase was mainly due to the increase in the operating revenues of the Company.
	•		Labor and benefits. In 2008, our labor and benefits expenses amounted to RMB 2,125.4 million, representing an increase of 10.2% from RMB 1,928.2 million in 2007. The increase was mainly due to (i) the increase in employees’ basic salaries and benefits and (ii) the increase in the number of operating staff and workload as a result of the increase in the number of trains in operation during the year.
	•		Equipment leases and services. Our expenses for equipment leases and services mainly consist of railway line usage fees, train hauling fees and train leasing fees paid to other railway administrations. In 2008, our expenses relating to equipment leases and services amounted to RMB 2,653.2 million, representing an increase of 2.2% from RMB 2,595.2 million in 2007. This was mainly due to (i) the temporary change in locomotives and routes of the long-distance trains as a result of the freezing weather at the beginning of 2008, which led to the increase in railway network expenses; (ii) the operation of Guangzhou-Zhengzhou trains in July 2008 and the corresponding increase in railway network expenses and (iii) the change in electric locomotive routing, which led to the increase in locomotive traction expenses. Such increase was partially offset by the fact that we did not incur any expenses relating to the lease of “Blue Arrow” high-speed electric train-sets in 2008.
	•		Materials and supplies. Our materials and supplies expenses consist mainly of materials, fuel, water and electricity expenses. In 2008, our materials and supplies expenses were RMB 1,345.7 million, representing an increase of 8.5% from RMB 1,240.8 million in 2007. The increase was mainly due to (i) the increase in the prices of fuel, electricity and other railway-related materials and (ii) the increased consumption of materials, fuel, water and electricity as a result of the increase in the number of trains we operated in 2008.

	•		Repair (excluding materials and supplies). Our repair expenses increased by 45.7% from RMB 460.1 million in 2007 to RMB 670.2 million in 2008, primarily due to (i) an increase in repairs of locomotives, cars, buildings and structures as a result of the increase in the number of trains we operated in 2008 and the expansion of our business and (ii) the addition of new vegetation and tree planting along the rail lines to strengthen the roadbed.
	•		Depreciation. Our depreciation expenses of fixed assets increased by 13.8% from RMB 1,006.7 million in 2007 to RMB 1,145.6 million in 2008, mainly due to the increase in depreciation expenses relating to the CRHs and the Fourth Rail Line between Guangzhou and Shenzhen.
	•		Utility and office expense. Our utility and office expense increased by 10.6% from RMB 109.8 million in 2007 to RMB 121.4 million in 2008. This was mainly due to the increase in security expenses during the Beijing 2008 Olympic Games.
	•		Others. Our other railway operating expenses increased by 23.4% from RMB 309.9 million in 2007 to RMB 382.2 million in 2008. This was mainly due to the increase in communication fees as a result of the installation of the train monitoring system and the upgrade of communication technology.

Profit from Operations

     Our profit from operations decreased by 2.8% from RMB 1,765.2 million in 2007 to RMB 1,715.0 million in 2008 due to a higher increase in our operating expenses as compared to the increase in our revenues.

Taxation

     As we are registered and established in the Shenzhen Special Economic Zone, we were subject to income tax in 2008 at a rate of 18%, which was 7% lower than the standard income tax rate of 25% applicable to PRC companies. According to relevant tax regulations, our subsidiaries were subject to income tax at the rate of either 18% or 25%, depending on the location of incorporation. Our income tax expense was RMB 277.3 million in 2008, representing an effective tax rate of 18.5% and an increase of RMB 44.9 million compared to RMB 232.3 million in 2007. The increase was mainly due to the overall increase in our effective income tax rate.

     On March 16, 2007, the National People’s Congress of the PRC promulgated the PRC Enterprise Income Tax Law, or the new EIT Law, which has taken effect from January 1, 2008. According to the new EIT Law, the preferential income tax rate of 15% that was previously applicable to companies incorporated in Shenzhen (like us) and other special economic zones are being gradually phased out in five years beginning from January 1, 2008. During the five years, the applicable tax rates will be 18%, 20%, 22%, 24% and 25% for 2008, 2009, 2010, 2011 and 2012, respectively. After such five-year period and effective from January 1, 2012, the tax rate applicable to us will be fixed at 25%, i.e., the unified income tax rate applicable to all domestic companies in the PRC (with limited exceptions).

Profit attributable to shareholders of the Company

     As a result of the above, our consolidated net profit decreased by 14.5% from RMB 1,431.4 million in 2007 to RMB 1,224.1 million in 2008.

Year ended December 31, 2007 compared with year ended December 31, 2006

Revenues

     In 2007, our total revenues were RMB 10,508.5 million, representing an increase of 192.4% from RMB 3,594.5 million in 2006. Our revenues from railroad passenger transportation service, freight transportation service, railway network usage and services and other businesses were RMB 5,833.5 million, RMB 1,326.5 million, RMB 2,659.5 and RMB 689.0 million, respectively, accounting for approximately 55.5%, 12.6%, 25.3% and 6.6%, respectively, of our total revenues in 2007.

     Passenger transportation service. In 2007, our total number of passengers was 73.1 million, representing an increase of 103.1% from 36.0 million in 2006. Our revenue from passenger transportation was RMB 5,833.5 million in 2007, representing an increase of 123.6% from RMB 2,608.8 million in 2006.

