SecProbe.io

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Mail Stop 3561

      							September 9, 2005

Mr. ShaoJian Wang
Chief Financial Officer
PacificNet Inc.
860 Blue Gentian Road
Suite 360
Eagan, MN 55121

	Re:	PacificNet Inc.
      Form 10-KSB for Fiscal Year Ended December 31, 2004
		Filed April 19, 2005

		Form 10-QSB for Fiscal Quarter Ended June 30, 2005
		File No. 000-24985

Dear Mr. Wang:

      We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and do not intend to expand our review to
other
portions of your documents.  Where indicated, we think you should
revise your documents in response to these comments.  If you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary.  Please be as detailed
as
necessary in your explanation.  In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure.  After reviewing this information, we may or may not
raise additional comments.

	Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects.  We welcome
any questions you may have about our comments or any other aspect
of
our review.  Feel free to call us at the telephone numbers listed
at
the end of this letter.

Form 10-KSB for Fiscal Year Ended December 31, 2004

Item 1.  Description of Business, page 1

Consolidation of Variable Interest Entities, page 5

1. We refer you to the 2nd to last paragraph on page 5 where you
indicate that you consolidate the financial statements of
Clickcom-
WOFE and Guangzhou3G-WOFE based on the determination that you are
the
primary beneficiary of these companies.  Please tell us whether
you
also consolidate Dianxun-DE and Sunroom-DE and explain to us your
GAAP basis for this accounting treatment.

Item 6.  Management`s Discussion and Analysis or Plan of
Operation,
page 22

Results of Operations, page 24

Interest Expenses / Income, page 25

2. It is not clear to us why you did not record any interest
expense
for 2003 and 2004 given that you had $1,396 thousand and $1,782
thousand of outstanding bank loans at December 31, 2004 and
December
31, 2003 respectively.  Please revise your bank loans note on page
45
to explain in more detail the nature of your bank loans that
caused
you not to incur any interest expense during each of the previous
two
years.

Report of Independent Registered Public Accounting Firm, page 28

3. We note that your audit report was signed by an audit firm
based
in Arizona. After asking your auditor, please tell us where the
majority of the audit work was conducted and how they concluded
that
it is appropriate to have an audit report issued by an auditor
licensed in Arizona in view that almost all of your operations in
China and Hong Kong.  In addition, please have your auditor tell
you
whether a foreign audit firm played a substantial role in the
preparation or furnishing of the audit report, and if so, whether
the
foreign audit firm is registered with the PCAOB.

Consolidated Balance Sheets, page 29

4. Refer to page 2 of your 10-QSB`s for the quarters ended March
31,
2005 and June 30, 2005 and explain to us management`s
consideration
of SFAS 5 in determining that it was appropriate not to have an
allowance for doubtful accounts recorded as of December 31, 2004
March 31, 2005 and June 30, 2005.  To the extent possible, provide
us
with support that shows it is probable that all receivables will
be
collected in full as of each balance sheet date and explain why
this
is true given that the receivable balance has been increasing each
fiscal period.

Consolidated Statements of Operations, page 30

5. We note your revenue recognition note on page 33 which
indicates
that you derive revenues from both product sales and services.  In
accordance with Rule 5-03 of Regulation S-X, please revise to
present
separately your revenues from product sales and services.

6. Please explain to us the nature of the Sundry income presented
on
your Consolidated Statements of Operations and tell us your
accounting policies related to it.  In accordance with Item 303 of
Regulation S-B, revise your MD&A to discuss the causes for the
year
over year change in this line item.

Note 13 - Consolidated Statements of Cash Flows, page 32

7. Refer to the operating activities section of your consolidated
statement of cash flows for the year ended December 31, 2004 and
the
quarters ended March 31, 2005 and June 30, 2005 and explain to us
why
the amount of the adjustment to net income from minority interest
differs from the amount of the minority interest line item on your
statement of operation for the respective period.

