1. CHINA February 2011 NewsletterCHINAFebruary 2011 NewsletterInside this issue:Pulling the Rabbit Out of the Hat1Pulling the Rabbit Out of the HatHCI Calendar 4Happy New Year the year of Pulling the rabbit out of the hat. Ironically, in a year that honorsHC International China Clientsa gentle, calm and thoughtful animal, 2011 has started out as anything but for investors in theby Industry Sector:6China-based, U.S.-listed small cap sector. In stark contrast to the broad indices, which have con-CLEANTECH/CLEAN ENERGY: tinued to scale a wall of worry with relative ease while breaking to new highs, U.S.-listed ChinaChina Hydroelectric Corporation (NYSE: CHC)6stocks have lagged badly, prompting many investors to wonder if it is time to capitulate. If count-China Integrated Energy (NASDAQ: CBEH) 6less calls with U.S. funds who say we own no China can be a contrarian indicator, we firmly be-China New Energy Group Co. (OTCQB: CNER) 6lieve the answer is no.Sino Clean Energy Inc. (NASDAQ: SCEI)6Are We There Yet?CONSUMER & BUSINESS SERVICES:China Internet Caf Holdings (OTCQB: CICC) 7China Linen Textile Industry Inc. (OTCQB: CTXIF) 7As with any objective investment analysis, it is critical to take a step back and assess how we gotChinaCast Education Corporation (NASDAQ: CAST) 7here. An astute student of capital markets understands that prior bull and bear market cyclesChinaNet Online Holdings, Inc. (NASDAQ: CNET)7share many similarities, but also a few distinct differences.CONSUMER - FOOD/RETAIL: Similarities DifferencesChina Marine Food Group Limited (AMEX: CMFO) 8Emerald Dairy, Inc. (OTCQB: EMDY)8 Too many bad deals prematurely brought to Companies are profitable and valuations are atSkyPeople Fruit Juice, Inc. (NASDAQ: SPU)8market with immature companies led by significant discounts relative to liquidity and ROIC.Tianli Agritech (NASDAQ: OINK) 8unsophisticated management teams.CONSUMER - OTHER: Investors took short cuts during due diligence The pool of sophisticated investors willing to properlyChina Redstone Group (OTCQB: CGPI) 9process to chase returns. capitalize on market fears is still not large enough.ENERGY: Inflation fears driving investors out of higher Long-only investors avoiding headline risk andChina Energy Corporation (OTCQB: CHGY) 9risk asset classes. throwing the baby out with the bathwater.LianDi Clean Technology Ltd. (OCTQB: LNDT) 9Keyuan Petrochemicals, Inc. (NASDAQ KEYP)10 Regulators are consistently one step behind Anyone (including those with no investment trackUS China Mining Group, Inc. (OTCQB: SGZH)10the curve in protecting shareholders. record) can create doubt in a stock by making allega-tions through an online posting or blog without statingHEALTHCARE/PHARMACEUTICAL:conflicts of interest or having tangible evidence.Biostar Pharmaceuticals, Inc. (NASDAQ: BSPM) 10Winner Medical (NASDAQ: WWIN)11Currently, out of approximately 600 China based companies listed in the U.S., approximately 250INDUSTRIAL: have graduated to the NYSE or Nasdaq, and nearly all of these have come public since 2005. AtChina Armco Metals (AMEX: CNAM)11the initial time of listing, the vast majority of those were companies with annual sales of underChina Rutai International (OTCQB: CRUI)11$50 million, run by entrepreneurial and motivated management teams that were determined toChina TMK Battery Systems, Inc. (OTCQB : DFEL) 11New Energy Systems Group (AMEX: NEWN)12leverage the US capital markets as a springboard to future prosperity. Attracted by the appetizingOssen Innovation Col, Ltd. (NASDAQ: OSN) 12 30%-40% annual revenue growth and 15%-25% net margin, investors gobbled up U.S.-listed, Chi-Wowjoint Holdings (NASDAQ: BWOW) 12 na-based companies while these stocks posted impressive average annual returns, far outpacingall U.S. indices. The gold rush was in full swing and hundreds of companies lined up for their sliceTELECOMMUNICATIONS /WIRELESS/ELECTRONICS:of the pie.SinoHub, Inc. (AMEX: SIHI) 12When the global financial crisis hit in Fall of 2008, investors unloaded U.S.-listed China stocksHCI China Index Update 13 even more quickly than they had bought them, driving these stocks down approximately 51.0%from September 2008 to the trough in March 2009. This proved to be a golden opportunity for Continued, next page For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130 Page 1

2. CHINA February 2011 Newsletterinvestors as most Chinese companies remained profitable and had minimal capital constraints through the crisis. With companies around theworld retrenching, Chinese companies continued to expand and invest, with the help of the PRC governments $586 billion stimulus and areopening of U.S. capital markets by late 2009. As a result, earnings rebounded swiftly in 2009-2010.Three Year Returns Halter Index S&P 500 Russell 2000Stock market cycles are driven simply by 2 things: fear and greed. The recent downturn in Chinese microcaps has been driven by prolific fearwhile US investors have focused their greed on owning domestic equities, something which does not require a 14 hour flight and interpreter.As a general rule, contrarian investors who sell stocks short is healthy because it makes markets and individual stocks more efficient. Profes-sional investors, including hedge funds, have successfully exposed a small subset of incompetent or dishonest public companies and manage-ment teams through thorough, objective and thoughtful analysis. Bogus allegations made by misinformed parties were either ignored or cor-rected by market forces, as savvy investors bought shares at a discount to intrinsic value. The vast majority of the recent flurry of shortattacks by independent analysts and anonymous online blogs has been the opposite of objective, thoughtful or factually accurate. Instead,these largely unregulated and unlicensed parties, many of whom have questionable backgrounds or have been paid to be a mouthpiece byshort sellers used fear and uncertainty to deliberately drive down the stock price of several China microcaps to make a profit. Instead of edu-cating investors at large about the nuances of accounting, how