**Harbin        Electric Reports Second Quarter 2007 Results**
** **

**Revenues        Up 44 Percent and Net Income Up 24 Percent Year Over Year **

**Highlights:        **

|   | · | Total                  revenues for the quarter were $14 million, up 44% compared to $9.7                  million                  in the second quarter of 2006 |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Second                  quarter 2007 net income was $4.6 million, up 24% compared to $3.7                  million                  in the second quarter of 2006 |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Diluted                  earnings per share were $0.24 for the quarter, up 14% compared                  to $0.21                  for the same quarter of last year |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**(Harbin,        China, August 13, 2007)**

**Quarterly        Key Figures**

|                                       |   | **Three                    Months Ended** |       |  **Three                    Months Ended** |   |                               |   |
|--------------------------------------------|--------|-------------------------------------------|------------|-------------------------------------------------|--------|------------------------------------|--------|
|                                       |   | **June                    30, 2007**      |       |  **June                    30, 2006**      |   | **YoY%                    Change** |   |
| **Revenues**                               |   | $                                         | 13,989,693 |                                            | $      | 9,711,345                          |   |   | 44 | % |
| **Gross                    Profit**        |   | $                                         | 7,220,370  |                                            | $      | 4,800,792                          |   |   | 50 | % |
| **Gross                    Profit Margin** |   |                                      | 52         | %                                               |   | 49                                 | %      |   |   |   |
| **Net                    Income**          |   | $                                         | 4,556,156  |                                            | $      | 3,677,745                          |   |   | 24 | % |
| **Net                    Profit Margin**   |   |                                      | 33         | %                                               |   | 38                                 | %      |   |   |   |
| **Diluted                    EPS**         |   | $                                         | 0.24       |                                            | $      | 0.21                               |   |   | 14 | % |

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**Six        Month Period Key Figures**

|                                       |   | **Six                    Months Ended** |       |  **Six                    Months Ended** |   |                               |   |
|--------------------------------------------|--------|-----------------------------------------|------------|-----------------------------------------------|--------|------------------------------------|--------|
|                                       |   | **June                    30, 2007**    |       |  **June                    30, 2006**    |   | **YoY%                    Change** |   |
| **Revenue**                                |   | $                                       | 27,615,907 |                                          | $      | 18,590,003                         |   |   | 49 | % |
| **Gross                    Profit**        |   | $                                       | 14,078,298 |                                          | $      | 9,074,527                          |   |   | 55 | % |
| **Gross                    Profit Margin** |   |                                    | 51         | %                                             |   | 49                                 | %      |   |   |   |
| **Net                    Income**          |   | $                                       | 7,960,219  |                                          | $      | 7,472,241                          |   |   | 7 | % |
| **Net                    Profit Margin**   |   |                                    | 29         | %                                             |   | 40                                 | %      |   |   |   |
| **Diluted                    EPS**         |   | $                                       | 0.42       |                                          | $      | 0.43                               |   |   | -2 | % |

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**About        Harbin Electric, Inc.:**

