UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 20-F

 

(Mark One)

o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                             to                                           

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                                         

Commission file number: 0-50841

51job, Inc.

N/A
(Translation of Registrant’s name into English)

(Title of Each Class)		(Name of Each Exchange on Which Registered)
American Depositary Shares, each representing two common shares, par value US$0.0001 per share		The NASDAQ Stock Market LLC (The NASDAQ Global Select Market)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 56,519,471 common shares, par value US$0.0001 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ No

If this 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. o Yes þ No

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. þ Yes o No

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):

o Large accelerated filer          þ Accelerated filer           o Non-accelerated filer

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

þ U.S. GAAP       o International Financial Reporting Standards as issued by the International Accounting Standards Board       o Other

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). o Yes þ No

 

 

TABLE OF CONTENTS

				Page
INTRODUCTION				ii
FORWARD-LOOKING STATEMENTS				iii
PART I
Item 1.		Identity of Directors, Senior Management and Advisers		1
Item 2.		Offer Statistics and Expected Timetable		1
Item 3.		Key Information		1
Item 4.		Information on the Company		24
Item 4A.		Unresolved Staff Comments		39
Item 5.		Operating and Financial Review and Prospects		39
Item 6.		Directors, Senior Management and Employees		56
Item 7.		Major Shareholders and Related Party Transactions		63
Item 8.		Financial Information		68
Item 9.		The Offer and Listing		69
Item 10.		Additional Information		70
Item 11.		Quantitative and Qualitative Disclosures About Market Risk		76
Item 12.		Description of Securities Other than Equity Securities		76
PART II
Item 13.		Defaults, Dividend Arrearages and Delinquencies		77
Item 14.		Material Modifications to the Rights of Security Holders and Use of Proceeds		77
Item 15.		Controls and Procedures		77
Item 16A.		Audit Committee Financial Expert		77
Item 16B.		Code of Ethics		78
Item 16C.		Principal Accountant Fees and Services		78
Item 16D.		Exemptions from the Listing Standards for Audit Committees		78
Item 16E.		Purchases of Equity Securities by the Issuer and Affiliated Purchasers		78
PART III
Item 17.		Financial Statements		79
Item 18.		Financial Statements		79
Item 19.		Exhibits		79
EX-4.5 Loan Agreements dated as of September 11, 2007
EX-4.8 Technical and Consulting Service Agreement dated as of September 11, 2007
EX-4.11 Equity Pledge Agreement dated as of September 11, 2007
EX-4.12 Investment Capital Transfer Agreement dated as of September 11, 2007
EX-4.13 Share Transfer Agreement dated as of November 20, 2007
EX-4.14 Share Transfer Agreement dated as of November 12, 2007
EX-4.21 Cooperation Agreement dated as of August 9, 2007
EX-8.1 List of subsidiaries of 51job, Inc.
EX-12.1 CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EX-12.2 CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EX-13.1 CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
EX-13.2 CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
EX-15.1 Consent of Maples and Calder
EX-15.2 Consent of Jun He Law Offices
EX-15.3 Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company

INTRODUCTION

     Unless otherwise indicated, references in this annual report to:

	•		“ADRs” are to the American depositary receipts that evidence our ADSs;
	•		“ADSs” are to our American depositary shares, each of which represents two common shares;
	•		“China” or the “PRC” are to the People’s Republic of China, excluding for the purpose of this annual report Hong Kong, Macau and Taiwan;
	•		“Nasdaq” are to the Nasdaq Global Select Market;
	•		“RMB” are to Renminbi, the legal currency of the PRC;
	•		“shares” or “common shares” are to our common shares, with par value US$0.0001 per share;
	•		“U.S. GAAP” are to the generally accepted accounting principles in the United States of America; and
	•		“US$” are to U.S. dollars, the legal currency of the United States of America.

     Unless the context indicates otherwise, “we,” “us,” “our company,” “our” and “51job” refer to 51job, Inc., its predecessor entities and subsidiaries, and, in the context of describing our operations, also include our affiliated entities.

     In addition, unless otherwise indicated, references in this annual report to:

	•		“51net” are to 51net.com Inc.;
	•		“AdCo” are to Shanghai Qianjin Advertising Co., Ltd.;
	•		“AdCo Subsidiaries” are to the subsidiaries of AdCo that conduct advertising businesses;
	•		“Qian Cheng” are to Beijing Qian Cheng Si Jin Advertising Co., Ltd.;
	•		“RAL” are to Shanghai Run An Lian Information Consultancy Co., Ltd.;
	•		“Run An” are to Beijing Run An Information Consultancy Co., Ltd.;
	•		“Tech JV” are to Qianjin Network Information Technology (Shanghai) Co., Ltd.;
	•		“Wang Cai AdCo” are to Shanghai Wang Cai Advertising Co., Ltd.;
	•		“Wang Ju” are to Shanghai Wang Ju Human Resource Consulting Co., Ltd.;
	•		“WFOE” are to Qian Cheng Wu You Network Information Technology (Beijing) Co., Ltd.; and
	•		“Wuhan AdCo” are to Wuhan Mei Hao Qian Cheng Advertising Co., Ltd.

     Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

     Solely for your convenience, this annual report contains translations of certain Renminbi amounts into U.S. dollar amounts at specified rates. All translations from Renminbi to U.S. dollars were made at the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise stated, the translations of Renminbi amounts into U.S. dollar amounts have been made at the noon buying rate in effect on December 31, 2007, which was RMB7.2946 to US$1.00. We make no representation that the Renminbi or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. See “Item 3. — Key Information — Risk Factors — Risks Related to the People’s Republic of China — Governmental control of currency conversion may affect the value of your investment” and “— The fluctuation of the Renminbi may materially and adversely affect your investment” for discussions of the effects of currency control and fluctuating exchange rates on the value of our ADSs. On June 26, 2008, the noon buying rate was RMB6.8630 to US$1.00.

     This annual report on Form 20-F includes our audited consolidated statements of operations data for the years ended December 31, 2005, 2006 and 2007, and audited consolidated balance sheet data as of December 31, 2006 and 2007.

FORWARD-LOOKING STATEMENTS

     This annual report on Form 20-F contains statements of a forward-looking nature. These statements are made within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other comparable terminology. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including the following risks:

	•		market acceptance of our services;
	•		our ability to expand into other recruitment and human resource services such as business process outsourcing;
	•		our ability to control our operating costs and expenses;
	•		our potential need for additional capital and the availability of such capital;
	•		behavioral and operational changes of our customers in meeting their human resource needs as they respond to evolving social, economic and political changes in China as well as stock market volatilities;
	•		changes in our management team and other key personnel;
	•		introduction by our competitors of new or enhanced products and services;
	•		price competition in the market for the various human resource services that we provide in China;
	•		seasonality of our business;
	•		fluctuations in the value of the Renminbi against the U.S. dollar and other currencies;
	•		our ability to develop or introduce new products and services outside of the human resources industry;
	•		fluctuations in general economic conditions; and
	•		other risks outlined in our filings with the Securities and Exchange Commission, including this annual report on Form 20-F and any amendments thereto.

     These risks are not exhaustive. You should read these statements in conjunction with the risks disclosed in “Item 3. — Key Information — Risk Factors” of this annual report and other risks outlined in our other filings with the Securities and Exchange Commission. Moreover, we operate in an emerging and evolving environment. New risks may emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of such risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statements. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not Applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     Not Applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

     The following tables present the selected consolidated financial information for our business. You should read the following information in conjunction with “Item 5. — Operating and Financial Review and Prospects.” The selected consolidated statement of operations data for the years ended December 31, 2005, 2006 and 2007, and the selected consolidated balance sheet data as of December 31, 2006 and 2007, are derived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1, prepared in accordance with U.S. GAAP and are qualified by reference to these consolidated financial statements and related notes. The selected consolidated statement of operations data for the years ended December 31, 2003 and 2004, and the selected consolidated balance sheet data as of December 31, 2003, 2004 and 2005 have been derived from our audited consolidated financial statements, which are not included in this annual report. The historical results presented below do not necessarily indicate results expected for any future period.

		For the year ended December 31,
		2003				2004				2005				2006				2007				2007
(in thousands, except per share data)		RMB				RMB				RMB				RMB				RMB				US$(2)
Selected Consolidated Statement of Operations Data:
Revenues:
Print advertising			182,606				300,652				356,285				389,535				430,621				59,033
Online recruitment services			76,960				111,509				159,495				219,794				282,688				38,753
Executive search			15,748				24,908				26,307				19,938				16,086				2,205
Other human resource related revenues			18,020				42,875				53,507				68,586				114,871				15,747
Total revenues			293,334				479,944				595,594				697,853				844,266				115,738
Net revenues			280,119				456,120				562,026				659,843				799,284				109,572
Cost of services(1)			(151,477	)			(224,607	)			(269,328	)			(294,068	)			(349,022	)			(47,847	)
Gross profit			128,642				231,513				292,698				365,775				450,262				61,725
Operating expenses(1):
Sales and marketing			(39,043	)			(69,029	)			(115,095	)			(136,770	)			(181,230	)			(24,844	)
General and administrative			(55,817	)			(72,096	)			(100,614	)			(114,322	)			(128,347	)			(17,595	)
Total operating expenses			(94,860	)			(141,125	)			(215,709	)			(251,092	)			(309,577	)			(42,439	)
Income from operations			33,782				90,388				76,989				114,683				140,685				19,286
Income before income tax provision			35,792				95,201				91,367				127,901				148,979				20,422
Income tax expense			(3,192	)			(34,058	)			(29,945	)			(28,560	)			(45,402	)			(6,224	)
Net income			32,600				61,143				61,422				99,341				103,577				14,198
Earnings per share:
Basic			0.83				1.32				1.10				1.79				1.84				0.25
Diluted			0.75				1.26				1.07				1.76				1.83				0.25
Earnings per ADS(3):
Basic			1.65				2.65				2.21				3.58				3.68				0.50
Diluted			1.50				2.52				2.15				3.52				3.66				0.50

		As of December 31,
		2003				2004				2005				2006				2007				2007
(in thousands)		RMB				RMB				RMB				RMB				RMB				US$(2)
Selected Consolidated Balance Sheet Data:
Assets:
Cash			115,085				848,293				830,634				868,698				1,007,520				138,119
Total current assets			145,573				893,647				892,544				919,576				1,075,288				147,409
Total non-current assets			39,831				43,735				70,875				208,039				227,878				31,239
Total assets			185,404				937,382				963,420				1,127,615				1,303,166				178,648
Liabilities:
Total current liabilities			56,096				85,564				109,540				139,075				176,115				24,143
Total non-current liabilities			24				—				—				122				516				72
Total liabilities			56,120				85,564				109,540				139,197				176,631				24,215
Total shareholders’ equity			129,284				851,818				853,880				988,418				1,126,535				154,433
Total liabilities and shareholders’ equity			185,404				937,382				963,420				1,127,615				1,303,166				178,648

		For the year ended December 31,
		2003				2004				2005				2006				2007				2007
(in thousands)		RMB				RMB				RMB				RMB				RMB				US$(2)
Cost of services			(597	)			(1,811	)			(1,480	)			(4,621	)			(4,931	)			(676	)
Operating expenses:
Sales and marketing			(423	)			(1,758	)			(1,438	)			(3,972	)			(4,241	)			(581	)
General and administrative			(17,682	)			(16,921	)			(11,635	)			(19,926	)			(20,479	)			(2,807	)

Exchange Rate Information

     We publish our financial statements in Renminbi. This annual report contains translations of Renminbi amounts into U.S. dollars at specified rates solely for your convenience. Unless otherwise noted, all translations from Renminbi to U.S. dollars were made at the noon buying rate in The City of New York for cable transfers of Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York as of December 31, 2007, which was RMB7.2946 to US$1.00. The prevailing rate on June 26, 2008 was RMB6.8630 to US$1.00. We make no representation that the Renminbi or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The Chinese government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade.

     The following table sets forth information regarding the noon buying rates in The City of New York for cable transfers of Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York for the periods indicated.

		Noon buying rate of Renminbi per U.S. dollar
Period		Period-end				Average(1)				Low				High
2003			8.2767				8.2772				8.2800				8.2765
2004			8.2765				8.2768				8.2771				8.2765
2005			8.0702				8.1826				8.2765				8.0702
2006			7.8041				7.9579				8.0702				7.8041
2007			7.2946				7.5806				7.8127				7.2946
December			7.2946				7.3682				7.4120				7.2946
2008
January			7.1818				7.2405				7.2946				7.1818
February			7.1115				7.1644				7.1973				7.1100
March			7.0120				7.0722				7.1110				7.0105
April			6.9870				6.9997				7.0185				6.9840
May			6.9400				6.9725				7.0000				6.9377
June (through June 26)		6.8630				6.9034					6.9633			6.8630

B. Capitalization and Indebtedness

     Not Applicable.

C. Reasons for the Offer and Use of Proceeds

     Not Applicable.

D. Risk Factors

Risks Related to Our Business

Because we face significant competition, including intense competition in several of our markets, we may lose market share and our results of operations may be materially and adversely affected.

     We face significant competition in our 51job Weekly and www.51job.com businesses as well as in our executive search and other human resource businesses. 51job Weekly currently faces competition within all of our markets. Competitors of 51job Weekly are primarily comprised of local newspaper publishers and specialized recruitment advertising publications. 51job Weekly also faces competition from online job search websites and other online businesses seeking to expand into print recruitment advertising.

     Our online recruitment services face intense competition from other dedicated job search websites such as ChinaHR.com, Cjol.com and Zhaopin.com, as well as from local job search websites. For example, according to public reports, ChinaHR.com and Zhaopin.com have significantly increased their sales and marketing activities in recent years. In addition, many executive search firms and other competitors currently engaged in print advertising or organizing job fairs have developed or acquired online capabilities.

     Our executive search and other human resource related businesses face significant competition from a variety of Chinese and foreign firms in all of our markets, including certain firms that compete with us in the market for print and online recruitment advertising. In addition, some of the competitors we encounter in our business process outsourcing business are affiliated with local government agencies and have licenses to provide a wider range of services than we do.

     Many of our competitors or potential competitors have long operating histories, have international strategic partners, have local government sponsorship, may have greater financial, management, technological development, sales, marketing and other resources than we do, and may be able to adopt our business model. As a result of competition, we may experience reduced margins, loss of market share or less use of our services by job seekers and employers. We cannot assure you that existing or future competitors will not develop or offer services and products which provide significant performance, price, creative or other advantages over our services. If we are unable to compete effectively with current or future competitors as a result of these or other factors, our market share and our results of operations may be materially and adversely affected.

New competitors face low entry barriers to our industries, and successful entry by new competitors may cause us to lose market share and materially and adversely affect our results of operations.

     In the future, we may face competition from new entrants in the recruitment advertising industry and other human resource industries in which we operate. We may face greater competition from Internet portals, newspapers, dedicated recruitment advertising websites and publications, and other human resource services providers who may enter the market for any or all of our services. Our businesses are characterized by relatively low start-up and fixed costs, modest capital requirements, short start-up lead times and an absence of significant proprietary technology that would prevent or significantly inhibit new competitors. As a result, potential market entrants, both in China and from abroad, face relatively low barriers to entry to all of our businesses and in all of our markets. In addition, we believe that there are relatively low existing penetration rates in our markets, and that competitors could acquire significant numbers of customers and establish significant market share within a relatively short period of time. Furthermore, the newspaper and print media industry in China is highly regulated at present which may have the effect of limiting competition and keeping prices, including print advertising prices, at higher levels. Any deregulation of the print media industry may result in increased competition and a material decrease in advertising rates, including the prices we charge for our print advertising services. Increased competition could result in a loss of market share and revenues, and have a material adverse effect on our business, financial condition and results of operations.

If we are unable to achieve or maintain economies of scale with respect to our recruitment advertising businesses, our results of operations from these businesses may be materially and adversely affected.

     We incur fixed costs such as printing, distribution, direct marketing, advertising, management, staff, office, infrastructure and utilities in each of our geographic markets in connection with operating our print advertising business. We also incur fixed costs relating to website connectivity, maintenance, design and operation in our online businesses. Our ability to achieve desired operating margins in our recruitment advertising businesses depends largely on our success in generating a sufficient amount of revenues from print and online recruitment advertisements to offset the associated fixed costs. In addition, to build and maintain employer and job seeker acceptance of 51job

Weekly and www.51job.com as attractive media for posting and finding jobs, we need to reach and maintain a critical mass of recruitment advertisements.

     In some of our markets, 51job Weekly has not achieved the necessary economies of scale to achieve our desired profitability targets, despite our having operated in these markets for a significant period of time. We believe that this has been primarily due to competition from rival print advertising publications as well as a decrease in market demand for print advertisement services in recent years. We may be unable to achieve and maintain sufficient economies of scale in any or all of our geographic markets in connection with our recruitment advertising businesses. Any failure to do so could materially and adversely affect our results of operations from these businesses.

A slowdown or other adverse developments in the PRC economy may materially and adversely affect our customers, demand for our services and our business.

     Substantially all of our operations are conducted in China and a significant majority of our revenues are generated from providing recruitment advertising services for PRC businesses or divisions of foreign firms operating in China. Although the PRC economy has grown significantly in recent years, we cannot assure you that such growth will continue. From time to time, the Chinese government has instituted various economic measures and other policy changes to regulate the pace of economic growth. Print advertising, online recruitment services, executive search and our other human resource related businesses are all relatively new industries in China, and we do not know with any degree of certainty how sensitive we are to a slowdown in economic growth or other adverse changes in the PRC economy. In response to adverse economic developments, employers might hire fewer permanent employees, engage in hiring freezes, lay off employees, or reduce spending on print advertising, online recruitment services and executive search services. Employers may decide to rely more heavily on traditional recruitment methods such as referrals and job fairs, and utilize more “in-house” resources to conduct training and perform other human resource functions, or otherwise modify their behavior in ways that may have a significant negative impact on our business. As a result, a slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in China may materially reduce the demand for our services and materially and adversely affect our business.

If the use of advertising to conduct recruitment does not achieve broader acceptance in China, we may be unable to expand our recruitment advertising businesses.

     The use of advertising services to recruit employees is relatively new in China. Due to the influence and regulation by the national and local governments, large job fairs and personal referrals continue to be key recruitment channels for the private sector in China. We believe that the use of advertising by employers and job seekers remains relatively low. As a result, we face considerable challenges in promoting greater use of advertising, which involves, among other things, significant changes in the way that employers disseminate information about jobs, the way that prospective employees search and apply for jobs, and the way in which hiring decisions are made. We cannot assure you that recruitment advertising will achieve broader acceptance in China. Any significant failure of advertising to gain acceptance among employers and job seekers may substantially limit our ability to expand our recruitment advertising businesses.

If the Internet, and online advertising in particular, does not achieve broad acceptance in China as a medium for recruitment, our online recruitment services business may be adversely affected.

     We generate a significant portion of our revenues from online recruitment services, which are targeted toward employers and job seekers who use the Internet. As part of our online recruitment services, we offer general online advertising on our website, which is an important element in our ability to sell online recruitment advertisements to employers and which generates a material portion of our revenues. China has only recently begun to develop the Internet as a commercial medium and has a relatively low Internet penetration rate compared to most developed countries. Our future results of operations from online recruitment services will depend substantially upon an increase in Internet penetration and an increase in acceptance and use of the Internet for the distribution of services and for the facilitation of commerce in China. In addition, as Internet penetration rates vary widely across the different cities and regions of China, the level of acceptance of online recruitment services may be low in certain geographies for an extended period of time, which may negatively impact our operations in those markets. Moreover, unless they are resolved, telecommunication capacity constraints may impede further development of the Internet to the extent that users experience delays, transmission errors and other difficulties. Any negative perceptions as to the effectiveness of online recruitment services, or online advertising generally, or any significant failure of the Internet to gain acceptance as a medium for recruitment may adversely affect our online recruitment services business and our ability to further integrate our online and print recruitment advertising businesses.

The market for other human resource related services, including business process outsourcing, remains in the development stage in China and we may be unable to expand such existing services or successfully develop new services in this area.

     We believe the market for other human resource related services, including business process outsourcing, is at an early stage of development in China. Many employers are unfamiliar with these services and may not accept the value proposition of these service offerings. Processing, tracking, collecting and remitting funds to the applicable regulatory agencies, employees and other third parties are complex operations, and many employers may not trust us with employee data or to make representations and cash payments on their behalf. As such, companies may not be willing to use our services for significant administrative functions and may instead choose to continue to perform such operations in-house.

     If we are unable to establish a nationwide capability, effectively monitor ongoing changes in PRC laws and regulations, acquire, develop and use up-to-date business and management technology and software, including advanced computer and technology systems that could require significant capital expenditures, and maintain the integrity and security of our systems and process flow, we may be unable to expand our business process outsourcing operations or gain wider customer acceptance for these services. In addition, we rely on a number of third party service providers, including couriers, agents and banks. Failure by these providers, for any reason, to deliver their services in a timely and accurate manner could result in significant disruptions to our business process outsourcing operations, impact our client relationships, harm our brand and result in significant penalties or liabilities to us.

     In addition, as part of our strategy to be a “one-stop” human resource services provider, we may decide to develop new services in the area of other human resource related services. We cannot assure you that we will be able to deliver new products or services on a commercially viable basis or in a timely manner, or at all. If any of our efforts to develop or operate new human resource related services are unsuccessful, our financial condition and results of operations may be materially and adversely affected.

We are dependent on local newspaper contractors in each of our geographic markets to publish and distribute 51job Weekly.

     In the PRC, entities engaged in publishing activities are required by the government to have a publishing license. We do not have any publishing licenses. We are, and will continue to be, dependent on contractual arrangements with local newspapers in each of our geographic markets in order to publish and distribute 51job Weekly. Our arrangements with our local newspaper contractors require them to print, publish and distribute 51job Weekly as an insert in their newspaper, and in some cases to contribute marketing support. The successful execution of our print advertising business model is highly dependent on establishing and maintaining relationships with newspapers in all of our existing markets as well as the new markets in which we intend to offer print advertising services.

     The term of our agreements with local newspaper contractors is generally two years, and eight of these agreements will expire between the date of this annual report and December 31, 2008. In addition, certain of these agreements are subject to early termination by either party on various grounds. We cannot assure you that our local newspaper contractors will conduct their activities in full compliance with applicable laws and regulations governing the publishing, distribution and sale of newspapers. In addition, we cannot assure you that:

	•		our local newspaper contractors will fulfill their obligations under our agreements;
	•		the agreements will be renewed on terms acceptable to us or at all;
	•		our current contractors will not, upon termination of our agreements, seek to compete directly against us or establish relationships with one or more of our competitors; or
	•		in the event that we wish to do so or it is necessary to do so, we will be able to locate and enter into an agreement with a suitable alternative local newspaper on a timely basis or at all.

