LJ International Announces Record Second Quarter and First Half Revenues

            Company Expects Continued Third-Quarter Growth and
                      Expansion into China Continues



HONG KONG and LOS ANGELES, Aug. 11 /Xinhua-PRNewswire-FirstCall/ -- LJ International, Inc. (LJI) (Nasdaq/NMS: JADE), one of the fastest-growing jewelry companies in the world, today reported record financial and operational results for the second quarter and six-month period ending June 30, 2005.  Highlights of the report include:

  -- Company exceeds second quarter revenue guidance by $1 million to a
     record $19 million.
  -- Year-over-year revenue gains are 17% for the second quarter and 19% for
     the first half to a record $36.5 million.
  -- Net income, before ENZO start-up expenses, increases 27% for the second
     quarter, 38% for the first half.  Including expenses, Company achieves
     net income of $303,000, or $0.02 per fully dilute share, in-line with
     guidance.


-- Company projects higher revenues and earnings in the third quarter - -

     $23 - $24 million in revenue, EPS of $0.09 - $0.10 per fully diluted
     share.



LJI's revenues in the second quarter, ending June 30, 2005, totaled a record $19.07 million, up over 17% from $16.26 million in the second quarter of 2004.  This represented more than $1 million above the earlier forecast range of $17.5 million to $18 million. The Company attributed the rise to higher-than-expected demand from existing customers.

Net Income Up Sharply Before Retail Rollout Expenses

Net income in the second quarter of 2005, excluding expected start-up expenses of approximately $300,000 for the ENZO Division, was $603,000, or $0.04 per fully diluted share.  This represented an increase of 27% from net income of $474,000, or $0.04 per fully diluted share, from the second quarter of 2004, which did not include any ENZO-related expenses.  The second quarter 2005 EPS was negatively impacted as a result of the issuance of additional shares from a private placement.

Including the start-up expenses from the ENZO Division, net income for the second quarter of 2005 was $303,000, or $0.02 per fully diluted share, compared to $0.04 per fully diluted share in the second quarter of 2004 and in-line with the Company's previously announced guidance.

Gross profit in the second quarter rose to $4.62 million, or approximately 24% of sales, up nearly 20% from $3.87 million, or approximately 24% of sales a year earlier.  Along with the slight widening of margins year over year, gross margins have been rising sharply on a sequential basis, from 21% in the first quarter of 2005 and 17% from the fourth quarter of 2004.  The Company indicated that this was due to a different product mix and expects gross margins to stabilize between 20-22% for the full-year.  However, the Company expects gross margins to improve significantly over time as sales from its higher margin ENZO retail stores begin to represent a higher percentage of total revenues.  The Company noted that a typical ENZO store is expected to achieve gross margins of at least 50%.

For the six months ending June 30, 2005, revenues reached a record $36.51 million, an increase of nearly 19% over revenues of $30.76 million in the first half of 2004.  First-half net income, excluding approximately $600,000 in expected start-up expenses for the ENZO Division, was $1,152,000, up 38% from $829,000 in the first half of 2004.  Including these start-up expenses, first half net income was $552,000, or $0.04 per fully diluted share compared to $0.07 per fully diluted share in the first half of 2004.

Company Trends Indicate Growth Across All Segments

'Our record results for the latest quarter clearly indicate that our core business is continuing to grow at a very healthy rate,' said Yu Chuan Yih, Chairman and Chief Executive Officer.  'Although the expenses relating to the opening of our ENZO retail stores in China will have an impact on our earnings in the short-term, the higher-margin sales from ENZO will begin to have a positive effect on our gross margins once it begins to gain momentum.  It also should be noted that this expansion is being financed internally, primarily from the cash flow of the ENZO stores themselves.  In short, LJ International is expected to continue to exceed all of our financial expectations as measured by revenues, margins, earnings and cash flow return on invested capital in the foreseeable future.  As these trends continue, we expect our number one objective will be met: enhancement of shareholder value,' continued Mr. Yih.