many transactions in China are structured using offshore holding companiesand subsidiaries, and differing cultural and regulatory practices between China and the U.S., the bulk of these short attackers simply statedthe existence of these differences and presented them as evidence of wrongdoing. Why has this worked in so many instances for so long?One reason because shareholders, regulators and companies let them get away with it. Investors do not have the patience to do additionaldue diligence to validate or refute the allegations. Regulators wait for the markets to fix itself since they have neither the resources nor thepolitical will to carry out their responsibilities. All but the most proactive and sophisticated management teams have the understanding orresolve to manage through these types of crisis.Given that short sellers have been murdered in the US equity markets during the past eighteen months they have found this group of stocksas easy pickings, much like a school of hungry sharks circling a meal. Making money in shorting China small-cap has been akin to shootingfish in a barrel. We believe we are at a tipping point when the responsible, honest, and informed investors and companies take back controlof the market from irresponsible market manipulators. The upside will be granted to patient and savvy stock pickers .Lastly, as we wrote extensively in our last newsletter,Chinese Vs. U.S. Inflationaccelerating inflation in China and other emergingmarkets represents a clear and present danger forconsumers, economies and stock markets. Sincethen, many commodities such as cotton and sugarhave continued to rise rapidly, reaching multi-decadehighs due to natural disasters in Australia, India, Rus-sia, the United States and other countries, while pro-fessional speculators continue to allocate dollars tothis trade. Various governments have taken an isolat-ed approach, ranging from price controls to exportbans to lending restrictions. So far the results have For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130Page 2 3. CHINA February 2011 Newsletterbeen mixed. Chinas inflation rate moderated slightly from the 28-month high of 5.1% in November to 4.9% in January. However, food infla-tion, which affects 100% of the population and represents almost 40% of Chinas consumer price index, continued to advance at an alarmingrate of 10.3% year-over-year. Meanwhile, inflation in the U.S. remained subdued, with overall inflation up merely 1.6% and food inflationrising by 1.8% in January 2011. Based on U.S. equity returns from 1946 to 2009, equity markets generated the highest returns when inflationis between 2%-5%.Brighter Days Ahead?With that grim picture as a backdrop, should we just liquidate our portfolios and move to Canada? All kidding aside, we believe three majordrivers will propel U.S.-listed, China-based stocks higher in 2011 and while no one can accurately predict exactly when it does, we believe thatlike most small-cap moves, large gains will be generated in a short period of time. 1. Chinas Economic Growth is SustainablePRC governments 12th 5-year Plan will help rebalance Chinas economy from an infrastructure and export-driven economy to a morebalanced and sustainable consumer-driven economy. 2. Good Companies Will Rise Above the NoiseChinese companies and management teams will continue to improve their corporate governance by improving their transparency andaccountability. Many have balance sheets which will provide flexibility to grow without raising capital, pursue buybacks or begin to in-stitute dividends. 3. Fundamentals and Valuations Will Matter AgainThe valuation gap between Chinese and U.S. microcaps will normalize once investors recognize they can buy Chinese companies withreal assets, cash flows and management teams at a 50%-70% discount to comparable U.S. companies. 4. The Shorts Enjoy the Day Of ReckoningThe SEC correctly identifies and severely penalizes multiple parties (including registered analysts and brokers) who are participating inillegal shorting activities, including collusion, slander, creation and dissemination of false information, and front running reports. Thiswake up call will be a game changer from a psychological perspective and is probably one of the biggest reasons institutions are avoid-ing the allocation they desire.One of the known but often overlooked facts is that China is only 40 years into liberalizing its economy. The speed, magnitude and progres-sion of improvements made in less than a generation of time has been nothing short of remarkable, especially in a country with a populationfour times that of the U.S. and a land mass of roughly the same size. Many of Chinas structural advantages a large current account andtrade surplus, unified fiscal and monetary policies that lead to rapid decision-making, and a large base of low cost labor will likely remain inplace for the foreseeable future. In addition, the central governments 12th 5-Year Plan, to be implemented through 2015, provides theframework and funding to create a more balanced and sustainable economy.The combinations of accelerated rural economic development, reallocation of Current Readingfunding from large state-owned enterprises to small and medium sized busi-nesses, and wage increases to low-income and middle class workers will shift The Big Short: Inside theChinas economy from one that relies heavily on exports and infrastructure in- Doomsday Machinevestments to one that unleashes the latent purchasing power of its 1.2 billionconsumers. This is a multi-decade phenomenon that is inevitable, regardless of By Michael Lewiswhat short term impediments the global economy may encounter.While we get a small glimpse into the crooked side ofAn industry rationalization is healthy and inevitable. Just as a fraction of internet Wall Street with short attacks, criminal managementcompanies after the dot-com bubble burst survived and prospered, dozens of teams and deal guys, this book will show you crooked inChinese microcap companies will take advantage of the short-term market dislo- a whole new light and on