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CORRESP
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    Albany

    New York

    Atlanta
    Philadelphia

    Brussels
    San Diego

    www.mckennalong.com

    Denver

    San Francisco

    Los Angeles

    Washington, DC

    Thomas Wardell
    email address

    (404) 527-4990
    twardell@mckennalong.com

January 30, 2013

Via EDGAR

United States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, NE

Washington, D.C. 20549-0405

 Attn: William H. Thompson, Accounting Branch Chief

Tony Watson

 Re: China Recycling Energy Corporation

Form 10-K for Fiscal Year Ended December 31, 2011

File No. 001-34625

Dear Mr. Thompson:

On behalf of our client,
China Recycling Energy Corporation (“CREG” or the “Company” and sometimes referred to as “we”
or “our”), and pursuant to our phone conference, on January 24, 2013 with Mr. Tony Watson, this firm is filing a final
response to the SEC Comment Letters, dated December 14, 2012 and January 23, 2013, in connection with complying with the issues
and outstanding disclosure items set forth therein. For convenience of reference, we have included, in this response letter, the
same caption and paragraph number, as well as the text of the comment, set forth in your January 23, 2013 comment letter followed
by our response.

In
addition, attached to this response letter, for the SEC’s review and comment, is a draft of Amendment No. 1 to the Company’s
Form 10-K for fiscal year ended December 31, 2011, reflecting the changes in disclosure described herein. Upon learning
from you that the SEC has no further comment, the Company will promptly file Amendment No. 1 to the
Company’s Form 10-K for fiscal year ended December 31, 2011 with the SEC.

Form 10-K for Fiscal Year Ended December 31, 2011

Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations, page 33

Liquidity and Capital Resources, page 43

 Comment 1. We reviewed your response to comment one in our letter
dated December 14, 2012. Please include a discussion of how cash is transferred to your PRC subsidiaries and how earnings are
transferred from your PRC subsidiaries to the parent company in the amendment you intend to file. Please also describe the nature
of the restrictions on the ability of your subsidiaries to transfer funds to the parent in the form of cash dividends, loans or
advances and the potential impact on your liquidity.

United States Securities and Exchange Commission

January 30, 2013

Page 2

Response:

Per our phone conference,
the response prepared and included, by the Company, in its Response Letter, dated January 14, 2013, was satisfactory to the SEC.
Amendment No. 1 to our Form 10-K for fiscal year ended December 31, 2011 includes the supplementary disclosures set forth below.
(please refer to pg. 45 of the Form 10-K/A).

The Company is able
to transfer cash (U.S. dollars) to its PRC subsidiaries by: (i) investment – increasing the Company’s registered capital
in a PRC subsidiary or (ii) a shareholder loan. Other than as follows, to date, its PRC subsidiaries have not transferred any earnings/cash
to the Company. As reflected in its Form 10-K, the Company’s business is primarily conducted through its subsidiaries. The
Company is a holding company and its material assets consist solely of the ownership interests held in its PRC subsidiaries. The
Company relies on dividends paid by its subsidiaries for its working capital/cash needs, including: (i) the funds necessary to
pay dividends/cash distributions to its shareholders, (ii) to service any debt obligations and (iii) to pay operating expenses.
As a result of PRC laws and regulations (noted below) that require annual appropriations of 10% of after-tax income to be set aside
in a general reserve fund prior to payment of dividends, the Company’s PRC subsidiaries are restricted to that extent, as
well as the others noted below, in their ability to transfer a portion of their net assets to the Company as a dividend.

	PRC has currency
and capital transfer regulations that require us to comply with regulations for the movement of capital.

With respect to transferring
cash from the Company to its subsidiaries, increasing the Company’s registered capital in a PRC subsidiary requires the pre-approval
of the local commerce department, and a shareholder loan requires a filing with the state administration of foreign exchange or
its local bureau.

With respect to the
payment of dividends:

 i. PRC regulations currently permit the payment of dividends only out of accumulated profits, as determined
in accordance with accounting standards and PRC regulations (an in-depth description of the PRC regulations is set forth below);

 ii. our PRC subsidiaries are required to set aside, at a minimum, 10% of their net income after taxes,
based on PRC accounting standards, each year as statutory surplus reserves until the cumulative amount of such reserves reaches
50% of their registered capital;

 iii. these reserves may not be distributed as cash dividends;

 iv. our PRC subsidiaries may also allocate a portion of their after-tax profits to fund their staff
welfare and bonus funds; except in the event of a liquidation, these funds may also not be distributed to shareholders; as disclosed
in Note 18, the Company does not participate in a Common Welfare Fund; and

 v. the incurrence of debt, specifically the instruments governing such debt, may restrict a subsidiary’s
ability to pay shareholder dividends or make other cash distributions; the Company is subject to covenants and consent requirements
(presently, the Company has all consents necessary).

