Message from the Past President, Teo Tong Kooi

Dear Shareholders,

As we entered 2008, we experienced continuing robust demand for our diesel engines as the Chinese economy remained strong, spending for the 2008 Beijing Olympics set new records and demand increased before the countrywide adoption of engines compliant with the mandated National III emission standards implemented progressively in China from July 1, 2008. However, the economies in North America, Europe and other markets suffered significant decline following from the global financial crisis in the second half of 2008 and automotive sales fell sharply in many markets. The Chinese economy fared better, but it was also affected by the global recession with gross domestic product growth rates falling to single digit ranges since 2003. While the overall Chinese automotive market continued to grow by 6.7% in 2008 to 9.34 million units, there was a pronounced slowdown in the second half of the year. Chinese commercial vehicle sales began to slow noticeably in the third quarter of 2008 and recorded an approximate 5.3% decline for 2008 compared to 2007 due to the global economic slowdown. However, our subsidiary, Guangxi Yuchai Machinery Company Limited ("GYMCL"), remained the No.1 seller of domestic diesel engines for the 8th year in a row according to the China Association of Automobile Manufacturers, and the "Yuchai" brand was awarded the "Chinese Brand of the Year" in the diesel engine category by the World Brand Laboratory ("WBL") in 2008.

Financial performance
For fiscal year 2008, our net revenues grew 8.3% to RMB 10.4 billion (US$1.5 billion) compared with RMB 9.6 billion in 2007. While our overall unit sales declined by 3%, our sales revenue increased due to the higher average selling price ("ASP") as the new National III compliant engines sold were at higher prices than the engine models they replaced, and we experienced greater engine parts sales. Fourth quarter sales were especially affected by the global financial crisis. Gross margin in 2008 was impacted by higher raw material prices while SG&A expenses remained fl at as a percentage of sales. Although our net income declined in 2008 as compared with 2007, there were a few one-time non-recurring charges during the year. We recorded an impairment charge of RMB 46.0 million ($6.7 million) in 2008 on the assets owned by Guangxi Yulin Hotel Company Ltd which was acquired by GYMCL in settlement of past loans. Another impairment in 2008 was related to other plant and equipment resulting in a charge of RMB 23.9 million ($3.5 million) and goodwill was impaired by RMB 5.7 million ($830,000). At December 31, 2008, our balance sheet showed RMB 693.4 million ($101.5 million) in cash and cash equivalents.

Developments
Our subsidiary GYMCL, continued to leverage on its R&D expertise to introduce a range of new engines compliant with both National III and IV emission standards with broad applications. In fact, GYMCL was the first to introduce diesel engines in China complying with the more stringent National IV and National V emission standards. The 2008 Beijing Olympics has led to an early implementation of the National IV standard in Beijing in 2008 with a targeted implementation in Shanghai in November 2009 and nationwide in late 2010. We are well positioned to continue to benefit from the demand for engines that comply with these stringent emission standards. We believe we are one of the leaders producing advanced emission standard engines and we are also a leader in the municipal bus market in China. Furthermore, in 2008 we announced the entry into of an equity joint venture agreement between GYMCL with Zhejiang Geely Holding Co., Ltd. and Zhejiang Yinlun Machinery Company Limited to form two joint venture companies in Tiantai, Zhejiang Province and Jining, Shandong Province, to develop and produce proprietary diesel engines and parts targeting the passenger car market in China. Diesel cars have successfully penetrated into the passenger car markets in Europe, but only make up a small proportion of the China market today which presents a good future growth prospect for us.

Reporting of results
Since May 2008, upon the conclusion of the independent investigation into the facts and circumstances of the potential accounting errors relating to the adjustment of GYMCL?s accounts payable of approximately RMB 168 million, we restated year 2005 audited consolidated financial results and thereafter announced the audited consolidated financial results for 2006, 2007 and 2008. Mr. Hoh Weng Ming joined us as our new Chief Financial Officer and we also added more senior accounting personnel and provided more training to augment our internal controls and improve reporting processes. These actions have brought us current with our filing and reporting requirements and Ernst & Young LLP, Singapore, was appointed as our new principal independent auditors at the April 17, 2009 annual shareholders meeting. In July and August 2009, we announced our unaudited first quarter and second quarter 2009 financial results respectively.