a scale so large its inconceiva-cations to become more resilient and competitive. Underneath the cloud of un- ble to most. What learned through the sub-prime hous-certainty, dozens of companies have made significant strides in corporate gov- ing debacle is that the only difference between many ofernance. These include providing a reconciliation of its SAIC and SEC filings; com- these Financial Professionals and bank robbers is thatpleting SARBOX certification, and more specifically names like KEYP, CBEH, CAAS bank robbers risk their lives, make far less money, takeand WATG recently upgrading to a big 4 accounting firm; KEYP initiating a cash on much more risk and can go to jail.dividend with a current yield of 7%; and BSPM eliminating its VIE corporateFor more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130 Page 3 4. CHINA February 2011 Newsletterstructure. The most competent management teams are beginning to recognize that ongoing investments in internal controls, reporting trans-parency, and accountability are just as important as investments in marketing, R&D and capacity expansion. There is still a wide gap betweenthe best-in-class and the laggards, and we firmly believe the gap will continue to widen. However, actions taken by an increasing number ofChinese companies signify an ability and willingness to improve.Use this time to prepare yourself for the upcoming 10-K season. Most China stocks are scheduled to file their annual reports by the end ofMarch. Many have recently signed on a Big 4 auditor and securing a sign-off from a top tier firm will provide comfort to many investors.A stock pickers market is emerging in the U.S.-listed, China microcap space. Its a natural evolution for a sector that until recently has notlargely been afforded significant premiums or discounts to the winners or losers. Fundamentals such as industry growth, barriers to entry,return on invested capital, intellectual property, and regulatory policies took a back seat to auditors, corporate structure, short interest, andbusiness advisors. Regardless of the depth and duration of the negative sentiment pervading in this sector, investors need to assess the risk-reward based on each individual companys business fundamentals, leadership, and valuation. In a $6 trillion economy growing at an 8%-10%CAGR, market opportunities that are valued in the billions can easily support hundreds of small and medium sized players. Diligent investorswith the discipline and patience to conduct thorough and objective analysis will discover dozens of cash rich, high return businesses with aclean balance sheet and simple corporate structure trading at 3x-4x cash flows. The stock market can be very irrational and humbling in theshort run, but also extremely rewarding to those who understand that fundamentals and valuations will win out and have the patience andstaying power to back that bet. High-quality, low-valuation stocks that got the green light from a tier one auditor should see significant priceappreciation this spring. This is where the big opportunity lies now.With these catalysts firmly in place, it will not take a magician pulling a rabbit out of a hat for U.S.-listed China stocks rally in 2011. The HCIteam is a firm believer in the Chinese proverb , - great things cannot be accomplished in a short period of time. Welook forward to helping clients and investors enjoy a calm, successful and prosperous year.HCI consistently has clients on the road in the U.S., Canada and Europe. If you would like to schedule a meeting during the next six monthsplease contact Mark Flather, Director of Outreach, at mflather@hcinternational.net. If you are traveling to China and would like to visit acompany please allow us to help you make arrangements. As always we welcome your feedback and support. Regards, Matthew Hayden Feng Peng Ted Haberfield John Mattio Scott Powell Mark Flather Johnny Lai Mark Henshaw Ling Zhang Jennifer Heady Debra Juhl Pearl PengSinohub management rings the closing bell at NYSE. For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130 Page 4 5. CHINA February 2011 Newsletter HCI Calendar Upcoming Corporate Access Events If you are interested in participating in any of the events below, please click on a city to request a meeting or contact Mark Flather, Director of Outreach at mflather@hcinternational.netRoadshowsDate Event / Company / Location / Meeting Request - - Click on City to Request a MeetingMar 17-23NDR China Integrated Energy, Inc. (CBEH: NASDAQ)Thu, Mar 17Fri, Mar 18 19 20Mon, Mar 21 Tue, Mar 22 Wed, Mar 23Thu, Mar 24Cities TBD - Request a Meeting in Your CityMar 17-23NDR China Energy Corporation (CHGY : OTCQB)Thu, Mar 17Fri, Mar 181920Mon, Mar 21 Tue, Mar 22 Wed, Mar 23Thu, Mar 24 Orange County/ San FranciscoDallas Boston New York New YorkMar 17-25NDR Keyuan Petrochemicals, Inc. (KEYP: NASDAQ) Thu, Mar 17Fri, Mar 18 19 20 Mon, Mar 21 Tue, Mar 22 Wed, Mar 23Thu, Mar 24 Fri, Mar 25 Portland/SeattleSan Francisco Los Angeles Chicago/Boston New YorkNew YorkMar 28-Apr 1 ChinaCast Education (CAST: NASDAQ) - CLSA Corporate Access Mini-Conference Mon, Mar 28 Tue, Mar29Wed, Mar 30Thu, Mar 31Fri, Apr 1 Grange St. Pauls,Metropolitan Hotel, Intercontinental Hotel, Sofitel Hotel, Sofitel Hotel, LondonLondon Boston New York New YorkConferencesDate Conference / LocationClients in AttendanceFeb 23-24Jefferies 11th Global Clean Technology Conference - New York CHCMar 7-9Cowen 31st Annual Healthcare Conference - Boston WWINMar 6-8Rodman & Renshaw Annual China Investment Conference - Shanghai, ChinaBSPM, CNAM, CHGY, CBEH, CTXIF, CMFO,CGPI, CRUI, CAST, CNET, KEYP, LNDT, NEWN,OSN, SCEI, SIHI, SPU, OINK, WWIN, BWOWMar 13-16Roth Capital Annual OC Growth Stock Conference - Dana Point, CACHC, CBEH, LNDT, CGPI, CAST, CNET, KEYP,SIHI, SPU, WWINMay 17 Piper Jaffray 8th Annual China Growth Conference - New YorkCASTMay 18-19Oppenheimer 5th Annual China Dragon Call Conference - New York CBEHOther EventsMar 5China Redstone Group (CGPI: OTCQB) Investor Day - Chongqing, China Download an Invitation 9:00 AM - 2:00 PMPlease visit us online for our up-to-date Calendar For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130 Page 5 6. CHINA February 2011 NewsletterHC International China Clients by Industry SectorCLEANTECH/CLEAN ENERGYChina Hydroelectric Corporation (NYSE: CHC)A consolidator, developer, and operator of hydropower plants in China, led by a seasoned International management team.Price (As of 2/21/11): $7.29Fully Diluted Shares Outstanding: 51.1 MillionMarket Cap: $372.5 Million Coverage Buy initiated by All-Star Water Analyst Michael Gaugler from Brean Murray with a $10 target. 