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    Unassociated Document

Albany

                Atlanta

                Brussels

                Denver

                Los
      Angeles

                THOMAS
      WARDELL

                (404)
      527-4990

                www.mckennalong.com

New
      York

                Philadelphia

                San
      Diego

                San
      Francisco

                Washington,
      DC

                EMAIL
      ADDRESS

                twardell@mckennalong.com

    August
31, 2010

    Via EDGAR

    United
States Securities and Exchange Commission

    Division
of Corporation Finance

    100 F
Street, NE

    Washington,
D.C.  20549-0405

    Attn:    H.
Christopher Owings, Assistant Director

              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

              File
      April 30, 2010

              Form
      10-Q for the Quarterly Period Ended March 31,
  2010

              Filed
      May 12, 2010

              File
      No. 001-34625

    Ladies
and Gentlemen:

    This firm
is counsel to the above-referenced company, China Recycling Energy Corporation
(“CREG” or the “Company” and sometimes “we” or “our”) and are filing this
response to your comment letter of August 3, 2010 with respect to the
above-referenced filings on CREG’s behalf.

    Form 10-K for the Fiscal
Year Ended December 31, 2009

    Item 1. Business, page
1

    Overview, page
1

    Business History, page
1

              Comment
    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.

    August
31, 2010

    Page
2

      Response:
  The Company acknowledges the comment by the Staff and intends to include
disclosure substantially similar to the following at the end of the last
paragraph on page 3 in future filings, as appropriate:

    Since the
Company targets producers of iron and steel, cement, and nonferrous metals for
its products and services, which products and services help reduce waste and
environmental impact, the commitment of substantial resources by the Chinese
government in these areas may assist potential customers for energy-recycling
projects with the Company to finance those projects.

              Comment
    2.

              You
      reference Phase 1 of the Erdos TCH project 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.

    Response:
 The Company acknowledges the comment by the Staff and points its attention
to page 39 of the Company’s Quarterly Report on Form 10-Q for the period ended
June 30, 2010 for additional disclosure regarding Erdos Phases II and III, which
additional disclosure is presented below for reference and supplements the
disclosure regarding Erdos Phase I as previously provided in the Company’s
Annual Report on Form 10-K for the period ended December 31, 2009.

    Erdos
Phase II and III of Power Generation Projects

    In April
2009, Erdos TCH signed a contract with Erdos Metallurgy to recycle heat from
groups of furnaces of Erdos Metallurgy’s metal refining plants to generate power
and steam, to be sold back to Erdos Metallurgy. According to the contract, Erdos
TCH will install a group of power generation projects with a total of 70MW power
capacity, which may expand up to 120MW, and 30-ton steam per hour, with an
estimated total investment in excess of $75 million (RMB 500 million). The
Company split the construction of the projects into three phases, two systems of
power generation in Phase I with a total of 18MW power capacity, three systems
in Phase II with a total of 27MW power capacity and one system in Phase III with
25MW power capacity.  For each phase of the project, the lease term is
20 years starting from the date of completion of the phase.  During
the lease term, Erdos TCH will be responsible for operating the projects and
charge Erdos Metallurgy for supply of electricity and steam.  Erdos
Metallurgy agreed to pay a fixed minimum of $0.22 million (RMB 1.5 million) per
month for each 9MW capacity power generation system.  Effective
January 1, 2010, Erdos TCH outsourced to an independent third party the
operation and maintenance of the first 9MW power generation project for $
922,000 (RMB 6.27 million) per year.  After 20 years, each system will be
transferred to Erdos Metallurgy without any charge.

    August
31, 2010

    Page
3

    During
the first quarter of 2010, Erdos power generation system Phase I project was
completed and put into operation.  Effective April 1, 2010, Erdos TCH
outsourced to an independent third party the operation and maintenance of the
second 9MW power generation project for $ 922,000 (RMB 6.27 million) per
year.

    As of
June 30, 2010 the projects of Erdos Phase II and Phase III are under
construction. At June 30, 2010, the Company had paid $44.17 million for Phase II
and Phase III.  The Company currently expects to complete Phase II and
Phase III in 2010.

