DISCLOSEABLE TRANSACTION

Zhejiang Expressway Co
20 December 2004

        THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to
be taken, you should consult a stockbroker or other registered dealer in
securities, a bank manager, solicitor, professional accountant or other
professional adviser.



If you have sold all your shares in Zhejiang Expressway Co., Ltd. (the 
'Company'), you should at once pass this circular to the purchaser or to the
bank, stockbroker or other agent through whom the sale was effected for
transmission to the purchaser.



The Stock Exchange of Hong Kong Limited takes no responsibility for the contents
of this circular, makes no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss howsoever arising from
or in reliance upon the whole or any part of the contents of this circular.



(a joint stock limited company incorporated in the People's Republic of China
                            with limited liability)

                               (Stock Code: 0576)


                            DISCLOSEABLE TRANSACTION


A letter from the Board is set out on pages 3 to 11 of this circular.


                                CONTENTS

Definitions                       1


Letter from the Board             3


Appendix - General Information   12


                                  DEFINITIONS

In this circular, unless the context otherwise requires, the following
expressions have the following meanings:


'Agreement'                   means the agreement entered into between the Company, Jiaxing Jiashao and Shaoxing
                              Communication dated 26th November, 2004 for the setting up of the JV Co.;
'Associate'                   has the meaning given to that term in the Listing Rules;
'Board'                       means the board of directors of the Company;
'Company'                     means Zhejiang Expressway Co., Ltd., a joint stock limited company incorporated in the
                              PRC, whose shares are listed on the main board of the Stock Exchange;
'Development Co'              means Zhejiang Expressway Investment Development Co., Ltd., a 51% owned subsidiary of
                              the Company;
'Directors'                   means the directors of the Company;
'HK$'                         means Hong Kong dollars, the lawful currency of Hong Kong;
'Hong Kong'                   means the Hong Kong Special Administrative Region of the PRC;
'Group'                       means the Company and its subsidiaries;
'JV Co.'                      means Zhejiang Jiashao Expressway Co., Ltd, a PRC limited liability company to be
                              established by the Company, Jiaxing Jiashao and Shaoxing Communication;
'Jiaxing Jiashao'             means Jiaxing Jiashao Expressway Investment and Development Limited Liability Company,
                              a PRC state-owned limited liability company;
'Jiaxing-Shaoxing Expressway' means the proposed 69.23 km Jiaxing-Shaoxing Expressway to be developed by the JV Co.
                              in the Zhejiang province of the PRC;
'Latest Practicable Date'     means 14th December, 2004 being the latest practicable date prior to the printing of
                              this circular for ascertaining certain information for inclusion in this circular;
'Listing Rules'               means the Rules Governing the Listing of Securities on the Stock Exchange;
'PRC'                         means the People's Republic of China;
'Project'                     means the development and operation of the Jiaxing-Shaoxing Expressway by the JV Co.;
'RMB'                         means Renminbi, the lawful currency of the PRC;
'Shaoxing Communication'      means Shaoxing Communication and Investment Limited, a PRC state-owned company;
'Shareholders'                means the shareholders of the Company;
'SFO'                         the Securities and Futures Ordinance of Hong Kong; and
'Stock Exchange'              means the Stock Exchange of Hong Kong Limited.

For the purposes of this circular, an exchange rate of RMB1.06: HK$1.00 has been
use


                             LETTER FROM THE BOARD


(a joint stock limited company incorporated in the People's Republic of China
                            with limited liability)

                               (Stock Code: 0576)


Board of directors                                 Registered address:
                                                   19th Floor,
Executive directors                                Zhejiang World Trade Center,
Geng Xiaoping                                      122 Shuguang Road,
Fang Yunti                                         Hangzhou, Zhejiang Province, 310007,
Zhang Jingzhong                                    The People's Republic of China
Xuan Daoguang

Non-executive directors
Zhang Luyun
Zhang Yang

Independent non-executive directors
Tung Chee Chen
Zhang Junsheng
Zhang Liping


                                                             20th December, 2004


To the Shareholders


Dear Sir and Madam,


                            DISCLOSEABLE TRANSACTION

INTRODUCTION


It was announced by the Directors on 29th November, 2004 that, the Company
entered into the Agreement with Jiaxing Jiashao and Shaoxing Communication on
26th November, 2004 to set up the JV Co. for the purpose of developing the
Project. The Company, Jiaxing Jiashao and Shaoxing Communication will be
interested in 35%, 35% and 30% of the share capital, respectively, of the JV Co.