11/10 - Announced definitive agreements to acquire 15 MW of Hydroelectric power projects in Yunnan Province and 55.4 MWof hydroelectric power projects in Fujian Province.China Integrated Energy, Inc. (NASDAQ: CBEH)An integrated biodiesel producer, wholesale distributor of finished and heavy oil products, and operator of retail gas stations.Price (As of 2/21/11): $6.21Diluted Shares Outstanding: 48.9 MillionMarket Cap: $303.9 Million 1/31/11 - Completed construction of a new 50,000-ton biodiesel production facility, adjacent to its existing 100,000-ton bio-diesel production facility in Tongchuan City, Shaanxi Province, bringing total production capacity to 200,000 tons per annum. 1/27/11Announced expansion plans: expects to grow its new Hainan facility ultimately to 300,000 tons of biodiesel produc-tionl ; Enters Marine Distribution business through partnership in Chongqing; anticipates $45M in 2011 revenues Guidance for 2010: Revenues = $435 million and net income of $53.5 million.China New Energy Group Co. (OTCQB: CNER)Vertically integrated natural gas company engaged in the development of natural gas distribution networks in China.Price (As of 2/21/11): $0.25Fully Diluted Shares Outstanding: 252.0 MillionMarket Cap: $63.0 Million 9/21/10 - China New Energy Enters Into agreement to acquire 70% equity interest in Dadi Gas for RMB 270 Million. Dadi Gasoperates 15 gas supply projects located in 5 provincial areas and owns and operates two gas stations. As of Dec. 31st, Dadi Gasowned approximately 199 miles of main pipeline and sub pipeline, and 273 miles of household pipelines. The firm also servedapproximately 115,200 households, 488 commercial customers and sold approximately 92 million cubic meters of gas in 2010. 1/18/11 - Completed the first installment payment of $17.6 million for the acquisition Dadi Gas and assumed managementcontrol of Dadi Gass operations.Sino Clean Energy, Inc. (NASDAQ: SCEI)A producer and distributor of coal-water slurry fuel (CWSF) in China., which improves energy yield and decreases pollution.Price (As of 2/21/11): $7.48Fully Diluted Shares Outstanding: 18.9 MillionMarket Cap: $141.4 Million 1/26/11 - Commences production of new 300,000-ton capacity facility in Guangdong, expanding the Companys total annualproduction capacity to 1,150,000 metric tons. Reaffirmed full year 2010 guidance with revenues of at least $105 million and adjusted net income of at least $25 million. For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130Page 6 7. CHINA February 2011 NewsletterCONSUMER & BUSINESS SERVICESChina Internet Caf Holdings Group, Inc. (OTCQB: CICC) - NEW CLIENTLeading internet cafe chain operator headquartered in Shenzhen, ChinaPrice (As of 2/21/11): $1.00Diluted Shares Outstanding: 24.9 MillionMarket Cap: $24.9 Million From October to December 2010, added five internet cafes in Shenzhen with a total capital investment of $1.5 million, bringingtotal internet cafes under operation to 48. Expects these stores to contribute an aggregate of approximately $2.4 million annu-ally in total. Currently, one of the internet cafes is ready for operation, while the remaining ones are in the process of construc-tion and expected to be completed by March 2011. 2/23/11 - Company closed a private placement financing with investors with gross proceeds of $6.35 million to fund the expan-sion of the Companys internet cafe portfolio. For 2010, expects to achieve approximately $ 19 million in revenue.China Linen Textile Industry Ltd. (OTCQB: CTXIF)A China-based producer of linen yarn fabric which is sold in China and Internationally.Price (As of 2/21/11): $1.05Fully Diluted Shares Outstanding: 20.2 MillionMarket Cap: $21.2 Million 12/22/10 - Commenced operations at new linen yarn dyeing facility, adding 600 tons of linen yarn dyeing capacity per year. Six-month 2010 revenues increased 26.9% to 17.6 million over the same period in 2009, six-month net income increased 50.3%to $4.0 million with EPS of $0.20 vs. $0.13 during the same period in 2009.ChinaCast Education Corporation (NASDAQ: CAST)A leading for-profit, post secondary and e-learning services provider in China.Price (As of 2/21/11): $7.02Fully Diluted Shares Outstanding: 50.4 MillionMarket Cap: $353.8 Million 2/1/11 - Signed academic exchange and cooperation agreement with University of North Carolina at Greensboro to cooperateon academic transfer programs for undergraduate and graduate degree and non-degree programs, student and faculty ex-change and joint research activities and academic materials exchange . Guidance for total net revenue between $78 million to $80 million (a YOY increase of 53% to 57%), adjusted net income ex-cluding share based compensation, amortization of intangibles, gain on disposal of property and equipment, and impairmentexpenses (non-GAAP), will be between $25 million to $27 million (a YOY increase of 34% to 44%).ChinaNet Online Holdings (NASDAQ: CNET)A leading full-service media development, advertising and communications company for small and medium-sized enterprises(SMEs) in China with an emphasis on franchise based organizations.Price (As of 2/21/11): $4.03Fully Diluted Shares Outstanding: 20.9 MillionMarket Cap: $84.2 Million 2/22/10Ladenburg Thalmann initiates coverage with a Buy and $7 target. 2/1/10 - Cooperation marketing agreement with the Taiwanese Franchise Association to market 28.com to its 300 members. 