UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



|FORM 10-QSB
|-----------

| X |   Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal quarter ended May 31, 2007

|     |   Transition report under Section 13 or 15(d) of the Securities

Exchange Act of 1934 for the transition period from ____ to______.



|Commission file number: 000-52409
|---------------------------------

CHINA ENERGY CORPORATION



|(Name of small business issuer in its charter)
|----------------------------------------------

|Nevada(State or other jurisdiction of incorporation or organization)
6130 Elton Avenue, Las Vegas, NV 
(Address of principal executive offices)
702-216-6000(Issuer's telephone number) | 98-0522950(IRS Employer Identification No.)
89107 
(Zip Code)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------



Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes | X | No |   |

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes |   | No | X |

State issuer's revenue for its most recent fiscal year: $ 13,685,370 for the fiscal year ended November 30, 2006.

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:

|Class                                                      | Outstanding as of June 31, 2007
|---------------------------------------------------------- | -------------------------------
|Common Stock, $.001 par value                              | 45,000,000 shares              
|                                                          
|Transitional Small Business Disclosure Format (Check one): | Yes |   | ; No | X |           



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|TABLE OF CONTENTS
|-----------------
|PART I.          
|Item 1.          
|                 
|                 
|                 
|                 
|                 
|                 
|Item 2.          
|Item 3.          
|PART II.         
|Item 1.          
|Item 2.          
|Item 3.          
|Item 4.          
|Item 5.          
|Item 6.          
|                 

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|FORWARD
|-------

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, among other things:

- general economic and business conditions, both nationally and in our markets,
- our expectations and estimates concerning future financial performance, financing plans and the impact of competition,
- our ability to implement our growth strategy,
- anticipated trends in our business,
- advances in technologies, and
- other risk factors set forth herein.

In addition, in this report, we use words such as "anticipates," "believes," "plans," "expects," "future," "intends," and similar expressions to identify forward-looking statements.

China Energy Corporation ("CEC" or the "Company") undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this prospectus. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

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|ITEM 1 .                FINANCIAL STATEMENTS
|--------------------------------------------



CHINA ENERGY CORPORATION



|Consolidated Financial StatementsMAY 31, 2007(Prepared Without Audit)
|---------------------------------------------------------------------

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|CHINA ENERGY CORPORATION                                                  
|--------------------------------------------------------------------------
|CONSOLIDATED BALANCE SHEETS                                               
|ASSETS                                                                    
|                                                                          
|Current Assets:                                                           
|                                                                          
|Cash                                                                      
|Notes and interest receivables                                            
|Accounts receivables                                                      
|Other receivables                                                         
|Advances to suppliers                                                     
|Inventory                                                                 
|Total current assets                                                      
|Fixed Assets:                                                             
|Property, plant and equipment                                             
|Coal Mine                                                                 
|Construction in Progress                                                  
|                                                                          
|Less accumulated depreciation and depletion                               
|Net fixed assets                                                          
|Other Assets:                                                             
|Investment property, net depreciation of $ 44,963                         
|Intangible asset, net of amortization of $ 444,901                        
|Long term investment                                                      
|Deferred charges                                                          
|Total other assets                                                        
|Total Assets                                                              
|                                                                          
|LIABILITIES AND STOCKHOLDERS' EQUITY                                      
|Current Liabilities:                                                      
|Notes payable                                                             
|Accounts payable                                                          
|Advances from customers                                                   
|Accrued liabilities                                                       
|Other accounts payable                                                    
|Shareholder loans                                                         
|Total current liabilities                                                 
|Long Term Obligations                                                     
|Total liabilities                                                         
|                                                                          
|Stockholders' Equity:                                                     
|Common stock : authorized 75,000,000 shares of $0.001 par                 
|value; issued and outstanding 45,000,000                                  
|Additional paid-in Capital                                                
|Retained earnings                                                         
|Statutory reserves                                                        
|Other Comprehensive loss                                                  
|Total Stockholders' equity                                                
|Total Liabilities and Stockholders' Equity                                
|The accompanying notes are an integral part of these financial statements.
|-F1-                                                                      

