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<SEC-DOCUMENT>0001010549-07-001042.txt : 20080811
<SEC-HEADER>0001010549-07-001042.hdr.sgml : 20080811
<ACCEPTANCE-DATETIME>20071214162712
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001010549-07-001042
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20071214

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CHINA RECYCLING ENERGY CORP
		CENTRAL INDEX KEY:			0000721693
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-BUSINESS SERVICES, NEC [7389]
		IRS NUMBER:				900093373
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		SUITE 909, TOWER B, CHANG AN INTL BLDG
		STREET 2:		NO. 88 NAN GUAN ZHENG XIE
		CITY:			XI AN CITY, SHAN XI PROVINCE
		STATE:			F4
		ZIP:			710068
		BUSINESS PHONE:		86-29-8765-1096

	MAIL ADDRESS:	
		STREET 1:		SUITE 909, TOWER B, CHANG AN INTL BLDG
		STREET 2:		NO. 88 NAN GUAN ZHENG XIE
		CITY:			XI AN CITY, SHAN XI PROVINCE
		STATE:			F4
		ZIP:			710068

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CHINA DIGITAL WIRELESS INC
		DATE OF NAME CHANGE:	20040810

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	BOULDER ACQUISITIONS  INC
		DATE OF NAME CHANGE:	20020430

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	BOULDER BREWING CO
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
<TEXT>
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<head>
<title>China Recycling Energy Corporation - Correspondence</title>
</head>

