SecProbe.io

August 3, 2010  Mr. Xinyu Peng, Chief Financia l Officer and Secretary
China Recycling Energy Corporation 12/F, Tower A, Chang An International Building No. 88 Nan Guan Zheng Jie Xi An City, Shan Xi Province, China 710068
Re: China Recycling Energy Corporation
Form 10-K for the Fiscal Year Ended December 31, 2009 Filed March 16, 2010 Definitive Proxy Statement on Schedule 14A Filed April 30, 2010 Form 10-Q for the Quarterly Period Ended March 31, 2010 Filed May 12, 2010
  File No. 001-34625

Dear Mr. Peng:
We have reviewed your filings and have the following comments.  You should comply
with the comments in all future filings, if app licable.  Please confirm in writing that you will do
so and also explain to us in sufficient detail how you intend to comply by providing us with your
proposed revisions.  In some of our comments, we may ask you to provide us with information
so we may better understand your disclosure.

Please respond to this letter within te n business days by providing the requested
information, or by advising us when you will provide the requested response.  If you do not believe our comments apply to your facts and circum stances please tell us w hy in your response.
 After reviewing the information you provide in response to these comments, we may
have additional comments.  Form 10-K for the Fiscal Year Ended December 31, 2009

 Item 1.  Business, page 1

 Overview, page 1

 Business History, page 1

1. Please revise the last paragraph on page 3 to clarify the relevance of these economic
stimulus plans to your business.  Refer to Item 101(h)(4)(ix) of Regulation S-K.

Mr. Xinyu Peng China Recycling Energy Corporation August 3, 2010 Page 2

2. You reference Phase I of the Erdos TCH proj ect in the second paragraph on page 3.
Please expand this discussion to describe the status of Phases  I, II and III of the Erdos
TCH project.  Refer to Item 101( h)(4)(iii) of Regulation S-K.
 Competition, page 6

3. In the fourth bullet on page 7 you state that your provision of “BOT” services is an
advantage over your competitors.  Please expa nd to define or explain BOT services.

Item 7.  Management’s Discussion and Analys is of Financial Condition and Results of
Operations, page 15
 Results of Operations, page 22

4. Please include a comparative analysis of non- operating income and expenses, income tax
expense and the effective tax rates for the years presented.
 Liquidity and Capital Resources, page 23

 Loan Payable – Collective Ca pital Trust Plan, page 24

5. Please expand your disclosure in the thir d paragraph on page 25, or elsewhere as
appropriate, to describe the Erdos Power Generation Projects  you first reference in the
third paragraph on page 25.
6. Please expand your disclosure in the fourth pa ragraph on page 25 to disclose the “benefits
from the Clean Development Mechanism” you expect to receive.
7. In the fifth paragraph on page 25 you state, in part, “accordingly, was eliminated in the
consolidation.”  The context of your disclosu re makes it unclear what was eliminated.
Please revise to clarify.
 Item 8.  Financial Statements and Supplementary Data, page 26

8. We note that your auditors are located in California.  It a ppears that all of your assets,
liabilities, revenues and expenses  relate to operations locate d in the People’s Republic of
China.  Please tell us how the audit of the operations in the People’s Republic of China,
including the associated asse ts and liabilities, was conducte d.  Your response should
include a discussion of the following:
• Whether another auditor was involved in the audit of the People’s Republic of China
operations.  If so, please tell the name of  the firm and indicate whether they are
registered with the Public Company Accounting Oversight Board (PCAOB).
Additionally, please tell us how your U.S. auditor assesse d the qualifications of the
other auditor and the other auditor's knowle dge of US GAAP and PCAOB Standards;

Mr. Xinyu Peng China Recycling Energy Corporation August 3, 2010 Page 3

• Whether your U.S. auditor performed all th e required audit procedures within the
United States or whether a portion of th e audit was conducted by your U.S. auditor
within the People’s Republic of China.

Report of Independent Registered Public Accounting Firm, page 26

9. Please include a conformed signature of the independent accountant to indicate the report
was manually signed.  Please refer to  Part 302 of Regulation S-T.
 Consolidated Statements of Stockholders Equity, page 29

10. Please include an analysis of changes in non-co ntrolling interests in the statement.  Please
refer to ASC 50-10-S99-1.
 Consolidated Statements of Cash Flows, page 30

11. Please tell us how you present cash flows used  in constructing power generating systems
and received from the sale /leasing of power generating systems and explain why your
presentation complies with FASB ASC 230.  In doing so, please reconcile the relevant
line items in the statement of cash flow such as “Gross investment in  sales-type leases”
and “Construction in progress” to th e consolidated balance sheet.
 Notes to Consolidated Financial Statements, page 31

