Unassociated Document

March 9, 2011

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

Re:

China Recycling Energy Corporation

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

Filed March 16, 2010

File No. 1-34625

Dear Mr. Thompson:

This firm is counsel to the above-referenced company, China Recycling Energy Corporation (“CREG” or the “Company” and sometimes referred to as “we” or “our”) and is filing this response to your comment letter, dated February 28, 2011, with respect to the above-referenced filings on CREG’s behalf. 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 comment letter followed by our response.

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

Item 8. Financial Statements and Supplementary Data, page 26

Consolidated Statements of Cash Flows, page 30

We reviewed the revised consolidated statements of cash flows provided in response to comment one in our letter dated February 9, 2011. Please provide us with a reconciliation of the changes in the “Investment in sales type leases, net,” and “Construction in progress” balance sheet line items to the “Changes in gross sales type leases receivables,” Collection of principal on sales type leases,” and “Construction in progress” reported in the statement for each year presented.

Response:

In accordance with your comment letter, dated February 28, 2011, a reconciliation of the requested changes, for fiscal years ended 2009 and 2010, is attached to and submitted with this response.

United States Securities and Exchange Commission

March 9, 2011

Page 2

Should you have any further comments or require any further information, or if any questions should arise in connection with this submission, please call me at (404) 527-4990 or Mr. James Thornton at (404) 527-8118.

Very truly yours,

/s/ Thomas Wardell

Thomas Wardell

cc:	David Chong, CFO, China Recycling Energy Corp.

Jeffrey Li, Esq.

James L. Thornton, Esq.

CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES

RECONCILATION OF CASH FLOW BASED ON BALANCE SHEET

	balance sheet date rate				balance sheet date rate											yearly average rate
Exchange rate	6.8282				6.6227											6.7695
	2010 vs 2009										NON-CASH		Change
	2009		2009		2010		2010
	RMB		USD		RMB		USD		difference of the amount @ 12/31/2009 and 12/31/2010 RMB		RMB		Changes in gross sales type leases receivables			Collection of principal on sales type leases		RMB
											a		b			c		b+c-a

Investment in sales type leases, net - current	¥	30,019,464	$	4,396,395	¥	50,495,683	$	7,624,637
Investment in sales type leases, net - noncurrent	¥	328,762,385	$	48,147,738	¥	778,737,670	$	117,586,131
Total investment in sales type lease, net	¥	358,781,849	$	52,544,133	¥	829,233,353	$	125,210,768	¥	-470,451,504	¥	80,000,000	¥	-422,589,658		¥	32,138,154	¥	-470,451,504
													$	(62,425,535	)	$	4,747,493

Construction in progress	¥	238,023,165	$	34,858,845	¥	168,070,768	$	25,377,983					¥	69,952,397
													$	10,333,466

* Non-Cash ￥80,000,000 is stock to be issued for purchase of equipment for biomass BMPG.

Exchange rate	6.8346				6.8282											6.831
	2009 vs 2008								difference of the amount @ 12/31/2009 and 12/31/2010 RMB		NON-CASH		Change
	2008		2008		2009		2009				RMB		Changes in gross sales type leases receivables			Collection of principal on sales type leases
	RMB		USD		RMB		USD				a		b			c		b+c-a
Investment in sales type leases, net - current	¥	13,468,201	$	1,970,591	¥	30,019,464	$	4,396,395
Investment in sales type leases, net - noncurrent	¥	101,410,968	$	14,837,879	¥	328,762,385	$	48,147,738
Total investment in sales type lease, net	¥	114,879,169	$	16,808,470	¥	358,781,849	$	52,544,133	¥	-243,902,680	¥	90,000,000	¥	-171,537,374		¥	17,634,694	¥	-243,902,680
													$	(25,111,382	)	$	2,581,568

Construction in progress	¥	25,500,000	$	3,731,016	¥	238,023,165	$	34,858,845						(212,523,165	)
													$	(31,111,575	)

* Non-Cash ￥90,000,000 is inventory and advance to suppliers for the equipment which was bought in prior years (in 2008), but used in 2009 for Shengmu project.

CHINA RECYCLING ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


	YEARS ENDED DECEMBER 31,
	2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES:
Income including noncontrolling interest	$	17,826,069		$	10,061,756
Adjustments to reconcile income including noncontrolling
interest to net cash used in operating activities:
Changes in sales type leases receivables		(62,425,535	)		(25,111,381	)
Depreciation and amortization		23,631			35,121
Amortization of discount related to conversion feature of convertible note		1,789,558			-
Stock options and warrants		2,940,985			1,793,228
Stock compensation expense		602,000			-
Accrued interest on convertible notes		246,805			184,530
Changes in deferred tax		4,516,906			2,085,709
(Increase) decrease in current assets:
Interest receivable on sales type lease		(101,476	)		(355,220	)
Collection of principal on sales type leases		4,747,493			2,581,568
Prepaid expenses		31,229			3,415,076
Other receivables		1,153,682			(1,421,503	)
Increase (decrease) in current liabilities:
Accounts payable		2,622,021			2,394,223
Taxes payable		908,894			(633,648	)
Unearned revenue		-			(658,762	)
Accrued liabilities and other payables		481,783			(745,309	)
Construction in progress		10,333,466			(31,111,575	)

Net cash used in operating activities		(14,302,489	)		(37,486,187	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Increase investment in subsidiary		-			(16,103	)
Restricted cash		(630,697	)		(1,461,060	)
Acquisition of property & equipment		(81,975	)		(33,498	)

Net cash used in investing activities		(712,672	)		(1,510,661	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Insurance of common stock		430,500			2,000,000
Insurance of convertible notes		7,533,391			3,000,000
Notes payable - bank acceptances		-			1,461,060
Cash contribution from noncontrolling interest		908,279			263,439
Proceeds from loans		15,444,272			25,559,947
Advance from related parties		682,158			556,940

Net cash provided by financing activities		24,998,600			32,841,386

EFFECT OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS		(23,132	)		61

NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS		9,960,307			(6,155,401	)
CASH & EQUIVALENTS, BEGINNING OF YEAR		1,111,943			7,267,344

CASH & EQUIVALENTS, END OF YEAR	$	11,072,250		$	1,111,943

Supplemental Cash flow data:
Income tax paid	$	1,745,643		$	1,480,698
Interest paid	$	4,758,991		$	358,789