     In addition, we may experience lower levels of readership and circulation if we lose the marketing support of a local newspaper contractor or change the newspaper contractor in one of our markets. Any adverse developments involving our local newspaper contractors could significantly disrupt or impair the publication, promotion and distribution of 51job Weekly, which in turn could damage our 51job Weekly brand name and materially and adversely affect our recruitment advertising business and our results of operations.

We are dependent on our Internet service providers, and we are vulnerable to failures of the Internet, fixed line telecommunications networks in China and our technology platform.

     Our online businesses are heavily dependent on the performance and reliability of China’s Internet infrastructure, the continual accessibility of bandwidth and servers to our service providers’ networks, and the continuing performance, reliability and availability of our technology platform.

     We rely on China Telecommunications Corporation, or China Telecom, and China Network Communications Group Corporation, or China Netcom, to provide us with bandwidth and server custody service for our services. We are unlikely to have any access to alternative networks or services in the event of disruptions, failures or other problems with China’s Internet infrastructure or the fixed telecommunications networks of China Telecom or China Netcom, or if China Telecom or China Netcom otherwise fail to provide such services. In addition, we have no control over the costs of the services provided by China Telecom or China Netcom. If China Telecom or China Netcom fails to provide these services, we would be required to seek other providers, and there is no assurance that we will be able to find alternative providers willing or able to provide high quality services and there is no assurance that such providers will not charge us higher prices for their services. If the prices that we are required to pay for Internet services rise significantly, our results of operations could be adversely affected.

If we are unable to protect or promote our brand names and reputation, our business may be materially and adversely affected.

     If we fail to generate a high volume of recruitment advertisements, maintain our relationships with local newspaper contractors, successfully promote and develop the perception of www.51job.com as a “destination site,” undertake effective marketing and promotional activities, and generally provide high quality services, we may not be successful in protecting or promoting our brand names and reputation in a cost-effective manner or at all. We may dedicate significantly greater resources in the future to advertising, marketing and other promotional efforts aimed at building awareness of our brands. According to public reports, our competitors, particularly those which provide online recruitment services, have significantly increased their expenditures on sales and marketing activities in recent years. Any significant damage to our reputation, the perceived quality or awareness of our brand names or services, or any significant failure on our part to promote and protect our brand names and reputation could make it more difficult for us to successfully attract job seekers, compete for customers or retain qualified personnel, which may have a material adverse effect on our business.

If we are unable to prevent others from using our intellectual property, our business may be materially and adversely affected.

     Our intellectual property has been, and will continue to be, subject to various forms of theft and misappropriation. Competitors copy and distribute content from our www.51job.com website, from 51job Weekly and from the training materials that we use, and utilize misleadingly similar Internet domain names and URLs in an effort to divert Internet traffic away from our website. We are also susceptible to others copying our business model and methods. The legal protection of trademarks, trade names, copyrighted material, domain names, trade secrets, know-how and other forms of intellectual property in the PRC is significantly more limited than in the United States and many other countries and may afford us little or no effective protection. Preventing unauthorized use of our intellectual property is difficult, time consuming and expensive, and may divert significant management and staff resources from our business operations, and yield limited and uncertain results. Misappropriation of our content, trademarks and other intellectual property could divert significant business to our competitors, damage our brand name and reputation, and require us to initiate litigation that could be expensive and require us to divert management resources from the operation of our businesses.

We rely heavily on our senior management team and key personnel, and the loss of any of their services could severely disrupt our business.

     Our future success is highly dependent on the ongoing efforts of the members of our senior management and key personnel, in particular on Rick Yan, our chief executive officer. We rely heavily on his management skills, his expertise in consumer products, marketing and technology, and his relationships with many of our clients and local contractors. We do not maintain key man life insurance on any of our senior management or key personnel, other than Mr. Yan and Kathleen Chien, our chief financial officer. The loss of the services of one or more of our senior executives or key personnel, Mr. Yan in particular, may have a material adverse effect on our business, financial condition and results of operations. Competition for senior management and key personnel is intense, and the pool of suitable candidates is very limited, and we may not be able to retain the services of our senior executives or key personnel, or attract and retain senior executives or key personnel in the future.

     In addition, if Mr. Yan, any other members of our senior management or any of our other key personnel joins a competitor or forms a competing company, we may not be able to replace them easily and we may lose customers, business partners, key professionals and staff members. Each of our senior executives and key personnel has entered into an employment agreement with us, which contains confidentiality and non-competition provisions. In the event of a dispute between any of our senior executives or key personnel and us, we cannot assure you as to the extent, if any, that these provisions may be enforceable in the PRC due to uncertainties involving the PRC legal system.

Our business may suffer if we do not successfully manage our current and potential future growth.

     We have experienced high growth since we commenced operations in 1998 and we intend to continue to expand in size and increase the number of services we provide. Our anticipated future growth will place significant demands on our management and operations. Our success in managing this growth will depend to a significant degree on the ability of our executive officers and other members of senior management to operate effectively both independently and as a group, and on our ability to improve and develop our financial and management information systems, controls and procedures. In addition, we will have to successfully adapt our existing systems and introduce new systems, expand, train and manage our workforce, and improve and expand our sales and marketing capabilities. If we are unable to properly manage our services in new or existing markets or the quality of our services deteriorates due to mismanagement, we could significantly damage our brand name and reputation, which would adversely affect our ability to expand our customer base.

If we are unable to successfully detect and prevent criminal actions or fraud perpetrated on us, we may be subject to liability and financial loss.

     The management of our business involves the collection of cash payments by our employees and agents from our customers, which constitute a significant portion of our total revenues. As a result, we are exposed to theft, embezzlement and other criminal and fraudulent activity by our employees, our agents and third parties. For example, in January 2008, we identified some irregularities and non-compliance to contract terms by a third party in connection with our human resource outsourcing operations in Beijing. While the outcome of our investigation of the third party remains unclear, we face probable liability and have estimated a financial loss of RMB9.7 million (US$1.3 million) related to this matter. If we are unable to successfully detect and prevent criminal or fraudulent activity, our results of operations and financial condition may be materially and adversely affected.

Our operating history may not serve as an adequate basis to judge our future prospects and results of operations.

     We began operations in 1998 and incurred net losses prior to 2002. We cannot assure you that we will maintain our profitability or that we will not incur net losses in the future. We expect that our operating expenses will increase as we expand. Any significant failure to realize anticipated revenue growth could result in significant operating losses. We may encounter risks and difficulties including our potential failure to:

	•		implement our business model and strategy and adapt and modify them as needed;
	•		increase awareness of our brands, protect our reputation and develop customer loyalty;
	•		anticipate with any degree of certainty the behavioral and operational changes of our customers that have a significant impact on our business from time to time as they respond to evolving social, economic and political changes in China;
	•		manage our expanding operations and service offerings, including the integration of any future acquisitions;
	•		maintain adequate control of our expenses;
	•		adequately and efficiently operate, maintain, upgrade and develop our website and the other systems and equipment we utilize in providing our services;
	•		attract, retain and motivate qualified personnel;
	•		maintain our current, and develop new, contractual arrangements with local newspapers and other important operational relationships; and
	•		anticipate and adapt to changing conditions in the print, online and other markets in which we operate as well as the impact of any changes in government regulation, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics.

     If we are not successful in addressing any or all of these risks, our business may be materially and adversely affected.

We rely on our print advertising business to provide a majority of our revenues and any adverse development in this business could materially and adversely affect our overall results of operations.

     We generate a majority of our revenues from 51job Weekly, which generated approximately 59.8% of our revenues in 2005, 55.8% of our revenues in 2006 and 51.0% of our revenues in 2007. While we have experienced growth in our 51job Weekly business in recent years, online advertisement may cause print media such as 51job Weekly to become less desirable as a form of advertising. In addition, we have observed that in some of our markets

where Internet penetration rates are relatively higher, a larger percentage of new, first-time customers may choose an online service as their initial recruitment advertising purchase with us. To the extent this continues to occur and if we are not able to generate sufficient revenues from our online recruitment services to offset any loss of revenues from our print advertisement business, our overall results of operations could be materially and adversely affected.

Our recruitment advertising business is subject to weekly fluctuations which hamper our ability to predict when revenue will ultimately be recognized, if at all.

     Due to the nature of recruitment advertising, we are unable to predict future revenue streams with any high degree of certainty. More specifically, the majority of our revenues is derived from print advertising and we do not recognize revenue until an advertisement is actually printed. Orders for print advertisements are generally placed week-to-week and advertisers may cancel or postpone their print advertisements within days of publication. Delays or cancellations by advertisers hamper our ability to predict when revenue will ultimately be recognized, if at all. Such uncertainty makes it difficult for us to accurately forecast revenues for a particular quarter. Therefore, actual results may differ significantly from our targets or estimated quarterly results, which could cause the price of our ADSs to fall.

Due to seasonal variations in demand for human resource services, we experience significant fluctuations in our revenue streams which affect our ability to predict our quarterly results and which may also cause quarterly results to vary from period to period.

     Significant fluctuations in our revenue streams, particularly during the seasonal peak hiring periods around the Chinese New Year holidays and the beginning of May and October, affect our ability to predict quarterly results. During these peak periods, demand for recruitment advertising and other human resource related services may or may not rise significantly depending on the needs of employers as well as their perceptions of the job market. In addition, the dates of the Chinese New Year holidays vary from year to year, which affects our business in the first quarter and impacts comparability of financial results to corresponding periods in prior years. Beginning in 2008, the Chinese government has instituted changes to the schedule of public holidays by eliminating the week-long holiday at the beginning of May and recognizing new observances, which may result in new seasonality patterns for our business. We have also experienced a trend of lower fourth quarter revenues as compared to revenues from the immediately preceding third quarter in recent years. As a result of these factors, our revenues may vary from quarter to quarter and quarterly results may not be comparable to the corresponding periods of prior years. Such uncertainty makes it difficult for us to predict revenues for a particular quarter. Therefore, actual results may differ significantly from our targets or estimated quarterly results, which could cause the price of our ADSs to fall.

We may not be able to successfully execute future acquisitions or efficiently manage any acquired business.

     We may decide to expand, in part, by acquiring certain complementary or new businesses in the future. The success of any material acquisition will depend upon several factors, including:

	•		our ability to identify and acquire businesses on a cost-effective basis;
	•		our ability to integrate acquired personnel, operations, products and technologies into our organization effectively; and
	•		our ability to retain and motivate key personnel and to retain the clients of acquired firms.

     Any such acquisition may require a significant commitment of management time, capital investment and other resources. There is a possibility that we will not be successful in identifying and negotiating acquisitions on terms favorable to us. In addition, we cannot be certain that any acquisition, if completed, will be successfully integrated into our existing operations. If we are unable to effectively integrate an acquired business or are required to incur restructuring and other charges to complete an acquisition, our business, financial condition and results of operations may be materially and adversely affected. In addition, if we use our equity securities as consideration for acquisitions, we may dilute the value of your common shares or ADSs. We have not engaged in any material acquisitions in our history.

If we are unable to attract and retain qualified personnel, our executive search, training and business process outsourcing businesses may be materially and adversely affected.

     The success of our executive search, training and business process outsourcing services depends heavily on our ability to attract and retain skilled personnel. Successful expansion of our executive search business depends on a dedicated team of consultants with expertise and relationships in the geographic markets and industries in which our clients seek candidates. Similarly, the success of our training business depends on personnel with the necessary skills to conduct and support our training seminars and other activities and services in this business. Our business of

performing traditional human resource department functions such as payroll, benefits and compliance management and related services for customers on an outsourced basis depends on having personnel with expertise in local and national PRC government employment regulations, payroll management and other human resource department functions. If we are unable to attract and retain critical skilled personnel, our executive search, training and business process outsourcing businesses may be materially and adversely affected.

If we choose to develop or introduce new products and services outside of the human resource services industry in China, these efforts may not be successful, which could materially and adversely affect our financial condition and results of operations.

     In April 2006, we formed a business alliance with Recruit Co., Ltd., or Recruit, a privately held human resource services company in Japan, to collaborate on the development of our human resource products and services in China. Under the terms of our business alliance agreement, we have also established an internal corporate planning group staffed with personnel from Recruit to explore potential business opportunities outside of the human resource services industry in China. In August 2007, we entered into an agreement with Recruit to form a new company focused on coupon advertising services in China. Under the agreement, we have committed to providing this new company with up to RMB32.8 million (US$4.5 million) in financing and have the ability to acquire up to 40% of the new company’s share capital. As of December 31, 2007, we have provided financing in the amount of RMB8.8 million (US$1.2 million) to the newly formed company. Because we lack experience and expertise in operating coupon advertising services and any businesses outside of the human resource services industry, we will rely on Recruit to manage these businesses and we cannot assure you that these efforts will be successful. We cannot assure you that we will be able to deliver new products or services outside of the human resource services industry on a commercially viable basis or in a timely manner, or at all. If any of our efforts to begin or operate a business outside of the human resource services industry are not successful, our financial condition and results of operations may be materially and adversely affected.

We may be subject to liability for placing advertisements with content that is deemed inappropriate.

     PRC laws and regulations prohibit advertising companies from producing, distributing or publishing any advertisement that contains any content that violates laws and regulations, impairs the national dignity of the PRC, involves designs of the national flag, national emblem or national anthem or the music of the national anthem of the PRC, is reactionary, obscene, superstitious or absurd, is fraudulent, or disparages similar products. If we are deemed to be in violation of such regulations, we may be subject to penalties including confiscation of the illegal revenues, levying of fines and suspension or revocation of our business license or advertising license, any of which may materially and adversely affect our business.

We are subject to potential legal liability from both employers and job seekers with respect to our executive search businesses and other human resource related services.

     We are exposed to potential claims associated with the recruitment process, including claims by clients seeking to hold us liable for recommending a candidate who subsequently proves to be unsuitable for the position filled, claims by current or previous employers of our candidates alleging interference with employment contracts, claims by candidates against us alleging our failure to maintain the confidentiality of their employment search or alleging discrimination or other violations of employment law or other laws or regulations by our clients, and claims by either employers or candidates alleging the failure of our business process outsourcing services to comply with laws or regulations relating to employment, employee’s insurance or benefits, individual income taxes or other matters. Any such claims, regardless of merit, may force us to participate in time-consuming, costly litigation or investigation, divert significant management and staff attention, and damage our reputation and brand names. We do not maintain insurance coverage for liabilities arising from claims by employers, candidates or third parties.

We may be exposed to infringement or misappropriation claims by third parties, which, if successful, could cause us to pay significant damage awards.

     Third parties may bring claims against us alleging patent, trademark or copyright infringement, or misappropriation of their creative ideas or formats, or other infringement of their proprietary intellectual property rights. Any such claims, regardless of merit, may involve us in time-consuming, costly litigation or investigation, divert significant management and staff attention, require us to enter into expensive royalty or licensing arrangements, prevent us from using important technologies, business methods, content or other intellectual property, result in monetary liability, or otherwise disrupt our operations. We expect that the likelihood of such claims may increase, particularly in our online businesses, as the number of competitors in our markets grows and as related patents and trademarks are registered or copyrights are obtained by such competitors.

We rely heavily on our information systems, and if our access to technology supporting our information systems is impaired or interrupted, or if we fail to further develop our technology, our operations may be seriously disrupted.

     Our ability to store, retrieve, process and manage substantial amounts of information, including our client and candidate databases, is an important part of our operations and a critical component of our success. To achieve our strategic objectives and to remain competitive, we must further develop and enhance our information systems. This may require the acquisition of equipment and software and the development, either internally or through independent consultants, of new proprietary software. Our inability to design, develop, implement and utilize, in a cost-effective manner, information systems that provide the capabilities necessary for us to compete effectively, or any interruption or loss of our information processing capabilities, for any reason, could materially disrupt our operations.

If we are not able to respond successfully to technological or industry developments, our business may be materially and adversely affected.

     The market for online products and services is characterized by rapid technological developments, frequent launches of new products and services, the introduction of new business models, changes in customer needs and behavior, and evolving industry standards. These developments may make our existing online recruitment services obsolete or less competitive. In order to respond to such developments, we may be required to undertake substantial efforts and incur significant costs. In the event that we do not successfully respond to such developments in a timely and cost-effective manner, our business may be materially and adversely affected.

Computer viruses and “hacking” may cause delays or interruptions on our systems and may reduce use of our services and damage our reputation and brand names.

     Computer viruses and hacking may cause delays or other service interruptions on our systems. “Hacking” involves efforts to gain unauthorized access to information or systems or to cause intentional malfunctions, loss or corruption of data, software, hardware or other computer equipment. In addition, the inadvertent transmission of computer viruses could expose us to a material risk of loss or litigation and possible liability. Hacking and computer viruses could result in significant damage to our hardware and software systems and databases, disruptions to our business activities, including to our e-mail and other communications systems, breaches of security and the inadvertent disclosure of confidential or sensitive information, interruptions in access to our website through the use of “denial of service” or similar attacks, and other material adverse effects on our operations. We may incur significant costs to protect our systems and equipment against the threat of, and to repair any damage caused by, computer viruses and hacking. Moreover, if a computer virus or hacking affects our systems and is highly publicized, our reputation and brand names could be materially damaged and usage of our services may decrease.

Our business could be adversely affected if our software contains bugs.

     Our online systems, including the www.51job.com website, and our other applications, products and systems could contain undetected errors or “bugs” that could adversely affect their performance. Additionally, we regularly update and enhance our website and our other online systems and introduce new versions of our products and applications. The occurrence of errors in any of these may cause us to lose market share, harm our reputation and brand names, and materially and adversely affect our business.

We are controlled by a small number of our existing shareholders, whose interests may differ from other shareholders, and our board of directors has the power to discourage a change of control.

     As of May 31, 2008, the following three shareholders beneficially owned approximately 65.9% of our outstanding common shares:

	•		Rick Yan, our chief executive officer and a director, who beneficially owned approximately 26.9% of our outstanding common shares;
	•		Recruit, which beneficially owned approximately 21.8%, and which is affiliated with Hiroyuki Honda, one of our directors; and
	•		entities affiliated with DCM, which beneficially owned approximately 17.2%, and which is affiliated with David K. Chao, one of our directors.

     These three shareholders, together with our other executive officers and directors, beneficially owned approximately 69.6% of our outstanding common shares. Accordingly, Mr. Yan, Recruit or DCM individually could have significant influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets,

election of directors and other significant corporate actions. In cases where their interests are aligned and they vote together, these shareholders will also have the power to prevent or cause a change in control. Without the consent of some or all of these shareholders, we may be prevented from entering into transactions that could be beneficial to us. In addition, these parties could violate their non-competition or employment agreements with us or otherwise violate their fiduciary duties by diverting business opportunities from us to themselves or others. The interests of our largest shareholders may differ from the interests of our other shareholders.

     In April 2006, entities affiliated with DCM, Rick Yan, Michael Lei Feng and Norman Lui, and Kathleen Chien, who is our chief financial officer, entered into a share purchase agreement with Recruit. Michael Lei Feng and Norman Lui are co-founders and former executive officers of our company. Under the terms and conditions of the share purchase agreement, Recruit completed a purchase of 8,452,918 common shares, which represented approximately 15% of our outstanding common shares as of December 31, 2005, from these shareholders in April 2006. The share purchase agreement also provides for an option that would allow Recruit to purchase up to an additional 14,862,313 common shares from these shareholders over a three-year period beginning April 2006 and result in Recruit owning approximately 40% of our fully diluted common shares outstanding as of December 31, 2005. In addition, under the share purchase agreement, each of these selling shareholders has agreed that it will use its commercially reasonable best efforts in cooperating with Recruit to have a representative of Recruit nominated to stand for election to our board of directors and that it will vote all of its shares in favor of the election of such nominee to our board of directors at any annual or extraordinary general meetings of our members at which such nominee may stand for election for the duration of the agreement. Mr. Hiroyuki Honda, an executive vice president and director of Recruit, was elected to our board of directors on July 28, 2006.

     In addition, our board of directors has the authority, without further action by our shareholders, to issue common and preferred shares of up to 20% by par value of all issued shares and to fix the powers and rights of these shares, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our common shares. These provisions could have the effect of depriving you of an opportunity to sell your ADSs at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of us in a tender offer or similar transaction.

If certain preferential tax treatments become unavailable in China, our effective income tax rate would increase. In addition, our foreign ADS holders may be subject to PRC withholding tax on the dividends payable by us and upon gains realized on their sales of our ADSs if we are classified as a PRC “resident enterprise.”

     We file separate income tax returns because we and our affiliated entities are incorporated in different jurisdictions. We are incorporated in the Cayman Islands where no income taxes are imposed. In addition, our entities incorporated in the British Virgin Islands are exempt from income tax on foreign derived income and there are no withholding taxes imposed in the British Virgin Islands. We do not expect that we or our entities in the British Virgin Islands will record any income tax provisions in the foreseeable future.

     We generate substantially all our net income from our operations in China which are conducted through various subsidiaries and affiliated entities. In accordance with former PRC income tax regulations, our subsidiaries and affiliated entities were generally subject to enterprise income tax, or EIT, at a statutory rate of 33%. However, under preferential tax rules, we have obtained preferential tax rates of 15% for some of our subsidiaries in the special economic zones of Shanghai’s Pudong area and Shenzhen and a preferential tax rate of 30% for the branches of Qianjin Network Information Technology (Shanghai) Co., Ltd., or Tech JV, outside of Shanghai.

     On March 16, 2007, the National People’s Congress approved and promulgated a new tax law named “Enterprise Income Tax Law of the PRC,” or the EIT Law, which applies a uniform 25% EIT rate to both foreign-invested enterprises and domestic enterprises effective January 1, 2008. For enterprises that were established before the new EIT Law was promulgated and were entitled to preferential tax rates under former tax laws and regulations, the new EIT Law has granted a grace period of up to five years for these enterprises to gradually transition from their preferential tax rates to the standard rate of 25%. If we are unable to maintain and utilize preferential tax statuses, the EIT of some of our PRC subsidiaries would increase and our consolidated effective tax rate could also increase and adversely and materially affect our earnings.

     In addition, under the new EIT Law, enterprises organized under the laws of jurisdictions outside China with their “de facto management bodies” located within China may be considered PRC “resident enterprises” and therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. Under the implementation regulations issued by the State Council relating to the new EIT Law, “de facto management bodies” is defined as the bodies that have material and overall management control over the business, personnel, accounts and properties of an enterprise. Substantially all of our management is currently based in China. As such, we may be

considered an enterprise established outside China with “de facto management bodies” located in China and thus a “resident enterprise” subject to the uniform 25% enterprise income tax rate as to our global income. Moreover, dividends payable by a foreign-invested enterprise to its foreign investors from profits earned after January 1, 2008 are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.

Our earnings have been and will continue to be adversely affected by changes in our accounting policies, including those related to the expensing of stock options.