The Company will, in aggregate, make a total capital contribution of
RMB1,145,375,000 to the JV Co. Therefore, the transaction contemplated under the
Agreement constitutes a discloseable transaction of the Company under the
Listing Rules.



BACKGROUND



The Company was incorporated on 1st March 1997 in the PRC and is a joint stock
limited company, currently with a registered share capital of RMB4,343,114,500
(HK$4,097,277,830). The main business of the Group is investment in and
development, operation, management and toll collection of
Shanghai-Hangzhou-Ningbo Expressway and Shangsan Expressway, both located in
Zhejiang Province of the PRC, as well as businesses ancillary to the operation
of the two expressways, such as billboard advertising and operation of service
areas on the expressways.



PROPOSED STRUCTURE OF THE JV CO.



The proposed shareholding structure of the JV Co. is as follows:



PRINCIPAL TERMS OF THE AGREEMENT


The principal terms of the Agreement are as follows:


Date                        26th November, 2004.
Parties                     The Company, Jiaxing Jiashao and Shaoxing Communication. To the best of the Directors'
                            knowledge, information and belief and after having made all reasonable enquiry, Jiaxing
                            Jiashao and Shaoxing Communication, together with their respective ultimate beneficial
                            owners, are third parties independent of the Company and its connected persons (as defined
                            in the Listing Rules) of the Company.
Initial Registered Capital  RMB100,000,000, which shall be contributed by the Company, Jiaxing Jiashao and Shaoxing
of JV Co.                   Communication in accordance with their respective equity holdings in the JV Co.
                            Accordingly, the Company, Jiaxing Jiashao and Shaoxing Communication shall contribute
                            RMB35,000,000, RMB35,000,000 and RMB30,000,000 respectively to the registered capital of
                            the JV Co.
                            The registered capital of the JV Co. shall be paid up within 7 days of the first
                            shareholders' meeting of the JV Co. which was held on 26th November, 2004.
                            However, since the registration of the JV Co. has not been completed, the parties agreed to
                            postpone payment of the registered capital until after the JV Co. has been established. It
                            is the Company's current expectation that registration of the JV Co. can be completed by
                            early January, 2005.
Total Capital Contribution  RMB3,272,500,000 (inclusive of the initial registered capital), which shall be contributed
to the JV Co.               by the Company, Jiaxing Jiashao and Shaoxing Communication in accordance with their
                            respective equity holdings in the JV Co.   Accordingly, the Company, Jiaxing Jiashao and
                            Shaoxing Communication shall contribute in cash RMB1,145,375,000, RMB1,145,375,000 and
                            RMB98,175,000 respectively to the total capital investment in the JV Co.   Other than the
                            registered capital, the parties shall fix the timetable for the payment of the remaining
                            capital contribution within 15 days upon obtaining the government approval for the
                            feasibility report of the Project.
Total Amount of Investment  The total amount of investment for the Project is currently estimated to amount to
of the Project              RMB9,350,000,000 (subject to final determination). Save for the capital contribution, there
                            is currently no timetable for the contribution of the remaining amount of investment, which
                            shall be financed by the JV Co. depending on the progress of the Project.   Save as
                            disclosed in this circular, there is no other capital commitment by the Company under the
                            Agreement.
Business Scope              The business scope of the JV Co. includes (subject to the approval by the Administration
                            for Industry and Commerce of the PRC) investment in and financing, construction, toll
                            collection, maintenance and management of expressway, as well as the provision of other
                            ancillary services.
Board representation        The board of the JV Co. shall comprise nine directors, of which, each of the Company,
                            Jiaxing Jiashao and Shaoxing Communication shall nominate three directors to the board of
                            the JV Co. and the chairman of the JV Co. shall be nominated by the Company.
Profit sharing              The Company, Jiaxing Jiashao and Shaoxing Communication shall share in the profit and loss
                            of the JV Co. in accordance with their respective equity holdings in the JV Co.
Pre-emptive right           Upon the formation of the JV Co., if any party intends to transfer its equity interests in
                            the JV Co., it has to obtain the prior consent of the other parties and on the same terms
                            and conditions, the other parties shall have the pre-emptive option to purchase that 
                            party's interest in the JV Co.
Term of operation for the   35 years
JV Co.