<body>

<p>&nbsp;</p>
<hr color="#000000" size="5"><font FACE="Times New Roman">
<p><font size="2">Linda van Doorn <br>
Jorge Bonilla <br>
Securities and Exchange Commission <br>
Division of Corporation Finance <br>
Mail Stop 4561 <br>
450 Fifth Street, N.W. <br>
Washington, D.C. 20549 </font></p>
<p><font size="2">RE:&nbsp;&nbsp; <u>China Recycling Energy Corporation, File
No. 000-12536 </u><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Form 10-KSB for the year
ended December 31,2006 </u><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Forms 10-QSB for the
quarters ended March 31,2007 and June 30,2007 </u></font></p>
<p><font size="2">Date: December 14, 2007 </font></p>
<p><font size="2">Dear Ladies and Gentlemen, </font></p>
<p align="justify"><font size="2">On behalf of our client China Recycling Energy
Corporation (the &quot;Company&quot;), in connection with the above referenced reports, we
are hereby providing you the following responses to the comments in your letter
dated October 03, 2007: </font></p>
<p><u><font size="2">Form 10-KSB <br>
Management's Discussion and Analysis <br>
Critical Accounting Policies, page 12 </font></u></p>
<p align="justify"><font size="2">1. <b>Comment:</b> In future filings, please
revise the MD&amp;A to address the role significant accounting policies and
estimates have in understanding the company's results. Provide a comprehensive
discussion of your critical accounting policies, including the judgments and
uncertainties affecting the application of those policies and the likelihood
that materially different amounts would be reported under different conditions
or using different but reasonably plausible assumptions. Refer to FR- 60. </font>
</p>
<b>
<p><font size="2">Response: </font></b><font size="2">Your comment is noted and
will be incorporated in the future filings</font><b><font size="2"> </font></p>
</b>
<p><u><font size="2">Financial Statements </font></u></p>
<p><u><font size="2">Note 3 - Summary of Significant Accounting Policies </font>
</u></p>
<p><u><font size="2">Foreign Currencies Translation, page 7. </font></u></p>
<p align="justify"><font size="2">2.</font></font><font FACE="Times New Roman" size="2"><i>
</i></font><font FACE="Times New Roman"><font size="2"><b>Comment: </b>The note
indicates that the functional currency of the Company is the U.S. dollar. Please
reconcile this assertion with the disclosure in note 17(a) on page 19 that
&quot;...100% of the Company's assets were located in the PRC and 100% of the Company's
revenues and purchases were derived from customers located in the PRC&quot;, and with
your disclosure in your 2005 Form 10-KSB. Explain to us how you considered
paragraphs 5-10 of SFAS 52 in determining your functional currency. Also, tell
us your accounting policy for foreign currency transaction gains or losses.
</font></p>
<hr color="#000000" size="5"><p Style='page-break-before:always'><b>
<p align="justify"><font size="2">Response: </font></b><font size="2">The
accounting policy on foreign currencies translation stated in the financial
statements contributed the same meaning as below:</font><b><font size="2">
</font></p>
</b>
<p ALIGN="JUSTIFY"><font size="2">Transactions denominated in currencies other
than the functional currency are translated into the functional currency at the
exchange rates prevailing at the dates of the transaction. Monetary assets and
liabilities denominated in currencies other than the functional currency are
translated into the functional currency using the applicable exchange rates at
the balance sheet dates. The resulting exchange differences are recorded in the
consolidated statement of operations. </font></p>
<p ALIGN="JUSTIFY"><font size="2">The functional and reporting currency of the
Company is the United States dollars (&quot;U.S. dollars&quot;). The accompanying
consolidated financial statements have been expressed in U.S. dollars. In
addition, the Company's operating subsidiary in the PRC, TCH maintains its books
and records in its local currency, the Renminbi Yuan (&quot;RMB&quot;), which is
functional currency as being the primary currency of the economic environment in
which its operations are conducted. </font></p>
<p ALIGN="JUSTIFY"><font size="2">Assets and liabilities of its subsidiary whose
functional currency is not the U.S. dollars are translated into US dollars, in
accordance with SFAS No 52, &quot;<i>Foreign Currency Translation&quot;</i>, using the
exchange rate on the balance sheet date. Revenues and expenses are translated at
average rates prevailing during the period. The gains and losses resulting from
translation of financial statements of foreign subsidiary is recorded as a
separate component of accumulated other comprehensive income within the
statement of stockholders' equity. </font></p>
<p align="justify"><u><font size="2">Note 4 -Impairment Write Down Recognized As
A Result Of Strategic Review of Certain Operations, page 9 </font></u></p>
<p align="justify"><font size="2">3. <b>Comment:</b> We noted that you charged
additional paid-in capital for the impairment relating to property and equipment
and deposit for business acquisition. Please explain to us your basis in GAAP
for this treatment. </font></p>
</font><font FACE="Times New Roman" size="2"><b>
<p align="justify">Response: </b>The $7,114,047 was transferred from the
retained earnings to the additional paid-in capital and then the impairment is
written-off against this $7,114,047 in the additional paid-in capital. So
effectively the impairment was written off against the retained earnings. </font>
<font FACE="Times New Roman"><b></p>
</b>
<p ALIGN="JUSTIFY"><font size="2">The ground that the impairment was written off
against the retained earnings is according to Statement of Financial Accounting
Standards No. 5 <i>&quot;Accounting for Contingencies&quot;</i>. According to paragraph 15
of this standard, an enterprise can have a portion of retained earnings as
appropriated for loss contingencies. The impairment to the property and
equipment and the deposit for business acquisition were understood as loss
contingencies as a result of the Company's plan to stop the mobile phone and
advertising business and the uncertainty in the collectibility of the deposit
for business acquisition. </font></p>
</font><hr color="#000000" size="5"><p Style='page-break-before:always'><font FACE="Times New Roman">
<p><u><font size="2">Note 7 Property and Equipment, Net, page 10 </font></u></p>
<p align="justify"><font size="2">4.<b> Comment:</b> It appears from the
disclosure in the last paragraph of note 7 that the assets that have been
written down are pledged as security for Sifang's line of credit. Please clarify
to us whether you guarantee this line of credit. </font></p>
</font><font FACE="Times New Roman" size="2"><b>
<p align="justify">Response: </b>There was no corporate guarantee provided by
the Company or its subsidiaries to Sifang Information Technology Co. as
alternative security to the property. </font><font FACE="Times New Roman"><b>
</p>
</b>
<p align="justify"><u><font size="2">Exhibit 3 1.1 and 3 1.2 - Certifications
</font></u></p>
<p align="justify"><font size="2">5. <b>Comment: </b>We noted that the
