Dear shareholders,

On behalf of the Board of Directors of China Shineway Pharmaceutical Group Limited (the "Company" or "China Shineway") together with its subsidiaries (the "Group"), I am pleased to present the annual report of the Group for the year ended 31 December 2008.

During 2008, sales of the Group increased by 25.9% from last year. All of our core products achieve continuous growth. Among them, sales of Qing Kai Ling Injection, Shen Mai Injection, Wu Fu Xin Nao Qing Soft Capsule and Shu Xie Ning Injection together surged by 22.9%. Sales of our five emerging products including Hou Xiang Zheng Qi Soft Capsule, Pediatric Qing Fei Hua Tan Granule, Huang Qi Injection, Qing Kai Ling Injection, and Liyan Jiedu Granule posted a 47.5% growth. Newly launched products such as Jiangzhi Tongluo Soft Capsule, Shujin Tongluo Granule, and Xiesaitong Dripping Pill together extended a 73.0% sales growth. Operating income increased by 34.8% as compared to last year. Nonetheless, volatility and instability of global financial markets caused the Group to incur net exchange loss on our foreign currency bank deposits. Consequently, the Group's profit for the year is lowered by 18.8% as compared to last year.

During the year, the Group continued to receive wide recognition from the PRC government and general public. The Group's "Wu Fu" trademark has been statutorily certified as a "China Famous Trademark" and our "Shen Miao" trademark is also conferred as "Hebei Province Well-Known Trademark". In addition, the Group has been named as "Forbes 2008 Emerging Chinese Enterprise", "2008 Hong Kong Outstanding Enterprise", "Chinese Enterprise of Outstanding Integrity" along with many other honors.

China Shineway has been relentlessly investing into advanced technologies and innovations. We are now upgrading our Chinese medicine extraction workshops to increase extraction capacity to 10,000 tonne per annum and to equip the workshops with automated near-infra-red detection systems capable of real time monitoring of extraction quality. The upgrade of our extraction workshops are designated by the National Development and Reform Commission of the PRC as a model project, the first of its kind in the country. Construction of our new research and development center and headquarters building in Lang Fang are progressing. A number of production workshops and facilities are also being upgraded with new technologies and additional capacities with a goal to fulfill the increasing demand for modern Chinese medicines.

The Group has strived to strengthen our work in research and development. During the year, we initiated two new research projects and received new medicine certificates for three new products - Lian Shen Tong Lin tablet, Qi Huang Tong Mi soft capsule, Xingsu Zhike soft capsule. Lian Shen Tong Lin tablet is believed to be the first modern Chinese medicine for the treatment of non-gonococcal urethritis. Its excellent therapeutic effect has been broadly praised by medical practitioners. The Group has entered into a memorandum of understanding with an university in Australia to work on an international cooperation of research in modern Chinese medicine. This joint research project aims to develop a new medicine for the treatment of Alzheimer's disease.

Near the end of the year, several Chinese medicine injection products of other manufacturers were reported to cause adverse drug reaction during clinical application. Criticism against the use of Chinese medicine injections without merit quickly spreaded out. While authorities concluded that these adverse drug reactions were isolated incidents, negative media reports against Chinese medicine injections have inevitably affected the public. The situation is not a healthy sign for the future development of Chinese medicine injections.

Technologies used to produce Chinese medicine injections are the most advanced among all modern Chinese medicine formulations. Swift bioavailability and prompt therapeutic effect make Chinese medicine injections ideal for treatment of medical emergency. Chinese medicine injections have been advancing rapidly and become an important direction toward modernization of Chinese medicine and an opportunity to enter into the main stream international medical practice.

The Group's Chinese medicine injections are all produced with superb quality. We are the only Chinese medicine injection manufacturer being named by authorities as a "Model Enterprise of Quality Medicine Management". As the country strengthens scrutiny and raises standards on Chinese medicine injections, those with inferior production knowhow and quality would likely be banished. Consequently, large scale pharmaceutical manufacturers which produce Chinese medicine injections of superb quality and advanced technologies will excel.

The pharmaceutical industry is undergoing rapid growth. The PRC government has ascertained its plan to allocate RMB 850 billion to reform the country's health care system with details to be announced soon. Market for medicines will expand swiftly. Riding on such favorable business environment, China Shineway pledges to continue our pursuit on the research and development of modern Chinese medicines with good efficacy, superb quality and affordable price, and to continue our missions to lead and expedite modernization of Chinese medicines and shine the pharmaceutical industry.

Appreciation

On behalf of the Board, I would like to thank our business partners, customers and shareholders for their support, and our employees for their diligent work in the past year. The Group's achievements are inseparable from the effort made by our employees. With solid foundation and our sternness in innovation, China Shineway is positioned to deliver good results.

Li Zhenjiang
Chairman of the Board

Hong Kong, 31 March 2009