INFORMATION ON THE PROJECT



The main business of the JV Co. will be the development, operation and
maintenance of the Project.



Jiaxing-Shaoxing Expressway is planned to start from the junction of
Shanghai-Hangzhou Expressway and Zhapu-Jiaxing-Suzhou Expressway in the
southwestern side of Jiaxing, Zhejiang Province and end at the junction of
Hangzhou-Ningbo Expressway and Shangsan Expressway in the western side of
Shangyu, Shaoxing with a total length of 69.23 km, including 12.32 km bridge
crossing over the Hangzhou Bay. There are a total of 11 interchanges along the
entire expressway.


Jiaxing-Shaoxing Expressway is planned to be designed as an 8-lane expressway
with a designed traffic speed of 100 km / hour.


It is planned that the Jiaxing-Shaoxing Expressway will commence operation by
the end of 2008.

REASONS FOR INVESTMENT IN THE JV CO. AND THE PROJECT

The reasons for the investment in the Project are two-fold. As far as the
strategic implication of its physical location is concerned, the Project links
with Shanghai-Hangzhou and Hangzhou-Ningbo Expressway and is connected to
Shangsan Expressway, and accordingly is closely related to the existing highway
network of the Company. The Project is not only an important integral part of
the trunk highway planning of Zhejiang Province, but also an important integral
part of the national road network planning. The Directors are of the view that
Jiaxing-Shaoxing Expressway serves as a shortcut linking up the north-south
traffic of Hangzhou Bay with an extensive radiation area and therefore, is
likely to attract a substantial volume of traffic flow.


As far as the future traffic demand is concerned, rapid growth in traffic volume
in the region has created much pressure on the existing national highway
networks immediately adjacent to the Project. Many of them are operating under a
saturated conditions, with the traffic volume on the Jiaxing-Hangzhou-Guzhu
(Shaoxing) section of the Shanghai-Hangzhou-Ningbo expressway being particularly
heavy, for instance. According to the estimation of the Zhejiang Transport
Planning and Design Institute, the traffic volume in the region will increase at
an annual average growth rate of 7.55% in the next 20 years.


Traffic Volume Forecasted for the Jiaxing-Shaoxing Expressway
(based on an 8-lane expressway)



                                                                                          PCU (Passenger Car Unit)
Year                                              2008        2010        2015        2020        2025        2027
Full Trips                                      26,425      32,982      49,343      66,311      81,038      84,811



Source:  Zhejiang Transport Planning and Design Institute

As the Project is still at early stage of planning and yet to receive regulatory
approval from relevant state authorities, many of the key economic factors are
to be determined. In assessing the financial viabilities of the Project, a
number of assumptions have been made. These include a 25-year concession period
to operate the Jiaxing-Shaoxing Expressway and to collect toll fee expected to
be granted by the Ministry of Communications, business tax, revenue tax and
surcharges that amount to approximately 5.55% as well as a 33% corporate income
tax rate.

In addition, the toll rate for passenger cars for the Jiaxing-Shaoxing
Expressway is assumed to be RMB0.90 per kilometre at the onset of the concession
period, with a 5% increase expected to take place once every five years. The
average starting toll rate across various classes of vehicles would be RMB1.40
per kilometre.

The Directors are of the view that the financial return of the Project is
expected to meet the investment criteria set by the Company which is based on
its weighted average cost of capital, and could be further enhanced by expanding
the ancillary services (such as providing towing facilities and roadside
advertising along the route of expressways) related to the expressway.


The entering into of the Agreement and the formation of the JV Co. have no
immediate and material impact on the earnings, assets and liabilities of the
Company.