New President
On July 1, 2009, Mr. Saw Boo Guan was appointed to the Board of Directors and assumed the role of President on August 1, 2009. Mr. Saw brings over 23 years of outstanding track record in the automotive industry from the Cummins organization and General Motors Corp. As President of Cummins Westport Inc. joint venture, he was responsible for the company?s worldwide natural gas engine business. Under his leadership from 2005 to 2008, revenue and profit increased 32% and 65% respectively on a compounded annual growth rate. From 1989 to 2005, Mr. Saw?s responsibilities included general management and marketing and distribution management for specific Cummins operations in the U.S., Singapore, Hong Kong and China. His leadership, experience and especially his knowledge of alternative automotive technologies will be invaluable to China Yuchai.

Outlook
In response to the global economic slowdown, the Chinese government had announced various stimulus measures to increase economic activity and encourage the sales of automotive vehicles. The measures include reduced sales taxes for certain automobiles, subsidies, low interest loans and tax benefit incentives for the large rural population to upgrade from their older vehicles and tractors with high exhaust emissions to fuel efficient, low emissions light-duty trucks, pickup trucks and mini vans. The GDP growth is expected to reach 7.9% in the second quarter of 2009 and passenger and light duty vehicle sales are expected to continue to grow strongly. The Chinese government has demonstrated its strong commitment to environmental improvement and pollution control to pave the way for sustainable long-term growth. A recently announced policy in the government new stimulus plan is to provide a subsidy of between RMB 3,000 and RMB 6,000 to replace vehicles which do not meet current emission standards or are between 8-12 years old, particularly targeting the commercial vehicle sector. More excitingly, a number of large infrastructure construction projects including high speed railroads, extended national highways, urban subways and large clean energy plants, are being implemented throughout China. We are hopeful these new measures will provide an impetus for greater spending and result in higher demand for the heavy duty commercial vehicles. Our other investments in affiliate companies namely HL Global Enterprises Ltd ("HLGE") and Thakral Corporation Ltd ("TCL") faced tough & challenging business conditions in 2008. Strong competition in China?s hospitality sector and the global financial turmoil adversely affected HLGE?s operating performance in 2008 with lower hotel occupancy rates. Our Shanghai serviced apartments is currently undergoing a major refurbishment which is scheduled for completion shortly. The outlook on the hospitality sector in China remains cautious due to an increasing influx of new hotels which will lead to more competition for room occupancy. TCL?s consumer electronic division continued to be affected by the global economic slowdown which led to tighter gross margins. The closure of one business unit in China led to net attributable loss for 2008. However arising from the China government measures to provide liquidity to the business sector through the stimulus measures, there are some positive signs of higher consumer spending in electronic goods in China. TCL continues to identify new product lines to expand its consumer electronic business.

Appreciation
We would like to thank our shareholders for their patience and support during the past year. We have weathered the storm and resolved past historical issues and now look forward to growing the Company further. During my tenure as the President of China Yuchai, we have successfully grown our base line diesel engine business and continue to expand our market share in China. We have also formed a dedicated management team to further support the Company?s growth and build shareholder value. I strongly believe that China Yuchai has a bright future ahead.

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Teo Tong Kooi
Past President
August 31, 2009

Message from New President, Saw Boo Guan

Dear Shareholders,

It is with great pleasure that I joined the board of directors of China Yuchai International Limited on July 1, 2009 and I look forward to my role as President. What attracted me to accept the position was the value and potential I see in China Yuchai. The "Yuchai" brand is highly admired and has acquired a good reputation throughout China and GYMCL is committed to excellence in its products with an emphasis on quality, innovation, and services. We are dedicated to providing a safe and stimulating environment to attract and retain the best workers taking pride in their accomplishments. Equally important, we have made it a priority to reduce the environmental impact of our engines through developing and adopting new technologies for the future.

I would like to take this opportunity to thank Mr. Teo Tong Kooi for his leadership, dedication and commitment which has positioned the Company for future growth. As the new President of China Yuchai, it will be my job to further unlock growth and development potential in the Company. I am prepared for the challenges ahead and encouraged by the opportunities available, and I believe this Company has provided me with a great foundation to achieve our goals and enhance long-term shareholder value.

Saw Boo Guan
President
China Yuchai International Limited
August 31, 2009

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