    Competition, page
6

              Comment
    3.

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

    Response:        The
Company acknowledges the comment by the Staff and future filings will include,
as appropriate, additional disclosure substantially similar to the
following:

    We
provide BOT (Build-Operate-Transfer) or capital lease services to our
customers, while our competitors usually use an EPC (engineering, procurement
and construction) or turnkey contract model. For each project, we design,
finance, construct and install the waste energy recycling projects for our
customers, operate the projects for five to 20 years, and then transfer the
projects to the owners.

    As a BOT service provider, we fund all
contracted projects on our own or jointly with our customers; such financing
arrangements can help our customers by removing or reducing the heavy capital
expenditure burden required by these projects, thereby allowing them to
concentrate on their core businesses. The BOT model creates a win-win solution
for both our customers and us. We provide the capital expenditure financing in
exchange for attractive returns on each project; our customers can focus their
capital resources on their core businesses, do not need to invest additional
capital to comply with government environmental regulations, reduce noise and
emissions and reduce their energy costs. We in turn efficiently recapture our
costs through the stream of lease payments. Compared to the EPC model, we
believe our BOT model creates a more efficient business solution for the China
market and is well recognized by our targeted customers.

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

    Results of Operations, page
22

              Comment
    4.

              Please
      include a comparative analysis of non-operating income and expenses,
      income tax expense and the effective rates for the years
      presented.

    August
31, 2010

    Page
4

    Response:        The
Company acknowledges the comment of the Staff.  In future filings the
Company will include the following disclosures:

    NON-OPERATING
EXPENSES (NET).  Non-operating expenses consisted of non sales-type
lease interest income, interest expense, bank charges and some miscellaneous
expenses.  For the year ended December 31, 2009, net non-operating
expenses were $0.48 million, consisting mainly of interest expense on
convertible notes; compared to the same period in 2008, this was a decrease of
$4.25 million from $4.73 million during the year ended December 31, 2008, as a
result of a $4.68 million one-time expense for the unamortized portion of the
beneficial conversion feature of our first $5 million convertible note at the
time of repayment in 2008.

    INCOME
TAX EXPENSE.  The income tax expense was $2.95 million for the year
ended December 31, 2009, an increase of $1.32 million compared to $1.63 million
for the same period of 2008.  The increase was mainly due to the
increase in taxable income from $0.59 million taxable loss during the year ended
December 31, 2008 to $13.01 million taxable income during the same period of
2009; the effective tax rate for 2009 was 22.7%.  The income tax rate
for Shanghai TCH was 18% and 20% for 2008 and 2009,
respectively.  Xi’an TCH’s effective income tax rate for 2008 and 2009
is 15% as a result of its high tech enterprise status that was approved by the
taxing authority.  Xingtai Huaxin’s effective income tax rate for 2008
and 2009 is 25%.  Our newly incorporated subsidiaries – Huahong and
Erdos TCH’s effective income tax rate for 2009 is 25%.

    Liquidity and Capital
Resources page 23

    Loan Payable – Collective
Capital Trust Plan, page 24

              Comment
    5.

              Please
      expand your disclosure in the third 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.

    Response:        The
Company acknowledges the Staff’s comment.  We point the Staff’s
attention to the top of page 3 as well as the second and third paragraphs of
page 17 of the Company’s Annual Report on Form 10-K for the period ended
December 31, 2009.  These sections describe the Erdos Power Generation
Projects, in particular Phase I of such projects.  We also refer the
Staff to our response to Comment 2 hereto, in which the Company has described
additional disclosure regarding Phase II and Phase III of the Erdos
projects.  To avoid confusion we will also explain/define the term
“Erdos Power Generation Projects” far forward in future filings, as
appropriate.  For example, to the disclosure at page 3 where the Erdos
projects are first described we will add the disclosure in the first bullet
below and thereafter we will use cross-references or shortened descriptions; in
particular we will also make the change noted in the second bullet below at page
24 in the first paragraph at “Loans Payable - Collective Capital Trust
Plan.”  These changes are:

    August
31, 2010

    Page
5

    ·           in
“Business - Overview - Business History” additional final sentences to what is
the first paragraph on page 3 in this 10-K (with appropriate references to the
term “Erdos Power Generation Projects” in other disclosures) that read as
follows:

    We refer
to these as the Erdos Power Generation Projects.  There are five
phases to complete these projects, which we refer to as Phases I, II, III, IV
and V and which, when completed, will together generate a total of 109 MW of
electricity.  Phase I began in the fourth quarter of 2009 and we
expect to complete all five phases by the end of the fourth quarter of
2011.