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|CHINA ENERGY CORPORATION                                       
|---------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF INCOME                              
|For the Three and Six Month Periods Ended May 31, 2007 and 2006
|(Prepared Without Audit)                                       
|                                                               
|                                                               
|                                                               
|                                                               
|Revenue                                                        
|Cost of Sales                                                  
|Gross Profit                                                   
|                                                               
|                                                               
|Expenses:                                                      
|Selling                                                        
|General and Administrative                                     
|Total expenses                                                 
|Operating income                                               
|                                                               
|Other Income and Expense:                                      
|Other Income (expense)                                         
|Finance expense                                                
|Non operating income (expense)                                 
|Income Before Income Taxes                                     
|                                                               
|Provision for Income Taxes:                                    
|Current Provision                                              
|                                                               
|Net income                                                     
|Other Comprehensive Income                                     
|Loss on foreign currency conversion                            
|Total Comprehensive Income                                     
|Income Per Share -                                             
|Basic and Diluted                                              
|Weighted average number of shares outstanding                  





|The accompanying notes are an integral part of these financial statements.
|--------------------------------------------------------------------------

**-F2-**

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|CHINA ENERGY CORPORATION                                                  
|--------------------------------------------------------------------------
|CONSOLIDATED STATEMENT OF CASH FLOWS                                      
|For the Six Months Ended May 31, 2007 and 2006                            
|(Prepared Without Audit)                                                  
|                                                                          
|                                                                          
|CASH FLOWS FROM OPERATIONS:                                               
|Net income                                                                
|Charges not requiring the outlay of cash:                                 
|Depreciation and amortization                                             
|Company share of (income) loss on equity investment                       
|Changes in assets and liabilities:                                        
|Decrease (Increase) in accounts receivable                                
|Decrease in note receivables                                              
|Increase in other receivables                                             
|Increase in advances to suppliers                                         
|Decrease (Increase) in inventory                                          
|Increase in accounts payable                                              
|Increase in advance from customers                                        
|Increase (Decrease) in accrued liabilities                                
|Increase (Decrease) in other accounts payable                             
|Net Cash Provided By Operating Activities                                 
|                                                                          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                     
|Purchase of fixed assets                                                  
|Increase in construction in progress                                      
|Decrease (Increase) in deferred charges                                   
|Purchase of mining rights                                                 
|Purchase of investment property                                           
|Net Cash Consumed By Investing Activities                                 
|                                                                          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                     
|Advances from shareholder                                                 
|Increase (Decrease) in long term liabilities                              
|Net Cash Provided By Financing Activities                                 
|                                                                          
|Exchange rate effect on cash                                              
|Net change in cash                                                        
|Cash balance, beginning of period                                         
|Cash balance, end of period                                               
|The accompanying notes are an integral part of these financial statements.
|-F3-                                                                      

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CHINA ENERGY CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
MAY 31, 2007 
(Prepared Without Audit)

|1. | BASIS OF PRESENTATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | The unaudited interim financial statements of China Energy Corporation. ("the Company") as of May 31, 2007 and for the three and six month periods ended May 31, 2007, and 2006, have been prepared in accordance with generally accepted accounting principles. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for such periods. The results of operations for the quarter ended May 31, 2007 are not necessarily indicative of the results to be expected for the full fiscal year ending November 30, 2007.
|  
|   | Certain information and disclosures normally included in the notes to financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission, although the Company believes the disclosure is adequate to make the information presented not misleading. The accompanying unaudited financial statements should be read in conjunction with the financial statements of the Company for the year ended November 30, 2006.                                                                                                                                                
|  
|2. | SEGMENT REPORTING                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   | The Company is made up of two segments of business, Coal Group which derives its revenue from the mining and purchase and sale of coal, and Heat Power which derives its revenue by providing heating and electricity to residents and businesses of a local community. Each of these segments is conducted in a separate corporation and each functions independently of the other.                                                                                                                                                                                                                                                      
|  
|   | During the periods reported there were no transactions between the two segments. There also were no differences between the measurements used to report operations of the segments and the consolidated operations of the Company. In addition, there were no differences between the measurements of the assets of the reported segments and the assets reported on the consolidated balance sheet.                                                                                                                                                                                                                                      
|  