Revenue Recognition, page 33

8. In order to help us better understand your revenue recognition
policies, please refer to your products and services discussion on
pages 6 and 7 and answer the following questions:
* Explain to us how you account for the sale of your proprietary
call
center management software and tell us whether it is sold in an
"off
the shelf form" or whether it requires significant production,
modification or customization.  In addition, tell us whether you
perform installation services related to this software, and if so,
how you account for those installation services.
* Provide us with more detail on the nature of your information
technology outsourcing services and tell to us whether you
recognize
revenue from these services upon completion of the contract or
over
the life of the contract using the percentage of completion
method.
If the latter, explain to us what approach you use to measure the
progress towards completion.
* For the arrangements in which Linkhead acts as a master
reseller,
tell us whether you recognize the revenue gross as a principal or
net
as an agent and explain to us your consideration of EITF 99-19 in
making this determination.
* For the arrangements in which Linkhead acts as a mobile phone
systems integrator for service providers in China, tell us whether
you recognize revenue upon completion of the contract or over the
life of the contract using the percentage of completion method.
If
the latter, explain to us what approach you use to measure the
progress towards completion.  In addition, explain to us your
consideration of SOP 97-2 and EITF 00-21 in accounting for these
multiple element arrangements.
* Explain to us in more detail the nature of the products and
services provided by PacificNet Solutions Ltd. (PacSo) and tell to
us
whether you recognize revenue from these services upon completion
of
the contract or over the life of the contract using the percentage
of
completion method.  If the latter, explain to us what approach you
use to measure the progress towards completion.  In addition, it
appears to us that PacSo enters into arrangements where they
provide
products and services.  Tell us how you considered the guidance of
SOP 97-2 and EITF 00-21 for these multiple element arrangements.
* For each type of product sale made by Guangzhou Yueshen TaiYang
Technology Limited, tell us whether you recognize revenue gross as
a
principle or net as an agent and explain to us your consideration
of
EITF 99-19 in making this determination.  In addition, explain to
us
when you recognize the revenue for these sales (e.g. at the point
of
shipment, at the point of use, etc.).
* For all of your product and service offerings, explain to us how
your revenue recognition policy is affected by any post-
shipment/delivery obligations, such as customer acceptance,
product
returns, etc.

In your response letter, reference all pertinent authoritative
GAAP
accounting literature that supports your accounting treatment.  In
addition please revise your revenue recognition disclosure to
discuss
the specific revenue recognition policies for each category of
products and services that you offer.

Allowance for Doubtful Accounts, page 33

9. We note your disclosure "The Company presents accounts
receivable,
net of allowance for doubtful accounts and returns."  Based on
this
statement, it appears to us that you record estimated sales
returns
as a bad debt expense rather than a reduction in revenue.  Please
explain to us your GAAP basis for this accounting treatment.  In
addition, based on the fact that you do not have an allowance for
doubtful accounts recorded as of December 31, 2004, March 31, 2005
and June 30, 2005, it appears to us that you did not expect to
have
any returns from sales that were made as of each balance sheet
date.
If true, please provide us with detailed support that
substantiates
this claim.  Otherwise, please advise.

Foreign Currency Translation, page 34

10. We note your statement in the 2nd paragraph of this note which
states, "The resulting foreign currency translation gain or loss
is
included in Cumulative Comprehensive Loss."  As such, explain to
us
why you do not show any foreign currency translation activity in
your
Consolidated Statements of Changes in Stockholders` Equity on page
31.  In addition, explain to us your consideration of SFAS 52 in
determining that the functional currency of all your subsidiaries
is
the Hong Kong dollar given that it appears that certain of your
subsidiaries are located in and conduct the majority of their
operations in mainland China.  Explain to us your consideration of
Appendix A of SFAS 52 in making this determination.

Goodwill and purchased intangible assets, page 34

11. Disclose in future filings the results of your goodwill
impairment test at each balance sheet date presented.  In
addition,
using the guidance in paragraphs 30-35 of SFAS 142 provide us the
following information:
* how many reporting units you have;
* how you identified these reporting units
* how you allocated goodwill amongst the reporting units;
* the method used to determine the fair value of each reporting
unit.

12. In a note to the financial statements provide the disclosures
required by paragraph 45 c of SFAS 142.

2.  Business Acquisitions, page 39

13. In order to help us better understand your accounting policies
related to your business acquisitions, please answer the following
questions for each of the business acquisitions described on pages
39
through 42, as applicable:
* Explain to us your GAAP basis for your determination of the
acquisition date and tell us how you determined the value of the
common stock issued as part of the purchase consideration.
* Tell us how you accounted for contingent consideration included
as
part of the acquisition agreement and explain us your GAAP basis
for
this accounting treatment.
*  Explain to us your GAAP basis for not including the value of
the
warrants as part of the purchase price.
In addition please revise your pro forma financial information so
that it is consistent with the guidance of paragraphs 54 through
57
of SFAS 141.