    ·           a
revised final sentence to the first paragraph under “Liquidity and Capital
Resources - Loan Payable - Collective Capital Trust Plan” (at page 24 in this
10-K) that reads as follows:

    All
amounts raised under the Plan are loaned to Erdos TCH in connection with the
construction and operation of Phases II and III of the Erdos Power Generation
Projects described above at “Business - Overview - Business
History.”  These projects, when completed, will recycle waste heat
from Erdos Metallurgy’s metal refining plants to generate electric power and
steam, which will then be sold back to Erdos Metallurgy.

              Comment
    6.

              Please
      expand your disclosure in the fourth paragraph on page 24 to disclose the
      “benefits from the Clean Development Mechanism” you expect to
      receive.

    Response:        The
Company acknowledges the comment of the Staff and in future filings disclosure
regarding the Clean Development Mechanism will be expanded substantially as
follows:

    Under the
CDM mechanism, any benefits received will be paid to Erdos
Metallurgy.  Under the agreement with Xi’an TCH, Erdos Metallurgy
agrees to deliver to Xi’an TCH 50% of the benefit Erdos Metallurgy
receives.  Xi’an TCH agrees to share 50% of the benefit it receives
from Erdos Metallurgy with Erdos TCH.  Under the loan agreement
between Erdos TCH and Beijing Trust, Erdos TCH agrees that 50% of any benefit it receives
will be delivered to Beijing Trust.  The receipt of benefits is
subject to a process of evaluation and certification of the project, the first
stages of which have been completed successfully.

              Comment
    7.

              In
      the fifth paragraph on page 25 you state, in part, “accordingly, was
      eliminated in the consolidation.” The context of your disclosure makes it
      unclear what was eliminated. Please revise to
  clarify.

    Response:        The
Company acknowledges the comment of the Staff and in future filings the
disclosure will be revised to read as follows:

    August
31, 2010

    Page
6

    In
December 2009, the Company sold 206,880,000 units for RMB 206,880,000 ($30.30
million), of which 9,100,000 units ($1.33 million) were purchased by the
management of Erdos TCH; 32,280,000 units ($4.73 million) were purchased by
Xi’an TCH, the amount of $4.73 million was considered as investment by Xi’an TCH
into Erdos TCH and, accordingly, was eliminated in the Company’s consolidated
financial statements.  The net long term loan payable under this trust
plan was $25.58 million at December 31, 2009.  Interest expense
accrued on this trust loan was $0 at December 31, 2009.

    Item 8. Financial Statements
and Supplementary Data, page 26

              Comment
    8.

              We
      note that your auditors are located in California. It appears that all of
      your assets, liabilities, revenues and expenses relate to operations
      located 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
      assets and liabilities, was conducted. 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 assessed
      the qualifications of the other auditor and the other auditor’s knowledge
      of US GAAP and PCAOB Standards;

              ·

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

    Response:        In
conducting the audit of the Company’s financial statements for the years ended
December 31, 2007 through 2009, the Company’s auditors used Beijing Anshun
International, CPAs Co., Ltd. (“Anshun”); HeQiao Building, Suite A310, Guanghua
Rd., Chaoyang District, Beijing, P.R. China 100026.  Tel:
+86-10-6581-2891; Fax: +86-10-6581-2892.

    Anshun is
registered with the PCAOB.  Our U.S. auditors have worked with Anshun
for the last four years.

    The
auditors make no reference to Anshun’s work in their audit report nor do they
obtain an audit report from Anshun.  Anshun’s international audit
department works exclusively for our auditors and is, in substance, their office
in China.

    Our
auditors plan the audit and develop the audit