     In 2006, we adopted Statement of Financial Accounting Standards No. 123R (revised 2004), “Share-Based Payment,” or SFAS No. 123R, which requires that stock-based compensation transactions, such as stock option grants, be accounted for using a fair value based method and recognized as expenses in our consolidated statement of operations. We use the Black-Scholes option pricing model to determine the fair value of stock options grants under SFAS No. 123R. This method is based upon, among other things, the volatility of our ADSs, which has been historically high. Therefore, the adoption of SFAS No. 123R negatively affects our profitability and the trading price of our ADSs. The implementation of SFAS No. 123R could also limit our ability to continue to use stock options as an incentive and retention tool, which could, in turn, hurt our ability to recruit employees and retain existing employees. Other new accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. The change to existing rules, future changes, if any, or the questioning of current practices may adversely and materially affect our earnings.

If we do not appropriately maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, our business, results of operations and the market price of our ADSs may be materially and adversely affected.

     We are subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, as required under Section 404 of the Sarbanes-Oxley Act of 2002, has adopted rules requiring public companies to include a report of management on the effectiveness of such companies’ internal control over financial reporting in its annual report. In addition, an independent registered public accounting firm must attest to and report on the effectiveness of the company’s internal controls over financial reporting. Our management has conducted an evaluation of the effectiveness of our internal control over financial reporting and concluded that our internal control over financial reporting was effective as of December 31, 2007. Our independent registered public accounting firm has issued an attestation report and concluded that our internal control over financial reporting was effective as of December 31, 2007.

     However, if we fail to maintain the effectiveness of our internal controls, our management may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with the Sarbanes-Oxley Act. In addition, even if our management has concluded that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our effectiveness or may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Moreover, effective internal controls are necessary for us to produce reliable financial reports. As a result, any failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the trading price of our ADSs. Furthermore, we have incurred and may need to incur additional costs and use additional management and other resources in an effort to comply with Section 404 of the Sarbanes-Oxley Act and other requirements going forward.

We have no business insurance coverage.

     Other than insurance for some of our properties, we do not maintain any insurance. We do not have any business liability insurance coverage for our operations. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources.

We are vulnerable to natural disasters and other calamities.

     Our servers are currently hosted in Shanghai and Tianjin. We have backup systems, but we cannot assure you that such backup systems will be adequate if there are problems, or that they will adequately protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist acts or similar events. Any of the foregoing events may give rise to server interruptions, breakdowns, system failures, technology platform failures and Internet failures, which could cause the loss or corruption of data or malfunctions of

software or hardware. Any such event could adversely affect our ability to provide our services to users. See “Item 4. — Information on the Company — Business Overview — Technology.”

We may become a passive foreign investment company, which could result in adverse U.S. tax consequences to U.S. investors.

     We may be a passive foreign investment company for U.S. federal income tax purposes for any year. Such classification could result in adverse U.S. tax consequences to U.S. investors. For example, if we are a passive foreign investment company for any year, our U.S. investors may be subject to increased tax liabilities under U.S. tax laws and regulations and may be subject to additional reporting requirements. The determination of whether we are a passive foreign investment company will be made on an annual basis and will depend on the composition of our income and assets, including goodwill. The calculation of goodwill will be based, in part, on the market value of our ADSs from time to time, which may be volatile. In general, we will be classified as a passive foreign investment company for any taxable year in which either (1) at least 75% of our gross income is passive income or (2) at least 50% of the value (determined on the basis of a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income. For purposes of these tests, cash, including working capital, and investments are considered assets that produce or are held for the production of passive income. If our retained cash or investments and any other passive assets comprised at least 50% of the value of our assets, we could be a passive foreign investment company. Our determination of whether we are a passive foreign investment company is not binding on the Internal Revenue Service. We cannot assure you that we will not be a passive foreign investment company for the current or any future taxable year. If we are a passive foreign investment company in any year that a U.S. investor holds shares or ADSs, we generally will continue to be treated as a passive foreign investment company for that investor in all succeeding years. We urge U.S. investors to consult their own tax advisors concerning the availability and making of a mark-to-market election. See “Item 10. — Additional Information — Taxation — United States Federal Income Taxation — Passive Foreign Investment Company Rules.”

Our subsidiaries face limitations on paying dividends or making other distributions to us.

     We are a holding company and do not have any assets or conduct any business operations other than our holding of the equity interests in, directly and indirectly:

	•		Qian Cheng Wu You Network Information Technology (Beijing) Co., Ltd., or WFOE, a wholly foreign owned enterprise in China;
	•		Qianjin Network Information Technology (Shanghai) Co., Ltd., or Tech JV;
	•		Shanghai Qianjin Advertising Co., Ltd., or AdCo, and its subsidiaries; and
	•		Shanghai Wang Ju Human Resource Consulting Co., Ltd., or Wang Ju.

     As a result of our holding company structure, we rely entirely on dividends, royalty payments and license fees paid under trademark license agreements and certain other contractual arrangements paid to us by our subsidiaries and affiliated entities in the PRC to finance our operations and to pay dividends to our shareholders. These royalty payments and license fees paid under trademark license agreements and certain other contractual arrangements do not require governmental or other third party approval. However, the payment of dividends in China is subject to certain restrictions and taxes. PRC regulations currently permit payment of dividends only out of accumulated profits as determined in accordance with PRC accounting standards and regulations. Our subsidiaries and affiliated entities in the PRC are also required to set aside a portion of their after-tax profits according to PRC accounting standards and regulations to fund certain reserve funds that are not distributable as cash dividends. In addition, the PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. We may also experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. See “Item 4. — Information on the Company — Business Overview — Regulation — Regulation of Foreign Currency Exchange and Dividend Distribution.” If we or any of our subsidiaries are unable to receive all of the revenues from our operations through these contractual or dividend arrangements, we may be unable to effectively finance our operations or pay dividends on our common shares.

Risks Related to Our Corporate Structure

If the PRC authorities determine that our past ownership structure was inconsistent with the requirements for operating certain of our businesses, we could be subject to sanctions.

     The PRC government has regulated foreign ownership in entities providing advertising and human resource related services. Prior to March 2004, PRC laws and regulations prohibited foreign persons from owning a controlling interest in advertising entities. This foreign ownership restriction was subsequently relaxed in recent

years and foreign persons are now permitted to wholly own advertising entities in China. In addition, until November 2003, there were no PRC laws or regulations explicitly prohibiting or limiting foreign ownership in entities providing human resource related services. Foreign ownership in entities providing human resource related services was limited to 49% beginning in November 2003 and this ownership limitation was increased to 70% in August 2006.

     Prior to our restructuring in May 2004, 51net, our British Virgin Islands subsidiary and a foreign entity, owned 99% of Tech JV, which in turn owned, and continues to own, 80% of AdCo. AdCo owned, and continues to own, 90% of the principal AdCo Subsidiaries. During this period, Tech JV, AdCo and the AdCo Subsidiaries conducted a portion of our advertising and human resource services businesses. We have been advised by Jun He Law Offices, our PRC counsel, that the foreign ownership percentage of Tech JV, AdCo and the AdCo Subsidiaries prior to our restructuring was above the maximum foreign ownership permitted for an entity conducting advertising operations. In addition, we have been advised by our PRC counsel that, prior to our restructuring, the foreign ownership percentage of Tech JV was above the maximum foreign ownership permitted for an entity conducting human resource operations. In May 2004, we restructured our operations to comply with then existing PRC laws and regulations governing foreign ownership in entities conducting advertising and human resource related services. In connection with our restructuring, we informed relevant PRC governmental authorities that, historically, our foreign ownership percentage of Tech JV, AdCo and the AdCo Subsidiaries was not in compliance with limitations on foreign ownership of entities conducting advertising and human resources operations. However, we have not received any waiver from the PRC government with respect to our past non-compliance with foreign ownership laws limitations.

     There remains uncertainty regarding whether foreign owned PRC entities, such as AdCo, are required to obtain special governmental approval in order to establish subsidiaries in the PRC or otherwise invest in PRC entities. Following the formation of the AdCo Subsidiaries, in connection with our restructuring we made inquiries with relevant PRC governmental authorities as to whether AdCo was required to obtain such approval before establishing the AdCo Subsidiaries. We have been unable to obtain any governmental ruling or advice on this matter. As a result, it is uncertain whether special governmental approval, which we did not obtain, was necessary for the establishment by AdCo of the AdCo Subsidiaries.

     The PRC government may determine that our ownership structure is or was inconsistent with or insufficient for the proper operation of our businesses, or that our business licenses or other approvals are or were not properly issued or not sufficient. For a discussion of the limitations on foreign ownership governing our businesses, see “Item 4. — Information on the Company — Business Overview — Regulation — Limitations on Foreign Ownership of Our Businesses.”

     If we or any of our subsidiaries or affiliated entities were found to be or to have been in violation of PRC laws or regulations governing foreign ownership of advertising or human resource services businesses, the relevant regulatory authorities would likely have broad discretion in dealing with such violation, including but not limited to:

	•		levying fines;
	•		revoking business licenses;
	•		restricting or prohibiting our use of proceeds from our initial public offering and any future offerings to finance our business and operations in China;
	•		requiring us to restructure the ownership structure or operations of our subsidiaries or affiliated entities; and/or
	•		requiring us to discontinue all or a portion of our business.

     Any of these or similar actions could cause significant disruption to our business operations or render us unable to conduct a substantial portion of our business operations and may materially and adversely affect our business, financial condition and results of operations.

We rely on our agreements with an affiliated entity to provide human resource related services and to act as an Internet content provider, and we rely on agreements with an affiliated entity and its shareholders to receive all of the beneficial interest of this entity.

     Current PRC laws and regulations limit foreign investment in entities providing human resource related services and in entities operating as Internet content providers. We currently provide technical, consulting and human resource related services in conjunction with our affiliated entity, RAL, which is indirectly wholly owned by David Weimin Jin and Tao Wang, two executive officers of our company. RAL holds a license to provide human resource related services and we rely on RAL to provide human resource related services to our clients under a contractual arrangement between RAL and our majority owned subsidiary Tech JV. Similarly, RAL holds a license to operate as an Internet content provider. While we provide all of our online recruitment services through Tech JV, we rely on

RAL to provide certain Internet content provider services to support Tech JV’s online recruitment services through a contractual arrangement with RAL. We have entered into agreements with RAL’s shareholders which enable us to effectively control RAL.

     Tech JV, AdCo and the AdCo Subsidiaries recognize substantially all of our revenues. The minority interests in Tech JV, AdCo and the AdCo Subsidiaries, which are direct or indirect subsidiaries of Tech JV, are held by Qian Cheng, which is indirectly wholly owned by David Weimin Jin and Tao Wang. Through agreements with Qian Cheng and its shareholders, we have the substantial ability to control, bear all the economic risks of, and receive all the economic rewards from, Qian Cheng. As a result, we consolidate all of its interests for U.S. GAAP reporting purposes.

     As we rely on the agreements with RAL and Qian Cheng to enable us to provide certain critical services to our clients as well as to receive all the economic benefits of Qian Cheng, a significant disruption in these contractual relationships as a result of governmental sanction or otherwise could result in our being required to restructure our operations which could result in a significant expenditure of resources. If we are unable to restructure our operations to provide those services through a different entity, we may experience significant disruptions in our ability to provide online recruitment services or human resource related services to our customers. In addition, if we are unable to consolidate the minority interests in Tech JV, AdCo and the AdCo Subsidiaries, our results of operations would reflect Qian Cheng’s minority interest in these entities which, if not otherwise consolidated, would result in a significant reduction in our reported net income. For a description of our contractual arrangements with these entities, see “Item 7. — Major Shareholders and Related Party Transactions — Related Party Transactions — Contractual Arrangements Among Our Group Entities.”

If our affiliated entity RAL is found to be operating in jurisdictions outside of Shanghai without a business license, we could be subject to sanctions and our revenues could be adversely affected.

     RAL’s existing human resource services license is limited to Shanghai. In 2007, revenues from human resource related services provided to customers outside Shanghai accounted for approximately 4% of our total revenues. It is possible that government authorities in jurisdictions outside Shanghai where certain of RAL’s customers are located may assert that RAL is providing human resource related services in such jurisdictions without a necessary license and is required to obtain a human resource services license in such jurisdictions. As a result, RAL could be required to cease providing human resource services to customers in such locations which could result in a reduction in human resource related revenues. In addition, RAL may be subject to sanctions in the form of forfeiture of profits, fines, or both.

Our contractual arrangements with RAL and Qian Cheng may not be as effective in providing operational control as direct ownership of these businesses.

     Because the percentage of foreign ownership in human resource and Internet content businesses in China is limited under PRC laws and regulations, we depend substantially on RAL, in which we have no direct ownership interest, and its contractual arrangements with us to provide those services. Similarly, we rely on our contractual arrangements with Qian Cheng, in which we have no direct ownership interest, to realize all of the economic rewards from Qian Cheng’s minority interests in Tech JV, AdCo and the AdCo Subsidiaries. Our contractual arrangements with RAL, Qian Cheng and their respective shareholders may not be as effective as direct ownership in providing control over their operations. RAL may fail to perform its contractual obligations required for us to operate our business, such as keeping in good standing under its business licenses. Qian Cheng and its shareholders may refuse to make payments or otherwise refuse to perform their contractual obligations necessary for us to realize the economic rewards relating to Qian Cheng’s minority interests in Tech JV, AdCo and the AdCo Subsidiaries. In addition, the contractual arrangements which provide us with the substantial ability to control these entities may be unenforceable and the shareholders of these entities may refuse to renew these contractual arrangements. In any such event, we will have to rely on the PRC legal system to enforce our rights. In many cases, the laws and regulations governing the enforcement and performance of contractual arrangements are significantly more limited than in the United States and many other countries and may afford us little or no effective protection. If we are unable to enforce our rights, we may be unable to operate our human resource and Internet content businesses through RAL or receive all of the economic rewards from Qian Cheng. As a result, we may be required to restructure our operations which would likely entail a significant expenditure of resources. We cannot assure you that any such restructuring would be effective or would not result in similar or other difficulties. For a description of these contractual arrangements, see “Item 7. — Major Shareholders and Related Party Transactions — Related Party Transactions — Contractual Arrangements Among Our Group Entities.”

If we or any of our subsidiaries or affiliated entities were found to be in violation of PRC laws or regulations, the relevant regulatory authorities would likely have broad discretion in dealing with such violation, including but not limited to:

	•		levying fines;
	•		revoking business licenses;
	•		restricting or prohibiting our use of proceeds from our initial public offering and any future offerings to finance our business and operations in China;
	•		requiring us to restructure the ownership structure or operations of our subsidiaries or affiliated entities; and/or
	•		requiring us to discontinue all or a portion of our business.

     Any of these or similar actions could cause significant disruption to our business operations or render us unable to conduct a substantial portion of our business operations and may materially and adversely affect our business, financial condition and results of operations.

The PRC laws and regulations governing our current business operations and contractual arrangements are uncertain, and if we are found to be in violation, we could be subject to sanctions. In addition, any changes in such PRC laws and regulations may have a material and adverse effect on our business.

     There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to the laws and regulations governing our business, or the enforcement and performance of our contractual arrangements in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings. We and our subsidiaries are considered foreign persons or foreign funded enterprises under PRC laws, and, as a result, we are required to comply with PRC laws and regulations, including those governing foreign ownership in the human resource services and Internet content industries. These laws and regulations are relatively new and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. In addition, the PRC authorities retain broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business licenses and requiring actions necessary for compliance. In particular, licenses, permits and beneficial treatments issued or granted to us by relevant governmental bodies may be revoked at a later time under contrary findings of higher regulatory bodies. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our businesses. We cannot assure you that any such restructuring would be effective or would not result in similar or other difficulties. We may be subject to sanctions, including fines, and could be required to restructure our operations. As a result of these substantial uncertainties, we cannot assure you that we will not be found in violation of any current or future PRC laws or regulations.

     Under equity pledge agreements, the shareholders of our Chinese affiliated entities have pledged their respective equity interests to us. On March 16, 2007, the PRC Property Law was promulgated and took effect on October 1, 2007. According to the PRC Property Law, a pledge of the equity interest of a company in China cannot be legally established until it is duly registered with the relevant administration of industry and commerce. The pledges under the equity pledge agreements between WFOE and the shareholders of Qian Cheng, RAL and Run An are yet to be registered with the relevant administration of industry and commerce as no registration procedures are currently available to our knowledge. We will make efforts to register such pledges when the administration for industry and commerce implements registration procedures in accordance with the PRC Property Law in the future. Since we have been unable to register the pledges, we cannot assure you about the effectiveness of the pledges.

     If we or any of our subsidiaries or affiliated entities or any of our contractual arrangements are found to be or to have been in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would likely have broad discretion in dealing with such violation, including but not limited to:

	•		levying fines;
	•		revoking business licenses;
	•		restricting or prohibiting our use of proceeds from our initial public offering and any future offerings to finance our business and operations in China;
	•		requiring us to restructure the ownership structure or operations of our subsidiaries or affiliated entities; and/or
	•		requiring us to discontinue all or a portion our business.

     Any of these or similar actions could cause significant disruption to our business operations or render us unable to conduct a substantial portion of our business operations and may materially and adversely affect our business, financial condition and results of operations.

     We are unable to quantify the likelihood that any sanctions would be imposed or the magnitude of the effect of any such sanctions on our business, financial condition or results of operations.

Risks Related to the People’s Republic of China

Our business could be affected by changes in China’s economic, political or social conditions or government policies.

     The PRC economy differs from the economies of most developed countries in many respects, including with respect to the:

	•		amount of government involvement;
	•		level of development;
	•		growth rate;
	•		control of foreign exchange; and
	•		allocation of resources.

     While the PRC economy has experienced significant growth in the past 20 years, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. In addition, since late 2007, the PRC government has implemented measures to restrain inflation. Such measures may cause a decrease in the level of economic activity in China, which in turn could adversely affect our results of operations and financial condition.

     The PRC economy has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of the productive assets in China is still owned by the PRC government. The continued control of these assets and other aspects of the national economy by the PRC government could materially and adversely affect our business. For example, the PRC government could determine to limit the extent to which government controlled entities may use private sector businesses such as ours to service their human resource requirements. The PRC government could also determine to develop and support government owned or controlled human resource enterprises in direct competition with us. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over PRC economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Efforts by the PRC government to slow the pace of growth in the Chinese economy could result in reduced job growth and recruitment activity, which in turn could reduce demand for our recruitment advertising services. The PRC government could also determine to more closely regulate the advertising, Internet content delivery or human resource industries, which could impose additional regulatory costs and burdens on us.

     On June 29, 2007, the Standing Committee of the National People’s Congress of China enacted the Labor Contract Law, which became effective on January 1, 2008. The Labor Contract Law establishes restrictions and increases costs for employers, including specific provisions related to fixed-term employment contracts, temporary employment, probation, consultation with the labor union and employee assembly, employment without a contract, dismissal of employees, compensation upon termination and overtime work, and collective bargaining. In addition, under the Regulations on Paid Annual Leave for Employees, which became effective on January 1, 2008, employees who have served more than one year for an employer are entitled to a paid vacation ranging from 5 to 15 days, depending on their length of service. Employees who waive such vacation time at the request of employers shall be compensated for three times their regular salaries for each waived vacation day. The implementation of the Labor Contract Law may impact the recruitment behavior and human resource budgets of companies in China which may materially and adversely affect our business.

PRC laws and regulations governing operators of Internet websites are unclear and the regulation of the telecommunications and Internet industries may become more burdensome, and if we are found to be in violation of PRC laws and regulations, we could be subject to sanctions.

     The interpretation and application of existing PRC laws and regulations, the stated positions of the main governing authority, the PRC Ministry of Information Industry, or MII, and the possibility of new laws or regulations being adopted, have created significant uncertainty regarding the legality of existing and future foreign investments in, and the businesses and activities of, companies with Internet operations, including those of our company. In particular, the PRC Ministry of Information Industry has stated that the activities of Internet content providers, or entities providing delivery of Internet content, are subject to regulation by various PRC government authorities, depending on the specific activities conducted by the Internet content provider. We cannot be certain that the commercial Internet content provider license issued by the local Shanghai Municipal Telecommunications Bureau and held by RAL will satisfy these requirements. For example, we may be required to obtain an inter-provincial Internet content provider license in order to operate online businesses in multiple provinces, autonomous regions and centrally administered municipalities. In addition, PRC government regulation of the telecommunications and Internet industries is burdensome and may become even more so. New regulations could increase our costs of doing business and prevent us from efficiently delivering our services. Our failure to comply with applicable PRC Internet regulations could subject us to severe sanctions.

     In July 2006, the MII issued the “Notice on Strengthening the Administration of Foreign Investment in the Operation of Value Added Telecommunication Business,” or the MII Notice. According to the MII Notice, foreign investors can only operate a telecommunications business in China by establishing a telecommunications enterprise with a valid telecommunications business operation license. Domestic value-added telecommunications services license holders are prohibited from leasing, transferring or selling telecommunications business operation licenses to foreign investors in any form, and from providing any resource, sites or facilities to foreign investors to facilitate the illegal operation of a telecommunications business in China. The MII Notice also requires that value-added telecommunications services license holders (including their shareholders) directly own the domain names and registered trademarks used by such value-added telecommunications services license holders in their daily operations. The MII Notice further requires each value-added telecommunications services license holder to have the necessary facilities for its approved business operations and to maintain such facilities in the regions covered by its license. In addition, all value-added telecommunications service providers are required to improve network and information security, draft relevant information safety administration regulations and set up networks and information safety emergency plans. The provincial communications administration bureaus in charge of telecommunications services are required to ensure that existing value-added telecommunications services license holders will conduct a self-assessment of their compliance with the MII Notice and submit status reports to the MII before November 1, 2006. For those who are not in compliance with the requirements above and fail to rectify the noncompliance within the limited period set by provincial communications administration bureaus, the provincial communications administration bureaus may revoke their operating licenses. Due to the lack of further necessary interpretation, it remains unclear what impact the MII Notice will have on us or other companies that have adopted the same or similar corporate and contractual structures as ours at this time.

The continued growth of the Chinese Internet market depends on the establishment of an adequate telecommunications infrastructure.

     Although private sector Internet service providers currently exist in China, almost all access to the Internet is maintained through China Telecom and China Netcom under the administrative control and regulatory supervision of the PRC Ministry of Information Industry. In addition, the national networks in China connect to the Internet through a government-controlled international gateway. This international gateway is the only channel through which a domestic user can connect to the international Internet network. We rely on this infrastructure and China Telecom and China Netcom to provide data communications capacity, primarily through local telecommunications lines. We cannot assure you that this infrastructure will be developed. We have no access to alternative networks or services, on a timely basis or if at all, in the event of disruptions, failures or other problems with China’s Internet infrastructure or telecommunications networks. The Internet infrastructure in China may not support the demands associated with continued growth in Internet usage.