13.  Segment Information, page 49

14. Please explain to us in detail how you applied the guidance of
paragraph 10 of SFAS 131 in identifying your three operating
segments.  Tell us who you have identified as your chief operating
decision maker and explain to us what reports this function
reviews
when assessing performance and allocating resources.

Item 8A  Controls and Procedures, page 51

15. We note your disclosure that your "disclosure controls and
procedures were effective such that the material information
required
to be included in your Securities and Exchange Commission ("SEC")
reports is recorded, processed, summarized and reported within the
time periods specified in SEC rules and forms relating to the
Company, including your consolidating subsidiaries."  If true,
please
revise your 10-KSB and your 10-QSB`s for the quarters ended March
31,
2005 and June 30, 2005 to also state that your disclosure controls
and procedures are effective to ensure that information required
to
be disclosed in the reports that you file or submit under the
Exchange Act is accumulated and communicated to your management,
including your principal executive and principal financial
officers,
to allow timely decisions regarding required disclosure.  See Rule
13a-15(e) of the Exchange Act for guidance.  Alternatively, you
may
simply state that your disclosure controls and procedures are
effective.  Otherwise, please advise.

16. We note your disclosure that "there were no significant
changes
in the Company`s internal controls or in other factors that could
significantly affect these controls subsequent to the evaluation
date."  Item 308(c) of Regulation S-B requires the disclosure of
any
change in your internal control over financial reporting
identified
in connection with an evaluation thereof that occurred during your
last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, your internal control over financial
reporting.  If true, please revise your 10-KSB and your 10-QSB`s
for
the quarters ended March 31, 2005 and June 30, 2005 to state that
there was no change in your internal control over financial
reporting
that occurred during the respective quarter that has materially
affected, or is reasonably likely to materially affect, your
internal
control over financial reporting.  Otherwise, please advise.

Form 10-QSB for the quarter ended June 30, 2005

Consolidated Balance Sheets, page 2

17. Refer to your consolidated statements of cash flows on page 4
and
explain to us your GAAP basis for including the Increase in loans
receivable of $3,238 thousand as an adjustment to net income in
the
operating cash flow section.  In addition, explain to us the
nature
of the loans receivable from third parties.

Consolidated Statements of Cash Flows, page 4

18. Please explain to us your US GAAP basis for including the
"decrease in restricted cash" as an adjustment to net income in
the
operating cash flow section.  In addition, tell us whether this
restricted cash line item relates to the restricted cash line item
included in the investing section of the cash flow statements from
your 10-KSB for the year ended December 31, 2004.

19. Please explain to us the nature of the increase in share
consideration post acquisition of subsidiaries and explain to us
why
this item affected cash flows from financing activities.  In this
regard, we note that the same amount is included as part of the
non
cash investing and financing activities.

3.  Business Acquisitions, page 7

20. In order to help us better understand your accounting for the
acquisition of Guangzhou 3G Information Technology Co. Ltd.
(Guangzhou3G-WOFE), please address the following in your response
letter:
* Explain to us how you accounted for Guangzhou3G-WOFE prior to
this
acquisition.  In this regard, we note on page 5 of your 10-KSB for
the year ended December 31, 2004 that you consolidate the
financial
statements of Guangzhou3G-WOFE because you determined that you are
the primary beneficiary.
* Revise to disclose the total cost of the acquired entity and to
include a condensed balance sheet that indicates the amount
assigned
to each major asset and liability caption of the acquired entity
at
the acquisition date.  Refer to paragraphs 51 and 58 of SFAS 141
for
guidance.
* Explain to us your GAAP basis for your determination of the
acquisition date and tell us how you determined the value of the
common stock issued as part of the purchase consideration.
* Tell us how you accounted for contingent consideration included
as
part of the acquisition agreement and explain us your GAAP basis
for
this accounting treatment.
*  Tell us whether you included the value of the warrants issued
as
part of the purchase price and explain your GAAP basis for this
treatment.
* Explain to us what you mean by your statement "Guangzhou3G-WOFE
was
set up as a wholly-owned foreign enterprise