12. If revenues from transactions with a single external customer amount to ten percent or
more of your revenues, please disclose that fact and the total amount of revenues from
each such customer.  Refer to FASB ASC 280-10-50-42.
13. Please disclose whether value added taxes ar e presented on a gross basis (included in
revenues and costs) or a net ba sis (excluded from revenues).  For any such taxes that are
reported on a gross basis, please disclose the amounts of those taxes in interim and annual
financial statements for each period for which an income statement is presented if those
amounts are significant.  Refer to ASC 605-45- 50-3 and 605-45-50-4.  In addition, please
explain to us in detail the nature of the de ductible VAT other receivable disclosed in Note
6 and why such amount can be used to offset  future VAT payable and is appropriately
reflected as an asset.
 Note 2.  Summary of Significan t Accounting Policies, page 33

 Basis of Consolidation, page 33

14. You disclose that Erdos TCH is a 90% ow ned subsidiary.  However, on page 2 you
disclose that you own 80% of Erdos TCH and in notes 1 and 13 to the financial
statements you disclose that you currently rece ive 80% of the profits from Erdos TCH.
Please tell us how the Erdos TCH joint vent ure is structured and the reasons for an

Mr. Xinyu Peng China Recycling Energy Corporation August 3, 2010 Page 4

allocation of profits on a basis that differs from  equity ownership interests.  In addition,
please revise your disclosure on page 2 or in note 1 to the financial statements regarding
your ownership interest in the JV as appropriate.
 Sales-type Leasing and Relate d Revenue Recognition, page 34

15. Please disclose your accounting policy for c ontingent rental income and the total
contingent rentals included in income for each year presented.  Refer to ASC 840-10-50-
5 and 840-30-50-4c.  Please provide us with an  example of your proposed disclosure.
 Basic and Diluted Earnings Per Share, page 36

16. Please tell us whether the dilutiv e effect of convertible secur ities is reflected in diluted
earnings per share by application of the if-c onverted method.  If so, please clarify your
disclosure regarding the method(s) applied to compute diluted earnings per share.
 Note 3.  Net Investment in Sales-Type Leases, page 39

17. You disclose that TRT systems leased to Xingt ai are accounted for as  sales-type leases.
However, your response to comment 8 in our le tter dated October 3, 2007 states that the
lease with Xingtai was accounted for as a dir ect financing lease.  Please tell us why you
changed your accounting method for the lease and the impact of  the accounting change, if
any, on your financial statements  or otherwise advise.
18. Please explain to us how you determined minimum lease payments and the discount rate
used to measure unearned income under each le ase contract.  Please also explain to us
why future minimum lease payments do not include amounts representing executory costs, such as maintenance,  taxes and insurance.
19. We note that you discuss the sales-type leas e agreements with each customer in note 1
with the exception of the agreement with Zh angzhi.  Please tell us why the arrangement
with Zhangzhi is not disclosed in note  1 or elsewhere in the document.
 Note 15.  Income Tax, page 43

20. Please disclose the significant components of  income tax expense attributable to
continuing operations for each year presented.  Those components would include, for example, current and deferred tax expens e.  Refer to FASB ASC 740-10-50-9.
 Note 17.  Loan Payable – Collect ive Capital Trust Plan, page 44

21. Please tell us whether or not you consolid ated Beijing Trust and the basis for your
conclusion.  In your response,  please discuss in detail  your application of the
consolidation guidance in ASC 810.  If Beijing Tr ust is consolidated, please disclose that
fact in your consolidation accounting policy in Note 2.  If Beijing Trust is a variable

Mr. Xinyu Peng China Recycling Energy Corporation August 3, 2010 Page 5

interest entity, please provide the disclo sures required by ASC 810-10-50-8 through ASC
810-10-50-19 to the extent applicable.  In addition, please tell us and expand your
disclosure in future filings to describe the terms of the agreement to share the benefits from the Clean Development Mechanism under the Kyoto Protocol  equally with Beijing
Trust and to pay the management stimulation pr ofit (or incentive benefit) as discussed in
Form 8-K filed December 8, 2009.  Further, please tell us how you are accounting for these provisions and how these provisions  will affect your consolidated financial
statements.
 Note. 18.  Convertible Notes Payable and Revolving Financing Agreement, page 45

22. Please tell us why the convert ible notes are classified as  current liabilities in your
consolidated balance sheets.  Please re ference the GAAP guidance which supports the
current classification.
23. Please tell us how you account for interest on co nvertible debt that is paid-in-kind.  To
the extent material, please disclose your acc ounting policy for paid-i n-kind interest in
future filings.  Refer to FASB ASC 470-20-30-16 through 470-20-30-18.
24. Please provide the disclosures required by ASC 825-20-50 for the convertible note
registration payment arrangeme nts disclosed on page 47.
 Note 19.  Stock-Based Compensation, page 47