The PRC legal system has inherent uncertainties that could materially and adversely affect us.

     The PRC legal system is based upon written statutes. Prior court decisions may be cited for reference but are not binding on subsequent cases and have limited value as precedents. Since 1979, the PRC legislative bodies have promulgated laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, the PRC has not developed a fully integrated legal system

and the array of new laws and regulations may not be sufficient to cover all aspects of economic activities in the PRC. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, published government policies and internal rules may have retroactive effects and, in some cases, the policies and rules are not published at all. As a result, we may be unaware of our violation of these policies and rules until some time later. Our contractual arrangements with our affiliated entities are governed by the laws of the PRC. The enforcement of these contracts and the interpretation of the laws governing these relationships is subject to uncertainty. See “— Risks Related to Our Corporate Structure — The PRC laws and regulations governing our current business operations and contractual arrangements are uncertain, and if we are found to be in violation, we could be subject to sanctions.”

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us or our management.

     We conduct substantially all of our operations in China and the majority of our assets are located in China. In addition, the majority of our directors and executive officers reside within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon these directors or executive officers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. Moreover, our PRC counsel has advised us that the PRC does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts.

Governmental control of currency conversion may affect the value of your investment.

     The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in Renminbi, which is currently not a freely convertible currency. Under our current structure, our income will be primarily derived from dividend payments from our PRC subsidiaries and other payments such as royalty and licensing fees. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries and our affiliated entities to remit sufficient foreign currency to pay dividends, royalty payments or other fees to us, or otherwise satisfy their foreign currency dominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.

The fluctuation of the Renminbi may materially and adversely affect your investment.

     The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. In May 2007, the PRC government widened the daily trading band from 0.3% to 0.5%. These changes in policy resulted in an appreciation in the value of the Renminbi against the U.S. dollar of approximately 2.5% in 2005, 3.3% in 2006 and 6.5% in 2007, and we reported losses from foreign currency translation of RMB11.3 million in 2005, RMB9.4 million in 2006 and RMB18.1 million (US$2.5 million) in 2007. It is possible that the Chinese government could adopt a more flexible currency policy, which could result in further and more significant revaluations of the Renminbi against the U.S. dollar or any other foreign currency. As a portion of our assets are denominated in U.S. dollars, any future upward revaluations of the Renminbi will result in charges to our income statement and reductions in the value of these U.S. dollar denominated assets when translated into Renminbi.

     In addition, as we rely entirely on dividends, royalty payments and other fees paid to us in Renminbi by our subsidiaries and affiliated entities in the PRC, any significant downward revaluation of the Renminbi may materially and adversely affect our cash flows, revenues and financial condition, and the value of, and any dividends payable on, our ADSs in foreign currency terms. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our common shares or for other business purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of the Renminbi we convert would be reduced. For further information on our foreign exchange risks and certain exchange rates, see “Item 3. — Key Information —

Selected Financial Data — Exchange Rate Information” and “Item 11. — Quantitative and Qualitative Disclosures about Market Risk — Foreign Exchange Risk.”

We face risks related to health epidemics and other outbreaks.

     Our business could be adversely affected by the effects of avian flu, Severe Acute Respiratory Syndrome, or SARS, or another epidemic or outbreak on the economic and business climate. Restrictions on travel resulting from any prolonged recurrence of avian flu, SARS or another epidemic or outbreak could adversely affect our ability to market and service new and existing customers throughout China. Our business operations could be disrupted if one of our employees is suspected of having avian flu, SARS or another health epidemic, which would require that a certain number of our employees be quarantined and/or our offices be disinfected. In addition, our results of operations could be adversely affected to the extent that avian flu, SARS or another outbreak harms the Chinese economy in general. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of avian flu, SARS or any other epidemic.

Recent PRC regulations relating to offshore investment activities by PRC residents and employee stock options granted by overseas-listed companies may increase our administrative burden and adversely impact our business and prospects. If our shareholders who are PRC residents fail to make any required registrations or filings under such regulations, we may be unable to distribute profits and may become subject to liability under PRC laws.

     As part of our growth strategy, we may decide to expand, in part, by acquiring certain complementary or new businesses in the future, including companies incorporated in the PRC. The PRC State Administration of Foreign Exchange, or SAFE, issued the “Notice on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Round-trip Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies” in October 2005, which became effective in November 2005, and an implementation rule in May 2007, or collectively the SAFE Rules. According to the SAFE Rules, PRC citizens and foreign citizens who reside in China, are required to register with SAFE or its local branch office before establishing or controlling any company outside of China for the purpose of financing the offshore company with their ownership interests in the assets of or their interests in any Chinese enterprise. The offshore companies are referred to in the SAFE Rules as “offshore special purpose companies.” In addition, a PRC resident that is a shareholder of an offshore special purpose company is required to amend its SAFE registration with the local SAFE branch with respect to the offshore special purpose company in connection with the injection of equity interests or assets of a Chinese enterprise in the offshore company or overseas fund raising by the offshore company, or any other material change in the capital of the offshore company, including any increase or decrease of capital, transfer or swap of shares, merger, division, long-term equity or debt investment or creation of any security interest. The SAFE Rules apply retroactively. As a result, Chinese residents who have established or acquired control of offshore companies that have made onshore investments in China in the past are required to complete the relevant registration procedures with the applicable local SAFE authority. If any resident of China fails to register with SAFE with respect to its ownership of an existing offshore entity, dividends remitted by the onshore entity to its overseas parent may be considered an evasion of foreign exchange purchase rules, and therefore, may be subject to penalties under relevant PRC foreign exchange laws and regulations. In addition, failure to comply with registration procedures may result in restrictions on the relevant onshore entity, including prohibitions on the payment of dividends and other distributions to its offshore parent or affiliate and on capital inflow from the offshore entity.

     Current regulations are still uncertain and unclear. It is possible that the relevant government authorities may promulgate new legislation to interpret, amend or implement the SAFE Rules in various ways. As a result, we cannot assure you that we or the owners of any target PRC business we may acquire, as the case may be, will be able to complete the necessary approval, filings and registrations for a proposed acquisition. This may restrict our ability to implement our acquisition strategy and adversely affect our business and prospects.

     On March 28, 2007, SAFE promulgated the “Application Procedure of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Holding Plan or Stock Option Plan of Overseas Listed Company,” or the Stock Option Rule, to regulate foreign exchange procedures for PRC individuals participating in employee stock holding and stock option plans of overseas companies. Under the Stock Option Rule, a PRC domestic individual must comply with various foreign exchange procedures through a domestic agent institution when participating in any employee stock holding plan or stock option plan of an overseas listed company. Certain domestic agent institutions, such as the PRC subsidiaries of an overseas listed company, a labor union of such company that is a legal person or a qualified financial institution, among others things, shall file with SAFE and be responsible for completing relevant foreign exchange procedures on behalf of PRC domestic individuals, such as applying to obtain SAFE approval for exchanging foreign currency in connection with owning stock or stock option

exercises. Concurrent with the filing of such applications with SAFE, the PRC subsidiary, as a domestic agent must obtain approval from SAFE to open a special foreign exchange account at a PRC domestic bank to hold the funds in connection with the stock purchase or option exercise, any returns based on stock sales, any stock dividends issued and any other income or expenditures approved by SAFE. The PRC subsidiary also is required to obtain approval from SAFE to open an overseas special foreign exchange account at an overseas trust bank to hold overseas funds used in connection with any stock purchase.

     Under the Stock Option Rule, all proceeds obtained by PRC domestic individuals from sales of stock shall be fully remitted back to China after relevant overseas expenses are deducted. The foreign exchange proceeds from these sales can be converted into RMB or transferred to the individual’s foreign exchange savings account after the proceeds have been remitted back to the special foreign exchange account opened at the PRC domestic bank. If the stock option is exercised in a cashless exercise, the PRC domestic individuals are required to remit the proceeds to the special foreign exchange account. If we or our PRC optionees fail to comply with these regulations in the future, we or our PRC optionees and their local employers may be subject to fines and legal sanctions.

Risks Related to Our ADSs

The market price for our ADSs may be volatile.

     The market prices of the securities of companies with Internet related and online businesses have been extremely volatile and may be subject to wide fluctuations in response to factors including the following:

	•		actual or anticipated fluctuations in our quarterly operating results;
	•		changes or revisions by us to previously released operating and financial targets;
	•		announcements of new services by us or our competitors;
	•		changes in financial estimates or recommendations by securities analysts;
	•		conditions in our industry, which is the market for recruitment advertising services and other human resource related services in China;
	•		announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
	•		additions or departures of key personnel;
	•		release of transfer restrictions on our outstanding common shares or ADSs or sales of additional common shares or ADSs; and
	•		pending or potential litigation or regulatory investigations.

     In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our ADSs. The price of our ADSs has experienced significant volatility since our initial public offering and we expect the price and volume volatility with respect to our ADSs to continue in the future.

The future sales, or perceived future sales, by our existing shareholders of a substantial number of our ADSs in the public market or through private transactions could adversely affect the price of our ADSs.

     If our shareholders sell, or are perceived as intending to sell, substantial amounts of our common shares or ADSs, including those issued upon the exercise of outstanding options, in the public market or through private transactions, the market price of our ADSs could fall. Such sales, or perceived potential sales, also might make it more difficult for us to sell equity or equity related securities in the future at a time and price that we deem appropriate. Common shares held by our existing shareholders and our affiliates may also be sold in the public market in the future under, and subject to the restrictions contained in, Rule 144 under the U.S. Securities Act of 1933, as amended, or the Securities Act. In addition, see “Item 6. — Directors, Senior Management and Employees — Compensation — Stock-Based Compensation Plans” for a description of outstanding options to purchase our common shares.

Your right to participate in any future rights offerings may be limited, which may cause dilution of your holdings.

     We may from time to time distribute rights to our shareholders, including rights to acquire our securities. Under the deposit agreement, the depositary bank will not offer you those rights unless the distribution to ADS holders of both the rights and any related securities is either registered under the Securities Act, or exempt from registration

under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.

You may not be able to exercise your right to vote.

     As a holder of ADSs, you may only exercise the voting rights with respect to the underlying common shares in accordance with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will vote the underlying common shares in accordance with these instructions. Otherwise, you will not be able to exercise your right to vote unless you withdraw the shares. Under our fifth amended and restated memorandum and articles of association, the minimum notice period required for convening either an annual meeting or a general meeting called to vote on matters requiring the approval of two thirds of the voting shares is 20 days. The minimum notice period for other general meetings is 14 days. When a general meeting is convened, you may not receive sufficient advance notice to withdraw the shares to allow you to vote with respect to any specific matter. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to vote and there may be nothing you can do if the shares underlying your ADSs are not voted as you requested.

You may not receive distributions on common shares or any value for them if it is illegal or impractical to make them available to you.

     The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on common shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of common shares your ADSs represent. However, the depositary is not responsible if it decides that it is inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, common shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, common shares, rights or anything else to holders of ADSs. This means that you may not receive the distribution we make on our common shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may have a material adverse effect on the value of your ADSs.

You may be subject to limitations on transfer of your ADSs.

     Your ADSs represented by the ADRs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary thinks it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited, because we are incorporated under Cayman Islands law.

     We are a company incorporated under the laws of the Cayman Islands, and the majority of our assets are located outside the United States. In addition, a majority of our directors and executive officers are nationals or residents of jurisdictions other than the United States and all or a substantial portion of their assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon our directors or executive officers, or enforce judgments obtained in the United States courts against our directors or executive officers.

     Our corporate affairs are governed by our memorandum and articles of association, the Cayman Islands Companies Law (2004 Revision), as amended and revised from time to time, and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively

limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws as compared to the United States, and some states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

     The Cayman Islands courts are also unlikely:

	•		to recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and
	•		to impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.

     There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

     As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

     We commenced our business in 1998. Since our inception, we have conducted substantially all of our operations in China. In March 2000, our founders incorporated a new holding company, now called 51job, Inc., as an exempted limited liability company in the Cayman Islands under the Cayman Islands Companies Law (2004 Revision). Subsequently, 51job, Inc. acquired 51net.com Inc., or 51net, a British Virgin Islands company, and other subsidiaries to become the holding company of our corporate group. We operate as a foreign investment enterprise in China through our wholly owned subsidiaries, 51net, which is the registered owner of some of our trademarks and our domain name, 51net Beijing and 51net HR, which are both Cayman Islands companies, as well as our PRC subsidiaries and affiliated Chinese entities, the primary ones being:

	•		Shanghai Qianjin Advertising Co., Ltd., or AdCo, and AdCo’s seven branch offices, seven majority owned subsidiaries and one jointly owned subsidiary with Tech JV, or, collectively, the AdCo Subsidiaries. AdCo and the AdCo Subsidiaries hold licenses and permits to conduct advertising businesses;
	•		Shanghai Run An Lian Information Consultancy Co., Ltd., or RAL, which holds human resource related services and Internet content provision licenses and is wholly owned by Run An;
	•		Qianjin Network Information Technology (Shanghai) Co., Ltd., or Tech JV, which is allowed to conduct online advertising and holds a human resource related services license;
	•		Qian Cheng Wu You Network Information Technology (Beijing) Co., Ltd., or WFOE, which is wholly owned by 51net Beijing and owns certain of our trademarks and registered copyrights;
	•		Beijing Qian Cheng Si Jin Advertising Co., Ltd., or Qian Cheng, which is our joint venture partner in Tech JV and is wholly owned by Run An;
	•		Beijing Run An Information Consultancy Co., Ltd., or Run An, which is jointly owned by David Weimin Jin and Tao Wang, two executive officers of our company;
	•		Shanghai Wang Cai Advertising Co., Ltd., or Wang Cai AdCo, which is an AdCo Subsidiary jointly owned by AdCo and TechJV and holds licenses to conduct advertising businesses;
	•		Shanghai Wang Ju Human Resource Consulting Co., Ltd., or Wang Ju, which is owned by 51net HR and Run An and holds a license to provide human resource related services; and
	•		Wuhan Mei Hao Qian Cheng Advertising Co., Ltd., or Wuhan AdCo, which holds a minority interest in Tech JV and our AdCo Subsidiary in the city of Wuhan that conducts advertising businesses.

     Since 2002, substantially all of our business and operations have been conducted through Tech JV and its branches, AdCo and the AdCo Subsidiaries.

     In May 2004, we restructured our operations to comply with then existing PRC laws and regulations governing foreign ownership in entities conducting advertising and human resource related services. For a discussion on our group structure, see “Item 4. — Information on the Company — Organizational Structure.”

     Our relationships with Qian Cheng, RAL and Run An, our affiliated entities, have been governed by a series of agreements. As a result of these agreements, under which we have borne all of the economic risks and received all of the economic rewards in these affiliated entities, the historical financial results of these entities have been consolidated in our financial statements as variable interest entities. For a discussion on the contractual arrangements among our entities, see “Item 7. — Major Shareholders and Related Party Transactions — Related Party Transactions — Contractual Arrangements Among Our Group Entities.”

     We completed the initial public offering of 6,037,500 American depositary shares, each representing two of our common shares, par value US$0.0001 per share, on October 4, 2004. On September 29, 2004, the trading of our ADSs on the Nasdaq Global Select Market, or Nasdaq, under the symbol “JOBS,” commenced.

     In April 2006, we formed a business alliance with Recruit, a privately held human resource services company in Japan, to collaborate on the development of our human resource products and services in China. Under the terms of our business alliance agreement, we have also established an internal corporate planning group staffed with personnel from Recruit to explore potential business opportunities outside of the human resource services industry in China. In addition, in August 2007, we entered into an agreement with Recruit to form a new company to provide coupon advertising services in China.

     Our principal executive offices are located at Building 3, No. 1387, Zhang Dong Road, Shanghai 201203, People’s Republic of China. Our telephone number at this address is +(86-21) 6160-1888. Our agent for service of process in the United States is National Registered Agents, Inc., located at 875 Avenue of the Americas, Suite 501, New York, New York 10001.

     Our principal capital expenditures for 2005 were approximately RMB54.4 million and included installment payments toward the purchase of a new office complex and purchases of office equipment and software. In April 2006, we completed the purchase of an office complex at No. 1387, Zhang Dong Road in Zhangjiang, Shanghai, which serves as our principal executive offices, for RMB113.7 million. Additionally, in July 2006, we completed the purchase of our former executive offices at 21st Floor, Wen Xin Plaza, 755 Wei Hai Road, which now serves as our downtown Shanghai sales office, for RMB27.9 million. Our principal capital expenditures in 2006 totaled RMB155.0 million and consisted of the remaining installment payments to complete the purchase of the Zhangjiang office complex, the purchase of the 21st Floor, Wen Xin Plaza and the purchases of computers, office equipment and software. Our principal capital expenditures for 2007 consisted of purchases of computers, network equipment, software and other intellectual property rights for a total of approximately RMB32.5 million (US$4.5 million).

     Our capital expenditure plans for 2008 have not yet been fixed, but we intend to purchase computers, technology-related equipment and software. Capital expenditures in 2007 have been funded through operating cash flows and through our existing capital resources, and we expect to continue fund our capital expenditures through these means.

B. Business Overview

     We believe that we are a leading nationwide provider of integrated human resource services in China, with a strong focus on recruitment advertising. We closely integrate print and online recruitment advertising services which enable us to attract a broad base of corporate advertisers and reach a wide and diverse audience of job seekers. In addition to recruitment advertising services, we also provide executive search and other complementary human resource related services to employers. We aim to be a “one-stop” solution to human resource departments by providing recruitment and other human resource related services to employers.

     Although we provide services to both employers and job seekers, we derive substantially all of our revenues from employers. We receive a majority of our revenues in the form of fees from employers for placing job advertisements on 51job Weekly and www.51job.com. We also receive fees from employers for accessing our www.51job.com resumé database, using our eHire product and in connection with our eSearch and other human resource related services.

Our Product and Services

     We provide a range of human resource services in the following categories:

	•		recruitment related services, including print advertising, online recruitment and executive search services; and
	•		other human resource related services, such as training and business process outsourcing.

     We generate a significant majority of our revenues from our recruitment related services consisting of our integrated print advertising and online recruitment services as well as our executive search services. Our print advertising business generated 59.8% of our revenues in 2005, 55.8% of our revenues in 2006 and 51.0% of our revenues in 2007. Our online recruitment services business generated 26.8% of our revenues in 2005, 31.5% of our revenues in 2006 and 33.5% of our revenues in 2007. Our executive search business generated 4.4% of our revenues in 2005, 2.9% of our revenues in 2006 and 1.9% of our revenues in 2007.

     We offer a number of other value-added human resource services in areas such as training and business process outsourcing. Other human resource related services generated 9.0% of our revenues in 2005, 9.8% of our revenues in 2006 and 13.6% of our revenues in 2007.

     Recruitment Related Services

     Print Advertising — 51job Weekly. 51job Weekly is a city-specific recruitment advertising publication which is published once a week and is distributed as an insert in local newspapers and/or on a stand-alone basis. As of March 31, 2008, 51job Weekly was published in 23 major cities in China.

     The 23 cities where 51job Weekly is published and our newspaper contractor in each city as of March 31, 2008 are as follows:

City		Newspaper contractor(1)
Beijing		China Trade News
Changchun		City Evening News
Changsha		Human Resource News
Chengdu		Hua Xi Metropolitan News
Chongqing		Human Resource News
Dalian		Dalian Evening News
Fuzhou		Straits Talent News
Guangzhou		Guangzhou Youth Daily
Hangzhou		News Information Daily
Harbin		Harbin Lifestyle Daily
Hefei		Hefei Evening News
Jinan		Jinan Times
Kunming		Chuncheng Evening News
Nanjing		Modern Express
Ningbo		Modern Golden News
Qingdao		Qingdao Financial Times
Shanghai		China Trade News
Shenyang		Friendly Times
Shenzhen		Nan Fang Metropolitan News
Tianjin		Metro Express
Wuhan		News Information Daily
Xian		China Merchant News
Zhengzhou		Youth Herald

     51job Weekly is not published in Dongguan, Hong Kong or Suzhou although we have established sales offices in these cities.

     A different version of 51job Weekly is published in each of our markets, with each version containing city-specific recruitment advertisements. We closely coordinate 51job Weekly with our www.51job.com online recruitment website and post substantially all of the recruitment advertisements appearing in 51job Weekly on www.51job.com as well. 51job Weekly contains recruitment advertisements for the full range of job categories that are available on our website, including sections for professional, middle management and technical personnel. Advertisements placed in 51job Weekly are primarily in Chinese language.

     Employers use 51job Weekly both as a recruitment tool and as an advertising and publicity medium to promote their brand name and raise their corporate awareness among job seekers. 51job Weekly recruitment advertisements come in a variety of formats, from large, multi-color advertisements using graphics and corporate trademarks, which are often placed by international and large domestic companies, to simple text job announcements, which are typically posted by smaller, local businesses. 51job Weekly is divided into a number of separate sections, with certain sections targeted at higher income and more educated job seekers containing large, colorful advertisements on glossy, high quality paper. Other sections include simpler text-only advertisements targeted at middle and lower income job seekers. The circulation, page dimensions, type of paper used and number of sections appearing in local editions of 51job Weekly differ from city to city.

     In China, entities engaged in publishing activities are required by the government to have a publishing license. Since we do not have any publishing licenses, we have established an exclusive relationship with a single local newspaper in each market where 51job Weekly is produced. We rely on these newspapers to provide us with printing and publishing services on a contractual basis, generally for a term of two years. These newspapers also generally provide us with distribution and marketing support in our local markets, although we sometimes undertake independent and/or additional marketing. 51job Weekly is distributed as an insert in our contractor’s newspaper in an effort to increase our circulation and help us establish our brand name. As an insert in these newspapers, 51job Weekly is sold at newsstands, kiosks, convenience stores, supermarkets and other venues. We provide point-of-sale vendors with marketing materials such as posters, display racks and other promotional items. We also circulate 51job Weekly independently through our direct marketing campaigns. Our direct marketing includes offering free copies of 51job Weekly at job fairs, in the lobbies of major office buildings, at post offices, on university campuses and in other public areas where the public circulation of newspapers is permitted. We have entered into marketing arrangements to offer free copies of 51job Weekly in subway stations in Nanjing, Shanghai and Shenzhen, and in light rail stations in Chongqing, Dalian, Tianjin and Wuhan.

     We may change our newspaper contractor in a city when we are able to obtain more favorable terms or higher quality service from a different newspaper contractor. From inception, we have changed our newspaper contractor a total of nine times across the 23 cities in which we had a contract with local newspapers as of March 31, 2008. See “Item 3. — Key Information — Risk Factors — Risk Related to Our Business — We are dependent on local newspaper contractors in each of our geographic markets to publish and distribute 51job Weekly.”