     Freight transportation. The total tonnage of freight we transported in 2007 was 71.0 million tonnes, representing an increase of 131.2% from 30.7 million tonnes in 2006. Revenues from freight transportation business in 2007 were RMB 1,326.5 million, representing an increase of 134.5% from RMB 565.6 million in 2006. This increase was primarily due to the acquisition of the railway transportation business of the Guangzhou-Pingshi Railway.

	•		In 2007, our outbound freight tonnage was 19.1 million tonnes, representing an increase of 151.3% from 7.6 million tonnes in 2006. Our outbound freight revenues were RMB 156.3 million, representing an increase of 7.9% from RMB 144.8 million in 2006.
	•		In 2007, our inbound and pass-through freight tonnages were 51.955 million tonnes, representing an increase of 124.7% from 23.125 million tonnes in 2006. Our inbound and pass-through freight revenues were RMB 1,071.2 million in 2007, representing an increase of 223.2% from RMB 331.4 million in 2006.

     Railway Network Usage and Services Business. Revenue from our railway network usage and services accounted for 25.3% of our total revenues and 27.1% of our railroad transportation revenues in 2007. In 2007, our revenue from railway network usage and services was RMB 2,659.5 million, representing an increase of 812.4% from RMB 291.5 million in 2006. The rapid increase was mainly due to the acquisition of the railway transportation business of Guangzhou-Pingshi Railway at the beginning of 2007.

     Other Businesses. Our other businesses mainly consist of repair and maintenance services (mainly for repair of locomotives), sales of goods and food on board and in stations, operation of restaurants and hotels, operation of warehouses, loading and discharging, providing advertising boards in our stations and railway-related construction, advertising and tourism services. Revenues from other businesses in 2007 were RMB 689.0 million, representing an

increase of 435.8% from RMB 128.6 million in 2006. The substantial increase in revenues from other businesses was mainly due to the incorporation of the business of Guangzhou-Pingshi Railway.

Operating Expenses

     In 2007, our total operating expenses were RMB 8,793.1 million, representing an increase of 226.4% from RMB 2,693.9 million in 2006.

     Railway Operating Expenses. Our total railway operating expenses increased by 229.6% from RMB 2,527.9 million in 2006 to RMB 8,334.3 million in 2007. The following sets forth a breakdown of major changes by line item:

	•		Business tax. Our business tax in 2007 was RMB 221.8 million, representing an increase of 125% from RMB 98.6 million in 2006. The increase was mainly due to the incorporation of the business of Guangzhou-Pingshi Railway.
	•		Labor and benefits. In 2007, our labor and benefits expenses amounted to RMB 1,928.2 million, representing an increase of 168.5% from RMB 718.0 million in 2006. The increase was mainly due to (i) the incorporation of the business of Guangzhou-Pingshi Railway; (ii) the implementation of the performance-based salary policy and the steady improvement of operating results in 2007 which resulted in an overall increase in employees’ salaries and benefits; (iii) the increase in the number of related operation staff and workload as a result of the increase in the number of long-distance trains in operation during the year and (iv) pursuant to an early retirement scheme we implemented in 2006, certain employees who meet certain criteria were provided with an offer to retire early and enjoy certain early retirement benefits, such as payments of basic salary and other fringe benefits until they reach the statutory retirement age. Under the terms of that scheme, all applications are subject to our approval. Expenses incurred on such employee early retirement benefits have been recognized in the income statement when we approved such applications from the employees. We recorded such expenses in the amount of RMB 63.3 million in the year ended December 31, 2007.
	•		Materials and supplies. Our materials and supplies expenses consist mainly of materials, fuel, water and electricity expenses. In 2007, our materials and supplies expenses were RMB 1,240.8 million, representing an increase of 362.5% from RMB 268.3 million in 2006. The increase was mainly due to the incorporation of the business of Guangzhou-Pingshi Railway.
	•		Depreciation. Our depreciation expenses of fixed assets increased by 217.2% from RMB 317.4 million in 2006 to RMB 1,006.7 million in 2007, mainly due to the increase in the fixed assets during the year as a result of the Acquisition.
	•		Repair (excluding materials and supplies). Our repair expenses increased by 116.6% from RMB 212.4 million in 2006 to RMB 460.1 million in 2007, primarily due to the acquisition of the railway transportation business of Guangzhou-Pingshi Railway.

	•		Equipment leases and services. Our expenses on equipment leases and services mainly consist of railway line usage fees, train hauling fees and train leasing fees paid to other railway administrations. In 2007, our expenses relating to equipment leases and services amounted to RMB 2,595.2 million, representing an increase of 310.0% from RMB 633.0 million in 2006. This was mainly due to (i) the incorporation of the business of Guangzhou-Pingshi Railway; (ii) the increase in operation of long-distance passenger trains, which led to the corresponding increase in railway usage fees and (iii) the increase in the number of temporary passenger trains operated during the Spring Festival season in 2007, which led to the increase of related equipment leases and services fees.
	•		Social services. Our social services fees in 2007 were RMB 396.8 million, representing an increase of 432.5% from RMB 74.5 million in 2006. The increase was primarily due to the incorporation of the business of Guangzhou-Pingshi Railway.
	•		Utility and office expense. Our utility and office expense increased by 6.6% from RMB 102.9 million in 2006 to RMB 109.8 million in 2007. This was mainly due to the incorporation of the business of Guangzhou-Pingshi Railway.

Profit from Operations

     Our profit from operations increased by 82.9% from RMB 965.2 million in 2006 to RMB 1,765.2 million in 2007 due to the increase in our total revenues without a proportional increase in our related expenses.