***Safe        Harbor Statement***

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|                                                                                                     |   | JUNE                  30, |        | DECEMBER 31, |   |
|----------------------------------------------------------------------------------------------------------|--------|---------------------------|-------------|-------------------|--------|
|                                                                                                     |   | 2007                      |        | 2006              |   |
|                                                                                                     |   | UNAUDITED                 |        |              |   |
|  ASSETS                                                                                             |   |
| CURRENT                  ASSETS:                                                                         |   |                      |        |              |   |
| Cash                                                                                                     |   | $                         | 62,700,593  |              | $      | 67,313,919 |   |
| Accounts                  receivable, net of allowance for doubtful accounts of                  $45,699 |   |                      |        |              |   |   |   |
| and                  $44,552 as of June 30, 2007 and December 31, 2006,                  respectively    |   |                      | 10,546,850  |              |   | 8,827,799 |   |
| Inventories                                                                                              |   |                      | 1,391,605   |              |   | 583,287 |   |
| Other                  receivables                                                                       |   |                      | 100,769     |              |   | 27,991 |   |
| Other                  receivables - related parties                                                     |   |                      | -           |              |   | 44,998 |   |
| Advances                  on inventory purchases                                                         |   |                      | 2,527,626   |              |   | 834,590 |   |
| Total                  current assets                                                                    |   |                      | 77,267,443  |              |   | 77,632,584 |   |
|                                                                                                     |   |                      |        |              |   |   |   |
| PLANT                  AND EQUIPMENT, net                                                                |   |                      | 10,233,847  |              |   | 9,219,534 |   |
|                                                                                                     |   |                      |        |              |   |   |   |
| OTHER                  ASSETS:                                                                           |   |                      |        |              |   |   |   |
| Debt                  issue costs, net of amortization                                                   |   |                      | 2,510,937   |              |   | 2,757,155 |   |
| Advances                  on equipment purchases                                                         |   |                      | 11,913,900  |              |   | - |   |
| Advances                  on intangible assets                                                           |   |                      | 2,134,625   |              |   | 2,585,977 |   |
| Intangible                  assets, net of accumulated amortization                                      |   |                      | 825,433     |              |   | 640,337 |   |
| Other                  assets                                                                            |   |                      | 174,168     |              |   | 123,234 |   |
| Investment                  in derivative hedge                                                          |   |                      | 1,004,401   |              |   | - |   |
| Total                  other assets                                                                      |   |                      | 18,563,464  |              |   | 6,106,703 |   |
|                                                                                                     |   |                      |        |              |   |   |   |
|  Total                  assets                                                                      |   | $                         | 106,064,754 |              | $      | 92,958,821 |   |
|                                                                                                     |   |                      |        |              |   |   |   |
| LIABILITIES                  AND SHAREHOLDERS' EQUITY                                                    |
|                                                                                                     |   |                      |        |              |   |   |   |
| CURRENT                  LIABILITIES:                                                                    |   |                      |        |              |   |   |   |
| Accounts                  payable                                                                        |   | $                         | 183,333     |              | $      | 258,911 |   |
| Other                  payables                                                                          |   |                      | 468,371     |              |   | 406,520 |   |
| Other                  payables - related party                                                          |   |                      | 35,613      |              |   | - |   |
| Accrued                  liabilities                                                                     |   |                      | 165,950     |              |   | 107,263 |   |
| Customer                  deposits                                                                       |   |                      | 330,214     |              |   | 319,261 |   |
| Taxes                  payable                                                                           |   |                      | 499,981     |              |   | 556,943 |   |
| Interest                  payable                                                                        |   |                      | 1,122,000   |              |   | 1,122,000 |   |
| Total                  current liabilities                                                               |   |                      | 2,805,462   |              |   | 2,770,898 |   |
|                                                                                                     |   |                      |        |              |   |   |   |
| NOTES                  PAYABLE, net of debt discount $19,144,335 and $21,410,401 as of                   |   |                      |        |              |   |   |   |
| June                  30, 2007 and December 31, 2006, respectively                                       |   |                      | 30,855,665  |              |   | 28,589,599 |   |
|                                                                                                     |   |                      |        |              |   |   |   |
| CROSS                  CURRENCY HEDGE PAYABLE                                                            |   |                      | 3,945,951   |              |   | - |   |
|                                                                                                     |   |                      |        |              |   |   |   |
| WARRANT                  LIABILITIES                                                                     |   |                      | -           |              |   | 16,568,080 |   |
|                                                                                                     |   |                      |        |              |   |   |   |
|  Total                  liabilities                                                                 |   |                      | 37,607,078  |              |   | 47,928,577 |   |
|                                                                                                     |   |                      |        |              |   |   |   |
| COMMITMENTS                  AND CONTINGENCIES                                                           |   |                      | -           |              |   | - |   |
|                                                                                                     |   |                      |        |              |   |   |   |
| SHAREHOLDERS'                  EQUITY:                                                                   |   |                      |        |              |   |   |   |
| Common                  Stock, $0.00001 par value, 100,000,000 shares authorized,                        |   |                      |        |              |   |   |   |
| 16,602,951                  shares issued and outstanding                                                |   |                      | 166         |              |   | 166 |   |
| Paid-in-capital                                                                                          |   |                      | 35,674,843  |              |   | 12,252,064 |   |
| Retained                  earnings                                                                       |   |                      | 27,829,594  |              |   | 26,222,408 |   |
| Statutory                  reserves                                                                      |   |                      | 4,523,715   |              |   | 4,523,715 |   |
| Accumulated                  other comprehensive income                                                  |   |                      | 429,358     |              |   | 2,031,891 |   |
| Total                  shareholders' equity                                                              |   |                      | 68,457,676  |              |   | 45,030,244 |   |
|  Total                  liabilities and shareholders' equity                                        |   | $                         | 106,064,754 |              | $      | 92,958,821 |   |