     The advertising fees that we charge depend on a variety of factors, including the size, placement, format, and use of color and graphics in the advertisement, the length of time the advertisement is to appear, and the city in which the advertisement is placed. As we grow in our existing markets and expand our operations, we focus on increasing our customer base and generating greater volumes of print advertising pages. Our print advertising revenues are primarily affected by the number of print advertising pages and the fees that we charge. Pricing for specific products can vary significantly from city to city due to local competition, purchasing power and other conditions.

     Our print advertising business is characterized by seasonal variations, particularly during the peak hiring periods around the Chinese New Year holidays and the beginning of May and October. As a result, our print advertising revenues may fluctuate significantly from quarter to quarter depending on customer demand and needs. Beginning in 2008, the Chinese government has instituted changes to the schedule of public holidays by eliminating the week-long holiday at the beginning of May and recognizing new observances, which may result in new seasonality patterns for our business. See “Item 3. — Key Information — Risk Factors — Risk Related to Our Business — Due to seasonal variations in demand for human resource services, we experience significant fluctuations in our revenue streams which affect our ability to predict our quarterly results and which may also cause quarterly results to vary from period to period.”

     The following table sets forth the estimated number of print advertising pages we generated for the periods indicated. 51job Weekly was published in 23 cities as of December 31, 2005, 2006 and 2007.

		For the year ended December 31,
		2005				2006				2007
Estimated number of print advertising pages			11,884				12,609				16,568

     From our inception through 2005, increases in our estimated number of print advertising pages generally reflected our geographic expansion as well as further penetration of existing markets. Beginning in 2006, we have focused our efforts and resources on increasing penetration in existing cities. There is no direct correlation between the growth in the number of cities in which we operate and in the overall number of our print advertising pages.

     Online Recruitment Services — www.51job.com. We established our online recruitment website, www.51job.com, in 1999. Online recruitment advertisements appear in both Chinese and English on www.51job.com. These advertisements cover many different job categories ranging from professional and middle management positions to clerical, industrial and hourly jobs. Job seekers may search for positions using keywords or based on a number of criteria, including city of employment, industry, job function, job title and job posting date. We regularly maintain and update our www.51job.com with job search, training and general career management content.

     We believe that www.51job.com is one of the largest dedicated national recruitment websites in China in terms of the number of recruitment advertisements. We also believe that www.51job.com is among the largest in terms of the number of registered job user accounts and posted job seeker resumés, with approximately 24.5 million user accounts established since the launch of our website in 1999 and more than 17.4 million resumés posted online as of March 31, 2008. We believe that www.51job.com is perceived as a “destination site” by job seekers because of its

large volume of advertisements and the job search, training and general career management and advisory content available on the website.

     We believe that www.51job.com provides employers with a cost-effective means of reaching their target audience. As our website contains nationwide recruitment advertisements, employers can access a large pool of potential candidates from a wide geographic area. Certain employers post advertisements solely online when they consider the demographics of their target audience to favor the use of the Internet for recruitment advertising. As a result, www.51job.com includes a higher number of technology related positions than 51job Weekly as well as recruitment advertisements targeted at younger job seekers that are more likely to use the Internet. We generally update the advertisements on our website several times each hour, which allows employers to receive responses more rapidly than is generally possible using print advertisements. Employers also use our website as a marketing tool, placing advertising banners, trademarks, logos, website hyperlinks and other devices to promote their corporate image for a fee that varies depending on the size, graphics, placement and duration. We believe that certain employers view this image promotion as a significant means of attracting online job seekers to their recruitment advertisements on our website. As a result, we believe that our ability to offer these promotional formats is an important element in our ability to attract online recruitment advertising business, which generates a material portion of our revenues. However, in the event of any adverse change in the actual or perceived effectiveness of online image promotion, or online advertising in general, our online recruitment advertising business may be adversely affected. See “Item 3. — Key Information — Risk Factors — Risks Related to Our Business — If the Internet, and online advertising in particular, does not achieve broad acceptance in China as a medium for recruitment, our online recruitment services business may be adversely affected.”

     Employers can use our eHire web-based platform to search our job candidate database and download resumés for a fee. In addition, eHire contains other tools that enable employers to manage, organize and streamline the recruitment and hiring process. We also offer website design as an additional value-added service and marketing tool for corporate customers. We can build customized “private label” recruitment websites with the “look and feel” of a dedicated website. We design these sites in-house to client specifications and operate and maintain these sites for our clients. These client sites, together with our www.51job.com website, are hosted by China Telecom and China Netcom.

     The following table sets forth the estimated number of unique employers who used our online recruitment services for the periods indicated.

		For the year ended December 31,
		2005				2006				2007
Estimated unique employers using online recruitment services			56,599				74,950				94,125

     www.51job.com provides job seekers with online tools to search for job opportunities and allows them to:

	•		search and review all current recruitment advertisements;
	•		receive e-mails of advertisements matching the job seeker’s profile and preferences;
	•		submit resumés directly to prospective employers to apply for a desired position;
	•		organize and track job related information and applications; and
	•		obtain information about upcoming job fairs and career development and other job related information.

     We provide job seekers access to www.51job.com free of charge.

     We closely coordinate 51job Weekly with our www.51job.com online recruitment website, and we post substantially all of the recruitment advertisements appearing in 51job Weekly on www.51job.com as well. We place a basic description of a 51job Weekly recruitment advertisement on our website as a complimentary service to our customers. This practice also allows us to introduce our online recruitment website to customers who have only purchased print recruitment advertising to increase potential cross-selling opportunities.

     Executive Search — eSearch. To meet employers’ recruitment needs, we supplement our recruitment advertising service with our eSearch executive search services. We conduct searches principally for employers seeking to fill mid-level professional, managerial and junior executive positions. We generally charge corporate clients a total assignment fee of up to 30% of the candidate’s annual compensation, including a minimum upfront retainer. We maintain a team of specialized executive search consultants whom we dedicate exclusively to providing this service, while working closely with our recruitment and other sales staff to cross-sell our products and develop client relationships. In addition, our search consultants can access our extensive online candidate resumé database which

other search firms are restricted from using. Substantially all of our executive search assignments are engaged locally in China.

     Other Human Resource Related Services

     We conduct training seminars in business management, leadership, sales and marketing, human resource, negotiation skills, financial planning and analysis, public administration, manufacturing, secretarial and other skills. We provide our seminars to the general public and on a customized, in-house basis for corporate clients. We license content and materials from third parties for some of the training courses we provide. We also enter into arrangements with certain trainers and lecturers that meet our knowledge, expertise and experience requirements. In addition to classroom-style seminars, we provide outdoor-based training exercises and programs for corporate clients to promote personal development, team building and communication. We believe that our training services build our brand awareness as a leading provider of integrated human resource services.

     We perform business process outsourcing services by managing human resource administrative functions for employers on an outsourced basis. We currently provide business process outsourcing services to a small number of corporate clients with respect to social insurance and welfare payment processing, tracking compliance with local governmental employment regulations and payroll processing. We continue to build our outsourcing capability and expertise.

     We seek to develop business process outsourcing services as part of our strategy to become a “one-stop” solution to our clients. While the market for these services in China is currently limited compared to developed economies like the United States, we expect to further expand and develop these services as the market in China grows. We believe that there is significant future potential for these services as more companies in China become accustomed to using third parties to perform human resource administrative functions.

     We organize and host annual human resource conferences and events in many of our cities. These conferences and events include lectures, seminars, workshops and networking opportunities for human resource professionals. Although we do not generate significant revenues from hosting these conferences and events, this service provides us with exposure to, and interaction with, existing and prospective clients.

     We provide campus recruitment services to corporations seeking to recruit college and university students. We assist corporations with recruitment strategy, selection of schools, schedule of campus visits, promotion of their image to students and logistical arrangements.

     We provide a monthly magazine called Future on a subscription or complimentary basis. Future contains articles, commentary, interviews and reports on general career management and development targeted principally at young working professionals. This magazine was formerly known as Human Capital and was re-designed and re-branded in December 2007.

     We also provide general and customized salary survey studies with analyses of compensation and benefits packages across various cities, industries and job positions. Human resource departments utilize this data to understand the market for compensation levels and to assist in their determination of compensation and benefits packages for employees and candidates.

     We have developed a proprietary assessment system to assist human resource departments in evaluating capabilities and dispositions of job candidates and existing employees, in aiding employee placement and in allocating employee resources.

Technology

     We design and update our website and develop our proprietary software entirely in-house. Our website is hosted by China Telecom and China Netcom, China’s principal telecommunications and Internet service providers. We own the copyrights, software, trademarks and other intellectual property with respect to the design and content of our website, other than the advertisements and trademarks provided by our advertisers.

     We employ a large staff of website designers and technicians to update and enhance our website as well as to design, build and provide assistance to customers whose recruitment websites we are maintaining. We update the advertisements on our website from our principal executive offices in Shanghai. New recruitment advertisements provided to us by employers who have purchased and registered online accounts generally appear on our website within several hours. Complimentary online postings for advertisements in 51job Weekly generally appear on www.51job.com within one to two days.

     From time to time we experience slower Internet service from our Internet service providers as a result of technical difficulties associated with high traffic volumes, computer viruses, the proliferation of “spam” e-mail traffic

and other difficulties that generally affect Internet traffic. To date, we have not been subject to significant targeted disruptions or “hacking” and we believe that difficulties we have experienced relating to the speed of the Internet service and web-hosting provided by China Telecom and China Netcom are consistent with the difficulties that affect Internet service in China generally. To date, our website has not gone off-line or been shut down for any significant period of time. We do not believe that our business has been materially disrupted or negatively affected by technical difficulties with respect to our website. However, we cannot assure you that our business will not face material disruptions or damage from spam, viruses, hacking or other technical difficulties. See “Item 3. — Key Information — Risk Factors — Risks Related to Our Business — Computer viruses and “hacking” may cause delays or interruptions on our systems and may reduce use of our services and damage our reputation and brand names;” “— We are vulnerable to natural disasters and other calamities;” and “— We are dependent on our Internet service providers, and we are vulnerable to failures of the Internet, fixed line telecommunications networks in China and our technology platform.”

Competition

     We face significant competition in each of our markets with respect to each of our business lines. See “Item 3. — Key Information — Risk Factors — Risks Related to Our Business — Because we face significant competition, including intense competition in several of our markets, we may lose market share and our results of operations may be materially and adversely affected.”

     Print Advertising

     51job Weekly is published in 23 cities across China as of March 31, 2008. We face competition within all of our markets. Our competitors typically consist of one or more large local newspapers that include a help-wanted section. Our competitors include Beijing Evening News, Guangzhou Daily, Shanghai Talent Market and Shenzhen Special Zone Daily.

     Online Recruitment Services

     We experience intense competition in our online recruitment services businesses from dedicated online recruitment websites and websites affiliated with local job fair operators. With the exception of Zhaopin.com which provides print advertising services in select cities in China, we are not aware of any other online competitor that also operates a significant print advertising business. We view our principal existing online competitors to be ChinaHR.com, Cjol.com and Zhaopin.com, which are primarily dedicated online recruitment websites.

     None of the well established nationwide Internet portals, including NetEase.com, QQ.com, Sina.com, Sohu.com and Tom.com, are dedicated providers of recruitment advertising or other human resource products, and each offers a wide variety of other online services. However, any or all of our online or print competitors may decide to allocate significant additional resources to providing recruitment advertising or other human resource services. For example, since Monster Worldwide’s initial purchase of an ownership interest in ChinaHR.com in February 2005, ChinaHR.com has been purported in public reports to have significantly increased its sales and marketing activities in China. In September 2006, SEEK Limited, a provider of online recruitment and training services in Australia, acquired an ownership interest in Zhaopin.com and according to public reports, Zhaopin.com has increased its sales and marketing expenditures. As a result of these events, we could encounter significantly increased competition in some or all of our markets.

     Other Services

     We believe that the competition for our other human resource related services, especially for executive search, training and business process outsourcing services, is largely fragmented and localized. The main competitors in our market for executive search services in China include entities such as Bó-Lè Associates, Ltd., Horton International, Hudson Highland Group, which is a spin-off from Monster Worldwide, and Sterling, each of which provides executive search services on a nationwide basis. In the training services market, we face competition primarily from small, local training firms or individual trainers who specialize in specific areas of expertise. The market for business process outsourcing services is in an early stage of development and our competitors are typically service agencies affiliated with or sponsored by local government personnel bureaus.

Customers

     Our customers consist of large multinational corporations, large national Chinese corporations and local Chinese enterprises of all sizes.

Sales and Marketing

     Our sales and marketing strategy is focused on promoting our brand names and further establishing our reputation as an integrated provider of high quality human resource services. We utilize such channels as direct marketing, event marketing, mass media advertising, online marketing, cross-marketing and media promotions to target three key groups:

	•		job seekers;
	•		employers with hiring and/or training needs; and
	•		human resource departments with actual or potential outsourcing needs.

     Direct Marketing. We target employers principally through direct marketing. As of December 31, 2007, we employed over 1,600 sales and account management representatives across our cities that identify and directly contact potential customers via telephone, personal sales visits, the Internet and the mail. We train our sales staff to cross-sell all of our services and to design comprehensive packages of human resource services for potential clients to meet their specific requirements. We believe that direct marketing has been highly effective in attracting new customers. In addition, we believe that, by providing significant personal contact with potential clients, direct marketing enables us to understand the current and evolving needs of our existing and prospective customers and helps us to develop new services and products.

     Event Marketing. We organize customer events, such as recruiting workshops, product information seminars, industry roundtables and networking events, to provide our sales team an opportunity to personally interact with employers and understand their recruitment needs. To attract potential job seekers and build brand awareness, we offer complimentary copies of 51job Weekly at job fairs, at office buildings, in subway and light rail stations in select cities, and in other public and commercial areas. We believe that offering complimentary copies of 51job Weekly to job seekers is also a highly effective means to cross-promote our www.51job.com website.

     Mass Media Advertising. We use traditional mass media advertising on a selective basis to increase our brand visibility and corporate image. We advertise though various media, including television, radio and outdoor advertising on digital displays, billboards, bus stops and buses. In addition, we advertise on print media such as newspapers, magazines, industry publications and telephone directories.

     Online Marketing. We utilize Internet advertising, such as banner advertisements, keyword and hyperlink purchases and paid listings, to promote our brand names. We also conduct and sponsor online promotion campaigns such as drawings, giveaways and contests to attract traffic and enhance the loyalty of job seekers to our website.

     Cross-Marketing. We cross-market our brand names, services and products in 51job Weekly, on www.51job.com and in Future. We also establish cross-marketing relationships with a variety of partners. In addition, we believe that we benefit from recommendations and referrals by the large base of job seekers and employers who use 51job Weekly and www.51job.com.

     Media Promotions. We produce surveys and analyses on job market trends and developments that are regularly featured and published in magazines, newspapers and on the Internet. We believe this exposure heightens our corporate profile and image among both employers and job seekers, and attracts interest and generates sales inquiries for our services.

Intellectual Property and Proprietary Rights

     We regard our copyrights, trademarks, trade secrets and other intellectual property rights as critical to our business. We rely on trademark and copyright law, trade secret protection, non-competition and confidentiality and/or licensing agreements with our executive officers, clients, contractors and others to protect our intellectual property rights. We have registered our www.51job.com Internet domain name as well as a number of similar domain names in an effort to prevent entities from diverting online traffic away from our website.

     We have registered trademarks with the Trademark Office of the PRC State Administration for Industry and Commerce, including , , 51job.com, , eHire, and eSearch. In addition, our wholly owned British Virgin Islands subsidiary 51net has registered our trademarks , 51job.com and with the Patents Registry, Intellectual Property Department of the Hong Kong Special Administrative Region. 51net is also the registered owner of our trademarks and 51job.com with the Intellectual Property Bureau of the Taiwan Ministry of Economy.

     All of our trademarks and the www.51job.com domain name are owned or registered in the PRC by 51net and WFOE. Under a trademark license agreement between 51net, as licensor, and RAL, as licensee, RAL has the right to

use certain trademarks in the PRC, with no right of assignment or sublicense. Under a domain name license agreement between 51net, as licensor, and RAL, as licensee, RAL has the right to use the www.51job.com domain name in connection with the operation of our website. See “Item 7. — Major Shareholders and Related Party Transactions — Related Party Transactions — Contractual Arrangements Among Our Group Entities.”

     In July 2006, the PRC Ministry of Information Industry, or MII, issued the “Notice on Strengthening the Administration of Foreign Investment in the Operation of Value Added Telecommunication Business,” or the MII Notice. According to the MII Notice, value-added telecommunication services license holders (including their shareholders) shall directly own the domain names and registered trademarks used by such value-added telecommunication services license holders in their daily operations. The provincial communications administration bureaus in charge of telecommunications services are required to ensure that existing value-added telecommunication services license holders will conduct a self-assessment of their compliance with the MII Notice and to submit status reports to the MII before November 1, 2006. For those who are not in compliance with the above requirements and fail to rectify the noncompliance within the limited period set by the provincial communications administration bureaus, the bureaus may revoke their operating licenses. See “Item 3. — Key Information — Risk Factors — Risks Related to the People’s Republic of China — PRC laws and regulations governing operators of Internet websites are unclear and the regulation of the telecommunications and Internet industries may become more burdensome, and if we are found to be in violation of PRC laws and regulations, we could be subject to sanctions.”

     Our intellectual property is subject to theft and other unauthorized use, and our ability to protect our intellectual property from unauthorized use is limited. In addition, we may in the future be subject to claims that we have infringed the intellectual property rights of others. See “Item 3. — Key Information — Risk Factors — Risks Related to Our Business — If we are unable to prevent others from using our intellectual property, our business may be materially and adversely affected” and “— We may be exposed to infringement or misappropriation claims by third parties, which, if successful, could cause us to pay significant damage awards.”

Regulation

     Advertising agencies, human resource services firms and Internet content providers are subject to substantial regulation by the Chinese government. An “Internet content provider” is a commercial operator providing the delivery of Internet content. This section sets forth a summary of the most significant PRC regulations that affect the businesses and the industries in which we operate.

     In addition to laws and regulations that apply generally to advertising agencies, human resource firms and Internet content providers, special limitations apply to foreign ownership of businesses engaged in human resource and Internet content provider services in China.

Limitations on Foreign Ownership of Our Businesses

     Advertising

     The principal regulations governing foreign ownership of advertising companies in China include:

	•		Foreign Investment Industrial Guidance Catalogue (2004); and
	•		Regulations on Administration of Foreign Investment in Advertising Enterprises (2004).

     Beginning on December 10, 2005, foreign investors, individually or in the aggregate, are permitted to own 100% of the equity interest in an advertising company in the PRC subject to certain qualification requirements. However, for those advertising companies who provide online advertising service, foreign ownership restrictions on the Internet content provision business are still applicable.

     Human Resource Services Companies

     The principal regulation governing foreign ownership in human resource services companies in China is the Interim Regulations on the Administration of Sino-foreign Equity Joint Venture as Human Resource Agencies (2003), as amended in 2005, jointly promulgated by the PRC Ministry of Personnel, the PRC Ministry of Commerce and the PRC State Administration for Industry and Commerce. Under this regulation, the percentage of foreign ownership in the equity interest of a human resource services company cannot be less than 25% or more than 49%. In August 2006, the PRC government increased the foreign ownership percentage to up to 70%.

     Internet Content Providers

     In the PRC, entities that coordinate with Internet service providers (such as telecommunications companies) to effect the online placement of content provided by either themselves or third parties are defined as “Internet content providers” and require a special license.

     The principal regulations governing foreign ownership in Internet content providers in China include:

	•		Administrative Rules for Foreign Investments in Telecommunications Enterprises (2001); and
	•		Foreign Investment Industry Guidance Catalogue (2007).

     Under these regulations, foreign investors, individually or in the aggregate, are prohibited from owning more than 50% of a PRC entity that provides value-added telecommunications services, which include the service of providing Internet content.

General Regulation of Our Businesses

     Advertising

     The PRC State Administration for Industry and Commerce is responsible for regulating advertising activities in the PRC. The principal regulations governing advertising (including online advertising) in China include:

	•		Advertising Law (1994);
	•		Administration of Advertising Regulations (1987);
	•		Implementation Rules on Administration of Advertising Regulations (2004); and
	•		Measures for the Administration of Advertising Business Licenses (2005).

     All enterprises, except for broadcast stations, television stations, newspapers, magazines, non-corporate entities and other entities specified in laws or administrative regulations, are no longer required to obtain a separate advertising license although they are required to apply for inclusion of “advertising services” in their business licenses.

     Human Resource

     Human resource services firms in China are mainly regulated by the PRC Ministry of Personnel. The principal regulation applicable to human resource services firms is the Regulations on Administration of Human Resource Markets (2001, as amended in 2005), jointly promulgated by the PRC Ministry of Personnel and the PRC State Administration for Industry and Commerce. Under this regulation, any entity providing human resource services in China must obtain a human resource services license from the local Administration of Personnel at the provincial level. Each of these Administrations may adopt rules, with some degrees of variation among provinces, to regulate human resource services operations conducted within the province.

     Internet Content Services and Online Commerce

     The delivery of content on our website is subject to PRC laws and regulations applicable to telecommunications and Internet service providers. We are also within the regulatory jurisdiction of various governmental bodies, including the PRC Ministry of Information Industry and the PRC State Administration for Industry and Commerce. The principal regulations applicable to telecommunications and Internet service providers include:

	•		Telecommunications Regulations (2000);
	•		The Administrative Measures for Telecommunications Business Operating Licenses (2001); and
	•		The Internet Information Services Administrative Measures (2000).

     Under these regulations, delivery of Internet content is classified as a value-added telecommunications service, and a commercial operator of such services must obtain an Internet content provider license from the appropriate telecommunications authorities.

     There are no PRC laws that have national applicability to online commerce relating to advertising and human resource services. However, local authorities may impose requirements on online business activities conducted within its jurisdiction, such as registration or filing requirements.

Regulations Relating to Our Intellectual Property Rights

     China has adopted comprehensive legislation governing intellectual property rights, including trademarks, patents and copyrights. China has adhered to the main international conventions on intellectual property rights and has become a member of the Agreement on Trade Related Aspects of Intellectual Property Rights upon its accession to the WTO in December 2001.

     The PRC amended its Copyright Law in 2001 to widen the scope of works that are eligible for copyright protection. The amended Copyright Law extends copyright protection to cover Internet activities and products disseminated over the Internet. Copyrighted software is protected under the Copyright Law and other regulations. In addition, there is a voluntary registration system administered by the China Copyright Protection Center.

     Registered trademarks are protected under the Trademark Law adopted in 1982 and revised in 2001. Trademarks can be registered with the Trademark Office of the PRC State Administration for Industry and Commerce for renewable ten-year periods. Trademark license agreements are required to be filed with the Trademark Office of the PRC State Administration for Industry and Commerce for the record, and the failure to complete such filings may cause the trademark license agreements to be unenforceable against bona fide third parties.

