Harbin Electric Reports Strong Results for the Second Quarter 2008-2

（By freelance Chinese translator li – based in Harbin，China – English to Chinese translation or Chinese to English translation services - website localization）

For the six-month period ended June 30, 2008, the Company achieved total revenues of $46.42 million compared to $27.62 million for the six-month period ended June 30, 2007, representing（呈现） a 68% year-over-year growth. Linear motors and related integrated application systems contributed 44% to total revenues, automobile specialty micro-motors contributed 38%, and controllers（控制器）, armatures（电枢）, and other special motors contributed 18% compared to 76%, 0%, and 24%, respectively, for the six months ended June 30, 2007. The year-over-year growth in revenues was primarily driven by sales of new products from the automobile specialty micro-motors and the tower type oil pumps, which contributed approximately $18 million, and $5 million to total revenues, respectively. The growth in new product sales was partially offset by slightly lower sales in other product types. Sales to markets outside China accounted for about 15% of total revenues for the six-month period. Contributions from the automobile specialty micro-motors business and the oil pumps did not begin until the second half of 2007.

Gross profit was $22.22 million compared to $14.08 million for the six months ended June 30, 2007. The increase is directly related to higher sales levels. Gross margin was 48% for the six months ended June 30, 2008 compared to 51% for the six months ended June 30, 2007. The slight decline in gross profit margin was mainly due to changes in the product mix with the introduction of the new product line of the automobile micro-motor business, which has a relatively lower gross profit margin. Average gross profit margin was 52% for linear motors and 40% for automobile specialty micro-motors.

Selling, general and administrative expense (SG&A) totaled $5.07 million for the six months ended June 30, 2008, compared to $2.96 million in the same period of 2007. The year-over-year increase in SG&A was primarily a result of business expansion and increased sales activities. However, as a percentage of total sales, total SG&A expenses remained relatively stable at 12%, which is within the Company's expected range（预期范围）.

Operating margin declined to 36% from 39% for the same six-month period in the prior year, mainly due to increased contributions from the Company's lower margin automobile micro-motors business.

Net Income was $11.58 million compared to $7.96 million for the six months ended June 3, 2007, representing a year-over-year increase of 46%. This increase in net income was mainly due to new sales driven primarily by automobile micro-motor business and the tower-type oil pumps. The income tax that the Company began to pay on earnings has resulted in a significant reduction in our growth of net earnings compared to previous periods. During the first six months, the Company has made a total of $2.05 provision for income tax.

Earnings per diluted share grew 36% from $0.42 to $0.58 in the six months ended June 30, 2007. The total diluted weighted average number of shares increased by 1.26 million shares, which negatively affected earnings per share.