2/10/11 - Purchased two privately held advertising agencies in Fujian which brings over 50 clients, including 10 recognizedbrands to its customer base. Reaffirmed 2010 adjusted net income guidance of $14.1 million, representing 19.0% growth over 2009 adjusted net income. For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130 Page 7 8. CHINA February 2011 NewsletterCONSUMER - FOOD/RETAILChina Marine Food Group (NYSE Amex: CMFO)Branded healthy seafood-based snack foods and High-Power beverage sold in China.Price (As of 2/21/11): $3.75Fully Diluted Shares Outstanding: 29.4 MillionMarket Cap: $110.3 Million 1/18/11 - Retail locations for "Hi-Power", the Companys marine algae-based beverage, surpassed 13,000 retail points by theclose of FY 2010 with sales for FY 2010 of Hi-Power of approximately $26.0 million, exceeding 2010 revenue guidance on Hi-Power sales of $23.0 to $25.0 million. To date, all sales have emanated from Fujian province. Expanded its retail footprint for seafood snack products by 100 sales points to 3,000 and sales grew 31.0% year over year. 2010 Guidance of $110 million in revenues and $21 million in net income. 11/2/10 Engages BDO China as the companys independent registered accountant.Emerald Dairy, Inc. (OTCQB: EMDY)A producer and distributor of infant and childrens branded power milk formula in Tier Two through Tier Four Cities in China.Price (As of 2/21/11): $1.04Fully Diluted Shares Outstanding: 34.5 MillionMarket Cap: $35.9 Million 1/25/11 - Announced a 2,000 store supplier agreement with a Guangdong-based pharmacy chain, Si Ming Yao Ye, for EmeraldDairys recently-launched Xinganling "Organic" infant formula. Emerald Dairy has expanded it formula capacity by 10,000 tons (Line B) to 19,000 tons annually. Test production began inSeptember, with commercialization commencing in January. 2010 guidance: $60-65 million in revenues and $8.0 to $9.0 in non-GAAP adjusted net income.SkyPeople Fruit Juice, Inc. (NASDAQ: SPU)A processor and manufacturer of concentrated and fresh kiwifruit, apple, pear and a line of consumer branded fruit ciders.Price (As of 2/21/11): $4.76Fully Diluted Shares Outstanding: 23.5 MillionMarket Cap: $111.9 Million 2/7/11 - Introduces four new labels for Hedetang Juice Beverages, with Walmart, Trust-Mart and La Cuisine Royale to stocknewly labeled juices beginning in February. 2/16/11 - Launches Qian Mei Duo(TM) High-Fiber Fruit Juice Beverages Juices, targeting health conscious Chinese women.Anticipates over $9.0 million in sales of Qian Mei Duo beverages in 2011, with average gross margins of approximately 30%. 2010 Revenues guidance of $92.0 to $102.0 million, adjusted net income of $21 to $23 million; adjusted EPS of $0.91 to $1.00.Tianli Agritech Inc. (NASDAQ: OINK)Raises, breeds and sells hogs for breeding and pork production in China.Price (As of 2/21/11): $4.12Fully Diluted Shares Outstanding: 9.7 MillionMarket Cap: $40.0 Million 1/3/11 - Closes acquisition of 10th hog farm, a 20,000 head annual production capacity hog farm in Wuhan City. Expected rev-enue of approximately $4.5 million at current market prices, with a targeted operating margin of approximately $1.8 million. 1/7/11 - Provide preliminary 2011 Guidance of $28.0-$29.5 million (+37%) revenues, $10.5-$11.5 million (+34%) in net incomeand $1.04-$1.14 (+20%) EPS. FY2010 Guidance: Revenues of approximately $21 million, net income of $8.1 million to $8.3 million, and EPS of $0.90 to $0.92. For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130 Page 8 9. CHINA February 2011 Newsletter CONSUMER - OTHERChina Redstone Group Inc. (OTCQB: CGPI)The largest death care provider in Chongqing, the largest and most populous of Chinas fourprovincial level municipalities.Price (As of 2/21/11): $2.85Diluted Shares Outstanding: 12.7 MillionMarket Cap: $36.2 Million Sold 1,682 cemetery plots for its Q3 FY2011 (ending December 31st). Average Q3 selling price per plot was $7,249, up 39%from Q3 FY2010 and above $5,000 to $6,250 forecast for FY11. Q3 FY 2011 revenues increased 6.0% to $12.1 million; non-GAAP adjusted net income increased 27.8% to $5.3 million withadjusted EPS of $0.42. Q3 gross margin increased 1000 basis points to 63.2% due to higher sales of premium plots. FY 2011 (March 31st) Guidance: Revenue of $40.0 million and net income of $19.5 million with EPS of $1.45, and on track tosell at least 7,000 plots in fiscal 2011. ENERGYChina Energy Corporation (OTCQB: CHGY)An energy company engaged in the production and processing of raw coal in the PRC.Price (As of 2/21/11): $1.40Fully Diluted Shares Outstanding: 45.0 millionMarket Cap: $63.0 Million For the nine months ended August 31, 2010, the Company reported revenue of $62.4 million, a 222% increase over revenue of$19.4 million in the same period of fiscal year 2009, with net income of $12.7 million, or $0.28 per share. Company reaffirms full year guidance: net income of $17 to $18 million. With production capacity of 800,000 metric tons, the Company is operating near 100% utilization and is exploring potentialacquisition opportunities to leverage the rich coal resources in Inner Mongolia.China LianDi Clean Technology Engineering Ltd. (OTCQB: LNDT)Provides equipment and engineering services to Chinas petroleum/petrochemical giants. Introducing new CleanTech products.Price (As of 2/21/11): $3.37Fully Diluted Shares Outstanding: 36.6 MillionMarket Cap: $123.3 Million 1/20/11 - Signed an agreement with Ruhrpumpen, a leading manufacturer of pumps located in Witten, Germany, to become adistributor of Ruhrpumpens products in China. Q3 FY2011 revenue increased 186.0% to $48.1 million, led by a 132.2% rise in equipment sales, and Q3 adjusted net incomeincreased 54.5% to $7.2 million; adjusted diluted EPS of $0.21. Increasing fiscal 2011 guidance, revenues $130 million and net income is expected to be $25 million. For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130Page 9 10. CHINA February 2011 NewsletterKeyuan Petrochemicals, Inc. (NASDAQ: KEYP)An Independent manufacturer and supplier of various petrochemical products in China.Price (As of 2/21/11): $5.47Fully Diluted Shares Outstanding: 57.9 MillionMarket Cap: $316.7 Million 1/18/11 - Announced it has engaged KPMG as its new auditor. 