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CORRESP
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filename1.htm

      CEDA Form CORRESP 11/16/2005

    CHINA
      EDUCATION ALLIANCE, INC.

    80
      Heng
      Shan Rd. Kun Lun Shopping Mall

    Harbin,
      P.R. China 150090

    ******

    October
      28, 2005

    Securities
      and Exchange Commission

    Division
      of Corporation Finance

    450
      Fifth
      Street, N.W.

    Washington,
      D.C. 20549-0404

    Attn:
      Steven
      Jacobs, Esq.

    Accounting
      Branch Chief

    Re:
      China
      Education Alliance, Inc.

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

    Form
      10-QSB for Fiscal Quarter Ended March 31, 2005

    Form
      10-QSB for Fiscal Quarter Ended June 30, 2005

    File
      Number: 333-101167

    Gentlemen:

        Thank
      you for
      your comment letter dated October 11, 2005 (the "Comment Letter") with respect
      to the above-captioned annual report and quarterly reports. We have filed our
      Amendment No. 1 to the quarterly reports on Form 10QSB/A (the “Quarterly
      Report”) of China Education Alliance, Inc. (the "Company"), and Amendment No. 2
      to the Form 10-KSB/A of the Company, which incorporate our responses to your
      comments, and this letter sets forth each of our responses in outline form
      below. Numbered paragraphs refer to the corresponding numbers contained in
      the
      Comment Letter.

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

    Item
      1-Business, page 3

    1.
      We
      note your disclosure in the Employees section on page 5 that you currently
      employ 15 staff members. Please tell us where the related compensation expense
      is recorded in the statement of operations.

    Response:

    The
      compensation expense related to the 15 staff members has been recorded into
      General and Administrative Expenses in the statement of operations, which was
      $11,346. The relatively low expenses were due primarily to the two reasons
      below:

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            1)

              There
                were only two months of payroll included in the General and Administrative
                Expenses because the inception of the Company was August 9, 2004
                and the
                payroll did not start until November of
                2004.

            2)

              The
                salary rate was low in China, which was approximately RMB 600 per
                person
                on average. Please refer to the supporting documents in Exhibit 1,
                which
                are worksheets prepared by our
                auditor.

    Consolidated
      Financial Statements

    Report
      of Independent Registered Public Accounting Firm, Page13

    2.
      Please
      tell us what steps your auditor has taken to obtain competency in US
      GAAP.

    Response:

    The
      Office of Chief Accountant of the SEC in January 2005 required our auditors,
      Jimmy C.H. Cheung & Co., to provide a report of a certifying consultant to
      represent to the SEC staff that Jimmy C.H. Cheung & Co. is competent in US
      GAAP, US GAAS, SEC standards and PCAOB requirements. This certifying consultant
      report issued by Mr. Donald D. Pangburn, a Director of GHP Horwath, P.C. was
      completed and submitted to the Office of Chief Accountant in July 2005.

    Note
      1
      -Summary of Significant Accounting Policies and Organization,
      page18

    3.
      Please
      explain further to us the nature of your debit cards and what they enable the
      end user to purchase. Further, please advise us of the nature of the
      relationship with your distributors and the basis on which revenues and related
      cost of sales are determined at the time of sale to these distributors. Finally,
      include a summary of the revenue cycle in your response.

    Response:

    Our
      revenue is derived from the sale of debit cards that allow purchasers/users
      to
      access our educational website to download educational materials. The debit
      cards are distributed by the Company’s salesmen and appointed third party
      distributors. Revenue is recognized by the Company when the debit cards are
      delivered and sold by the salesmen or distributors, at which time the customers
      bear the risk of loss. All debit cards are sold for cash and are non-refundable
      either for loss or unused portions. There is no revenue cycle as such and
      therefore the requested summary is not included.

    4.
      We
      note your disclosures within the Business section at page 3, and in the Business
      sections of your Forms 10-QSB for the fiscal quarters ended March 31, 2005
      and
      June 30, 2005, that, in addition to your debit card sales, you have sales of
      your self-developed educational software and of educational books media as
      well
      as provide other services such as text book downloading and electronic storage
      management. Please tell us how you have considered these revenue streams in
      determining your revenue recognition policies.

        2

    Response:

    Our
      revenue presentation in the Forms 10-KSB/A and 10-QSB/A as included a
      description of self developed educational software and education books media
      as
      well as the provision of other services such as text book downloading and
      electronic storage management. At this point in time, we have not booked any
      revenue for the sale of these items, although they are part of our business
      plan. Further, we did not recognize any revenues for these items in our
      Statement of Operations for the fiscal period ending December 31, 2004 or the
      interim quarterly periods that followed. Nonetheless, in order to be
      conservative in our disclosure, we have amended the annual and interim reports
      to delete any reference to revenue or sales being derived from self developed
      educational software and educational books media as well as the provision of
      other services such as text book downloading and electronic storage management.

    We
      do
      offer downloadable materials which are paid for by our debit cards in the
      following manner. The Company's revenue from downloadable materials is
      recognized at the time of sale of the debit card, as mentioned above. However,
      if a debit card user has insufficient points left on his card, downloadable
      services will not be available until the client makes a payment to our sales
      center in cash or by wire transfer in order to purchase additional points.
      Revenue would be recognized for such additional purchases at the time that
      the
      funds were provided.