identification of the certifying individual at the beginning of the
certification required by Exchange Act Rule 13a-14(a) included in the 10-KSB and
Forms 10-QSB also includes the title of the certifying individual. Considering
that the certifications must be signed in a personal capacity, please confirm to
us that your officers signed such certification in a personal capacity. Also,
confirm that in future filings you will revise the identification of the
certifying individual at the beginning of the certification so as not to include
the individual's title. </font></p>
</font><font FACE="Times New Roman" size="2"><b>
<p align="justify">Response: </b>The Company confirms that the officers signed
such certification in a personal capacity and also confirm that in future
filings the Company will revise the identification of the certifying individual
at the beginning of the certificate so as not to include the individual's title.
</font><font FACE="Times New Roman"><b></p>
</b>
<p align="justify"><u><font size="2">Forms 10-OSB for the quarters ended March
31, 2007 and June 30, 2007 </font></u></p>
<p align="justify"><u><font size="2">Financial Statements </font></u></p>
<p align="justify"><u><font size="2">Condensed Consolidated Balance Sheet </font>
</u></p>
<p ALIGN="JUSTIFY"><font size="2">6. <b>Comment:</b> Please explain to us the
transactions that gave rise to the amount reported as &quot;Due from a third party&quot;,
the nature of the considerations exchanged and your basis in GAAP for your
accounting. </font></p>
<b>
<p align="justify"><font size="2">Response: </font></b><font size="2">The amount
due from a third party, Shanghai Sifang Information Technology Co. (&quot;Sifang
Information&quot;), a Shanghai-based privately owned enterprise established under the
laws of the PRC, is unsecured, non-interest bearing and repayable in the next
twelve months.</font><b><font size="2"> </font></p>
</b>
<p align="justify"><font size="2">During 2006, Sifang Information was considered
as a related party whereas its shareholders were related through common
ownership with the major shareholders of the Company. On January 24, 2007, these
shareholders of Sifang Information disposed of their ownership in the Company.
Hence, Sifang Information became a non-related party as of March 31, 2007 and
June 30, 2007. </font></p>
</font><hr color="#000000" size="5"><p Style='page-break-before:always'>
<p><font size="2">The nature of the transactions were trade related and relating
to the mobile phone distribution business and they were recorded at cost. </font>
</p>
<p><u><font size="2">Note 2 - Organization and Business Background, page 9
</font></u></p>
<p align="justify"><font size="2">7.<b> Comment:</b> We note that under the
Joint-Operation Agreement with Yingfeng, TCH provides various forms of
investments and properties into the Project and in return TCH becomes entitled
to all the rights, benefits and interests that Yingfeng originally had under the
Project Contract, including but not limited to the cash payment made by Xingtai
on a regular basis and other property rights and interests. We also note your
funding commitment related to a TRT System project disclosed in note 14 on page
16. Please explain to us how you considered the guidance in FIN 46R with respect
to your rights and obligations referenced above and your relationship with
Yingfeng. </font></p>
<b>
<p align="justify"><font size="2">Response: </font></b><font size="2">The
Company's subsidiary, Shanghai TCH Data Technology Co., Ltd. (&quot;TCH&quot;) and Xi'an
Yingfeng Science and Technology Co., Ltd. (&quot;Yingfeng&quot;) are two independent legal
entity registered in the PRC. TCH and Yingfeng have no common control and
managed by two different management teams. Under the Joint-Operation Agreement,
TCH is entitled to all the rights, interest, risks and expected returns or
losses of the TRT system. On the other hand, Yingfeng is contracted for the
provision of maintenance service to the TRT system and in return received a
monthly maintenance fee. Under the above circumstances, Yingfeng is not
considered as a variable interest entity of TCH under FIN 46R.</font><b><font size="2">
</font></p>
</b>
<p><u><font size="2">Note 3 - Summary of Significant account in Policies </font>
</u></p>
<p><u><font size="2">Revenue Recognition, page 11 </font></u></p>
<p ALIGN="JUSTIFY"><font size="2">8.<b> Comment: </b>The notes suggests that
your basis for accounting your lease with Xingtai as direct financing lease is
that the lease transfers substantially all benefits and risks of TRT system
ownership to Xintai. Please specifically explain to us how this lease meets the
criteria in paragraph 6.b.ii. of SFAS 13. </font></p>
<b>
<p><font size="2">Response: </font></b><font size="2">The lease between Xingtai
Iron and Steel Company Ltd. (&quot;Xingtai&quot;) and TCH is classified as direct
financing lease as:</font><b><font size="2"> </font></p>
</b>
<p style="text-indent: -26; margin-left: 26"><font size="2">a)&nbsp;&nbsp;&nbsp;&nbsp;
the lease did not involve a long-term creditor and hence it is not classified as
leveraged lease under paragraph 42 of SFAS 13; </font></p>
<p style="text-indent: -26; margin-left: 26"><font size="2">b)&nbsp;&nbsp;&nbsp;&nbsp;
the lease transfers all benefits and risks of the TRT system ownership to the
lessee, Xingtai, by the end of a five-year lease term under paragraph 7.a. of
SFAS 13; </font></p>
<hr color="#000000" size="5"><p Style='page-break-before:always'>
<p ALIGN="JUSTIFY" style="text-indent: -26; margin-left: 26"><font size="2">c)&nbsp;&nbsp;&nbsp;&nbsp;
the collectibility of the minimum lease payments is reasonably predictable under
paragraph 8.a. of SFAS 13 as the management of TCH predicted to collect the
lease payments in December 2007; and </font></p>
<p style="text-indent: -26; margin-left: 26"><font size="2">d)&nbsp;&nbsp;&nbsp;&nbsp;
there is no important uncertainties surround the amount of unreimbursable costs
yet to be incurred by TCH under the lease under paragraph 8.b. of SFAS 13.
</font></p>
<p><font size="2">Please also find attached in Exhibit a statement made by the
Company in connection with responding to your comments. The attached statement
acknowledges that: </font></p>
<p><font size="2">(1) the company is responsible for the adequacy and accuracy
of the disclosure in the filings; </font></p>
<p><font size="2">(2) staff comments or changes to disclosure in response to
staff comments do not foreclose the Commission from taking any action with
respect to the filings; and </font></p>
<p><font size="2">(3) the company may not assert staff comments as a defense in
any proceeding initiated by the Commission or any person under the federal
securities laws of the United States. </font></p>
<p><font size="2">If you have any questions or comments regarding the foregoing,
please do not hesitate to contact us at telephone: (212) 219-7783 or fax: (212)
219-3604 </font></p>
<p><font size="2">Very truly yours, </font></p>
<p><font size="2"><u>/s/ Bernard &amp; Yam, LLP <br>
</u>Bernard &amp; Yam, LLP </font></p>
<p><font size="2">401 Broadway Suite 1708 <br>
New York, NY 10013 </font></p>
<hr color="#000000" size="5">