     Domain name disputes are governed by the Measures of China Internet Network Information Center for Resolving Disputes Regarding Domain Names promulgated by the Chinese Internet Network Infrastructure Center, or CNNIC, on February 14, 2006 and effective on March 17, 2006, under which CNNIC can authorize domain name dispute resolution institutions to decide disputes.

Regulations Relating to Internet Privacy

     The Constitution of the PRC provides that PRC law protects the freedom and privacy of communications of citizens and that infringement of such rights is not permitted. While PRC laws do not prohibit Internet content providers from collecting personal information of their users, in recent years, the relevant government authorities have enacted legislation on the use of the Internet that recognizes the protection of personal information from unauthorized disclosure. Under the Regulation on Internet Information Service, Internet information service providers are prohibited from producing, copying, publishing or distributing information that is humiliating or slanderous to others or that trespasses the lawful rights and interests of others. Depending on the nature of their violation, Internet content providers that violate this provision may face criminal charges or be sanctioned by security authorities. In addition, they may be ordered to temporarily suspend their service, or their licenses may be revoked. While PRC laws do not prohibit Internet content providers from collecting personal information of their users, under the Administration Regulation on the Internet BBS Service, Internet content providers that provide electronic messaging services must keep users’ personal information confidential and must not disclose such personal information to any third party without the consent of the users, unless the law requires such disclosure. The regulations further authorize the relevant telecommunications authorities to order Internet content providers to rectify an unauthorized disclosure. Internet content providers could be subject to legal liability if the unauthorized disclosure causes damages or losses to the users. To comply with these regulations, we provide subscribers to our website with a range of confidentiality options. They may choose to authorize us to disclose their personal information to third parties, or to instruct us to keep this information strictly confidential. Our systems are designed to maintain information received from these subscribers in accordance with their instructions.

     However, the PRC government retains the power and authority to order Internet content providers to turn over personal information of Internet users if the users post any prohibited content or engage in illegal activities on the Internet.

Regulation of Foreign Currency Exchange and Dividend Distribution

     Foreign Currency Exchange

     The principal regulation governing foreign currency exchange in the PRC is the Foreign Currency Administration Rules (1996), as amended. Under these rules, Renminbi is freely convertible for payments of current account items, such as trade and service related foreign exchange transactions and dividend payments, but not for expenses of capital, such as direct investment, loan or investment in securities, outside the PRC unless the prior approval of the State Administration for Foreign Exchange of the PRC is obtained.

     Under the Foreign Currency Administration Rules, foreign-invested enterprises in the PRC may purchase foreign exchange without the approval of the State Administration for Foreign Exchange of the PRC for trade and service related foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange (subject to a cap approved by the State Administration for Foreign Exchange

of the PRC) to satisfy foreign exchange liabilities or to pay dividends. However, the relevant PRC government authorities, which have significant administrative discretion in implementing the laws, may restrict or eliminate the ability of foreign-invested enterprises to purchase and retain foreign currencies in the future. In addition, foreign exchange transactions involving direct investment, loan and investment in securities outside the PRC are subject to limitations and require approvals from the State Administration for Foreign Exchange of the PRC.

     Dividend Distribution

     The principal regulations governing distribution of dividends paid by wholly foreign owned enterprises and Sino-foreign equity joint ventures include:

	•		Wholly Foreign Owned Enterprise Law (1986), as amended;
	•		Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended;
	•		Sino-foreign Equity Joint Venture Enterprise Law (1979), as amended;
	•		Sino-foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), as amended; and
	•		PRC Enterprise Income Tax Law and its Implementation Rules (2007).

     Under these regulations, foreign-invested enterprises in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, foreign-invested enterprises in the PRC are required to set aside certain amounts out of their accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends.

C. Organizational Structure

     The following chart sets forth our current ownership structure.

     Our subsidiary, 51net, directly holds 51% of the outstanding shares of Tech JV, Qian Cheng directly holds 1% of the outstanding shares of Tech JV, and our AdCo Subsidiary located in the city of Wuhan, Wuhan Mei Hao Qian Cheng Advertising Co., Ltd., or Wuhan AdCo, directly holds the remaining 48% of the outstanding shares of Tech JV. As a result of 51net’s indirect majority ownership of Wuhan AdCo and Qian Cheng’s direct minority ownership of Wuhan AdCo, 51net is deemed to effectively hold 69.7% of the equity interest in Tech JV and Qian Cheng is deemed to effectively hold 30.3% of the equity interest in Tech JV.

     Qian Cheng and RAL are wholly owned by Run An. Run An is jointly owned by David Weimin Jin and Tao Wang, two executive officers of our company.

     Our services are currently provided through the following group entities:

	•		online recruitment services are provided by Tech JV, which does not act as an Internet content provider;
	•		print advertising services are provided by AdCo and the AdCo Subsidiaries, which are all direct and indirect majority owned PRC subsidiaries of Tech JV;
	•		human resource related services are provided by RAL and Shanghai Wang Ju Human Resource Consulting Co., Ltd., or Wang Ju, which hold licenses to provide human resource related services; and
	•		Internet content provider services are provided by RAL through a contractual arrangement with Tech JV; RAL holds a license to act as an Internet content provider and operates our www.51job.com website.

     Tech JV and its branches, AdCo and the AdCo Subsidiaries recognize substantially all of our revenues and receive substantially all of the cash payments from our clients. Our relationships with Qian Cheng, RAL and Run An, our affiliated entities, have been governed by a series of agreements, under which we have borne all of the economic risks and received all of the economic rewards in these affiliated entities. As a result, the historical financial results of these entities have been consolidated in our financial statements as variable interest entities under FASB Interpretation No. 46 (revised 2003), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.”

     In the opinion of Jun He Law Offices, our PRC legal counsel:

	•		our current ownership structure is in compliance with existing PRC laws and regulations;
	•		the agreements among our subsidiaries, affiliated entities and their respective shareholders are valid and binding, and are enforceable under, and will not result in any violation of, existing PRC laws or regulations, with exception to the effectiveness of the equity pledge agreements, which are subject to registration with the relevant administrations of industry and commerce, and the trademark license agreement, which may not be enforceable against bona fide third parties until registration with the relevant trademark administration authorities; and
	•		except as otherwise disclosed herein, our current business operations as described in this annual report are not in violation of existing PRC laws, rules and regulations in all material aspects.

     There are, however, substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to the laws and regulations governing our business or the enforcement and performance of our contractual arrangements in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings. Accordingly, we cannot assure you that PRC regulatory authorities will not take a view contrary to the opinion of our PRC legal counsel. See “Item 3. — Key Information — Risk Factors — Risks Related to Our Corporate Structure — If the PRC authorities determine that our past ownership structure was inconsistent with the requirements for operating certain of our businesses, we could be subject to sanctions” and “ — Risks Related to the People’s Republic of China — The PRC legal system has inherent uncertainties that could materially and adversely affect us.”

     We have been advised by our PRC counsel that the foreign ownership percentage of Tech JV, AdCo and the AdCo Subsidiaries prior to our restructuring in May 2004 was above the maximum foreign ownership permitted for entities conducting advertising and human resource operations at that time. For a description of the risks associated with our past ownership structure, please see “Item 3. — Key Information — Risk Factors — Risks Related to Our Corporate Structure — If the PRC authorities determine that our past ownership structure was inconsistent with the requirements for operating certain of our businesses, we could be subject to sanctions.”

     We intend to continue to evaluate from time to time the PRC regulatory environment with respect to the foreign ownership of, and foreign participation in, human resource related services and Internet content provider services, and plan to continue to streamline our ownership structure and operations as and when permitted by PRC laws and regulations.

Description of the Material Group Entities

     51net

     51net is an intermediate-level holding company that is the registered owner of some of our trademarks and our domain name and holds direct and indirect equity interests in several of our PRC subsidiaries. Our wholly owned subsidiary 51net is an international business company incorporated in the British Virgin Islands. Specifically, 51net owns the trademarks , , 51job.com and under certain categories specified by relevant PRC trademark regulations, and the domain name www.51job.com. All of these trademarks have been registered with the Trademark Office of the PRC State Administration for Industry and Commerce and are protected under the PRC Trademark Law adopted in 1982 and revised in 2001. For a description of PRC regulations relating to intellectual property rights, see “Item 4. — Information on the Company — Business Overview — Regulation — Regulations Relating to Our Intellectual Property Rights.”

     Tech JV

     We provide online recruitment services through Tech JV. Tech JV was initially established as an equity joint venture between 51net and Qian Cheng. Before our restructuring in May 2004, 51net held 99% of the equity interest in Tech JV and Qian Cheng held the remaining 1%. As part of our restructuring, 51net transferred 48% of its equity interest in Tech JV to Wuhan AdCo. Since 51net indirectly holds a majority equity interest in Wuhan AdCo, and Qian Cheng directly and indirectly holds a minority interest in Wuhan AdCo, 51net holds 69.7% of the effective equity interest and Qian Cheng holds 30.3% of the effective equity interest in Tech JV. Because 51net is a British Virgin Islands company, Tech JV is deemed a foreign-invested enterprise and its business activities are subject to the PRC regulatory limitations on foreign ownership as discussed in “Item 4. — Information on the Company — Business Overview — Regulation — Limitations on Foreign Ownership of Our Businesses.” Tech JV has obtained a permit to conduct online advertising from the PRC State Administration for Industry and Commerce. The scope of its business license also includes software development, multimedia and network system design and information technology.

     Qian Cheng

     Qian Cheng is our joint venture partner in Tech JV and holds a 30.3% effective equity interest in Tech JV. Qian Cheng is an affiliated entity in which we hold no equity interest. Qian Cheng is wholly owned by Run An, which is jointly owned by David Weimin Jin and Tao Wang. Qian Cheng holds a license issued by the Beijing Municipal Administration for Industry and Commerce to provide advertising services, including designing, producing and publishing advertisements for Chinese and multinational companies in China and contracting for advertising projects.

     RAL

     We provide human resource related and Internet content provider services through RAL. RAL operates our www.51job.com website. RAL is a PRC limited liability company and is an affiliated entity in which we hold no equity interest. RAL is wholly owned by Run An, which is jointly owned by David Weimin Jin and Tao Wang. RAL holds a permit issued by the Shanghai Bureau of Personnel, which allows it to provide certain human resource related services. RAL has also obtained a permit from the Shanghai Municipal Telecommunications Bureau, which allows it to provide Internet content provider services applicable to our businesses.

     AdCo and the AdCo Subsidiaries

     We provide print advertising services through Shanghai Qianjin Advertising Co., Ltd., or AdCo, and AdCo’s seven branch offices, AdCo’s seven majority owned subsidiaries and Wang Cai AdCo, a jointly owned subsidiary with Tech JV, or collectively, the AdCo Subsidiaries, located in different cities and provinces in China. AdCo is a PRC equity joint venture company. Tech JV and Qian Cheng own 80% and 20%, respectively, of the equity interest in AdCo. AdCo and the AdCo Subsidiaries have obtained permits from the local Administrations for Industry and Commerce in the cities where they operate, which allow them to conduct advertising business, including the designing and production of advertisements and the contracting of domestic advertising projects.

     WFOE

     We provide advertising related technical and consulting services to Qian Cheng and software and web related technical and consulting services to RAL through WFOE, our wholly owned PRC subsidiary. WFOE is registered in the PRC with the relevant regulatory authorities as a wholly foreign owned enterprise. WFOE owns certain of our trademarks and registered copyrights and its principal business is network and software related technical support services.

     Wang Ju

     We provide human resource related services through Wang Ju. 51net HR and Run An own 70% and 30%, respectively, of the equity interest in Wang Ju. Because 51net HR is a Cayman Islands company, Wang Ju is deemed a foreign-invested enterprise and its business activities are subject to the PRC regulatory limitations on foreign ownership as discussed in “Item 4. — Information on the Company — Business Overview — Regulation — Limitations on Foreign Ownership of Our Businesses.” Wang Ju holds a permit issued by the Shanghai Bureau of Personnel, which allows it to provide certain human resource related services.

D. Property, Plants and Equipment

     Our executive offices as well as our principal customer service, marketing, web operations and development facilities are currently located at No. 1387, Zhang Dong Road, Shanghai 201203, People’s Republic of China. We maintain a large sales office in downtown Shanghai at 21st Floor, Wen Xin Plaza, 755 Wei Hai Road, Shanghai 200041, People’s Republic of China. We also lease space for our network of sales offices in Beijing, Changchun, Changsha, Chengdu, Chongqing, Dalian, Dongguan, Fuzhou, Guangzhou, Hangzhou, Harbin, Hefei, Jinan, Kunming, Nanjing, Ningbo, Qingdao, Shenyang, Shenzhen, Suzhou, Tianjin, Wuhan, Xian, Zhengzhou and Hong Kong. As of the date of this annual report, we have leases for office space totaling approximately 18,150 square meters. We believe that we will be able to obtain adequate facilities, principally through the leasing of appropriate properties, to accommodate our expansion plans in the near future.

     In April 2006, we completed the purchase of an office complex totaling approximately 12,600 square meters at No. 1387, Zhang Dong Road in Shanghai. The purchase price for these premises was RMB113.7 million and was funded through operating cash flows and existing capital resources. We completed the move of our national technology and online service center as well as our principal executive offices to this office complex in September 2006.

     In July 2006, we completed the purchase of our former executive offices of approximately 1,615 square meters at 21st Floor, Wen Xin Plaza, 755 Wei Hai Road, for an aggregate consideration of RMB27.9 million. This location serves as our downtown Shanghai sales office. We funded this purchase through operating cash flows and through our existing capital resources.

ITEM 4A. UNRESOLVED STAFF COMMENTS

     None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included elsewhere in this annual report on Form 20-F.

A. Overview

     We believe that we are a leading nationwide provider of integrated human resource services in China. Our financial results have been primarily driven by the increase in revenues from our print advertising and online recruitment services businesses. Our growth in revenues in 2005 reflected greater customer penetration in our existing markets as well as expansion into new cities in China. We slowed our new market entries in 2006 and have since focused our resources on growing our customer base and increasing sales in existing cities. In 2007, our other human resource related services business, consisting primarily of our training and business process outsourcing services, experienced high growth rates due to greater customer demand and adoption. As we further develop our capabilities in providing these services and gain wider customer acceptance, we believe the revenue contribution from these services will increase and complement the growth of our recruitment related businesses.

     We became profitable in 2002 on a full-year basis and our net income has increased in each subsequent year. The increase in our net income is principally affected by revenue growth as well as a decline in cost of services as a percentage of net revenues driven by improved economies of scale and operational efficiencies. However, as we grow, we have incurred higher operating expenses, of which a significant portion is related to our sales and marketing expenses. Our discretionary spending on sales and marketing activities changes from year to year and is impacted by a number of factors, including competition and our strategic initiatives. Our net income increased slightly in 2005 as our revenue growth and the decrease in cost of services as a percentage of net revenues were mainly offset by higher operating expenses. The increase in net income in 2006 reflected the combination of revenue growth, reduction in cost of services as a percentage of net revenues and lower tax rates, which were partially offset

by higher operating expenses. In 2007, the increase in net income was driven by revenue growth and lower cost of services as a percentage of net revenues, which was partially offset by greater operating expenses and higher tax rates.

Revenues

     In 2007, our total revenues were RMB844.3 million (US$115.7 million), an increase of 21.0% from RMB697.9 million in 2006. The substantial majority of our revenues come from employers who purchase our print advertising and online recruitment services. We have historically achieved revenue growth in our recruitment advertising businesses principally by increasing sales in existing cities as well as our expansion into new cities. Since January 2006, we have not established operations in a new city and have focused our resources and efforts on increasing customer penetration in existing cities. We believe that our revenue growth will continue to be affected by broad macroeconomic factors in China, including deregulation and market liberalization, the proliferation of new enterprises, increasing competition among companies for skilled and experienced workers, and growth in job openings in China. We believe these factors should lead to increased use and growing acceptance of recruitment advertising and other human resource services by employers in China. In addition, we believe that an increasingly skilled, educated and urbanized workforce in China will drive the demand for and utilization of our services.

     The following table sets forth the revenues from our principal lines of business as a percentage of our total revenues for the periods indicated.

		For the year ended December 31,
		2005				2006				2007
Revenues:
Print advertising			59.8	%			55.8	%			51.0	%
Online recruitment services			26.8				31.5				33.5
Executive search			4.4				2.9				1.9
Other human resource related revenues			9.0				9.8				13.6
Total revenues			100.0	%			100.0	%			100.0	%

     The following table sets forth our revenue growth rates by business line for the periods indicated.

		2005				2006				2007
		compared to				compared to				compared to
		2004				2005				2006
Print advertising			18.5	%			9.3	%			10.5	%
Online recruitment services			43.0				37.8				28.6
Executive search			5.6				(24.2	)			(19.3	)
Other human resource related revenues			24.8				28.2				67.5
Total revenues			24.1	%			17.2	%			21.0	%

     Recruitment Related Revenues

     We receive recruitment related revenues from the fees that employers pay us for our 51job Weekly print advertising services and our www.51job.com online recruitment services as well as our eSearch executive search services. We believe that our print advertising and online recruitment services businesses are characterized by significant potential economies of scale. As a result, we expect to continue to focus a majority of management time, resources and efforts on developing and expanding these businesses to increase our revenues and profit margins. We expect that we will continue to earn the majority of our revenues and profits from our recruitment related services in the future.

     Print Advertising Revenues. We generate our print advertising revenues from fees that we charge employers for placing recruitment and related advertisements in local editions of 51job Weekly across our markets in China. We do not receive revenues from the sale of 51job Weekly. The print advertising contracts we enter into with employers are for single or multiple advertisements in one or more markets. In addition, these contracts as well as the time between the signing of a contract and the publishing of an advertisement in 51job Weekly are generally short-term in nature.

     The advertising rates that we charge vary and depend on a number of factors including the size, placement, format and use of color and graphics in the advertisement, the length of time the advertisement is to appear and the market in which the advertisement is placed. The number of employers who have used our print advertising services and the number of advertising pages printed has grown as we have increased our operations in existing markets as

well as expanded into new cities. Our print advertising revenues are primarily affected by the number of print advertising pages and the fees that we charge.

     We expect that the future growth for our print advertising business will be largely driven by increases in the number of our print advertising pages rather than increases in average revenue per page. We believe that our penetration of the total potential market of employers for our print advertising business remains relatively low. As a result, our strategy for the print advertising business is focused on increasing the number of employers and print pages as opposed to increasing the prices that we charge.

     Our print advertising prices vary considerably between individual markets due to differences in local competition, purchasing power and other conditions. Historically, the print advertising businesses in our individual markets have not been subject to significant or prolonged price competition. While the prices we charge for print advertising in each city have been generally stable, we have from time to time undertaken special promotions or sales campaigns in certain markets which impact our overall average revenue per page. In addition, differences in the relative growth rates in the local markets affect our overall average revenue per page. Although the prices we charge in our individual markets may remain generally unchanged, we expect that faster growth in lower priced markets will reduce our overall average revenue per page.

     The growth experienced by our print advertising business has varied in recent years. We believe this growth has been affected by a number of factors including, but not limited to, changes in market demand for print advertising services in China, the size and allocation of employer budgets for print advertising services, and the use of other recruitment channels, such as the Internet. These factors, many of which are outside of our control, may continue to impact the growth and development of our print advertising business and may result in significant growth rate fluctuations on a quarterly or annual basis. See “Item 3. — Key Information — Risk Factors — Risks Related to Our Business — We rely on our print advertising business to provide a majority of our revenues and any adverse development in this business could materially and adversely affect our overall results of operations.”

     We calculate the number of our print advertising pages by physically counting the number of paid advertising pages in each of our editions of 51job Weekly. In calculating the number of paid advertising pages, we make adjustments to take into account differing page sizes and pages with mixed advertising and non-advertising content. This is a manual process that is subject to error, including errors in judgment as to the appropriate adjustments to be made. We cannot assure you that our methodology, page counting, calculations and analyses are accurate, or that they yield results that are comparable between periods or give a correct approximation of the actual revenues we generate per page.

     As our customers usually place orders for print advertisements on a week-to-week basis, our print advertising business is subject to weekly fluctuations. We do not recognize advertising revenue until an advertisement is actually printed in 51job Weekly. As a result, delays or cancellations by advertisers hamper our ability to predict print advertising revenues for future periods and makes it difficult for us to accurately forecast revenues with any degree of certainty. See “Item 3. — Key Information — Risk Factors — Risks Related to Our Business — Our recruitment advertising business is subject to weekly fluctuations which hamper our ability to predict when revenue will ultimately be recognized, if at all.”

     We generally require that all advertising fees be paid in advance of posting an advertisement, although we may offer credit terms to select clients on a case-by-case basis.

     Online Recruitment Services Revenues. We generate our online recruitment services revenues from fees we charge employers for placing recruitment and related advertisements on our www.51job.com website and for access to eHire through which our resumé download services and recruitment management tools are available. In addition, we generate online revenues for website design and hosting services that we provide to corporations that wish to maintain their own dedicated recruitment website within www.51job.com. We do not charge job seekers for using www.51job.com.

     We believe that the increase of our online recruitment services revenues has been characterized by a combination of greater acceptance of the Internet as a recruitment medium in China and our effectiveness in increasing the number of employers using our online recruitment services. In addition, we believe that, by offering online advertising in connection with our print advertising service, we are able to attract print advertising customers to our online recruitment services, as well as new customers seeking the broader coverage offered by our integration of these two channels and reaching a wider audience of job seekers.

     We expect the future growth of our online recruitment services revenues will be largely driven by greater numbers of unique employers using these services rather than increases in average revenue per unique employer. The prices we charge for online recruitment services have been generally unchanged in recent years. Our overall average revenue per unique employer has been generally stable due to two offsetting trends. Because new customers tend to

use basic, lower priced online recruitment services, significant increases in the number of these customers generally result in higher aggregate online recruitment services revenues but lower average revenue per unique employer. In addition, we may choose to offer introductory packages at reduced prices or provide complimentary trials from time to time, which will also lead to a reduction in average revenue per unique employer. However, our ability to retain customers and migrate them over time to higher-priced products has offset these factors that lower our average revenue per unique employer. As more customers become increasingly familiar with our online platform and we build customer loyalty, we may be able sell them a package of multiple online recruitment services or extend the length of their membership period, both of which increase our average revenue per unique employer. Our ability to retain customers and migrate them to higher priced products or multiple purchases may be adversely affected by, among other things, difficulties we may encounter in developing or launching higher priced services as well as offerings of similar services by competitors.