Taxation

     Our income tax expense was RMB 232.3 million in 2007, representing an effective tax rate of 13.9% and an increase of RMB 83.1 million compared to RMB 149.2 million in 2006.

Profit attributable to shareholders of the Company

     Our consolidated net profit increased by 85.5% from RMB 771.5 million in 2006 to RMB 1,431.4 million in 2007.

Critical Accounting Policies and Estimates

     Our audited consolidated financial statements have been prepared in accordance with IFRS. Our principal accounting policies are set out in Note 2 to our audited consolidated financial statements. IFRS also requires us to exercise our judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4 to our audited consolidated financial statements included elsewhere in this annual report. Although these estimates are based on our best knowledge of current events and actions, actual results ultimately may differ from those estimates.

Fixed assets

     The railway industry is capital intensive. Under IFRS, fixed assets are initially recorded at cost less accumulated depreciation and impairment loss. Cost represents the purchase price of the asset and other costs incurred to bring the asset into existing use. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation is calculated using the straight-line method to write off the cost amount, after taking into account the estimated residual value of not more than 4% of cost, of each asset over its estimated useful life. The estimated useful lives are as follows:

Buildings (Note a)		20 to 40 years
Leasehold improvements		Shorter of useful life or lease terms
Track, bridges and service roads (Note a)		16 to 100 years
Locomotives and rolling stock		20 years
Communications and signaling systems		8 to 20 years
Other machinery and equipment		4 to 25 years

     The assets’ residual values and estimated useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

     Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

     Gains and losses on disposals are determined by comparing the sales proceeds with the carrying amount and are recognized within other gain or loss on the income statement.

Receivables

     Receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision made for impairment of these receivables. A provision for impairment of receivables is established when there is objective evidence that we will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or

financial re-organization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized in the income statement as “operating expenses.” When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in the income statement.

Goodwill

     Goodwill represents the excess of the cost of an acquisition over the fair value of share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is disclosed separately on our balance sheet. Goodwill is tested for impairment annually or, whenever there is an indication of impairment, and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

     Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

Impairment of investment in subsidiaries, associates and non-financial assets

     Assets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

Current and deferred income tax

     The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the PRC where our subsidiaries and associates operate and generate taxable income. We periodically evaluate positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establish provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

     Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the audited consolidated financial statements included elsewhere in this annual report. However, the deferred income tax is not accounted for if it arises from goodwill or from initial recognition

of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

     Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

     Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by us and it is probable that the temporary difference will not reverse in the foreseeable future.

Item 5B. Liquidity and Capital Resources

     Our principal source of capital has been cash flow from operations and cash flow from financing activities, and our principal uses of capital are to fund capital expenditures, investment and payment of taxes and dividends.

     We generated approximately RMB 1,641.1 million of net cash flow from operating activities in 2008. Substantially all of our revenues were received in cash, with accounts receivable arising primarily from long-distance passenger train services provided and pass-through freight transactions originating from other railway companies whose lines connect to our railroad. Similarly, some accounts payable arise from payments for railroad transportation services that we collect on behalf of other railroad companies and should pay to these companies. Accounts receivable and payable were generally settled either quarterly or monthly between us and the other railroad companies. Most of our revenues generated from our other businesses were also received in cash. We also have accounts payable associated with the purchase of materials and supplies in our other businesses.

     In 2008, other than operating expenses, our cash outflow mainly related to the following:

	•		capital expenditures of approximately RMB 2,947.8 million, representing an increase of 166.2% from RMB 1,107.3 million in 2007; and
	•		payment of dividends of approximately RMB 566.7 million.

     Our capital expenditures for 2008 consisted primarily of the following projects:

	•		construction of the auxiliary projects of the Fourth Rail Line;
	•		purchasing CRHs; and
	•		upgrading the facilities of the Shenzhen-Guangzhou-Pingshi railway

     Funds not required for immediate use are kept in short term investments and bank deposits. We had cash and cash equivalents of approximately RMB 1,561 million as of December 31, 2008.

     As of December 31, 2008, the Company had an overdue time deposit in the amount of approximately RMB 31.4 million placed with Zengcheng Licheng Urban Credit Cooperative. The Company had initiated legal proceedings and obtained a judgment against the debtor in our favor regarding the repayment. However, as the judgment debtor was undergoing restructuring, the court ordered a stay of execution of the judgment obtained by the Company. The said overdue time deposit accounts for approximately 0.1% of the net assets and 1.5% of the total current assets of the Company and has no material impact on the capital usage and operations of the Company. The Company had presented the gross outstanding balance in other receivables and full provision had been made for impairment in prior years. Except for such overdue time deposit, we have no other overdue time deposit that has not been repaid. We have not encountered any difficulty in withdrawing deposits. We have placed most of our deposits with commercial banks in the PRC.

     As of December 31, 2008, we did not have any trust deposits placed with any financial institutions in the PRC and we did not engage in any trust business.

     As of December 31, 2008, we had unsecured borrowings of RMB 3,900 million, representing an increase of RMB 1,050 million from RMB 2,850 million in 2007. The additional borrowings obtained in 2008 were mainly for the financing of the construction of the auxiliary projects of the Fourth Rail Line and the purchase of locomotives. The maturity dates of 86.7% of the total unsecured borrowings are within two to five years. The effective interest rates of the bank borrowings were 6.44% as of December 31, 2008. As of December 31, 2008, we had approximately RMB 900 million in unutilized banking facilities.