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<head>
<title>China Recycling Energy Corporation - Correspondence Exhibit</title>
</head>

<body>

<font FACE="Times New Roman">
<p>&nbsp;</p>
<hr color="#000000" size="5">
<p align="center"><font size="2">CHINA RECYCLING ENERGY CORPORATION </font></p>
<p><font size="2">TO: </font></p>
<p><font size="2">Linda van Doorn <br>
Jorge Bonilla <br>
Securities and Exchange Commission <br>
Division of Corporation Finance <br>
Mail Stop 4561 <br>
450 Fifth Street, N.W. <br>
Washington, D.C. 20549 </font></p>
<p><font size="2">RE:&nbsp; <u>China Recycling Energy Corporation, File No.
000-12536 </u><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Form 10-KSB for the year ended
December 31,2006 </u><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Forms 10-QSB for the quarters
ended March 31,2007 and June 30,2007 </u></font></p>
<p><font size="2">Date: December 14, 2007 </font></p>
<p><font size="2">Dear Ladies and Gentlemen, </font></p>
<p><font size="2">As the Chief Executive Officer of China Recycling Energy
Corporation (the &quot;Company&quot;), I hereby acknowledge, on behalf of the Company and
in connection with the response to the staff's comment letter dated on October
03, 2007, that: </font></p>
<p><font size="2">(1) the company is responsible for the adequacy and accuracy
of the disclosure in the filings; </font></p>
<p><font size="2">(2) staff comments or changes to disclosure in response to
staff comments do not foreclose the Commission from taking any action with
respect to the filings; and </font></p>
<p><font size="2">(3) the company may not assert staff comments as a defense in
any proceeding initiated by the Commission or any person under the federal
securities laws of the United States. </font></p>
<p><font size="2">Sincerely yours, </font></p>
<p><u><font size="2">/s/ Guangyu Wu</font></u></p>
<p><font size="2">Guangyu Wu </font></p>
<p><font size="2">Chief Executive Officer </font></p>
<hr color="#000000" size="5"></font>

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