AVIC Group forms new joint venture partnership to invest $105 million in Chinese telecommunications projects.

NEW YORK--(BUSINESS WIRE)--March 18, 1997--AVIC Group International, Inc. (ASE: AV), a developer of telecommunications projects in the People's Republic of China, announced that it has formed a new joint venture partnership with the Hebei Provincial Government to develop telecommunications and other related projects in Hebei requiring an investment of approximately $105 million over the next three years.

The new joint venture partnership expands the relationship of AVIC and the Hebei government substantially beyond their contract to build a 70,000 subscriber GSM cellular phone network that began operations last month, at a cost of $60 million, to include the development of a 5 million subscriber multimedia hybrid fiber-optical coaxial (HFC) network, at a cost of $45 million. The joint venture partnership also previously signed an agreement to develop a fixed wireline network in Hebei.

AVIC Group Chairman and CEO, Joseph R. Wright said, "This is an important step for AVIC, as we have formed this key partnership company with the Hebei government to increase our participation in the telecommunications industry in this rapidly growing province of 65 million which surrounds Beijing. Vice Governor Guo of Hebei said, "We are excited about the opportunities that working with AVIC Group offers the province of Hebei."

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Wright explained, "Last week we provided an additional $1.2 million of capital to fund the new joint venture partnership, which will oversee the operations of the GSM cellular phone network, the development of the multimedia HFC network and future projects already in planning stages, some of which could be up and running within twelve months. We are delighted with the success we've had in bringing our cellular network to market on time and under budget, and expect the same with the multimedia project over the next year. I cannot imagine our shareholders' money could be invested in a more dynamic marketplace anywhere in the world."

AVIC's first project in Hebei, a GSM cellular phone network with Nippon Telegraph and Telephone International (NTTI) as a partner, began commercial operations last month, only one year after construction began, and will report revenue in AVIC's current fiscal year ending March 31, 1997. Construction costs for the network are currently 10% below budget.

NTTI committed more than $30 million to the first phase of building the project, which is scheduled to have a capacity of 40,000 subscribers by mid-1997. The second phase of construction will begin later this year and will expand capacity to 70,000 subscribers at an additional cost of $30 million. The third phase of the project calls for expanding capacity to 200,000 subscribers by the year 2000, making it one of the fastest growing cellular networks in China. AVIC will receive 25% of cash-flow from the network for 15 years. Wright added, "I attribute the outstanding performance of this project to the smooth working relationship between AVIC and its partners, The Electronic Industry Department of Hebei Province, Hebei UNICOM and NTTI."

The second project of the new joint venture company will be an expansion of the existing cable-TV network in Hebei in partnership with the Hebei Bureau of Broadcasting. The province-wide multimedia network will offer upgraded cable-TV service, Internet access, private network telephony and other broadband communications services. Hebei's cable-TV network now has 1.4 million subscribers and current annual revenue in excess of $20 million. This two-phased project will cost approximately $45 million. The expansion of the current network to cover 12.5 million households will cost approximately $20 million, and the upgrade to HFC for multiple broadband multimedia applications will cost approximately $25 million. Profit sharing arrangements are expected to be similar to those for the GSM network.

Following the upgrade, the Hebei Broadcast Television Commission projects the cable television subscriber base to double to 2.8 million by the year 2000 and to continue to grow to more than 5 million by the year 2007. Subscribers for Internet access, private data network and private network telephony are expected to contribute up to 50% of the revenue generated by the network. Wright stated, "We expect to have the same positive working relationship as exists on our first project and welcome the Hebei Bureau of Broadcasting as a partner. When this project is completed, it will be one of the ten largest cable-TV networks in the world."

AVIC is focusing on developing telecommunications projects in Hebei because it is one of the wealthiest provinces in China with a population of 65 million and a GDP growing well above the national average of 9-10%. The political and economic climates are highly receptive to investment from the U.S. The China Daily reported on March 12, 1997 "North China's Hebei Province is quietly gathering momentum to integrate into the economic development of its two big neighbors, Beijing and Tianjin....China s capital Beijing and industrial giant Tianjin are both encircled by Hebei." In 1996, foreign investment rose 58.4% to reach $1.24 billion, making Hebei number one in China's 17 coastal provinces in terms of foreign investment growth rate. Governor Ye Liansong recently stated before the National People's Congress, "If people invest in Hebei, they will find it very easy to enter the Beijing and Tianjin markets."

AVIC Group International, Inc. develops telecommunications and information systems networks in the People's Republic of China, concentrating on the northern province of Hebei and the adjacent cities of Beijing and Tianjin. AVIC projects include cellular and cable. -0- Note: Forward-looking statements in this press release are necessarily subject to risks and uncertainties which may affect the accuracy of such statements. Such risks may include any political instability in China, the state of US-China bilateral relations, any delays in network construction and market acceptance of and demand for the company's products. For a full discussion of such risks, please refer to the company's Form 10-KSB for the fiscal year ended March 31, 1996 and subsequent filings.

CONTACT: Company Contact: Cheryl Bell

Director of Investor Relations 

212/319-9160

or

Agency Contact: Warren J. Cavior

The Cavior Organization

212/687-6070 / [e-mail]