China Energy Resources Corporation Announces Letter of Intent With the Orient Group.

NEW YORK--(BUSINESS WIRE)--Dec. 2, 1998--China Energy Resources Corporation (ASE:CHG) today announced that it signed a letter of intent with America Orient Group, Inc. ("AOG"), the U.S. subsidiary of The Orient Group of China ("OG") for AOG to assume the Company's management responsibilities and invest $1 million in the Company, for which AOG will receive five million shares of China Energy common stock and warrants to purchase five million shares of China Energy common stock exercisable over a five-year period at prices ranging from the lesser of 75% of the market price or $.75 per share to $3.00 per share.

The issuance of the five million shares to AOG will increase the current outstanding 3.2 million shares to 8.2 million shares. AOG, through Orient Finance Company, would also provide China Energy with a three-year $2 million line of credit at market rates, with a possible three-year extension. Additionally, AOG would use its best efforts to expand the Company's capital base by at least $5 million in 1999 and $10 million in 2000. AOG would make additional investments through exercising its warrants or otherwise to meet these targets if the Company can not raise sufficient capital through equity or debt financing.

The affiliation with OG would bring to China Energy substantial financial strength, on-site management expertise, experience in international business, mergers and acquisitions, and managing a public company, as well as an established operating base in the U.S. OG's plans for China Energy include designating OG executives to manage the Company and its subsidiaries, improving the function of the Board of Directors, developing a corporate strategy and business plan, identifying projects for China Energy, and improving shareholder relations. OG would also refine the Company's internal controls, audit the regulatory requirements, monitor all compliance requirements, among other management responsibilities.

China Energy and AOG are working in good faith to close the transaction within the next 60 days. Closing of the transaction is contingent, among other things, upon the approval of the Company's shareholders and the Company's convertible note holders agreeing to several adjustments to the terms of such convertible notes. A proxy statement will be sent to the shareholders shortly. China Energy does not currently meet the continued listing guidelines for the American Stock Exchange, and there can be no assurances that the Company's listing will be continued. However, the Company believes that the proposed transaction with AOG will favorably affect the Company's continued listing eligibility.

Mr. C.T. Yeh, Acting Chairman and Chief Executive Officer of China Energy, stated, "Management believes the proposed transaction with AOG is in the best interest of the Company's shareholders as well as its creditors. With a strong partner such as OG, and with the additional capital infusion, China Energy would be in a strong position to improve its operations and embark on a path of growth.

Mr. Guoliang Guan, Vice President of OG, commented, "We have analyzed China Energy extensively and while we understand the difficulties it faces, we see synergistic advantages of a relationship with the Company. Our commitment will provide more than capital; it includes our corporate credibility, enterprise management expertise, strategic locations of operating bases and other resources."

Mr. Guan continued, "Turning China Energy around certainly will be a challenge, but we feel we are up to the task. By bringing a new set of development opportunities to the Company, we expect to set China Energy on the right track to benefit from the rapidly growing energy sector of China."

Founded in 1978, OG is one of the largest private sector conglomerates in China, with 1997 total revenues and profits of $745 million and $42 million, respectively. As of December 1997, OG had total assets of $865 million and a net worth of $445 million. OG operates in six main industries, including civil engineering and construction, real estate development and property management, financial services, transportation, light manufacturing and trade and commerce. Its main operations are in China, Russia, the U.S. and South Africa. OG is headquartered in Heilongjiang Province of China where China Energy's operations are located.

China Energy Resources Corporation is a coal processing company operating in the People's Republic of China.

The statements in this press release that are not historical facts constitute "forward-looking statements" that involve risks, uncertainties and other facts which may cause actual results to be materially different from those set forth in the forward-looking statements. Such factors include but are not limited to, the following general economic and business conditions; competition; the ability to implement and the effectiveness of business strategy and development plans; quality of management; business abilities and judgment of personnel; availability of qualified personnel; labor and employee benefit costs; and availability and cost of raw materials and supplies. China Energy Resources Corporation will not undertake and specifically declines any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Parties receiving this release are encouraged to review all filings made by the Company with the Securities and Exchange Commission.