     We define a unique employer as a customer that purchases our online recruitment services during a specified period. We make adjustments for multiple purchases by the same customer within a city to avoid double counting. Each employer is assigned a unique identification number in our management information system. Affiliates and branches of a given employer may, under certain circumstances, be counted as separate unique employers. Our calculation of the number of unique employers is subject to misidentification and other forms of error, including errors in judgment as to appropriate adjustments to be made to the data. We cannot assure you that our methodology, employer identification, calculations and analyses are accurate, or that they yield results that are comparable between periods or give a correct approximation of actual numbers of customers.

     As with 51job Weekly, we generally require that all advertising fees be paid in advance of posting an advertisement on our website, although we may offer credit terms to select clients on a case-by-case basis.

     Executive Search Revenues. We generate our eSearch executive search revenues from fees and commissions paid by employers. We generally charge a total assignment fee of up to 30% of the candidate’s annual compensation, including a minimum upfront retainer. We offer executive search services as a part of our “one-stop” solution strategy to provide employers with a comprehensive suite of human resource services. We do not expect that this business will contribute significantly to our revenues in the foreseeable future and our ability to expand this business is affected by competition, our ability to retain our experienced consultants and the adoption of executive search by employers in China as an effective recruitment tool. As a result, we expect that our executive search service revenues may continue to decline as a percentage of our overall revenues.

     Other Human Resource Related Revenues

     We generate revenues from our other human resource related services principally from fees paid for attending our training seminars and for contracting our business processing outsourcing services as well as, to a lesser extent, for participating in our industry conferences, using our campus recruitment services, utilizing our assessment services and purchasing our salary survey studies. We expect to continue to expand our training and outsourcing businesses and aim to develop additional human resource related services and products for our corporate clients. We believe that these services are an important component of our “one-stop” human resource solution strategy and enhance our reputation and image as an industry innovator. In addition, we believe our business process outsourcing business may experience less seasonal and cyclical variations in revenues than our recruitment advertising businesses over time.

     Growth of our other human resource related services will be dependent on our ability to successfully develop, introduce and increase adoption of these types of products and services as well as a relaxation of government regulations in China. We believe the increase in our other human resource related revenues has been primarily driven by growing customer acceptance of these products and services, particularly our training and business process outsourcing services, as well as our sales and marketing efforts. In 2007, we achieved high growth in our other human resource related revenues, which provided 13.6% of our total revenues. We expect that as we continue to expand these services and meet growing market demand, revenues generated from these services may increase as a percentage of our overall revenues in the future.

Net Revenues and Business Taxes

     Our net revenues reflect a PRC business tax of 5% and other related surcharges which are levied on our revenues, after certain deductions, generated from services we provide in China. Due to certain local government financial incentives, a portion of these business taxes that we had previously paid was refunded in 2005, 2006 and 2007 and included as other income in our statement of operations. We cannot assure you if or when we will receive such financial incentives in the future.

Costs

     We operate and manage our various businesses as a single segment. In addition, we share operating costs and management resources amongst these businesses. As a result, we do not account for our results of operations on a geographical or other basis, and we are unable to allocate costs among our various businesses.

     The following table sets forth our cost of services and total operating expenses as a percentage of our net revenues for the periods indicated.

		For the year ended December 31,
		2005				2006				2007
Cost of services			(47.9	%)			(44.6	%)			(43.7	%)
Total operating expenses			(38.4	%)			(38.0	%)			(38.7	%)

     Our cost of services declined as a percentage of our net revenues from 2005 to 2007. We believe this has been primarily a result of our ability to achieve greater economies of scale and operating efficiencies, particularly in our print advertising and online recruitment services businesses. As we have grown our operations and infrastructure, we believe that we have also been able to attract new employers and to increase cross-selling opportunities with existing customers across our various markets. This has allowed us to achieve greater economies of scale as we have realized a higher level of revenues relative to our direct costs. In addition, the expansion of our online recruitment services business requires limited additional fixed costs. The higher growth and revenue contribution of the online business relative to our other businesses has improved our overall operating efficiency. We believe that our online recruitment services business will achieve higher profit margins than our other recruitment related businesses in the longer term.

     We believe that our operating expenses increased as a percentage of our net revenues in 2005 due to the expansion of our sales force, higher marketing expenses and greater general administrative expenses following our becoming a public company in September 2004. In 2006, our operating expenses declined slightly as a percentage of our net revenues compared to the prior year as operating leverage was largely offset by higher share-based compensation expenses. Our operating expenses as a percentage of our net revenues increased in 2007 due to greater sales and marketing expenses as well as a loss provision relating to a third party contractor included in general and administrative expenses. Although we expect to increase spending on sales and marketing activities and product development in order to strengthen our brand and enhance our service offerings, we aim to decrease our cost of services and total operating expenses as a percentage of our net revenues in the longer term through economies of scale and improved operating efficiencies. However, our ability to achieve economies of scale and operating efficiencies is subject to significant uncertainties. As a result, we cannot assure you that we will be able to decrease these costs as a percentage of our net revenues.

     Cost of Services

     Our cost of services primarily consists of printing related expenses and employee compensation. Printing related costs, which principally include printing, publishing and distribution expenses that we pay to our newspaper contractors, represent the majority of our cost of services. Our printing related costs are characterized by both fixed and variable components. In addition, these costs have tended not to increase or decrease proportionately to increases or decreases in our print advertising revenues. As a result, we have been able to grow our print advertising businesses while incurring lower printing related costs relative to our print advertising revenues. We aim to lower our printing related costs as a percentage of print advertising revenues and we continuously seek opportunities to secure more favorable terms with local newspaper contractors, which may result in changes in our newspaper contractors. In addition, to a significant extent, we have been able to leverage our existing infrastructure to grow our online recruitment services revenues, allowing us to incur limited additional costs relative to the higher revenues we have generated. The majority of our employee compensation and other costs of services are largely shared across our various business lines.

     Operating Expenses

     Our operating expenses include sales and marketing expenses and general and administrative expenses.

     The following table sets forth our operating expenses as a percentage of our net revenues for the periods indicated.

		For the year ended December 31,
		2005				2006				2007
Operating expenses:
Sales and marketing			(20.5	%)			(20.7	%)			(22.7	%)
General and administrative			(17.9	)			(17.3	)			(16.0	)
Total operating expenses			(38.4	%)			(38.0	%)			(38.7	%)

     Our sales and marketing expenses primarily consist of salaries, commissions and share-based compensation for our sales and marketing staff, advertising and promotion expenses, and expenses for our management and staff related to our daily operations in local markets. The level of sales and marketing expenditures varies in each city annually and is impacted by a number of factors, including competition and our strategic objectives in each market. In addition, the sales and marketing strategies we employ in each city varies depending on our determination of the most effective means to promote our brand and services. Our sales and marketing expenses have increased in recent years due primarily to expansion of our sales force and greater marketing and promotional activities. We expect to invest further resources to strengthen our market position and brand. We also receive marketing support for 51job Weekly from many of our newspaper contractors. However, since we record all costs associated with our relationships with our newspaper contractors under cost of services, our sales and marketing expenses do not reflect costs incurred in connection with this marketing support.

     Our general and administrative expenses primarily consist of employee salaries, bonuses and share-based compensation, building depreciation, office rent and property management fees, administrative office expenses and professional services fees. Our general and administrative expenses as a percentage of our net revenues declined from 2005 to 2007 due primarily to improved operating efficiencies, although the decrease was largely offset in 2006 by higher share-based compensation expenses under the adoption of a new accounting policy and in 2007 by a loss provision relating to a third party contractor. As we expand our business and improve our operating and management efficiencies, we aim to lower our general and administrative expenses as a percentage of net revenues in the longer term, but due to significant uncertainties, we cannot assure you of our ability to do so.

Income Taxation

     We file separate income tax returns because we, our subsidiaries and our affiliated entities are incorporated in different jurisdictions.

     Under the current laws of the Cayman Islands, we are not subject to income or capital gain taxes. In addition, upon payments of dividends by us to our shareholders, no Cayman Islands withholding tax will be imposed.

     Under the current laws of the British Virgin Islands, we are exempt from income tax on foreign derived income. In addition, there are no withholding taxes in the British Virgin Islands.

     Under the former PRC laws and regulations, foreign-invested enterprises that are incorporated in China were generally subject to enterprise income tax, or EIT, at a rate of 33%. As opposed to our business taxes which are based on our total revenues and discussed above in “— Revenues — Net Revenues and Business Taxes,” EIT is a separate tax based on our taxable income. The PRC government also entitled newly organized PRC entities conducting advertising businesses to elect a tax exemption for their first two years of operation and to carry forward tax losses incurred, if any, during this two-year period to future periods subject to government approval. A number of our AdCo Subsidiaries had received the two-year tax exemption treatment and, upon expiration of these exemptions beginning in 2004, were taxed at the then statutory tax rate of 33%. The amount of income tax payable by our PRC subsidiaries in the future will depend on various factors, including, among other things, the results of operations and taxable income of, and the statutory tax rate applicable to, each of the subsidiaries, and our effective tax rate depends in part on the extent of each of our subsidiaries’ relative contribution to our consolidated taxable income. As our overseas entities recognize share-based compensation expense and losses from foreign currency translation which are not deductible for PRC tax purposes, our effective tax rate has at times exceeded the statutory rate.

     On March 16, 2007, the National People’s Congress approved and promulgated a new tax law named “Enterprise Income Tax Law of the PRC,” or the EIT Law, which applies a uniform 25% EIT rate to both foreign-invested enterprises and domestic enterprises effective January 1, 2008. For enterprises that were established before the new EIT Law was promulgated and were entitled to preferential tax rates under former tax laws and regulations, the EIT Law has granted a grace period of up to five years for these enterprises to gradually transition from their preferential tax rates to the standard rate of 25%. Prior to the promulgation of the new EIT Law, we

obtained preferential tax treatment from local tax authorities for AdCo’s subsidiary in Shenzhen and Wang Cai AdCo’s subsidiaries in Shanghai and Shenzhen, each at a tax rate of 15%. In late 2006, our foreign-invested Chinese subsidiary, Tech JV, obtained approval from the tax bureau of Pudong New District for a preferential EIT rate of 15% in Shanghai. Other branches of Tech JV were granted a preferential EIT rate of 30%. We are awaiting further official clarifications to determine the tax status of these entities as well as how to grandfather preferential tax statuses if they remain available to us. Meanwhile, we are subject to the new 25% EIT rate.

     Under the former PRC tax law, dividend payments to foreign investors made by foreign-invested enterprises, such as TechJV, were exempt from PRC withholding tax. However, pursuant to the new EIT Law, dividends payable by a foreign-invested enterprise to its foreign investors from profits earned after January 1, 2008 are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The Cayman Islands, where we are incorporated, does not have such a tax treaty with China. In addition, under the new EIT Law, enterprises organized under the laws of jurisdictions outside China with their “de facto management bodies” located within China may be considered PRC resident enterprises and therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. Under the implementation regulations issued by the State Council relating to the new EIT Law, “de facto management bodies” is defined as the bodies that have material and overall management control over the business, personnel, accounts and properties of an enterprise. Substantially all of our management is currently based in China. Under the new EIT Law, we may be considered an enterprise established outside China with “de facto management bodies” located in China and thus a “resident enterprise” subject to the uniform 25% enterprise income tax rate as to our global income. See “Item 3. — Key Information — Risk Factors — Risks Related to Our Business — If certain preferential tax treatments become unavailable in China, our effective income tax rate would increase.”

     Some of our PRC subsidiaries and affiliated entities have accumulated tax loss carryforwards that have not previously been recognized as deferred tax assets because there was significant uncertainty as to whether we would be able to realize the benefit from those loss carryforwards. To the extent permitted by PRC tax rules, we may undertake further reorganizations or transactions among our subsidiaries and affiliated entities or with third parties to utilize some or all of these tax loss carryforwards before they expire, or qualify for additional tax benefits.

Critical Accounting Policies

     We prepare financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements, and the reported amounts of revenues and expenses during the financial reporting period. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We consider the policies discussed below to be critical to an understanding of our financial statements as their application assists management in making their business decisions.

     We operate and manage our various businesses as a single segment. In addition, since our revenues are primarily generated from customers in the PRC, we do not account for our results of operations on a geographical or other basis. Since many of our management and staff provide services with respect to many or all of our businesses, and since our infrastructure and operations are designed to facilitate all of our businesses as an integrated unit, we are unable to allocate costs among our various businesses or present our financial results in terms of multiple business segments.

     Income Taxes

     We adopted Financial Accounting Standard Board, or FASB, Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109,” or FIN 48, effective January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in our financial statements in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” and prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. The cumulative effects of applying FIN 48 is recorded as an adjustment to retained earnings as of the beginning of the period of adoption. We did not incur a cumulative effect adjustment upon adoption of FIN 48. We have elected to classify interest and

penalties related to an uncertain tax position, if any and when required, as general and administrative expenses. For the year ended December 31, 2007, we did not have any interest and penalties associated with uncertain tax positions.

     We provide a valuation allowance on our deferred tax assets to the extent we consider it to be more likely than not that we will be unable to realize all or part of such assets. Our future realization of our deferred tax assets is dependent on many factors, including our ability to generate taxable income within the period during which temporary differences reverse or before our tax loss carryforwards expire, the outlook for the Chinese economy and overall outlook for our industry. We consider these factors at each balance sheet date and determine whether valuation allowances are necessary.

     We had deferred tax assets, net of valuation allowance, of RMB6.3 million as of December 31, 2005, RMB4.9 million as of December 31, 2006 and RMB6.1 million (US$0.8 million) as of December 31, 2007.

     As of December 31, 2005, 2006 and 2007, we recognized aggregate valuation allowances of RMB5.8 million, RMB7.8 million and RMB6.5 million (US$0.9 million), respectively. As a result of our current expectations as to our ability to generate taxable income, we currently do not expect to provide significant further valuation allowances with respect to our net deferred tax assets. In the event that unexpected developments prevent us from realizing some or all of our deferred tax assets, we will be required to take a charge against our net income for the period in which such events occur.

     Share-Based Compensation

     Prior to January 1, 2006, we accounted for share-based compensation arrangements under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” or APB No. 25, and complied with the disclosure provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” or SFAS No. 123. In general, compensation cost under APB No. 25 was recognized based on the difference, if any, between the estimated fair value or market value of our common shares and the amount an employee was required to pay to acquire the shares, as determined on the date the option was granted. Compensation cost, if any, was recorded in shareholders’ equity as additional paid-in capital with an offsetting entry recorded to deferred share-based compensation. Deferred share-based compensation was amortized and charged to expense based on the vesting terms of the underlying options. We recognized share-based compensation in connection with the grant of options to employees and directors, the sale of common shares to one of our directors at a price below fair market value, and the extension of the exercise period of options held by certain terminated employees. This resulted in share-based compensation expense of RMB14.6 million in 2005.

     Beginning on January 1, 2006, we have accounted for share-based compensation arrangements under Statement of Financial Accounting Standards No. 123R (revised 2004), “Share-Based Payment,” or SFAS No. 123R, which requires companies to expense the value of employee stock options and similar awards. Under SFAS No. 123R, share-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis, net of estimated forfeitures, over the vesting period. We have selected the modified prospective method as the transitional method, under which the expenses related to unvested but still outstanding options as calculated under the original SFAS No. 123 be charged to expense without any change in previously calculated measurement. We recognized share-based compensation expense of RMB28.5 million in 2006 and RMB29.7 million (US$4.1 million) in 2007 in connection with the grant of options to our employees, executives and directors.

     Under SFAS No. 123R, we applied the Black-Scholes valuation model in determining the fair value of options granted, which requires the input of highly subjective assumptions, including the expected life of the stock option, stock price volatility and the pre-vesting option forfeiture rate. Our assumption for expected life is based on historical exercise patterns, which we believe are representative of future behavior. We estimate expected volatility at the date of grant based on historical volatilities of the market price of our ADSs. The assumptions used in calculating the fair value of stock options represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. We estimate the forfeiture rate based on historical experience of our stock options that are granted, exercised and forfeited. If our actual forfeiture rate is materially different from our estimate, the share-based compensation expense could be significantly different from what we have recorded in the current period.

     See note 2(n) to our consolidated financial statements included elsewhere in this annual report for further discussion of stock-based compensation under SFAS No. 123R. The guidance provided in SFAS No. 123R and Staff Accounting Bulletin No. 107, or SAB No. 107, is relatively new and may be subject to further interpretation and refinement over time. The adoption of SFAS No. 123R increased our share-based compensation expense in our

consolidated statement of operations beginning in 2006 and we expect the implementation of SFAS No. 123R may continue to adversely affect our earnings in the future.

     Basis for Consolidation and Our Relationships with Our Affiliated Variable Interest Entities

     We consolidate 100% of the interests of all of our subsidiaries and affiliated entities.

     We have entered into contractual arrangements with Qian Cheng, RAL and Run An under which we bear all of their economic risk and received all of their economic rewards. In our consolidated financial statements, we have consolidated all of the interests of Qian Cheng, RAL and Run An under FASB Interpretation No. 46 (revised 2003), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” or FIN 46R. Qian Cheng and RAL are wholly owned by Run An. Run An is jointly owed by David Weimin Jin and Tao Wang, PRC nationals and executive officers of our company.

     FIN 46R requires a “variable interest entity” to be consolidated by the primary beneficiary of such entity. An entity is considered to be a variable interest entity if certain conditions are present, including where the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Under various agreements with Qian Cheng, RAL and Run An, we are considered the primary beneficiary of Qian Cheng, RAL and Run An, and all of their interests have been consolidated in our financial statements. In addition, as a result of our consolidation of Qian Cheng, its minority interests in Tech JV and its subsidiaries have been consolidated in our financial statements. All significant transactions and balances between us, our subsidiaries, Qian Cheng, RAL and Run An have been eliminated upon consolidation.

     In the opinion of Jun He Law Offices, our PRC legal counsel, except as otherwise disclosed in this annual report, these contractual arrangements and our current business operations are not in violation of existing PRC laws, rules and regulations in all material aspects. There are, however, substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to the laws and regulations governing our business or the enforcement and performance of our contractual arrangements in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings. Accordingly, we cannot assure you that PRC regulatory authorities will not take a view contrary to the opinion of our PRC legal counsel. See “Item 3. — Key Information — Risk Factors — Risks Related to Our Corporate Structure — If the PRC authorities determine that our past ownership structure was inconsistent with the requirements for operating certain of our businesses, we could be subject to sanctions” and “— Risks Related to the People’s Republic of China — The PRC legal system has inherent uncertainties that could materially and adversely affect us.”

     For additional information with respect to our contractual arrangements with Qian Cheng, RAL and Run An, see “Item 7. — Major Shareholders and Related Party Transactions — Related Party Transactions — Contractual Arrangements Among Our Group Entities.”

     Allowances for Doubtful Accounts

     We provide general and specific provisions for bad debts when facts and circumstances indicate that the receivable is unlikely to be collected. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

     Long-Lived Assets

     Our accounting for long-lived assets, including property and equipment, is described in note 2(g) to our consolidated financial statements included elsewhere in this annual report. The recorded value of long-lived assets is affected by a number of management estimates, including estimated useful lives, residual values and impairment charges. We assess impairment for long-lived assets whenever the net book value for these assets is more than the estimated future cash flows attributable to them. During each of the years ended December 31, 2005 and 2007, we did not record any impairment charges. In 2006, we recorded a RMB48,966 impairment charge associated with office equipment, which we disposed in 2007. If different judgments or estimates had been utilized, material differences could have resulted in the amount and timing of the impairment charge and the related depreciation and amortization charges.

Results of Operations

     The following table sets forth a summary of our audited consolidated statements of operations for the periods indicated both in Renminbi and as a percentage of net revenues:

		For the year ended December 31,
		2005								2006								2007
(in thousands, except percentages)		RMB				%				RMB				%				RMB				%
Revenues:
Print advertising			356,285				63.4				389,535				59.0				430,621				53.9
Online recruitment services			159,495				28.4				219,794				33.3				282,688				35.4
Executive search			26,307				4.7				19,938				3.0				16,086				2.0
Other human resource related revenues			53,507				9.5				68,586				10.4				114,871				14.3
Total revenues			595,594				106.0				697,853				105.8				844,266				105.6
Less: Business and related tax			(33,568	)			(6.0	)			(38,010	)			(5.8	)			(44,982	)			(5.6	)
Net revenues			562,026				100.0				659,843				100.0				799,284				100.0
Cost of services(1)			(269,328	)			(47.9	)			(294,068	)			(44.6	)			(349,022	)			(43.7	)
Gross profit			292,698				52.1				365,775				55.4				450,262				56.3
Operating expenses(1):
Sales and marketing			(115,095	)			(20.5	)			(136,770	)			(20.7	)			(181,230	)			(22.7	)
General and administrative			(100,614	)			(17.9	)			(114,322	)			(17.3	)			(128,347	)			(16.0	)
Total operating expenses			(215,709	)			(38.4	)			(251,092	)			(38.0	)			(309,577	)			(38.7	)
Income from operations			76,989				13.7				114,683				17.4				140,685				17.6
Loss from foreign currency translation			(11,320	)			(2.0	)			(9,440	)			(1.4	)			(18,134	)			(2.3	)
Interest and investment income			20,385				3.6				20,744				3.1				24,635				3.1
Other income			5,313				1.0				1,914				0.3				1,793				0.2
Income before income tax provision			91,367				16.3				127,901				19.4				148,979				18.6
Income tax expense			(29,945	)			(5.4	)			(28,560	)			(4.3	)			(45,402	)			(5.7	)
Net income			61,422				10.9				99,341				15.1				103,577				12.9
(1) Share-based compensation expense:
Included in cost of services			(1,480	)			(0.3	)			(4,621	)			(0.7	)			(4,931	)			(0.6	)
Included in operating expenses:
Sales and marketing			(1,438	)			(0.3	)			(3,972	)			(0.6	)			(4,241	)			(0.5	)
General and administrative			(11,635	)			(2.1	)			(19,926	)			(3.0	)			(20,479	)			(2.6	)

      2007 Compared to 2006

     Total Revenues. Our total revenues increased 21.0% to RMB844.3 million (US$115.7 million) in 2007 from RMB697.9 million in 2006. This increase was primarily driven by growth in revenues from our online recruitment services, other human resource related services and print advertising. We derived our total revenues from:

	•		Print Advertising. Our print advertising revenues increased 10.5% to RMB430.6 million (US$59.0 million) in 2007 from RMB389.5 million in 2006. This increase was primarily due to a higher number of recruitment advertisements placed in our editions of 51job Weekly as we increased customer penetration in our existing markets. We estimate that the number of print advertising pages increased 31.4% to 16,568 in 2007 from 12,609 in 2006. The increase in revenues from greater advertisement volumes was partially offset by a 15.9% decrease in our overall average revenue per page due to higher growth rates in lower priced markets. We did not materially change the prices we charge for print advertising in each local market in 2007.
	•		Online Recruitment Services. Our online recruitment services revenues increased 28.6% to RMB282.7 million (US$38.8 million) in 2007 from RMB219.8 million in 2006. This increase was mainly attributable to growth in the number of unique employers placing recruitment and related advertisements on www.51job.com as well as greater use of our eHire web-based online resumé and recruitment management platform. We estimate that the number of unique employers increased 25.6% to 94,125 in 2007 from 74,950 in 2006. The prices we charge for our online recruitment services were generally unchanged in 2007. However, our average revenue per unique employer in 2007 increased 2.4% over 2006 as a result of

			the greater number of customers purchasing multiple online recruitment services and the migration of customers to higher priced products, both factors which increase our average revenue per unique employer, more than offset the increase in new online customers, who generally purchase basic, lower priced recruitment advertisements and decrease our average revenue per unique employer.
	•		Executive Search. Our executive search revenues decreased 19.3% to RMB16.1 million (US$2.2 million) in 2007 from RMB19.9 million in 2006, primarily as a result of fewer candidate assignments.
	•		Other Human Resource Related Revenues. Our revenues from other human resource related services increased 67.5% to RMB114.9 million (US$15.7 million) in 2007 from RMB68.6 million in 2006. This increase was primarily attributable to an increase in training revenues as we conducted a greater number of seminars and added new course content as well as an increase in business process outsourcing revenues from the growing number of corporate customers and their employees we served.