25. Please disclose the number and weighted-ave rage exercise price of stock options
exercisable at the end of th e year.  In addition, for fully vested options and options
expected to vest at the late st balance sheet date please di sclose the number, weighted-
average exercise price, aggr egate intrinsic value, and weighted-average remaining
contractual term of options outstanding and currently exercisable.  Refer to ASC 718-10-
50-2c.iii and 718-10-50-2e.
26. Please tell us how you are accounting for the warra nts issued to investor relations firms.
Please specifically discuss your determinati on of measurement dates and the facts that
support the measurement dates of the awards.  Please also  address your accounting for
the changes in fair valu e of the awards between the issuan ce date of the awards and their
measurement dates.  Refer to FASB ASC 505-50-30.
Item 9A.  Controls a nd Procedures, page 51

 Internal Control Over Financial Reporting, page 51

27. Please include a statement as to whether or not  internal control over financial reporting is
effective.  Please refer to Item 308T(a)(3) of Regulation S-K.

Mr. Xinyu Peng China Recycling Energy Corporation August 3, 2010 Page 6

Changes in Internal Control Over Financial Reporting, page 52

28. Please specifically disclose any change in in ternal control over financial reporting that
occurred during the last fiscal quarter that ha s materially affected, or  is reasonably likely
to materially affect, your in ternal control over financial reporting rather than providing
the qualified disclosure presently provided.  Please refer to Item 308T(b) of Regulation S-
K.
 Item 15.  Exhibits, Financial Statement Schedules, page 52

29. We note that you have effective Registration Statements on Form S-8 that incorporate by
reference all documents subsequently filed pur suant to the Securities Exchange Act.  As
such, please file the written consent of your independent ac countant in accordance with
Item 601(b)(23) of Regulation S-K.
 Signatures, page 54

30. Please include the signatures of your principal financial officer and controller or principal
accounting officer in the second signature section.  Please refe r to general instruction D.2.
of Form 10-K.  Please also confirm in your  response whether your principal financial
officer and controller or pr incipal accounting officer have manually signed a copy of this
10-K, and if not, why.
Definitive Proxy Statement on Schedule 14A

 Executive Officers and Directors, page 4

31. For each director, briefly discuss the specifi c experience, qualifications, attributes or
skills that led to the conclusion that the pe rson should serve as a director.  See Item
401(e) of Regulation S-K.
 Corporate Governance and No minating Committee, page 6

32. Please provide the disclosure required by Item 407(c)(2)(vi) of Regulation S-K regarding
your nominating committee’s process for identi fying and evaluating director nominees.
Please make sure to state whether the co mmittee considers diversity in identifying
director nominees, whether the committee has a related policy, and if  so, how such policy
is implemented.
33. Please provide the disclosure required by Item 407(h) of Re gulation S-K regarding your
board leadership structure and its role in ri sk oversight.  In this  regard, we note that
Guohua Ku serves as both your Chief Executiv e Officer and Chairman of the Board.

Mr. Xinyu Peng China Recycling Energy Corporation August 3, 2010 Page 7

Executive Compensation, page 8

 Summary Compensation Table, page 8

34. Please provide disclosure explaining why your Chief Financial O fficer’s salary is
significantly greater than  your Chief Executive Officer’s salary.  Refer to Item 402(o) of
Regulation S-K.

Form 10-Q for the Quarterly Period Ended March 31, 2010
35. We note that your disclosure in your Form 8- K filed on May 5, 2010 that you entered into
a material loan agreement w ith Industrial Bank Co., Ltd., Xi’a n Branch.  Please confirm
that you will file a copy of this agreement w ith your next periodic report.  Refer to Item
601(b)(10) of Regulation S-K.

We urge all persons who are responsible for th e accuracy and adequacy of the disclosure
in the filing to be certain that the filing include s the information the Securities Exchange Act of
1934 and all applicable Exchange Act rules requir e.  Since the company and its management are
in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy
and adequacy of the disclosures they have made.
In responding to our comments, please provi de a written statement from the company
acknowledging that:

• the company is responsible for the adequacy an d accuracy of the disclo sure in the filing;

• staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and

• the company may not assert staff comments as  a defense in any proceeding initiated by
the Commission or any person under the federa l securities laws of  the United States.

In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the sta ff of the Division of Corporati on Finance in our review of your
filings or in response to our comments on your filings.

Mr. Xinyu Peng China Recycling Energy Corporation August 3, 2010 Page 8

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