1/27/11 - Approved the distribution of an annual cash dividend of $0.36 per share for 2011 to be paid quarterly to its commonstock shareholders at the assigned dates of record. At current price yield > 7%. 2/1/11 - Signed an agreement with Ningbo Institute of Technology, an affiliate of Zhejiang University, to jointly develop com-mercial applications for K-resin. This is one component of Keyuans long-term strategy to invest in technology advancement. Expect revenues for 2010 of $550 million with net income of $36.3 million Expects revenues for 2011 of $660 million with production volume of approximately 740,000 metric tons.US China Mining Group, Inc. (OTCQB: SGZH)Engaged in coal production and sales by exploring, assembling, assessing, permitting, developing and mining coal properties in China.Price (As of 2/21/11): $4.50Fully Diluted Shares Outstanding: 15.3 MillionMarket Cap: 68.9 Million 12/1/10 - 2010 Financial Guidance: Revenue of approximately $66.5 million and net income of approximately $14.1 million. 1/7/11 - Announced the closing of a private placement financing, resulting in gross proceeds of $15 million. In addition to $40million in cash (as of 9-30-10) the company is well positioned to capitalize on growth and consolidation opportunities. Upon completion of mining upgrades at its Xing An mine will be able to maintain coal production year-round and will increasecoal production from 600,000 metric tons per year to 900,000 metric tons per year pending approval from local Government in2012. Expects to be at the full production of 600,000 tons when all upgrades have been completed in May of 2011.HEALTHCARE/PHARMACEUTICALBiostar Pharmaceuticals (NASDAQ: BSPM)Develops, produces and markets Chinese Pharmaceuticals. Flagship product is the #1 OTC sold Hepatitis-B medicine, namedXin-Aoxing.Price (As of 2/21/11): $2.51Fully Diluted Shares Outstanding: 27.4 MillionMarket Cap: $68.8 Million 1/20/11- Chairman and Chief Executive Officer, Mr. Ronghua Wang, is a Chinese Entrepreneur Representative on Chinese Pres-ident Hu Jintaos delegation during the official visit to the United States in January 2011. Unaudited October and November 2010 combined revenues increased 68% to approximately $18.3 million; Sales of Xin Aoxingincreased 67% to $12.4 million Expanded its rural distribution network to 9,500 locations, on track to reach 10,000 by December 31, 2010. Sees significantopportunities created by state-implemented New Rural Cooperative Medical System to expand its rural distribution network. 2010 guidance : $80.0 million revenues and $18.0 million net income. For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130 Page 10 11. CHINA February 2011 NewsletterWinner Medical (NASDAQ: WWIN)Leading domestic and international supplier of cotton based medical dressings and branded PurCotton retail products.Price (As of 2/21/11): $4.83Fully Diluted Shares Outstanding: 24.0 MillionMarket Cap: $115.9 Million Q1 FY 2011 (ending December 31) results; Revenues were up 13.2% to $33.7 million and net income decreased by 15.1% to$3.3 million driven by delayed acceptance of increased selling prices and lower high-margin protective products sales. FY2011 revenue guidance: $138-$150 million, up 20%-30% YOY PurCotton sales increased 78.08% during the first quarter of 2011 to $4.5 million as a result of steady wholesale sales of jum-bo roll to foreign customers and robust growth of domestic retail business. As of February, 29 stores have been opened in high traffic shopping malls in Beijing, Shanghai and Guangdong province. INDUSTRIALChina Armco Metals (AMEX: CNAM)Price (As of 2/21/11): $3.30Fully Diluted Shares Outstanding: 15.3 MillionMarket Cap: $50.5 Million 1/6/11 - Received confirmation that local government imposed power restrictions for energy intensive industries and steelproducers would be lifted in January 2011, allowing the Companys scrap metal recycling business to return to full operations. Expects to produce and sell approx. 25,500 tons of recycled steel with an aggregate value of approx. $12 million in Q4 2010. Net revenues for the YTD 2010 were $44.3 million compared to the $55.2 million YTD 2009. Gross margins for Q3 2010 im-proved to 4.9% as compared to 3.8% in Q3 2009.China RuiTai (OTCQB: CRUI)One of the largest manufactures of organic non-ionic cellulose ether products which are incorporated into many everyday products.Price (As of 2/21/11): $0.73Fully Diluted Shares Outstanding: 26.0 MillionMarket Cap: $19.0 Million 10/13/10 - Secured a 50 ton cellulose ether contract valued at $0.5 million from ThinFilm, pharmaceutical tablet coating co. Company added 506 new customers in first nine months of 2010 Total revenue for Q3 2010 was $11.2 million, up 9.8% from $10.2 million in the prior years period, net income for Q3 2010was up 5.2% to $1.9 million, with diluted EPS of $0.07. During 2nd half of 2010; Added 500 tons of capacity to its ethyl cellulose production line; expected to contribute $4.8 millionin revenues at approximately 45% gross margin once it operates at full capacity.China TMK Battery Systems (OTCQB: DFEL)A Chinese manufacturer specializing in developing and product NiMH rechargeable batteries.Price (As of 2/21/11): $0.70Fully Diluted Shares Outstanding: 36.9 MillionMarket Cap: $25.8 Million 2/15/11 - Initial order from Alexis Power for 480 Nickel Metal Hydride (Ni-MH) battery packs to be used as backup power sup-ply sources to be used in telecommunications infrastructure. Production has begun, shipments will commence in April 2011. 