     As described in Note 2.1 to our audited consolidated financial statements included elsewhere in this annual report, we had net current liabilities of approximately RMB 616.2 million as of December 31, 2008. In addition, we had total capital commitments, authorized but not contracted for and contracted but not provided for, of approximately RMB 2,530.3 million and RMB 390.7 million, respectively, as of December 31, 2008. We have undertaken the following measures to control the liquidity risks, including:

•		maintaining and generating stable operating cash inflow from our profitable operations;
•		undertaking close monitoring process to control the magnitude and timing of the expected cash outlays associated with the construction of railway lines, the improvement of the existing operation equipment and the purchase of new locomotives; and
•		obtaining new bank facilities and identifying sources of medium term financing in order to finance the expected cash outlays associated with the expected capital expenditures.

     We believe that these measures would be sufficient to control the liquidity risk at an acceptable level.

Cash Flow

     Our net cash and cash equivalents in 2008 decreased by approximately RMB 791.4 million from 2007. The table below sets forth certain items in our consolidated cash flow statements for 2007 and 2008, and the percentage change in these items from 2007 to 2008.

		Year ended December 31,								Change
		2007				2008				from 2007
		(RMB thousands)
Net cash generated from operating activities			1,957,645				1,641,069				(16.2	%)
Net cash used in investing activities			(5,585,414	)			(2,915,785	)			(47.8	%)
Net cash generated from financing activities			128,289				483,317				276.7	%
Net decrease in cash and cash equivalents			(3,499,480	)			(791,399	)			(77.4	%)

     Our principal source of capital was revenues generated from operating activities and cash flow from financing activities. The net cash inflow from our operations decreased from RMB 1,957.6 million in 2007 to RMB 1,641.1 million in 2008, representing a decrease of RMB 316.6 million, mainly due to the decrease in profit before tax when compared with that of 2007. The net cash inflows from operating activities, after making adjustments of the expenses that have no impact on cash flows in operating activities, were RMB 2,997 million. Most of the non-cash expenses were relating to depreciation and interest expenses on bank borrowings. Changes in receivables and payables arising from operating activities resulted in a decrease of approximately RMB 820 million in cash inflows, mainly due to the decrease in payables and the increase in receivables generated from our operating activities.

     Our net cash used in investing activities decreased by RMB 2,669.6 million from RMB 5,585.4 million in 2007 to RMB 2,915.8 million in 2008. The cash used in investing activities was mainly for the purchase of CRHs, payments for construction-in-progress and the prepayments for the purchase of fixed assets.

     Our net cash generated from financing activities increased from RMB 128.3 million in 2007 to RMB 483.3 million in 2008, representing an increase of RMB 355.0 million. The cash generated from financing activities mainly consists of long-term and short-term bank borrowings incurred in the year.

     Our working capital was mainly used for capital expenditures, operating expenses and payment of taxes and dividends and temporary cash investments. In 2008, our expenses for the purchase of fixed assets and payments for construction-in-progress totalled RMB 2,947.8 million. In addition, we paid RMB 311.1 million for income taxes and approximately RMB 566.7 million for dividends.

     We believe we have sufficient financial resources to meet our operational and development requirements in 2009.

Item 5C. Research and Development, Patents and Licenses, etc.

     We do not generally conduct our own research and development with respect to major capital projects. In the past, in connection with our high-speed train and electrification projects, our predecessor relied upon the engineering and technical services of various research and design institutes under the MOR. In recent years, we conducted limited research and development activities in connection with the implementation of automated ticket sales, including the development of related computer software.

     We do not anticipate a significant need for research and development services in the foreseeable future, and do not expect to require any such services in connection with our other businesses. To the extent that these services are needed, we expect to engage outside service providers to satisfy this need. In connection with major engineering and construction projects, as well as major equipment acquisitions, we intend to conduct technical research and feasibility studies with relevant engineering service organizations, so as to ensure the cost-effectiveness of our capital expenditures.

Item 5D. Trend Information

     The Pearl River Delta has been one of China’s fastest growing economic regions. We believe that various factors, including the increasing economic cooperation within the Pearl River Delta region and its adjacent areas, the “Relaxed Individual Travel” program, the improvement of the subway system in Shenzhen and Guangzhou, will continue to increase passenger travel and freight transportation within our service region. We expect the PRC government’s current economic, import and export, foreign investment and infrastructure policies to generate additional demand for transportation services in our service areas. These policies and measures may have both positive and negative effects on our business development. They are expected to promote economic growth and create new demand for our transportation services.

     At the same time, however, with the improvement of highway and waterway transportation facilities, we anticipate additional competition. In addition, the economic measures PRC government implemented to manage its economy may have an impact on our business and results of operations in 2009. In addition, any change of the benchmark interest rates set by the PRC government and the implementation of other applicable policies may have an impact on our business and results of operations in 2009.

     We believe that while the PRC government is in the progress of lessening restrictions on foreign investment, the opening up of domestic railway transportation will be gradual and we expect competition from foreign and domestic railway to be limited in the short term. However, China’s entry into the WTO may increase other Chinese coastal cities’ significance in trading. As a result, part of the freight currently transferred through ports in Hong Kong and Shenzhen may be diverted to other ports in the PRC, which could adversely affect our freight transportation business. In addition, as the PRC government lifts control over foreign investments, including allowing foreign participation in railway construction, our railway monopoly position in our service region may be challenged by foreign strategic investment. We believe that we are

prepared for the challenges as well as the opportunities that have arisen or will arise with China’s accession to the WTO.