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|                                                                |   | FOR THE SIX MONTHS |       | FOR THE THREE MONTHS |   |
|---------------------------------------------------------------------|--------|-----------------------------------|------------|-------------------------------------|--------|
|                                                                |   | ENDED                    JUNE 30, |       | ENDED                    JUNE 30,   |   |
|                                                                |   |  2007                        |       | 2006                                |   | 2007 |   | 2006 |   |
| REVENUES                                                            |   | $                                 | 27,615,907 |                                | $      | 18,590,003 |   | $ | 13,989,693 |   | $ | 9,711,345 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| COST                    OF SALES                                    |   |                              | 13,537,609 |                                |   | 9,515,476 |   |   | 6,769,323 |   |   | 4,910,553 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| GROSS                    PROFIT                                     |   |                              | 14,078,298 |                                |   | 9,074,527 |   |   | 7,220,370 |   |   | 4,800,792 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| RESEARCH                    AND DEVELOPMENT EXPENSE                 |   |                              | 453,359    |                                |   | 826,754 |   |   | 235,519 |   |   | 504,165 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| SELLING,                    GENERAL AND ADMINISTRATIVE EXPENSES     |   |                              | 2,960,321  |                                |   | 1,430,853 |   |   | 1,445,858 |   |   | 636,677 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| INCOME                    FROM OPERATIONS                           |   |                              | 10,664,618 |                                |   | 6,816,920 |   |   | 5,538,993 |   |   | 3,659,950 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| Other                    (income) expense, net                      |   |                              | (9,310     | )                                   |   | (53,148 | ) |   | (6,854 | ) |   | 914 |   |
| Non-operating                    (income)                           |   |                              | (763,408   | )                                   |   | - |   |   | (757,087 | ) |   | - |   |
| Realized                    (gain) on sale of marketable securities |   |                              | -          |                                |   | (571,143 | ) |   | - |   |   | - |   |
| Amortization                    expense of debt discount            |   |                              | 2,266,066  |                                |   | - |   |   | 1,133,033 |   |   | - |   |
| Gain                    on cross currency hedge                     |   |                              | (297,637   | )                                   |   | - |   |   | (297,637 | ) |   | - |   |
| Interest                    expense (income), net                   |   |                              | 1,508,688  |                                |   | (31,030 | ) |   | 911,382 |   |   | (18,709 | ) |
| OTHER                    EXPENSE (INCOME), NET                      |   |                              | 2,704,399  |                                |   | (655,321 | ) |   | 982,837 |   |   | (17,795 | ) |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| INCOME                    BEFORE PROVISION FOR INCOME TAXES         |   |                              | 7,960,219  |                                |   | 7,472,241 |   |   | 4,556,156 |   |   | 3,677,745 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| PROVISION                    FOR INCOME TAXES                       |   |                              | -          |                                |   | - |   |   | - |   |   | - |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| NET                    INCOME                                       |   |                              | 7,960,219  |                                |   | 7,472,241 |   |   | 4,556,156 |   |   | 3,677,745 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| OTHER                    COMPREHENSIVE LOSS                         |   |                              | 1,602,533  |                                |   | 264,816 |   |   | 2,307,201 |   |   | 1,093,730 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE                    INCOME                             |   | $                                 | 6,357,686  |                                | $      | 7,207,425 |   | $ | 2,248,955 |   | $ | 2,584,015 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| BASIC                    WEIGHTED AVERAGE NUMBER OF SHARES          |   |                              | 16,600,507 |                                |   | 16,600,451 |   |   | 16,600,562 |   |   | 16,600,451 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| BASIC                    EARNING PER SHARE                          |   | $                                 | 0.48       |                                | $      | 0.45 |   | $ | 0.27 |   | $ | 0.22 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| DILUTED                    WEIGHTED AVERAGE NUMBER OF SHARES        |   |                              | 18,739,186 |                                |   | 17,245,535 |   |   | 18,740,981 |   |   | 17,350,758 |   |
|                                                                |   |                              |       |                                |   |   |   |   |   |   |   |   |   |
| DILUTED                    EARNING PER SHARE                        |   | $                                 | 0.42       |                                | $      | 0.43 |   | $ | 0.24 |   | $ | 0.21 |   |

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