2/23/11 - Received and delivered an initial order from a Fortune 500 multinational electronics and defense manufacturerbased in the U.S. for 26,150 nickel metal hydride (NI-MH) battery packs to be used in water pump applications. Sales for Q3 2010 were $16.5 million, up 26.5% over the previous year, net income of $3.1 million, up 52.5% for Q3 2010 withcorresponding adjusted earnings per share of $0.08. For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130 Page 11 12. CHINA February 2011 NewsletterNew Energy Systems Group (NYSE Amex: NEWN)Manufactures and distributes lithium ion batteries and components in China.Price (As of 2/21/11): $6.04Fully Diluted Shares Outstanding: 12.6 MillionMarket Cap: $76.1 Million 1/27/11 - Expanded product offering for China Unicoms retail kiosks to five models sold in 39 China Unicom locations in:Beijing, Changchun, Guangzhou, Harbin, Hohhot, Hulunbeier, Jinzhong and Shenyang. After Q3, the Company revised 2010 guidance of $95 million of revenues, $18.0 million of non-GAAP adjusted net income, and$1.40 of non-GAAP adjusted earnings per share, respectively, for the full year 2010.Ossen Innovation Co., Ltd (NASDAQ: OSN) - NEW CLIENTManufactures and sells a wide variety of plain surface pre-stressed steel materials and rare earth coated and zinc coated pre-stressed steel materials. Its products are mainly used in the construction of bridges, highways and infrastructure projects. Has twomanufacturing facilities in Anhui and Jiangxi Provinces, with a combined annual production capacity of 140,000 tons per year .Price (As of 2/21/11): $4.49Fully Diluted Shares Outstanding: 15.0 MillionMarket Cap: $67.4 Million Global Hunter initiated with a Buy and $9 price target. 12/23/10 - raised $22.5 million in IPO. The capital will be utilized to add 30,000 tons of new capacity for the Companys propri-etary coated pre-stressed steel wire products.Wowjoint Holdings Limited (NASDAQ: BWOW)Designs, engineers and manufactures customized heavy duty lifting and carrying machinery for large scale infrastructure projectsincluding railway, highway and bridge construction.Price (As of 2/21/11): $3.10Fully Diluted Shares Outstanding: 7.9 MillionMarket Cap: $24.5 Million Revenue for Q3 2010 exceed guidance with $8.7 million compared to $2.6 million in the Q3 2010, and $2.7 million in the threemonth period ended September 30, 2009; Q3 2010 net income and earnings per share were $0.3 million with $0.04 in EPS. Received $1.5 million leasing contract for a 900-ton straddle carrier from CCCC First Harbor Engineering Company, and signed a$1 million equipment sales contract with China Railway Fangshan Bridge Co. for two customized 160-ton special carriers. Dur-ing the fourth quarter, Wowjoint signed approximately $3 million in service contracts which will diversify its revenue base. Current backlog as of November 15th, 2010 of signed contracts totals approximately $20 million, up from $17 million at theend of the second quarter of 2010, and management issued revenue guidance for Q4 2010 of approximately $9.2-$9.5 million.TELECOMMUNICATIONS/WIRELESS/ELECTRONICSSinoHub Inc. (NYSE Amex: SIHI)Electronic component supply chain management services company and producer of mobile phones for international distributorsand operators.Price (As of 2/21/11): $3.10Fully Diluted Shares Outstanding: 28.7 MillionMarket Cap: $89.0 Million 1/7/11 - Received an initial order to manufacture 20,000 3G mobile phones for China Unicom. The Company expects to shipthe order in the first quarter of 2011. 1/31/11 - In order to align the name with its mobile phone manufacturing business, renamed its mobile phone manufacturingand sales business to "Integrated Contract Manufacturing (ICM). Company raised FY10 revenue forecast to $192 million, representing approximately 50% YOY growth. Company expects to sell over 3 million phones through the ICM platform in 2011. For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130 Page 12 13. CHINA February 2011 Newsletter The HCI CHINA INDEX Date HCI Stock Price Stock Price % ChangeClient Representation StartedThenFebruary 21, 2011Since RepresentationBSPM5/31/2009$2.50 $2.510.4%BWOW 3/2/2010$7.00 $3.10-55.7%CAST1/19/2009$2.46 $7.02 185.4%CBEH 2/5/2009$3.60 $6.21 72.5%CGPI 3/5/2010$3.36 $2.85-15.2%CHC 1/28/2010 $14.80 $7.29-50.7%CHGY 3/2/2010$1.40 $1.400.0%CICC2/17/2011$0.85 $1.00 17.6%CMFO3/20/2008$3.21 $3.75 16.8%CNAM 11/19/2010$3.04 $3.308.6%CNER 1/3/2011$0.17 $0.25 47.10%CNET7/16/2009$2.50 $4.03 61.0%CRUI4/14/2010$1.01 $0.73-27.7%CTXIF 5/16/2010$1.20 $1.05-12.5%DFEL2/20/2010$1.25 $0.70-44.0%EMDY 4/6/2010$1.30 $1.04-20.0%KEYP4/25/2010$3.25 $5.47 68.3%LNDT2/27/2010$3.50 $3.37 -3.7%NEWN11/1/2010$6.34 $6.04 -4.7%OINK 10/19/2010$5.32 $4.12-22.6%OSN2/1/2011$4.50 $4.49 -0.2%SCEI9/23/2009$4.10 $7.48 82.4%SGZH1/18/2011$5.20 $4.50-13.4%SIHI 2/1/2010$3.10 $3.100.0%SPU 12/9/2009$3.17 $4.76 50.2%WWIN 10/28/2009$4.86 $4.83 -0.6%Previous Clients (Performance Measured During Contractual Period Only)ALN* 1/26/2010 $3.29 $2.87 -12.8%AOB* 9/30/2005 $4.55$10.54 131.6%CABL* 9/1/2007 $5.70 $2.35 -58.8%CAGM* 2/8/2010 $2.30 $1.01 -56.1%CBAK* 3/1/2005 $3.50 $8.76 150.3%CDS*1/1/2006 $2.50 $7.50 200.0%CFSG* 2/1/2007 $4.00 $6.9573.8%CGA* 3/24/2009 $3.35 $8.77 161.8%CHBT* 5/1/2006 $6.25 $8.7039.2%CHLN* 1/1/2007 $2.40 $4.0568.8%CHME*11/1/2006 $2.50 $4.0060.0%CIWT*8/20/2008 $4.00 $1.68 -58.0%COGO* 5/5/2005 $5.41$16.24 200.2%CSOL*7/23/2007 $2.07 $1.95-5.8%CSR* 3/15/2006 $4.00$14.25 256.3%CXTI* 5/1/2006 $2.01 $1.05 -47.8%D3W.SI*8/10/2009 $0.32 $0.6293.8%F2X.SI*11/1/2009 $0.19 $0.20 5.3%FSIN* 5/1/2006 $4.65 $8.2076.3%GFRE*3/26/2007 $1.02 $1.8581.4%GSI* 10/8/2007$12.75 $4.00 -68.6%HSYT* 3/1/2007 $3.99 $3.60-9.8%IDWK* 3/1/2004 $4.42 $6.5548.2%NOEC*10/1/2006 $2.00 $5.02 151.0%SBAY*3/15/2010$14.48 $7.11 -50.9%SOPW* 1/1/2006 $1.00 $1.2525.0%TPI* 1/28/2008 $1.70 $4.20 147.1%TSTC* 9/9/2009 $4.78$10.95 129.1%TXIC* 8/1/2008 $7.90 $4.77 -39.6%VLOV*2/10/2010 $3.75 $3.95 5.3% *All Clients in the above table have a stock price on date services ended, which shows stock performance while HCI was engaged.For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130Page 13 14. CHINA February 2011 Newsletter HC InternationalOur organization works with top management to help them clearly andRegional Offices consistently articulate their business strategy, position in the market and value proposition, in order to attract and retain high quality institutional NEW YORK ownership through proactive introductions.CALIFORNIA All HC International team members share a deep understanding of our FLORIDA clients businesses, products and financial results, which helps to shorten the due diligence process for prospective