     In addition, the current global financial crisis and economic downturn have adversely affected economies and businesses around the world, including in China. Due to the global economic downturn, the economic situation in China has been severe since the second half of 2008. This change in the macro-economic conditions may have an adverse impact on our business and operations by causing a decrease in the number of passengers and the volume of freight that we transport. We may also experience pricing pressure on our services, which could have an adverse effect on our profitability. If the current economic downturn continues, our businesses, results of operations and financial condition could be materially and adversely affected.

     In 2009, China’s economy is expected to grow at a lower rate than in previous years. The reform and development of the national railway system will be accelerated. With the strengthening economic cooperation in the Pan Pearl River Delta and the further implementation of CEPA, it is expected that there will be a continuing increase of demand in the passenger and freight transportation markets in our service territory and we will embrace favorable business environment and development opportunities. We believe that the overall transportation business will maintain a positive growth trend in 2009.

Item 5E. Off-Balance Sheet Arrangements

     There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 5F. Tabular Disclosure of Contractual Obligations

     The following table sets forth our contractual obligations, capital commitments and operating lease commitments as of December 31, 2008 for the periods indicated.

Contractual Obligations Payments Due by Period

		Payment due by period
		(RMB in thousands)
						Less than 1												More than
Contractual Obligations		Total				year				1-3 year				3-5 year				5 years
Long-Term Debt Obligations (1)			3,400,000				10,000				2,350,000				1,040,000				—
Capital Expenditure Obligation			390,691				176,500				214,191				—				—
Capital (Finance) Lease Obligations			—				—				—				—				—
Operating Lease Obligations(2)			1,332,000-				74,000				148,000				148,000				962,000
Purchase Obligations			—				—				—				—				—
Other Long-Term Liabilities Reflected on the Company’s Balance Sheet under IFRS			288,541				51,119				113,285				82,375				41,762
Total			5,411,232				311,619`				2,825,476				1,270,375				1,003,762

     Based on the current progress of our new projects, we estimate that our capital expenditures for 2009 will amount to approximately RMB 3,200 million, which consists primarily of the following projects:

	•		purchasing 25G and 25T passenger trains;
	•		purchasing CRHs;
	•		constructing the Buji passenger station; and
	•		upgrading and expanding the transportation equipment for the Shenzhen-Guangzhou-Pingshi Railway.

Item 5G. Safe Harbor

Safe Harbor

     See “Forward-Looking Statements.”

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Item 6A. Directors and Senior Management

Directors

     Our board of directors is composed of six non-independent directors and three independent directors. Except for Mr. Li Liang and Mr. Luo Qing, who were elected at our shareholders’ general meeting held on June 25, 2009 and Mr. Shen Yi, who was elected at our shareholders’ extraordinary general meeting held on December 4, 2008, all the other current directors were elected or re-elected at our shareholders’ general meeting held on June 26, 2008 by cumulative voting. The business address of each of our directors is No. 1052 Heping Road, Shenzhen, People’s Republic of China 518010.

     The table below sets forth the information relating to our directors as of June 25, 2009:

								Date First
								Elected or
Name		Age				Position		Appointed
He Yuhua			56			Chairman of the Board of Directors		2007

								Date First
								Elected or
Name		Age				Position		Appointed
Shen Yi			54			Director and General Manager		2008
Cao Jianguo			51			Director		2006
Yu Zhiming			50			Director		2008
Luo Qing			44			Director		2009
Li Liang			49			Director		2009
Dai Qilin			41			Independent Director		2008
Wilton Chau Chi Wai			47			Independent Director		2004
Lv Yuhui			54			Independent Director		2008

     He Yuhua, age 56, joined the Company in June 2007 and is the Chairman of the Board of Directors of the Company. Mr. He holds a bachelor’s degree and is a senior economist. Mr. He started working in the railway industry in 1969 and has more than 30 years of experience in transportation management. He has served various senior management positions with Tianjin Railway Sub-bureau, Beijing Railway Bureau and GRGC before joining our Company. He is currently the chairman of GRGC, Guangmeishan Railway Company Limited, Sanmao Railway Company Limited and Yuehai Railway Company Limited.

     Shen Yi, age 54, joined the Company in October 2008 and is a Director and the General Manager of the Company. Mr. Shen graduated from the Northern Jiaotong University (currently known as Beijing Jiaotong University) with a bachelor’s degree in Transportation. Mr. Shen has over 30 years experience in the railway industry in China. He previously worked at Hong Kong Qiwen Trade Company Limited, Guangmeishan Railway Company Limited and Huaihua Railway Company. Before joining the Company, he was the General Manager of Shichang Railway Company Limited.

     Cao Jianguo, age 51, joined the Company in June 2006 and is a Director of the Company. Mr. Cao graduated from Central South University with a degree in Railway Transportation. Mr. Cao has been working for many years in the operation and organization of railway transportation. He previously held various managerial positions such as the stationmaster of Zhuzhou Station, the deputy general manager of Changsha Railway Company and chief of the transportation department of GRGC. Since March 2006, Mr. Cao has been the deputy general manager of GRGC.

     Yu Zhiming, age 50, joined the Company in June 2008 and is a Director of the Company. He has a university qualification and a master’s degree in Engineering. He is a senior accountant with numerous years of experience in finance. He was the director of the finance sub-division of Wuhan Railway Sub-bureau of Zhengzhou Railway Bureau. From 2005 to 2006, he was the director of the finance division of Wuhan Railway Bureau and capital settlement center. He was a standing vice director of the capital settlement center of the MOR from September 2006 to April 2008. Mr. Yu has been the chief accountant of GRGC since April 2008.