     Net Revenues. Our net revenues increased 21.1% to RMB799.3 million (US$109.6 million) in 2007 from RMB659.8 million in 2006. Our net revenues reflected our total revenues less the amounts paid as business taxes of RMB45.0 million (US$6.2 million) in 2007 and RMB38.0 million in 2006.

     Cost of Services. Our cost of services increased 18.7% to RMB349.0 million (US$47.8 million) in 2007 from RMB294.1 million in 2006. This increase was principally due to higher printing related expenses associated with greater page volumes of 51job Weekly as well as higher employee compensation expense from staff additions and a rise in wage levels. Our cost of services in 2007 also included share-based compensation expense of approximately RMB4.9 million (US$0.7 million) compared with RMB4.6 million in 2006. Our cost of services decreased as a percentage of net revenues in 2007 due to greater economies of scale and improved operating efficiencies in our businesses.

     Gross Profit. As a result of the above factors, our gross profit increased 23.1% to RMB450.3 million (US$61.7 million) in 2007 from RMB365.8 million in 2006. Our gross profit margin, which is equal to our gross profit divided by our net revenues, was 56.3% in 2007 compared with 55.4% in 2006.

     Operating Expenses. Our total operating expenses increased 23.3% to RMB309.6 million (US$42.4 million) in 2007 from RMB251.1 million in 2006. The increase in our operating expenses was primarily due to an increase in sales and marketing expenses as well as a loss provision included in general and administrative expenses. Our operating expenses consisted of:

	•		Sales and Marketing Expenses. Our sales and marketing expenses increased 32.5% to RMB181.2 million (US$24.8 million) in 2007 from RMB136.8 million in 2006. This increase was due to the expansion of our sales and marketing staff, higher employee salaries and commissions, and greater spending on advertising and promotional activities. Our advertising and promotion expenses in 2007 increased 79.6% to RMB34.1 million (US$4.7 million) from RMB19.0 million in 2006 due to a greater number of customer events and activities as well as increased spending on brand advertising campaigns. Our sales and marketing expenses in 2007 also included share-based compensation expense of RMB4.2 million (US$0.6 million) compared with RMB4.0 million in 2006.
	•		General and Administrative Expenses. Our general and administrative expenses increased 12.3% to RMB128.3 million (US$17.6 million) in 2007 from RMB114.3 million in 2006. This increase was primarily due to a loss provision of RMB9.7 million (US$1.3 million) recorded in the fourth quarter of 2007 relating to the non-compliance to contract terms by a third party which provided services to us in connection with our human resource outsourcing operations in Beijing. We have terminated our relationship with the third party contractor and have been involved in an ongoing investigation of this contractor with the assistance of local authorities. Due to the contractor’s non-compliance, we have assessed that we face probable liability and have estimated a loss of RMB9.7 million (US$1.3 million) related to this matter. We are exploring all legal options available to recover funds from the third party contractor. However, the outcome of the investigation and our ability to recover funds is unclear.
			In addition to the loss provision, our general and administrative expenses increased in 2007 due to higher employee compensation and depreciation and amortization expenses which were partially offset by lower office rent and professional services fees. Our general and administrative expenses in 2007 included share-based compensation expense of RMB20.5 million (US$2.8 million) compared with RMB19.9 million in 2006.

     Loss from Foreign Currency Translation. We recognized a loss from foreign currency translation of RMB18.1 million (US$2.5 million) in 2007 compared with RMB9.4 million in 2006 as a result of the appreciation of the Renminbi against the U.S. dollar. For more information about China’s foreign exchange policy, see “Item 10. — Additional Information — Exchange Controls.”

     Interest and Investment Income. Our interest and investment income increased 18.8% to RMB24.6 million (US$3.4 million) in 2007 from RMB20.7 million in 2006 due to higher average balances in our interest bearing bank deposits.

     Income Tax Expense. We recorded an income tax expense of RMB45.4 million (US$6.2 million) in 2007 compared with RMB28.6 million in 2006. Our effective tax rate increased to 30.5% in 2007 from 22.3% in 2006 due to the expiration of certain tax exemptions for some of our entities in China in 2007. Effective January 1, 2008, we are subject to a new PRC tax law. For more information about taxation in China, see “— Income Taxation.”

     Net Income. As a result of the above factors, our net income increased 4.3% to RMB103.6 million (US$14.2 million) in 2007 from RMB99.3 million in 2006.

      2006 Compared to 2005

     Total Revenues. Our total revenues increased 17.2% to RMB697.9 million in 2006 from RMB595.6 million in 2005. This increase was primarily driven by growth in our print advertising revenues and our online recruitment services revenues, which was partially offset by a decrease in our executive search revenues. We derived our total revenues from:

	•		Print Advertising. Our print advertising revenues increased 9.3% to RMB389.5 million in 2006 from RMB356.3 million in 2005. This growth was primarily due to a greater volume of print advertisements in our editions of 51job Weekly, which reflected increased penetration in existing markets and our sales and marketing efforts, as well as higher overall average revenue per page. We estimate that the number of print advertising pages increased 6.1% to 12,609 in 2006 from 11,884 in 2005. Our overall average revenue per page rose approximately 3.0% over 2005 as a result of modest price increases we made for certain print advertisement products in some cities in late 2005.
	•		Online Recruitment Services. Our online recruitment services revenues increased 37.8% to RMB219.8 million in 2006 from RMB159.5 million in 2005. This increase was primarily the result of significant growth in the number of unique employers using our online recruitment services complemented by a modest increase in our average revenue per unique employer. We estimate that the number of unique employers increased 32.4% to 74,950 in 2006 from 56,599 in 2005, mainly due to our greater sales and marketing efforts and increased customer acceptance of the Internet as a channel for recruitment advertising. Although the prices we charge were generally unchanged in 2006, our average revenue per unique employer in 2006 increased 4.1% from 2005 as the employers who purchased multiple online services or higher priced products offset the first-time customers who generally purchase discounted introductory and promotional online recruitment services packages.
	•		Executive Search. Our executive search revenues decreased 24.2% to RMB19.9 million in 2006 from RMB26.3 million in 2005 due to fewer candidate assignments and case closings.
	•		Other Human Resource Related Revenues. Our revenues from other human resource related services increased 28.2% to RMB68.6 million in 2006 from RMB53.5 million in 2005. This increase was primarily driven by growth in sales of training and outsourcing services. Training revenues grew as a result of an increase in the number of public and in-house seminars we conducted in 2006. In addition, we believe the increase in revenues from our human resource outsourcing business reflected growing customer acceptance and demand for these services as well as our sales and marketing efforts.

     Net Revenues. Our net revenues increased 17.4% to RMB659.8 million in 2006 from RMB562.0 million in 2005. Our net revenues reflected our total revenues less the amounts paid as business taxes of RMB38.0 million in 2006 and RMB33.6 million in 2005.

     Cost of Services. Our cost of services increased 9.2% to RMB294.1 million in 2006 from RMB269.3 million in 2005. This increase was primarily attributable to higher employee compensation expense due to salary increases and the hiring of additional staff to service our growing customer base. In addition, we incurred higher printing related expenses associated with our 51job Weekly operations as well as an increase in page volumes. Our cost of services in 2006 also included an increase in share-based compensation expense to RMB4.6 million from RMB1.5 million in 2005 due to the adoption of SFAS No. 123R. Our cost of services declined as a percentage of net revenues as we benefited from increasing economies of scale and operating efficiencies in our businesses.

     Gross Profit. As a result of the above factors, our gross profit increased 25.0% to RMB365.8 million in 2006 from RMB292.7 million in 2005. Our gross profit margin was 55.4% in 2006 compared to 52.1% in 2005.

     Operating Expenses. Our total operating expenses increased 16.4% to RMB251.1 million in 2006 from RMB215.7 million in 2005. The increase in our operating expenses was primarily due to an increase in sales and marketing expenses as well as general and administrative expenses. Our operating expenses consisted of:

	•		Sales and Marketing Expenses. Our sales and marketing expenses increased 18.8% to RMB136.8 million in 2006 from RMB115.1 million in 2005. This increase was primarily due to increases in commissions and bonuses paid to sales personnel, the hiring of additional sales and marketing staff, increases in employee salaries and benefits, increases in marketing and promotional expenses, and the addition of a new sales office in Tianjin in 2006. We calculate commissions based on a percentage of total revenues generated by a salesperson. In addition, we pay bonuses to account executives for achieving and exceeding certain sales targets and goals. Our total advertising and promotion expenses in 2006 decreased 11.1% to RMB19.0 million from RMB21.4 million in 2005 due to lower advertising expenses which were partially offset by higher promotion expenses from conducting a greater number of promotional events and other brand awareness activities. Our sales and marketing expenses in 2006 also included an increase in share-based compensation expense to RMB4.0 million from RMB1.4 million in 2005 due to the adoption of SFAS No. 123R.
	•		General and Administrative Expenses. Our general and administrative expenses increased 13.6% to RMB114.3 million in 2006 from RMB100.6 million in 2005. This increase was primarily due to higher share-based compensation expense, hiring of additional office staff, higher employee salaries and bonuses, higher professional services fees, and costs associated with our purchase of office facilities in Shanghai, including greater depreciation expenses, moving and renovation expenses, and office management fees. Our general and administrative expenses in 2006 included a 71.3% increase in share-based compensation expense to RMB19.9 million from RMB11.6 million in 2005 due to the adoption of SFAS No. 123R.

     Loss from Foreign Currency Translation. We recognized a loss from foreign currency translation of RMB9.4 million in 2006 compared with a loss of RMB11.3 million in 2005 due to the appreciation of the Renminbi against the U.S. dollar.

     Interest and Investment Income. Our interest and investment income increased 1.8% to RMB20.7 million in 2006 from RMB20.4 million in 2005 due to a higher interest rate environment.

     Income Tax Expense. We recorded an income tax expense of RMB28.6 million in 2006 compared to RMB29.9 million in 2005. Our effective tax rate decreased to 22.3% in 2006 from 32.8% in 2005. The decrease was primarily due to certain tax exemptions and preferential tax approvals obtained for some of our entities in China.

     Net Income. As a result of the above factors, our net income increased 61.7% to RMB99.3 million in 2006 from RMB61.4 million in 2005.

      Inflation

     Since our inception, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the change of consumer price index in China was 1.8%, 1.5% and 4.8% in 2005, 2006 and 2007, respectively. According to the National Bureau of Statistics, China’s general consumer price index increased 7.7% in May 2008 compared to May 2007. Although we have not in the past been materially affected by any such inflation since our inception, we can provide no assurance that we will not be affected in the future by higher rates of inflation in China. For example, certain operating costs and expenses, such as employee compensation and office operating expenses may increase as a result of higher inflation. Additionally, because a substantial portion of our assets consists of cash and cash equivalents, high inflation could significantly reduce the value and purchasing power of these assets. We are not able to hedge our exposures to higher inflation in China.

      Unaudited Quarterly Results of Operations

     We have presented our unaudited quarterly results of operations for the four fiscal quarters of 2007. You should read the following table in conjunction with the consolidated financial statements and related notes contained elsewhere in this annual report. We have prepared the unaudited information on the same basis as our audited consolidated financial statements. This information reflects all adjustments, consisting only of normal recurring adjustments, which are in the opinion of our management necessary for fair presentation of our results of operations for the quarters presented. Because the recruitment advertising and human resource industries in China are new and rapidly evolving, and because our business is also relatively new, operating results for any quarter are not necessarily indicative of results for any future quarters or for a full year.

     The following table presents our unaudited quarterly results of operations for 2007:

		For the three months ended,
		March 31,				June 30,				September 30,				December 31,
		2007				2007				2007				2007
(in thousands)		RMB				RMB				RMB				RMB
Revenues:
Print advertising			113,557				107,569				114,065				95,430
Online recruitment services			61,585				71,203				73,018				76,882
Executive search			3,852				4,676				3,592				3,966
Other human resource related revenues			21,491				26,497				29,558				37,325
Total revenues			200,485				209,945				220,233				213,603
Net revenues			189,382				199,170				208,456				202,276
Cost of services(1)			(84,850	)			(84,076	)			(90,657	)			(89,439	)
Gross profit			104,532				115,094				117,799				112,837
Operating expenses(1):
Sales and marketing			(33,776	)			(42,232	)			(50,548	)			(54,674	)
General and administrative			(28,915	)			(29,804	)			(31,866	)			(37,762	)
Total operating expenses			(62,691	)			(72,036	)			(82,414	)			(92,436	)
Income from operations			41,841				43,058				35,385				20,401
Income before income tax provision			44,502				45,126				38,756				20,595
Income tax expense			(12,347	)			(14,095	)			(12,078	)			(6,882	)
Net income			32,155				31,031				26,678				13,713
(1) Share-based compensation expense:
Included in cost of services			(1,184	)			(1,168	)			(1,300	)			(1,279	)
Included in operating expenses:
Sales and marketing			(1,017	)			(1,005	)			(1,119	)			(1,100	)
General and administrative			(5,187	)			(4,648	)			(5,698	)			(4,946	)

B. Liquidity and Capital Resources

     We believe that our current cash and cash equivalents and cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for the foreseeable future. However, we may require additional cash resources due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue.

Liquidity

     Our liquidity has been principally affected by our significant increases in net cash from operating activities as well as our repurchases of ADSs in the open market in 2005 and our purchases of property, equipment and software.

     The following table sets forth a summary of our cash flows for the periods indicated.

		For the year ended December 31,
		2005				2006				2007				2007
(in thousands)		RMB				RMB				RMB				US$
Net cash provided by operating activities			122,026				185,229				193,315				26,501
Net cash used in investing activities			(54,391	)			(144,402	)			(41,248	)			(5,655	)
Net cash provided by (used in) financing activities			(74,098	)			6,099				4,470				613
Net increase (decrease) in cash			(17,659	)			38,064				138,822				19,031

     Cash Flows from Operating Activities. Our net cash provided by operating activities in 2005 increased to RMB122.0 million and consisted of RMB61.4 million in net income. The increase also included RMB14.6 million in share-based compensation, RMB13.1 million in depreciation and RMB11.3 million in loss from foreign currency translation. In addition, our net cash provided by operating activities was impacted by an increase of RMB22.8 million in advances from customers, an increase of RMB7.6 million in salary and employee related accrual, a decrease of RMB8.6 million in prepayments and other current assets, and a decrease of RMB7.4 million in taxes payable.

     Our net cash provided by operating activities in 2006 increased to RMB185.2 million and consisted of RMB99.3 million in net income, which increased primarily due to higher revenues generated by our online recruitment services and print advertising businesses as well as a lower effective tax rate. The increase in net cash provided by operating activities also included RMB28.5 million in share-based compensation, RMB15.9 million in depreciation and RMB9.4 million in loss from foreign currency translation. In addition, our net cash provided by operating activities was impacted by an increase of RMB17.3 million in advances from customers and an increase of RMB7.3 million in salary and employee related accrual.

     Our net cash provided by operating activities in 2007 increased to RMB193.3 million (US$26.5 million) and consisted of RMB103.6 million (US$14.2 million) in net income, which increased principally due to revenue growth in our online recruitment services, other human resource related services and print advertising businesses. The increase in net cash provided by operating activities also included RMB29.7 million (US$4.1 million) in share-based compensation, RMB18.4 million (US$2.5 million) in depreciation and RMB18.1 million (US$2.5 million) in loss from foreign currency translation. In addition, our net cash provided by operating activities was impacted by an increase of RMB15.1 million (US$2.1 million) in prepayments and other current assets, an increase of RMB17.6 million (US$2.4 million) in advances from customers, an increase of RMB9.7 million (US$1.3 million) in taxes payable and an increase of RMB7.7 million (US$1.0 million) from other payables and accruals.

     Cash Flows from Investing Activities. Our net cash used in investing activities from 2005 to 2007 reflected purchases of property, equipment, software and other intellectual property rights in these years in connection with the general growth of our businesses and the opening of new offices. We established four new offices in 2005 and one new office in 2006. In 2005, we made installment payments totaling RMB22.8 million toward our purchase of an office complex in Shanghai’s Zhangjiang area. In 2006, we paid the remaining balance of RMB90.9 million to complete the purchase of our principal executive offices in Zhangjiang and purchased our former executive offices at 21st Floor, Wen Xin Plaza, 755 Wei Hai Road, which serves as our downtown Shanghai sales office, for RMB27.9 million. In 2007, under our cooperation agreement with Recruit for the new coupon advertising company, we provided financing to the new company in the amount of RMB8.8 million (US$1.2 million).

     Cash Flows from Financing Activities. Our net cash from financing activities from 2005 to 2007 has been primarily affected by the repurchase of our ADSs and proceeds from the exercise of options by our employees, executives and directors. In 2005, our net cash used in financing activities consisted of our repurchase of 686,438 ADSs in the open market for an aggregate consideration of RMB75.6 million, which was partially offset by the exercise of options by employees and certain directors and officers. Our net cash provided by financing activities consisted of the exercise of options by employees and certain directors and officers in 2006 and 2007.

Capital Resources

     We have financed our operations primarily through cash flows from operating activities as well as equity investments by certain of our founders and current shareholders. To date, we have not financed our operations through significant borrowings, and as of December 31, 2007, we had no material debt obligations outstanding to unrelated parties.

     Our external financing has consisted primarily of the proceeds from our initial public offering. In October 2004, we raised net proceeds of RMB635.5 million from the sale of 6,037,500 ADSs in our initial public offering.

     Our operations are conducted primarily through Tech JV and its subsidiaries. As a result, our ability to finance our operations and any debt that we, or our subsidiaries, may incur is dependent, in part, upon the flow of dividends from, and the payment of royalties and other fees by, our subsidiaries. The payment of dividends in China is subject to restrictions. PRC regulations currently permit payment of dividends only out of accumulated profits as determined in accordance with PRC accounting standards and regulations. Our subsidiaries and affiliated entities in the PRC are also required to set aside a portion of their after-tax profits according to PRC accounting standards and regulations to fund certain reserve funds that are not distributable as cash dividends. Through certain contractual arrangements, we are able to require Qian Cheng to pay us any cash it receives as dividends or other distributions with respect to its minority shareholding in Tech JV and its subsidiaries. Our ability to obtain cash or other assets under these contracts depends on their effectiveness and enforceability. For a description of these agreements and our PRC counsel’s opinion as to their enforceability, see “Item 7. — Major Shareholders and Related Party Transactions — Related Party Transactions — Contractual Arrangements Among Our Group Entities.” If we or any of our subsidiaries are unable to receive all of the revenues from our operations through these contractual arrangements or dividends, we may be unable to effectively finance our operations.

     In April 2006, we completed the purchase of a new office complex in Shanghai’s Zhangjiang area for an aggregate consideration of RMB113.7 million. In addition, in July 2006, we completed the purchase of our former principal executive offices at 21st floor, Wen Xin Plaza, 755 Wei Hai Road, which serves as our downtown Shanghai

sales office, for an aggregate consideration of RMB27.9 million. For a discussion of our capital expenditures, see “Item 4. — Information on the Company — History and Development of the Company.”

     We believe that our current cash and cash equivalents and cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for the foreseeable future. We may, however, require additional cash resources due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue.

C. Research and Development

     We employ a large staff of website designers and software developers to design and update our website and create our proprietary software. We did not incur material expenditures with respect to our research and development activities in any of the three years ended December 31, 2005, 2006 or 2007. For more information on our technology operations, see “Item 4. — Information on the Company — Business Overview — Technology.”

D. Trend Information

     Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2005 to December 31, 2007 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

E. Off-Balance Sheet Arrangements

     Other than our operating lease and capital commitments, we do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts. We do not engage in trading activities involving non-exchange traded contracts.

F. Contractual Obligations

     We have entered into non-cancelable agreements with initial or remaining terms in excess of one year for the publication of 51job Weekly, the lease of office premises and the lease of office equipment. Our contractual cash obligations consist largely of obligations under property lease agreements for office premises. Payments made under operating leases, net of any incentive discounts that we receive from the leasing company, are charged to our income statement on a straight-line basis over the lease periods.

     The following table sets forth our future minimum payments with respect to non-cancelable agreements as of December 31, 2007:

														Capital
		Operating Lease Commitments												Commitments
		Publication				Office								Office
		fees				premises				Others				equipment				Total
(in thousands)		RMB				RMB				RMB				RMB				RMB
Less than one year			51,912				14,775				11,709				929				79,325
1-3 years			31,398				20,426				3,508				—				55,332
3-5 years			960				5,033				72				—				6,065
More than 5 years			600				24,345				1,521				—				26,466
Total			84,870				64,579				16,810				929				167,188

     The term of our publication fee agreements is generally for two years and our office lease agreements ranges from one to five years. We expect to renew substantially all of these agreements as they expire, although we cannot predict the terms and conditions of such renewals. In addition, we have entered into a long-term contract with a property management company for the maintenance and management of our principal executive offices in Shanghai.

     Rental expenses incurred under operating leases were RMB28.7 million in 2005, RMB29.9 million in 2006 and RMB23.9 million (US$3.3 million) in 2007.

     WFOE, our wholly owned PRC subsidiary, has entered into equity pledge agreements with the respective shareholders of each Qian Cheng, RAL and Run An. Under each of these equity pledge agreements, WFOE has an option, exercisable during a term of ten years, to purchase the equity interests in each of Qian Cheng, RAL and Run An, respectively, when and if, and at the lowest price, permitted by PRC law. At the end of the term, if and to the extent these options have not been exercised, WFOE is obligated to purchase the maximum amount of the equity