Further, the Directors expect that the Project, upon its completion, will
generate significant synergies for the the Company's operation, and will have
a positive impact on the earnings and assets of the Company over an extended
period of time after a brief initial period of traffic volume build-up. The
Directors are of the view that the Project is unlikely to cause significant
increase in the Company's liability level on a consolidated accounting basis
in the next few years because the Company currently has a high level of cash
equivalent (Please refer to the section 'FUNDING FOR THE PROJECT' below for
more details) and that the Project itself shall not have significant direct
impact on the Company's dividend policy for the next few years.


The completion of the Project may cause traffic diversions in certain sections
of Shanghai-Hangzhou-Ningbo Expressway. Through the investment in the Project
and as one of the majority shareholders, the Project is beneficial to the Group
as a whole.


The Project is still in a preliminary stage. The Project has not been approved
by the relevant PRC government authorities. There is no guarantee that such
government authorities can be obtained. Therefore, the Project faces a number of
uncertain factors, including the implementation time of the Project, investment
scale, operation period, toll levels and future adjustments and the project
construction and operation risks. Such risks may reduce the financial return of
the Project.


Based on the above reasons, the Directors believe that the terms of the
Agreement, which were determined after arm's length negotiation, are fair and
reasonable and are in interests of the Company and the Shareholders as a whole,
and that the transaction contemplated under the Agreement constitutes a
discloseable transaction of the Company under the Listing Rules and is required
to be disclosed by way of an announcement and this circular containing further
details of the Project.



FUNDING FOR THE PROJECT



Amongst the estimated total amount of investment of approximately
RMB9,350,000,000 for the Project, RMB3,272,500,000 will be contributed by the
Company, Jiaxing Jiashao and Shaoxing Communication in accordance with their
respective equity holdings in the JV Co. as equity capital, with the remaining
balance to be financed by the JV Co. itself through bank borrowings. Should the
total amount of investment of the Project exceed the contractually agreed amount
of RMB9,350,000,000 the increased amount shall also be financed by the JV Co.
through bank borrowings.


As the existing projects of the Company generate a substantial amount of cash
flow and the Company has, as at the Latest Practicable Date, immediately
realisable cash equivalents of approximately RMB1,000,000,000 and cash and time
deposits of approximately RMB500,000,000, the Company has adequate financial
resources to support the capital commitments to the Project, while still being
able to maintain a positive balance of its cash flow at the same time. All
capital commitment of the Company under the Agreement will be funded from the
internal financial resources of the Company.


INFORMATION REGARDING JIAXING JIASHAO AND SHAOXING COMMUNICATION


Jiaxing Jiashao is a PRC state-owned limited liability company with a registered
capital of RMB50,000,000. Jiaxing Jiashao is engaged in the business of
investment in and development, constructuion, maintenance, operation and
management of expressway.


Shaoxing Communication is a PRC state-owned company with a registered capital of
RMB500,000,000. Shaoxing Communication is engaged in the businesses of
transportation infrastructure facilities, ancillary facilities and related
property investment, development, asset management and the letting out of
ancillary facilities.


INFORMATION REGARDING THE OTHER POTENTIALLY COMPETING BRIDGE PROJECT IN HANGZHOU
BAY


Construction of a major Hangzhou Bay Bridge was started in June 2003 and is
expected to be completed in 2008. That bridge is located approximately 50 km
east of, and parallel to the Project. According to media reports, it is a 6-lane
expressway with an estimated total investment cost of RMB 11.8 billion. The
Hangzhou Bay Bridge is likely to become the longest sea-crossing bridge in the
world with a total bridge length of 36 km (as compared to a total bridge length
of approximately 12km for the Project). As such, it is expected to share some of
the traffic crossing the general area of Hangzhou Bay with the Jiaxing-Shaoxing
Expressway.


However, the Directors are of the view that the direct competition of the
Hangzhou Bay Bridge with the Project will be limited due to the following
reasons:


•  The Hangzhou Bay Bridge will serve the traffic between the general area
   of Ningbo-Zhoushan and that of Jiaxing-Shanghai, while the Project will serve
   the traffic between the general areas of Shaoxing, the southeast coastal cities
   of Taizhou and Wenzhou and Jiaxing-Shanghai area. The Project is expected to
   further smoothen the traffic between the rapidly developing Fujian Province,
   particularly the eastern and southern Fujian area and Shanghai.