     Luo Qing, age 44, joined the Company in June 2009 and is a Director of the Company. Mr. Luo graduated with a bachelor’s degree in Economic Management from the Correspondence

Institute of the Party School of the Central Committee of the Chinese Communist Party. He has served in various positions including athlete, coach and secretary-general of Guangdong provincial sports team, trade union of Guangzhou Sub-bureau of Guangdong Railway Administration, trade union of Yangcheng Railway Company, Locomotive Sports Association of Yangcheng Railway Company and Locomotive Sports Association of GRGC. From April 2006 to November 2008, he was the chief of the organization division of the trade union of GRGC. He has been the chairman of trade union of our Company since November 2008.

     Li Liang, age 49, joined the Company in June 2009 and is a Director of the Company. He is a university graduate and an engineer. Mr. Li previously served in various positions including head of Anyang Engineering Section and Xinxiang Engineering Section of Xinxiang Sub-bureau of Zhengzhou Railway Administration, deputy head of Zhengzhou Sub-bureau and Wuhan Sub-bureau of Zhengzhou Railway Administration and deputy head of Wuhan Railway Administration. He has been an executive deputy general manager of GRGC since December 2006.

     Dai Qilin, age 41, joined the Company in June 2008 and is an independent non-executive Director of the Company. Mr. Dai holds a master’s degree in Accounting. Mr. Dai is a senior accountant and is qualified to practice as a PRC certified public accountant and a PRC certified public appraiser. Mr. Dai has served in various professional positions in the finance department of the MOR from 1986 to 1997. Mr. Dai is currently the chief accountant of Beijing Zhongluhua Certified Public Accountants Limited. Prior to his joining Beijing Zhongluhua Certified Public Accountants in April 2001, he was an accountant, senior accountant and deputy head of Beijing Huafeng Certified Public Accountants Limited from 1997 to 2001.

     Wilton Chau Chi Wai, age 47, joined the Company in June 2004 and is an independent non-executive Director of the Company. Dr. Chau obtained a bachelor’s degree in Applied Mathematics from the University of Hong Kong, a bachelor of laws degree from the University of Wolverhampton, a master of business administration degree from the University of Wales and a doctorate of business administration degree from the University of Newcastle in Australia. Dr. Chau is a fellow member of the Association of Chartered Certified Accountants and a member of Singapore Institute of Arbitrators. Since 1987, Dr. Chau has served in senior positions in various financial institutes overseeing investment and development in railway, road and airport infrastructure projects. Dr. Chau is currently chairman of QLeap Venture Limited and managing partner of QLeap Asia Limited. Dr. Chau also serves several companies as board advisor or director.

     Lv Yuhui, age 54, joined the Company in June 2008 and is an independent non-executive Director of the Company. Mr. Lv holds a postgraduate degree from the Department of Finance and Trading of the Chinese Academy of Social Sciences. Mr. Lv is a senior accountant. Mr. Lv is currently the deputy general manager and chief accountant of Beijing Jingtie Beifang Investment Management Company and China Railway Joint Logistics Company Limited, and is a director of Inner Mongolia China Rail Tailida Joint Logistics Company Limited. Mr. Lv also served as general manager and chief accountant of Beijing Railway International Travel Agency Company Limited and as chief accountant of Huayun Travel Investment (Group) Company Limited.

Supervisors

     The table below sets forth the information relating to our supervisors as of June 25, 2009:

								Date First Elected
Name		Age				Position		or Appointed
Yao Muming			55			Chairman of the supervisory committee			1999
Chen Shaohong			42			Supervisor			2008
Wang Jianping			52			Supervisor			2008
Li Zhiming			48			Supervisor			2005
Huang Lika			52			Supervisor			2008
Liu Xilin			53			Supervisor			2008

     Yao Muming, age 55, joined the Company in April 1997 and is the Chairman of the supervisory committee of the Company. Mr. Yao graduated from South China Normal University and was deputy director of the Guangzhou and Zhuhai Animal and Plant Quarantine Bureau. From 1997 to 2003, he was a member of the senior management of the Company. Since July 2003, Mr. Yao has been a member of the senior management of GRGC.

     Chen Shaohong, age 42, joined the Company in June 2008 and is a Supervisor of the Company. Mr. Chen graduated from South China Normal University and is an economist. From 2001, he was a deputy chief and also chief of the structural reform division of the corporate management office, deputy head of the corporate management office, and deputy chief and chief of the corporate and legal affairs division of GRGC. Since June 2008, he has served as the deputy chief economist of GRGC.

     Wang Jianping, age 52, joined the Company in June 2008 and is a Supervisor of the Company. Mr. Wang graduated from the Party School of CPC, majoring in Economics and Management. In 1974, Mr. Wang joined the railway departments and served in various managerial positions in GRGC since then. Since June 2007, Mr. Wang has been the director of the human resources department of GRGC.

     Li Zhiming, age 48, joined the Company in May 2005 and is a Supervisor of the Company. Mr. Li graduated from the Party School of CPC, majoring in Economics and Management and is an accountant. Since 1981, Mr. Li has served in various managerial positions in Hengyang Railway Sub-administration and Changsha Railway Company. From 1996 to March 2005, he served as the chief of the finance sub-division of Changsha Railway Company. Since April 2005, Mr. Li has been the head of the audit department of GRGC.

