Chongqing Machinery & Electric : UPDATE ON PROFIT WARNING

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

Chongqing Machinery & Electric Co., Ltd.*

(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 02722)

UPDATE ON PROFIT WARNING

This announcement is made by Chongqing Machinery & Electric Co., Ltd.* (the "Company") pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong).

Reference is made to the profit warning announcement of the Company dated 23 January 2020 (the "Previous Profit Warning Announcement"). Unless otherwise defined, terms used herein shall have the same meaning as defined in the Previous Profit Warning Announcement.

Since the Profit Warning Announcement, the Board further reviewed the latest unaudited consolidated management accounts of the Company and its subsidiaries for the year ended 31 December 2019 and the information currently available, and wishes to provide the following update.

Based on the preliminary review and assessment of the above information by the management, the Company expects that the net profit attributable to the shareholders of the Company for the year ended 31 December 2019 will decrease by approximately 55%-60% as compared to the same period in 2018. The decrease was mainly attributable to (i) the weakened market demands which resulted from the domestic and international economic downturn, (ii) the shrinked profit margins which were caused by the intensified market competition, and (iii) the impairment provision for receivables from the rubber trade business of approximately RMB85.60 million.

For item (iii) mentioned above, as disclosed in the Previous Profit Warning Announcement, in or around the fourth quarter of 2019, Chongqing General Trading Chemical Co., Ltd. (重慶商社化工有 限公司), one of the customers of the rubber trade business of PTG Hong Kong, had not made

• For identification purposes only

- 1 -

payment to PTG Hong Kong as agreed for the goods purchased. As a result, the Company and PTG Hong Kong had to honor the letter of credit themselves, involving an amount totalled approximately RMB285.33 million as of 12 March 2020, of which approximately RMB87.57 million and approximately RMB197.76 million were involved by the Company and PTG Hong Kong, respectively. The Company is negotiating with relevant parties for appropriate actions. Based on the latest development of the matter and preliminary discussion with the auditors of the Company, it is expected that the impairment provision made by the Company for the year ended 31 December 2019 will increase from approximately 10% as disclosed in the Previous Profit Warning Announcement to approximately 30%.

The information contained in this announcement is only based on the preliminary review by the Company's management on the financial information currently available to it and is not based on any figures or information that has been audited or reviewed by the auditors or the audit committee of the Company. Shareholders and potential investors are advised to read carefully the results announcement of the Company for the year ended 31 December 2019 which is expected to be published in late March 2020.

Shareholders of the Company and potential investors are advised to exercise caution when dealing in the securities of the Company.

By order of the Board

Chongqing Machinery & Electric Co., Ltd.*

Wang Yuxiang

Executive Directors and Chairman

Chongqing, the PRC

13 March 2020

As at the date of the announcement, the executive Directors are Mr. Wang Yuxiang, Ms. Chen Ping and Mr. Yang Quan; the non-executive Directors are Mr. Huang Yong, Mr. Zhang Yongchao, Mr. Dou Bo and Mr. Wang Pengcheng; and the independent non-executive Directors are Mr. Lo Wah Wai, Mr. Ren Xiaochang, Mr. Jin Jingyu and Mr. Liu Wei.

• For identification purposes only

- 2 -