Cathay Forest Signs Joint Venture for Commercial Timber Activities in China

Toronto, Ontario, Canada, 18 January 2007 -- Cathay Forest Products Corp. has signed an agreement to establish of a joint venture with Rao He Song Lin Economic Trade Co Ltd. for the production, manufacture, sale, and export of forestry raw timber and other products.

Cathay Forest will own 60% and Rao He 40% of the joint venture. There will be an equity injection of USD 1,500,000 into the joint venture by the parties in two phases. Cathay Forest will make an investment of USD 600,000 into Rao He as initial phase operations fund, and USD 300,000 invested in cash and Rao He will invest USD 600,000. In addition, under the terms of the joint venture, Cathay Forest will issue 300,000 common shares to Yao Song-lin, principal of Rao He, subject to regulatory approval.

The board of the joint venture will consist of five directors, including three appointees of Cathay Forest. Once the joint venture has been established, Yao Song-lin will be the general manager of Rao He.

After-tax profits of the joint venture company will be used and distributed in accordance with the parties' ownership interest in the joint venture, i.e., Cathay Forest 60% and Rao He 40%.

About Cathay Forest Products

Cathay Forest is a forest products company managing standing timber properties and developing fast-growth, high-yield poplar plantations in the Peoples Republic of China. Cathay Forest is building a world class forest products company through a customer base that includes the domestic Chinese pulp and paper industry and harvesting customers serving a variety of wood product industries.