     Huang Lika, age 52, joined the Company in April 2008 and is a Supervisor of the Company. Mr. Huang graduated from the Party School of the CPC with a concentration in Economics and Management. Mr. Huang has over 30 years experience in the railway transportation business. Since April 2008, Mr. Huang has served as the secretary of the Party and Labor Committee and the secretary of the Discipline Working Commission of our Company, as well as a Supervisor elected by the employee representatives of our Company.

     Liu Xilin, age 53, joined the Company in January 2007 and is a Supervisor of the Company. Mr. Liu graduated from the Party School of the CPC and majored in Economics and Management. He has served as the deputy station master of Dalang, director of Enterprise Management Office of Yangcheng Railway Company, and section head of Guangzhou North Rolling Stock Section. Mr. Liu has served as the section head of Guangzhou Rolling Stock Section since January 2007 and has been elected as a Supervisor by the employee representatives of our Company since April 2008.

Senior Management

     The table below sets forth information relating to our senior management as of June 25, 2009:

						Date First Elected
Name		Age		Position		or Appointed
Shen Yi		54		General Manager		2008
Mu Anyun		49		Deputy General Manager		2009
Wu Weimin		51		Deputy General Manager		2004
Tang Xiangdong		40		Chief Accountant		2008
Guo Xiangdong		43		Company Secretary		2004
Luo Jiancheng		36		Assistant General Manager		2006

     Shen Yi is our Director and General Manager.

     Mu Anyun, age 49, joined the Company in February 2009 and is a Deputy General Manager of the Company. Mr. Mu obtained a master’s degree in Business Management from Macau Science University and is an economist. In 1981, Mr. Mu joined the railway industry and has served in various managerial positions in Guangzhou Railway Administration and GRGC. From May 2000 to February 2009, he served as Director and Deputy General Manager of Guangmeishan Railway Company Limited. Since February 2009, he has served as Deputy General Manager of the Company.

     Wu Weimin, age 51, joined the Company in January 2004 and is a Deputy General Manager of the Company. Mr. Wu graduated from the Guangdong Radio & TV University and is an engineer. Since 1984, he had served in various managerial positions in the materials and equipment department, the planning and statistics department and the labor and wage department of Yangcheng Railway Company. He also served as an engineer of the materials and equipment section and director of the planning and statistics sub-department of Yangcheng Railway Company. Mr. Wu was the director of the labor and wage sub-department and director of the social insurance centre of Yangcheng Railway Company before joining the Company.

     Tang Xiangdong, age 40, is Chief Accountant of the Company. Mr. Tang obtained a master’s degree in Business Management from Jinan University and is a senior accountant. In June 1990, Mr. Tang joined the railway departments and has served in various managerial positions in the labor and capital department, diversified business department and capital settlement center. From March 2006 to December 2008, he served as the director of the

accounting department. Since December 2008, Mr. Tang has served as the Chief Accountant of the Company.

     Guo Xiangdong, age 43, is Company Secretary. Mr. Guo graduated from Central China Normal University with a bachelor’s degree in Laws and a master’s degree in Business Administration. Mr. Guo is an economist. He joined the Company in 1991 and has served as Deputy Section Chief, Deputy Director and Director of Secretariat of the Board. Mr. Guo has been Company Secretary of the Company since January 2004.

     Luo Jiancheng, age 36, joined the Company in January 2006 and is the Assistant General Manager. Mr. Luo graduated from Changsha Railway Institute, majoring in Transportation Management. From 1996, he has served in various managerial positions in the technical and transportation departments of Yangcheng Railway Company, GRGC and Sanmao Railway Company Ltd. Before joining the Company, Mr. Luo served as deputy director of the transportation department of GRGC.

Additional Information

     Members of our board of directors, supervisory committee and senior management also serve as the directors, supervisors or senior management members in other companies as follows:

Name		Position
He Yuhua		Chairman of the Board of Directors of:
		•		GRGC
		•		Guangmeishan Railway Company Limited
		•		Sanmao Railway Company Limited
		•		Yuehai Railway Company Limited
Cao Jianguo		Vice Chairman of the Board of Directors of:
		•		Shenzhen Pingnan Railway Company Limited
		Director of:
		•		Sanmao Railway Company Limited
		•		Guangdong Tieqing International Travel Agency Company Limited
		Deputy General Manager of:
		•		GRGC
Yu Zhiming		Chairman of the supervisory committee of:
		•		Yuehai Railway Company Limited
		Director of:
		•		Guangmeishan Railway Company Limited
		•		Sanmao Railway Company Limited
		•		Shichang Railway Company Limited
Li Liang		Executive Deputy General Manager of:

Name		Position
		•		GRGC
Lv Yuhui		Director of:
		•		Inner Mongolia China Rail Tailida Joint Logistic Company Limited
Yao Muming		Chairman of the supervisory committee of:
		•		Guangmeishan Railway Company Limited
		•		Sanmao Railway Company Limited
		•		Shichang Railway Company Limited
Li Zhiming		Chairman of the supervisory committee of:
		•		Guangdong Tieqing International Travel Agency Company Limited
		•		Guangdong Tiecheng Industrial Company Limited
		Supervisor of:
		•		Sanmao Railway Company Limited
		•		Sanmao Railway Enterprise Development Company Limited
		•		Shichang Railway Company Limited
		•		Yuehai Railway Company Limited
Chen Shaohong		Director of:
		•		Guangmeishan Railway Company Limited
		•		Guangdong Tieqing International Travel Agency Limited
		•		Yuehai Railway Company Limited
		•		Sanmao Railway Enterprise Development Company Limited
		Supervisor of:
		•		Shichang Railway Company Limited
		•		Sanmao Railway Company Limited

     The lines operated by Guangmeishan Railway Company, Sanmao Railway Company, Shichang Railway Company, Yuehai Railway Company, and Shenzhen Pingnan Railway Company are all local railroads. Sanmao Railway Enterprise Development Company and Guangdong Tieqing International Travel Agency Company are subsidiaries of GRGC. Guangzhou Tiecheng Industrial Company is our joint venture partner. We are currently involved in certain legal proceedings relating to this joint venture. See “Item 8A.7—Legal Proceedings” for details of such legal proceedings.