United States Securities and Exchange Commission

January 30, 2013

Page 3

If, for the reasons
noted above, our subsidiaries are unable to pay shareholder dividends and/or make other cash payments to the Company when needed,
the Company’s ability to conduct operations, make investments and/or acquisitions, or undertake other activities requiring
working capital may be materially and adversely affected. However, our operations and business, including investment and/or acquisitions
by our subsidiaries within China, will not be affected as long as the capital is not transferred in or out of the PRC.

PRC Regulations

In accordance with
PRC regulations on Enterprises with Foreign Investment and their articles of association, a foreign-invested enterprise (“FIE”)
that is established in the PRC is required to provide certain statutory reserves, which are appropriated from net profit, as reported
in the FIE’s PRC statutory accounts. FIEs are required to allocate at least 10% of its annual after-tax profit to the surplus
reserve until such reserve has reached 50% of its respective registered capital (based on the FIE’s PRC statutory accounts).
The aforementioned reserves may only be used for specific purposes and may not be distributed as cash dividends. In the event that
the FIE’s statutory accounts are insufficient to satisfy this requirement, the FIE’s shareholders are required to contribute
capital required to satisfy the registered capital requirement. Until such contribution of capital is satisfied, the FIE is not
allowed to repatriate profits to its shareholders, unless otherwise approved by the State Administration of Foreign Exchange. After
satisfaction of this requirement, the remaining funds may be appropriated at the discretion of the FIE’s board of directors.
Our subsidiary, Shanghai TCH, qualifies as an FIE and is therefore subject to the above-mandated regulations on distributable profits.

Additionally, in accordance
with PRC Company Law, a domestic enterprise is required to maintain a surplus reserve of at least 10% of its annual after-tax profit
until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts.
A domestic enterprise is also required to provide discretionary surplus reserve, at the discretion of the board of directors, from
the profits determined in accordance with the enterprise’s PRC statutory accounts. The aforementioned reserves can only be
used for specific purposes and may not be distributed as cash dividends. Xi’an TCH, Xingtai Huaxin, Huahong, Pingshan Shengda
(dissolved in 2012) and Erdos TCH were established as domestic enterprises; therefore, each is subject to the above-mentioned restrictions
on distributable profits.

As a result of PRC
laws and regulations that require annual appropriations of 10% of after-tax income to be set aside, prior to payment of dividends,
in a general reserve fund, the Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their
net assets to the Company as a dividend or otherwise.

Chart of the Company’s
Statutory Reserve

Pursuant to PRC
corporate law, effective on January 1, 2006, the Company is now required to maintain a statutory reserve by appropriating from
its after-tax profit before declaration or payment of dividends. The statutory reserve represents restricted retained earnings.
Our restricted and unrestricted retained earnings under US GAAP are set forth below:

United States Securities and Exchange Commission

January 30, 2013

Page 4

    As at December 31,

    2011
    2010

    Unrestricted retained earnings
    $ 34,414,271
    $ 14,812,630

    Restricted retained earnings (surplus reserve fund)
      7,051,843
      5,203,605

    Retained earnings (including surplus reserve fund)
    $ 41,466,114
    $ 20,016,235

Item 8. Financial Statements and Supplementary Data, page
50

Note 2: Summary of Significant Accounting Polices, page
57

Fair Value of Financial Instruments, page 60

 Comment 2. We reviewed your response to comment three in our letter
dated December 14, 2012. Please disclose the fair value of long-term debt together with the related carrying amounts and the method
and assumptions used to estimate the fair value in the amendment you intend to file.

Response:

Per our phone conference,
the response prepared and included, by the Company, in its Response Letter, dated January 14, 2013, was satisfactory to the SEC.
Amendment No. 1 to our Form 10-K for fiscal year ended December 31, 2011 includes the supplementary disclosures set forth below.
(please refer to pg.  62 of the Form 10-K/A).

The following are our
considerations with respect to disclosures of fair value of long-term debt obligations.

As of fiscal year ended
December 31, 2011, the Company’s long term debt obligations consisted of the following: (i) bank loans payable in the amount
of $20.79 million, (ii) trust loans payable in the amount of $31.50 million and (iii) a long term payable for a sale-leaseback
transaction in the amount of $5.00 million.