Company Continues to Strengthen Balance Sheet

LJI is continuing to strengthen its balance sheet as reflected by its strong cash position, positive financial ratios and nearly zero debt.  Cash and cash equivalents totaled $7.73 million, or approximately $0.57 per fully diluted share as of June 30, 2005.  The Company remained nearly free of long-term debt, with non-current payables totaling only $61,000.  Net working capital totaled $27.4 million, up 16% since the end of 2004.  The Company noted that its strengthening balance sheet coupled with the cash flow generated from its growing ENZO Division should provide it with the necessary financial flexibility to continue to execute on its China retail expansion plan without having to tap into the capital markets in the near future.

Second Quarter Experiences Significant Retail Expansion

During the second quarter, LJI opened four ENZO stores -- two in Beijing, one in Shanghai and one in Harbin -- bringing the total ENZO stores opened to date to seven at the end of the second quarter.  Since then, it has announced that it will open its largest ENZO store yet by the end of 2005.  This is an 8,000-square-foot site in the Fisherman's Wharf development in Macau, one of the world's most popular destinations for gaming and tourism.  In all, LJI expects to have 12 ENZO stores open by the end of 2005.

In another significant development during the second quarter, LJI booked a record volume of orders, approximately $20 million, at the annual JCK jewelry show held in Las Vegas during June.  This was 20% above its orders booked at JCK in 2004 and 33% over its volume at the 2003 show.  It expects the revenues from these orders to be reflected in results for the third and fourth quarters of 2005.

Mr. Yih continued, 'Our investments made into China years ago in anticipation of the country being accepted into the World Trade Organization (WTO) are finally beginning to bear fruit.  As a result of us moving in a more aggressive, yet systematic, manner than our global competitors, we have benefited from having a first-mover advantage into China's lucrative jewelry retailing industry.  We truly are becoming one of the only vertically integrated jewelry companies in the world considering we mine our own stones, manufacture them out of our cost-effective factories in China and distribute them directly to the end consumer through our ENZO retail stores.  This unique model is enabling us to post 50% gross margins on our ENZO stores, which could represent the highest margins any major jewelry retailer has ever experienced,' concluded Mr. Yih.

Third Quarter Guidance Points to Continued Growth

For the third quarter ended September 30, 2005, LJI is projecting revenues between $23 million to $24 million, with EPS in a range of $0.09 to $0.10 per fully diluted share.  This would represent be a year-over-year revenue increase of 6% to 11% over the third quarter of 2004, with EPS on a fully diluted basis equal to or above the $0.09 reported in the year-ago quarter. On a sequential basis, third quarter 2005 revenues are expected to be 21% to 26% above the second quarter 2005 revenues, with EPS on a fully diluted basis up between 350% to 400%.  These EPS figures include start-up costs for future ENZO store openings that are expected to occur during the third quarter.

Conference Call Information

The Company will conduct a conference call today, August 11, 2005 at 11:00 am EST to discuss today's financial results and for a Q&A session.  The call will be hosted by Betty Ho, Vice President of Corporate Development.  The conference call is accessible live via phone by dialing 888-338-6461, or 973-935-8509 for international callers, and asking for the LJ International call.  Please call at least 10 minutes prior to the start time, or hear the call live over the Internet by logging on to the Company's Website at http://www.ljintl.com/ .

If you would like to be added to LJI's investor email lists please contact Haris Tajyar with Investor Relations International at .

About LJ International

LJ International, Inc. (LJI) is a publicly-owned company, based in Hong Kong and the U.S., engaged in designing, branding, marketing and distributing a full range of jewelry.  It has built its global business, currently one of the fastest-growing in the jewelry industry, on a vertical integration strategy and an unwavering commitment to quality and service.  LJI distributes to fine jewelers, department stores, national jewelry chains and electronic and specialty retailers throughout North America and Western Europe, with a growing retail presence in China through its ENZO stores and e-shopping sites. Its product lines incorporate all major categories sought by major retailers, including earrings, necklaces, pendants, rings and bracelets.  It trades on the Nasdaq National Market under the symbol JADE.

For more information on LJI, go to its Web Site at http://www.ljintl.com/ .

Forward looking statement: Except for the historical information, the matters discussed in this news release may contain forward-looking statements, including, but not limited to, factors relating to future sales.  These forward-looking statements may involve a number of risks and uncertainties. Actual results may vary significantly based on a number of factors, including, but not limited to, uncertainties in product demand, the impact of competitive products and pricing, changing economic conditions around the world, release and sales of new products and other risk factors detailed in the company's most recent annual report and other filings with the Securities and Exchange Commission.