Item 6B. Board Compensation

Directors and Senior Management

     Total remuneration of our directors, supervisors and senior management members during 2008 included wages, bonuses, other schemes and allowances. Directors or supervisors who are also officers and employees of Guangshen Railway receive certain other benefits in kind from GRGC, GEDC or us, such as subsidized or medical insurance, housing and transportation, as

customarily provided by the railway companies in the PRC to their employees.

     The aggregate amount of cash remuneration paid by Guangshen Railway in 2008 to all individuals who are our directors, supervisors and senior management members was approximately RMB 3.3 million, of which approximately RMB 1.4 million was paid to our non - independent directors and supervisors and approximately RMB 0.4 million was paid to the independent non-executive directors.

     The aggregate amount of cash remuneration we paid during the year ended December 31, 2008 for pension and retirement benefits to all individuals who are currently our directors, supervisors and senior management members was approximately RMB 0.2 million.

Interests of Our Directors, Supervisors and Other Senior Management in Our Share Capital

     As of December 31, 2008, there was no record of interests or short positions (including the interests or short positions which were taken or deemed to have under the provisions of the Hong Kong Securities and Futures Ordinance) held by our directors or supervisors in our shares, debentures or other securities, or securities of any of our associated corporation (within the meaning of the Hong Kong Securities and Futures Ordinance) in the register required to be kept under section 352 of the Hong Kong Securities and Futures Ordinance. We had not received notification of any interests or short positions from any of our directors or supervisors required to be made to us and the HKSE pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in Appendix 10 to the HKSE Listing Rules. We have not granted any of our directors or supervisors, or any of their respective spouses or children under the age of 18, any right to subscribe for any of our shares or debentures.

Service Contracts of Our Directors and Supervisors

     Each of our directors and supervisors has entered into a service agreement with us. Except as disclosed, no other service contract has been entered into between any of our subsidiaries or us on one hand, and any of our directors or supervisors on the others, that cannot be terminated by us within one year without payment of compensation (other than statutory compensation).

Contracts Entered into by Our Directors and Supervisors

     None of our directors or supervisors had any direct or indirect material interests in any contract of significance subsisting during the year ended on December 31, 2008 or at December 31, 2008 to which we or any of our subsidiaries was a party.

Remuneration of Our Directors and Supervisors

     The level of remuneration of our directors and supervisors was determined by reference to various factors, including the going rates of remuneration in Shenzhen, where we are located, and the job nature of each of our directors and supervisors. The remuneration and annual incentive of the Directors and the Supervisors will be considered and recommended by the Remuneration Committee and will be approved and authorized by the shareholders at

shareholders’ general meetings of the Company. No Director or Supervisor is involved in determining his own remuneration.

Item 6C. Board Practices

Board of Directors

     In accordance with our currently valid Articles of Association, our board of directors comprises nine directors, one of whom is the chairman. Directors are appointed at our shareholders’ general meeting through voting, and serve for a term of three years. Upon the expiration of the term of their office, they can serve consecutive terms if re-appointed at the next shareholders’ general meeting. The service contracts that we have entered into with our directors do not provide for any payment of compensation upon termination.

Supervisory Committee

     We have a supervisory committee consisting of five to seven supervisors. Supervisors serve a term of three years. Upon the expiration of their terms of office, they may be re-appointed to serve consecutive terms. The supervisory committee is presided over by a chairman who may be elected or removed with the consent of two-thirds or more of the members of the supervisory committee. The term of office of the chairman is three years, renewable upon re-election. Our supervisory committee consists of four representatives of the shareholders who may be elected or removed by our shareholders’ general meeting, and two representatives of our employees who may be elected by our employees at the employees’ congress or employees’ general meeting or through any other democratic means. Members of our supervisory committee may also attend meetings of the board of directors. The current members of our supervisory committee are: Yao Muming, Wang Jianping, Chen Shaohong, Li Zhiming, Huang Lika and Liu Xilin. All of the current members of our supervisory committee who are representatives of the shareholders were elected or re-elected at the annual shareholders’ general meeting held on June 26, 2008. The term of these supervisors will be 3 years. Our supervisory committee held four meetings during the year ended December 31, 2008, at which resolutions concerning identified key issues were passed and notified to our board of directors. Our supervisors attended shareholders’ general meetings, meetings of our board of directors and other important meetings concerning our operation during the year ended December 31, 2008. Our supervisory committee reviewed the report of our directors, the financial report and proposed profit distribution presented by our board of directors at the annual general meeting of shareholders held on June 25, 2009.

     Supervisors attend board meetings as non-voting members. The supervisory committee is accountable to the shareholders’ general meeting and has the following duties and responsibilities:

	•		to examine the Company’s financial situation;
	•		to supervise the performance of duties of the directors, general manager, deputy general managers and other senior management; to propose the dismissal of directors, general manager, deputy general managers and other senior