Seeking Alpha is conducting a Q & A with Simon Fu, chief financial officer for China Expert Technology (CXTI.OB). This innovative format allows readers to submit questions directly to the CFO, and receive direct answers, without the spin or paraphrasing of a reporter.

I asked Fu the following questions:

1. CXTI has landed numerous substantial e-government contracts in the Fujian province. At some point, I imagine that most of the larger governments will have at least a basic level of e-government services in place and the contracts will shift from larger implementation projects to smaller maintenance and improvement contracts. Is this assumption correct, and if so when do you see the market in Fujian maturing?

Answer: In Fujian, there are 82 cities and counties, and approximately 30% of these cities and counties are our target customers. At the moment, we have contracts with 12 of them and we believe there are substantial business opportunities in Fujian, in addition to possible future system upgrades and maintenance services opportunities.

2. CXTI has recently announced contracts outside Fujian province. Looking out three to five years, what percentage of new revenues would you expect to see from non-Fujian contracts? How important has the consultant CXTI retained been in landing these contracts?

Answer: Recently, we have adopted a balanced business development strategy and we will explore new business within and outside Fujian province. In three to five years time, we expect at least half of our revenues generated outside Fujian. We will work with different consultants to explore new prospects but hopefully we can have less reliance on them in future once we have more credible references and successful cases.

3. Now that CXTI has cleared up the debentures, what steps does it intend to take to upgrade its listing to Amex or (preferably) Nasdaq smallcap?

Answer: We have make an application to Nasdaq for listing on GM recently but it takes time and subject to their approval. We are working on getting an effective registration statement and several compliance issues to facilitate such listing.

4. Are there any changes likely in the tax rates paid by CXTI in coming years?

Answer: At the moment, we are subject to PRC corporation income tax at 15% on the net income derived in China. According to the latest PRC tax reform, such tax rate will be raised to 25% with effective from January 2008 though some kind of transitional arrangement is generally expected, but no details have been released by the State Council of PRC government yet.

Thanks to Mr. Fu for answering these questions, and to Seeking Alpha (and especially Ezra Marbach) for organizing the event. The company’s openness is encouraging, and I continue to believe that CXTI has a bright future. I have been a shareholder many times over the past year and a half, and will probably buy again in the near future.

DISCLOSURE: I have no position in CXTI.OB. Not a recommendation to buy or sell any security. For informational and educational purposes only.

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