                           LJ INTERNATIONAL INC
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                               (UNAUDITED)
             (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                 Three months ended   Six months ended
                                      June 30              June 30
                                  2005       2004       2005       2004
                                   US$        US$        US$        US$

  Operating revenue             19,074     16,259     36,513     30,756
  Costs of goods sold          (14,454)   (12,392)   (28,243)   (23,453)
  Gross profit                   4,620      3,867      8,270      7,303

  Selling, general and
   administrative expenses      (3,936)    (3,170)    (7,555)    (6,034)

  Operating income                 684        697        715      1,269

  Other revenue and expense
  Other revenues                    72         36        108         68
  Share of results of investment
   securities                       --          4        215        (62)
  Impairment loss on goodwill       --         --     (1,493)        --
  Interest expenses               (402)      (203)      (726)      (385)

  Income (Loss) before income
   taxes, minority
  interest and extraordinary
   gain                            354        534     (1,181)       890
  Income taxes                     (48)       (60)      (150)       (61)

  Income (Loss) before minority
   interest and
   extraordinary gain              306        474     (1,331)       829
  Minority interest                 (3)        --         (3)        --

  Income (Loss) before
   extraordinary gain              303        474     (1.334)       829
  Extraordinary gain in
   negative goodwill                --         --      1,886         --

  Net income                       303        474        552        829

  Earnings per share:
    Basic                         0.02       0.04       0.04       0.08

    Diluted                       0.02       0.04       0.04       0.07

    Weighted average number
     of shares used in
     calculating diluted
     earnings per share     13,463,017 11,906,139 13,599,965 11,905,463


                          LJ INTERNATIONAL INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT SHARE DATA)

                                                   As of        As of
                                                 June 30  December 31
                                                    2005         2004
                                              (Unaudited)
  ASSETS                                              US$         US$
  Current assets:
      Cash and cash equivalents                     2,156       3,228
      Restricted cash                               5,578       6,393
    Investment in capital guaranteed fund           2,370          --
      Trade receivables, net of
       allowance for doubtful
       accounts (US$284 as of June 30,2005 and
       December 31, 2004)                          13,405      15,653
      Inventories                                  46,647      36,629
      Prepayments and other current assets          1,580       2,539
      Total current assets                         71,736      64,442
  Properties held for lease, net                    1,424       1,452
  Property, plant and equipment, net                5,692       4,673
  Due from related parties                            491         491
  Goodwill, net                                     1,521       1,521
  Investment securities, net                           --       1,792

  Total assets                                     80,864      74,371

  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
      Bank overdrafts                               3,352         607
      Notes payable, current portion                2,674       2,487
    Capitalized lease obligation, current
     portion                                           22          19
      Letters of credit, gold and other loans      24,603      21,911
    Embedded derivative                             1,442       1,462
      Trade payables                                9,036       9,553
      Accrued expenses and other payables           2,934       4,631
    Income taxes payable                              152          68
      Deferred taxation                                87          87
      Total current liabilities                    44,302      40,825
  Other payables, non-current                          61          58
  Total liabilities                                44,363      40,883

  Minority interest                                   112          --

  Stockholders' equity
      Common stocks, par value US$0.01 each,
      Authorized - 100 million shares,
      Issued -
       13,122,658 shares as of June 30, 2005;
       12,304,658 shares as of
       December 31, 2004                              131        123
  Additional paid-in capital                       26,281     23,382
  Accumulated other comprehensive loss               (277)      (151)
  Unearned compensation                              (469)       (37)
  Retained earnings                                10,723     10,171
  Total stockholders' equity                       36,389     33,488

  Total liabilities and stockholders' equity       80,864     74,371

  For further information:

   AT LJI:                                 AT INVESTOR RELATIONS INTL:
   Betty Ho                                Haris Tajyar
   Vice President, Corporate Development   Managing Partner
   Tel:   [phone]                Tel:   [phone]
   Email:                  Email: 

DATASOURCE: LJ International, Inc.



CONTACT:  Betty Ho of LJ International, +011-852-2170-001, or

; Haris Tajyar of Investor Relations Intl, [phone] or

, for LJ International 



Web site:  http://www.ljintl.com/ 

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