•  The traffic volume crossing the Hangzhou Bay is expected to increase
   rapidly so that there shall be sufficient traffic demand for both projects after
   end of 2008 when the Project becomes operational. According to the estimation of
   the Zhejiang Transport Planning and Design Institute, the traffic demand
   crossing Hangzhou Bay will increase at an average annual growth rate of 7.97% in
   the next 20 years, with the total traffic volume estimated at 79,352 PCU/day
   (PCU = Passenger Car Unit) by 2008 and 275,033 by 2027.

Therefore, in the view of the Directors, the Hanghzou Bay Bridge is unlikely to
create significant traffic diversion impact on the Project.


ADDITIONAL INFORMATION


Your attention is drawn to the information set out in the Appendix to this
circular.


                                                        Yours faithfully,
                                                      By Order of the Board
                                                        ZHANG Jingzhong
                                                        Company Secretary


APPENDIX                                            GENERAL INFORMATION

1.     Responsibility statement


This circular includes particulars given in compliance with the Listing Rules
for the purpose of giving information with regard to the Company. The Directors
collectively and individually accept full responsibility for the accuracy of the
information contained in this circular and confirm, having made all reasonable
enquires, that to the best of their knowledge and belief there are no other
facts the omission of which would make any statement herein misleading.


2.     Directors' interests in securities


As at the Latest Practicable Date, the interests and short positions of the
Directors, Supervisors, and the chief executive in the shares, underlying shares
and debentures of the Company or any associated corporations (within the meaning
of the SFO) which were required to be notified to the Company and the Stock
Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including
interests and short positions which they have taken on were deemed to have under
such provisions of the SFO), or which were required, pursuant to section 352 of
the SFO, to be entered in the register referred to therein, or which were
required to be notified to the Company and the Stock Exchange pursuant to the
Model Code for Securities Transactions by Directors of Listed Companies were as
follows:


Name                                          Position           Contribution of    Nature of             Percentage of
                                                                 registered capital interest         registered capital
                                                                 to Development Co.                   in Development Co
                                                                              (RMB)

Mr. Geng Xiaoping                             Chairman                    2,400,000 beneficially                   3.00
                                                                                    owned(1)
Mr. Fang Yunti                                Director/Chief              1,920,000 beneficially                   2.40
                                              executive                             owned(2)
Mr. Zhang Jingzhong                           Director                      550,000 beneficially                   0.69
                                                                                    owned(3)
Mr. Xuan Daoguang                             Director                    1,100,000 beneficially                   1.38
                                                                                    owned(4)
Mr. Fang Zhexing                              Supervisor                    700,000 beneficially                   0.88
                                                                                    owned(5)


Notes:


(1)  These interests in the registered capital of Development Co. are held
     by Ms. Huang Qiuxia as trustee for and on behalf of Mr. Geng Xiaoping pursuant
     to a trust agreement dated 26th May, 2003.


(2)  These interests in the registered capital of Development Co. are held
     by Ms. Huang Qiuxia as trustee for and on behalf of Mr. Fang Yunti pursuant to a
     trust agreement dated 26th May, 2003.


(3)  These interests in the registered capital of Development Co. are held by
     Ms. Huang Qiuxia as trustee for and on behalf of Mr. Zhang Jingzhong pursuant to
     a trust agreement dated 26th May, 2003.


(4)  These interests in the registered capital of Development Co. are held
     by Ms. Huang Qiuxia as trustee for and on behalf of Mr. Xuan Daoguang pursuant
     to a trust agreement dated 26th May, 2003.


(5)  These interests in the registered capital of Development Co. are held
     by Ms. Huang Qiuxia as trustee for and on behalf of Mr. Fang Zhexing pursuant to
     a trust agreement dated 26th May, 2003.