investors. This alleviating SHANGHAI management from this necessary, but time intensive obligation and HONG KONG enables them to focus on executing their business plan. Our team has over 70 years of collective experience in investor relations, portfolio management and equity analysis, which allows us to provide clients with timely market insight, including a comprehensive analysis ofContact us: info@hcinternational.net current market perception and valuations. Armed with these resources, we assist our client companies to navigate the public markets and make the most out of their respective opportunities. www.hcinternational.net Our advice is based on a rigorous understanding of the U.S. SEC regulations, macro economic trends and extensive experience covering multiple industry verticals.DisclaimerInformation has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. This material is not an offer to sell or asolicitation of an offer to buy any securities. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof,nor the statements made herein. THE READER SHOULD VERIFY ALL CLAIMS AND DO THEIR OWN DUE DILIGENCE BEFORE INVESTING IN ANY SECURITIESMENTIONED. COMMON STOCKS INVOLVE SUBSTANITAL RISK AND IT IS POSSIBLE TO LOSE YOUR ENTIRE INVESTMENT. IF YOU ARE NOT PREPARED TO SUSTAIN ASUBSTANTIAL LOSS THEN INVESTING IN INDIVIDUAL EQUITIES IS NOT ADVISEABLE FOR YOU. This information is not an endorsement of the Company by HC International (HCI).HCI is not responsible for any claims made by the Company. You should independently investigate and fully understand all risks before investing. Statements included in thisemail or fax may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks anduncertainties such as competitive factors, technological development, market demand and the Companys ability to obtain new contracts and accurately estimate net revenuesdue to variability in size, scope and duration of projects, and internal issues in the sponsoring client. Further information on potential factors that could affect the Companysfinancial results, can be found in the Companys Registration Statement and in its Reports on Forms 10-K and 10Q filed with the Securities and Exchange Commission (SEC).HCI and its affiliates, officers, directors, subsidiaries and agents have been compensated by its clients to perform shareholder and investor relation services. Each contractvaries in duration, services performed and compensation received. This newsletter should not be regarded as an independent publication. Hayden CommunicationsInternational, its employees, consultants and affiliates may, from time to time, acquire positions in the companies that they cover. This could represent a conflict of interest. HCIand its consultants, employees and affiliates shall be under no obligation to inform readers about its trading activities. These parties and entities reserve the right to buy or sellshares in these companies. The following companies, featured in this newsletter, have compensated HCI (Hayden Communications International), which ranges from a consultingfee of four thousand to fourteen thousand dollars per month under contract periods that range from 6 months to 1 year. HCI also received the following equity from theseclients: ALN issued a warrant to purchase 80,000 shares of stock at $3.00. BSPM issued a warrant to purchase 55,000 shares of common stock at strike price of $2.0 and will issuean additional warrant under new agreement to purchase 55,000 shares at VWAP January 1st if services continue. BWOW issued a warrant to purchase 60,000 shares with a strikeprice of $10.00. CAGM issued a warrant to purchase 350,000 shares at $.90. CAST issued a warrant to purchase 100,000 shares of stock at $2.58/share and a warrant to purchase50,000 shares at $7.85 per share. CBEH issued a warrant to purchase 30,000 shares of common stock at $6.00 per share and a warrant to purchase 30,000 shares at $8.80 pershare. CGPI issued 60,000 shares of restricted stock. CHGY issues 5,000 shares of 144 stock per month. CICC will issue HCI a warrant to purchase 125,000 shares at $1.35 pershare. CMFO issued 50,000 shares of 144 stock covering 3 years of IR and will issue 20,000 shares for year four. CNAM one year agreement effective November 1, 2010 payment begins January 1, 2011 3,600 shares of 144 restricted stock per month. CNET issued 80,000 shares of 144-common stock and is obligated to issue 60,000 shares of 144stock. CRUI issued warrant to purchase 120,000 shares with a strike price equal to 10 day VWAP prior to contract signing date of April 14, 2010. CTXIF issued 80,000 shares ofrestricted stock 48,000 within 30 days of contract date and 32,000 shares after performance targets are met. EMDY issued a warrant to purchase 160,000 shares with a strikeprice at $1.65. DFEL issued 125,000 shares of 144 stock. GCHT issued a warrant to purchase 260,000 shares at 10-day VWAP at the time the contract was signed on August 19,2010. KEYP issued 88,000 shares of restricted stock. LNDT issued 89,000 shares of restricted stock. NEWN will issue a warrant to purchase 36,000 shares for each 6 monthscontract period with a price of $5.90. OINK issued 10,000 shares of restricted 144 stock for the initial 3 month period effective October 19, 2010 and will pay 34,000 shares foradditional 9 months if they decided to continue. SCEI issued a warrant to purchase 40,000 shares at $4.00. SIHI issued a warrant to purchase 75,000 shares with a strike of $3.50.Southern China Livestock (Ticker TBD) will issue 2,000 shares of restricted stock per month, payable in installments of 6,000 shares at the beginning of each 3-month period. SPUwill issue a warrant to purchase up to 175,000 shares at a price of $4.50. VLOV issued a warrant to purchase 50,000 shares at $3.43. WWIN issued 10,000 shares of 144 stock.SGZH will issue for each six months period, a warrant to purchase 20,000 shares with will carry a strike price equal to $6.00 per agreement effective January 18, 2011.For more information on any of our clients, please contact us at info@hcinternational.net or call 212-301-7130Page 14