Fair value measurements/approximations,
for certain financial instruments, are based on what a reporting entity would likely have to pay to transfer the financial obligation
to an entity with a comparable credit rating. Our bank loans and trust loans payable are privately held (i.e., nonpublic) debt;
therefore, pricing inputs are not observable. For this reason, we classified bank loans and trust loans payable as a Level 3 fair
value measurement in the valuation hierarchy.

For each of our long
term debt obligations noted above, we believe the carrying amounts approximate their fair values. The following reasons are supportive
of this determination.

United States Securities and Exchange Commission

January 30, 2013

Page 5

Bank Loans Payables
of $20.79 Million (noncurrent portion)

As of fiscal year ended
December 31, 2011, the Company had three loans with the same Chinese commercial bank with terms of 3, 3 and 4 years, respectively.
Each loan was for our subsidiary’s (Xi’an TCH’s) energy saving and emission reduction projects and had a floating
interest rate that reset at the beginning of each quarter at 110%, 115% and 115%, respectively, of the national base interest rate
for the same term and same level loan. Each of these loans was guaranteed by Xi’an TCH (along with a pledge of its accounts
receivables) and by certain executive officers of the Company, and a pledge of certain BMPG (Biomass Power Generation) systems.
Based on our understanding of the credit markets, the fact that our business is in a sector (energy-saving green) that is supported
by the PRC government and the lending bank, we believe that we could have obtained similar loans at December 31, 2011 on similar
terms and interest rates. In addition, in connection with the fair value measurement, we considered nonperformance risk (including
credit risk) relating to the debt obligations, including the following: (i) we are considered a low credit risk customer to the
lending bank and our creditors; (ii) we have a good history of making timely payments and have never defaulted on any loans; and
(iii) we have a stable and continuous cash inflow from collections from our sales-type lease of energy saving projects.

Trust Loans Payable
of $31.50 Million (noncurrent portion)

Pursuant to a Trust
Loan Plan, the Company issued trust loans at RMB 1 per unit for total of 300,000,000 units with interest rates ranging from 8.35%
- 12.05% and terms ranging from 2 – 4 years. Of these units, (i) 13,750,000 units ($2.0 million) were purchased by the management
of Erdos TCH; and (ii) 47,850,000 units were purchased by Xi’an TCH. All of the proceeds raised under the Trust Loan Plan
were loaned to Erdos TCH to fund the construction and operation of its waste heat power generation projects. To guarantee the repayment
of the loans, Erdos TCH provided a lien on its equipment, assets and accounts receivable. Xi’an TCH and Mr. Guohua Ku, our
CEO, the Chairman of our Board of Directors and a major shareholder, provided unconditional and irrevocable joint liability guarantees
for Erdos TCH’s performance under the Agreement. Erdos (the minority shareholder and customer of Erdos TCH) provided a commitment
letter on minimum power purchase from Erdos TCH. The carrying value of the trust loans approximates the fair value, because we
believe that we could obtain similar trust loans at December 31, 2011 for the same purpose of usage on comparable interest rates
and terms. In addition, in connection with the fair value measurement, we considered nonperformance risk (including credit risk),
including the following: (i) we are considered a low credit risk customer to the lending bank and our creditors; (ii) we have a
good history of making timely payments and have never defaulted on any loans; and (iii) we have a stable and continuous cash inflow
from collections from our sales-type lease of energy saving projects to make repayment.

Sale-Leaseback Transaction
of $5.00 Million

We recorded the sale-lease
back transaction at fair value, which is the present value of the total future cash outflow including principal and interest payments.

Note 17: Shareholders’ Equity, page 78

 Comment 3. We reviewed your response to comment seven in our letter
dated December 14, 2012. Please provide us with a copy of the letter from Mr. Dong and any other correspondence from Mr. Dong
which supports the extinguishment of the obligation. In addition, tell us your consideration of initially accounting for the agreement
with Mr. Dong within equity as opposed to a liability given that the contract contained an explicit limit on the number of shares
to be delivered to settle the contract. Refer to guidance in ASC 815-40-25 and ASC 815-40-25.

Response:

A.		          Please
provide us with a copy of the letter from Mr. Dong and any other correspondence from Mr. Dong which supports the extinguishment
of the obligation.

United States Securities and Exchange Commission

January 30, 2013

Page 6

Attached
to this Response Letter please find a copy of the requested letter, from Mr. Dong to the Company, dated May 24, 2011, supporting
the extinguishment of the debt obligation (please see attached). The original letter is in Chinese;
for ease of reference, an English transl