Save as disclosed above, as at the Latest Practicable Date, none of the
Directors, the Supervisors and the chief executive and their respective
associates had any interests or short positions in the shares, underlying shares
and debentures of the Company or any associated corporations (within the meaning
of the SFO) which were required to be notified to the Company and the Stock
Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including
interests and short positions which they have taken on were deemed to have under
such provisions of the SFO), or which were required, pursuant to section 352 of
the SFO, to be entered in the register referred to therein, or which were
required to be notified to the Company and the Stock Exchange pursuant to the
Model Code for Securities Transactions by Directors of Listed Companies.


3. Substantial-shareholders interests in securities


As at the Latest Practicable Date, according to the register kept by the Company
pursuant to section 336 of the SFO and so far as the Directors were aware, the
following persons (not being a Director, Supervisor or chief executive of the
Company) had an interest or short position in the shares and underlying shares
of the Company which would fall to be disclosed to the Company under the
provisions of Divisions 2 and 3 of Part XV of the SFO or who was, directly or
indirectly, interested in 10% or more of the nominal value of any class of share
capital carrying rights to vote in all circumstances at general meetings of any
member of the Group together with the number of shares in which they were deemed
to be interested:


Name                                                           Capacity             Number of shares      Percentage of
                                                                                                held      share capital
                                                                                                      (domestic shares)

Zhejiang Communications Investment Group Co., Ltd.             Direct                  2,432,500,000             83.61%
Huajian Transportation Economic Development Center             Direct                    476,760,000             16.39%


Name                                                           Capacity             Number of shares      Percentage of
                                                                                                held  share capital  (H
                                                                                                                shares)

Aberdeen Asset Management Asia Ltd.                            Investment Manager        178,267,000             12.43%
Sumitomo Life Insurance Company                                Investment Manager     100,482,000(1)              7.01%
The Capital Group Companies, Inc.                              Investment Manager      80,849,500(2)              5.64%



Notes:


(1) These shares are held by Sumitomo Mitsui Asset Management Company,
    Limited which is 35% owned by Sumitomo Life Insurance Company.


(2) These shares are held by The Capital Group Company, Inc. as follows:

    (i)  Capital Research and Management Company, which is 100% owned by The
         Capital Group Companies, Inc. has a direct interest in 72,868,000 
         shares; and

   (ii) Capital International, Inc., which is 100% owned by The Capital Group
        Company, Inc through Capital Group International, Inc., has a direct 
        interest in 7,981,500 shares.



Save as disclosed above, as at the Latest Practicable Date, there was no other
person (other than the interests of the Director, Supervisor or chief executive
of the Company), who had an interest or short position in the shares and
underlying shares and debentures of the Company which would fall to be disclosed
to the Company under the provisions of Division 2 and 3 of Part XV of the SFO or
who was, directly or indirectly, interested in 10% or more of the nominal value
of any class of share capital carrying rights to vote in all circumstances at
general meetings of any member of the Group.



4. Service contracts


As at the Latest Practicable Date, none of the Directors nor Supervisors has a
service contract with any member of the Group which is not determinable within
one year without payment of compensation (other than statutory compensation).



5.  Interests in competing businesses



As at the Latest Practicable Date, none of the Directors or Supervisors (and
their respective associates) has any interest, and as far as each Director is
aware none of his associates have any interests, in any business which competes
or is likely to compete, either directly or indirectly, with the existing
business of the Group.



6.  Litigation



So far as the Directors were aware, as at the Latest Practicable Date, no
litigation or claims of material importance are pending or threatened against
any member of the Group.



7.  General



(a) The Secretary of the Company is Zhang Jingzhong. As at the date hereof,
    the Company has not appointed any qualified accountant as required under the
    Listing Rules. The Company is in the process of obtaining a waiver in relation
    to compliance with Rule 3.24 of the Listing Rules.



(b) The registered office and head office is situated at 19th Floor, Zhejiang
    World Trade Centre, 122 Shuguang Road, Hangzhou, Zhejiang Province, 310007, the
    PRC. The branch share registrar of the Company in Hong Kong is Hong Kong
    Registrars Limited, Room 1901-1905, 19th Floor, Hopewell Centre, 183 Queen's
    Road East, Hong Kong.



(c) The English language text of this document shall prevail over the Chinese
    language text.



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