    The
      price
      list of downloadable materials, including equivalent points, is shown as
      follows:

    Price
      List of Downloadable Materials

              Items

              Description

              Price

              (RMB)

              Points

              Comprehensive
                Database

              Concurrent
                Exercise

              0.3

              30

              Unit
                Exercise

              0.3

              30

              Mid-term
                Exam

              0.5

              50

              Final
                Exam

              0.5

              50

              Simulative
                Exam for College Entry

              1.0

              100

              Simulative
                Exam for High School Entry

              1.0

              100

              Enhanced
                Exam

              1.0

              100

              Monthly
                Test

              0.5

              50

              Enhanced
                Exam for High School Entry

              3.0

              300

              Enhance
                Exam for College Entry

              3.0

              300

              Exam
                Database from Named School

              Concurrent
                Exercise

              0.5

              50

              Unit
                Exercise

              1.0

              100

              Mid-term
                Exam

              1.0

              100

              Final
                Exam

              1.0

              100

              Simulative
                Exam for College Entry

              5.0

              500

              Simulative
                Exam for High School Entry

              5.0

              500

              Enhanced
                Exam

              0.5

              50

              Monthly
                Test

              1.0

              100

              Enhanced
                Exam for High School Entry

              10.0

              1,000

              Enhance
                Exam for College Entry

              10.0

              1,000

              Exam
                Database from Named Teachers

              Concurrent
                Exercise

              0.5

              50

              Unit
                Exercise

              0.5

              50

              Mid-term
                Exam

              2.0

              200

              Final
                Exam

              2.0

              200

              Simulative
                Exam for College Entry

              3.0

              300

              Simulative
                Exam for High School Entry

              3.0

              300

              Study
                / Notes from Named Teachers

              1.0

              100

              Enhanced
                Exam

              0.5

              50

              Daily
                Test

              0.2

              20

              Weekly
                Test

              0.5

              50

              Monthly
                Test

              1.0

              100

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    5.
      Please
      provide us with your basis for amortizing communication equipment over a 10-year
      useful life. Please describe the nature of the equipment and tell us how you
      concluded that a 10 year life was reasonable.

    Response:

    Communication
      equipment comprised 10 sets of DVD home theatres used for presentations of
      educational materials; two sets of servers to power the Company’s website and
      one set of satellite receivers. The equipment was put to use in October 2004
      and
      the Company’s Board of Directors is of the opinion that given due care and
      maintenance, this equipment would be able to provide at least a 10 year useful
      life. Accordingly, we have amortized the communication equipment over 10 years
      on a straight line basis, less an estimated residual value.

    Item
      8A-Controls and Procedures, page 22

    6.
      We
      note your disclosures regarding the inherent limitations on the effectiveness
      of
      control systems and that based upon their evaluation, your CEO and CFO concluded
      that, “subject to the limitations noted above, the Company’s disclosure controls
      are effective…” Please revise to state clearly, if true, that your disclosure
      controls and procedures are designed to provide reasonable assurance of
      achieving their objectives and that your chief executive officer and chief
      financial officer concluded that your disclosure controls and procedures are
      effective at that reasonable assurance level. In the alternative, remove the
      reference to the level of assurance of your disclosure controls and procedures.
      Please refer to Section II.F.4 of Management’s Reports on Internal Control Over
      Financial Reporting and Certification of Disclosure in Exchange Act Periodic
      Reports, SEC Release No. 33-8283, available on our website at http://www.sec.gov/rules/final/33-8283.htm.
      Please
      make conforming changes to your Forms 10-QSB for the fiscal quarters ended
      March
      31, 2005 and June 30, 2005.

    Response:

    We
      have
      revised our disclosure in the amended annual report and the amended quarterly
      reports to state that our disclosure controls and procedures are designed to
      provide reasonable assurance of achieving their objectives and that our CEO
      and
      CFO concluded that our disclosure controls and procedures are effective at
      that
      reasonable assurance level.

    Item
      10-Executive Compensation, page 28

    7.
      We
      note your disclosure that your officers and directors do not presently receive
      compensation. Please tell us what accounting literature you considered in
      determining whether the value of the services provided by these persons should
      be recorded as an expense with a corresponding contribution to
      equity.

    Response:

    We
      considered FAS-116 in determining whether the value of services provided by
      our
      officers and directors should be recorded as an expense with a corresponding
      contribution to equity. A definitive interpretation under FAS-116 states that
      services that do not (a) create or enhance non financial assets or (b) require
      specialized skills do not have to be expenses with a corresponding contribution
      to equity, particularly where they are provided by donation. In addition,
      routine volunteer services requiring no particular expertise may not be reported
      as contribution revenue. Based on our reading of FAS-116 and its
      interpretations, we have decided not recorded these non-material amounts of
      services as an expense with a corresponding contribution to equity.

    Please
      let us know if you have further questions.

    Sincerely,

    /s/
      Yu,
      Xi Qun, President

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