|                            | Six Month Period Ended May 31, 2007 | Six Month Period Ended May 31, 2006
|--------------------------- | ----------------------------------- | -----------------------------------
|                            | Heat                                | Coal                               
|                            | Power                               | Group                              
|                           
|Sales to external customers | 3,252,137                           | 5,929,401                          
|Inter-segment revenues      | -                                   | -                                  
|Interest expense            | 680,799                             | 248,394                            
|Depreciation &              |                                     |                                    
|depletion                   | 713,980                             | 228,478                            
|Segment profit (loss)       | 104,192                             | 2,440,091                          
|                           
|                            |                                     | May 31, 2007                       
|                            | Heat                                | Coal                               
|                            | Power                               | Group                              
|                           
|Segment assets              | 26,952,435                          | 15,395,510                         
|Expenditures for segment    |                                     |                                    
|assets:                     |                                     |                                    
|Construction in progress    | 552,239                             | 1,576,799                          
|Other assets                | -                                   | 5,183,085                          
|                           
|-F4-                       
|                           
|- 8 -                      

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|CHINA ENERGY CORPORATION                  
|------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|MAY 31, 2007                              
|(Prepared Without Audit)                  
|                                          
|2.                                        
|                                          
|                                          
|                                          
|                                          
|                                          
|Sales to external customers               
|Inter-segment revenues                    
|Interest expense                          
|Depreciation &                            
|depletion                                 
|Segment profit (loss)                     
|                                          

-F5-- 9 -

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ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



|History
|-------

We, China Energy Corporation ("CEC"), produce coal through our subsidiary Inner Mongolia Tehong Coal Group Co, Ltd. ("Coal Group") and supply heating and electricity requirements throughout the XueJiaWan district through our subsidiary Inner Mongolia Zhunger Heat Power Co., Ltd. ("Heat Power").

CEC was incorporated in the state of Nevada on October 11, 2002 for the purpose of producing coal to meet the increasing demand in power and heating industries and also to expand thermoelectric plants and networks in rural developments. CEC acquired Coal Group and Heat Power on November 30, 2004.

Inner Mongolia Tehong Coal Group Co., Ltd. ("Coal Group")

Coal Group produces coal from the LaiYeGou coal mine located in Erdos City, Inner Mongolia, People's Republic of China. Its trade consists of production and processing of raw coal for domestic heating, electrical generation and coking purposes for subsequent steel production. The principal sources of revenue are generated from local heating power industry.

Coal Group produces approximately 500,000 tons of coal per year based on current levels of input and has the capacity of producing approximately up to 1,200,000 tons subject to enhancement of productions lines in the next 2 years. Coal Group is in the process of increasing its capacity.

The raw coal produced is non caking coal and has a high ash melting point with high thermal value used almost exclusively as fuel for steam-electric power generation. It has low sulphur and low chemical emission which satisfies government environmental protection standards with heating capability of 6,800 -7,000 Kilocalories ("Kcal").

Inner Mongolia Zhunger Heat Power Co., Ltd. ("Heat Power")

Heat Power currently supplies heating requirements throughout 120 hectares of the XueJiaWan district in XueJiaWan Town, Zhunger County with its newly constructed thermoelectric plant ("XueJiaWan Expansion") and 2 heating plants previously used exclusively for heating supply operations. These plants are operated by Heat Power employees. The Autonomous Region Planning & Reform Committee appointed Heat Power in 2003 to establish a thermoelectric plant providing heating and electricity capable of expanding coverage in the area serving a larger population base.

Heat Power supplies heating to users directly and supplies electricity through a government controlled intermediary, Inner Mongolia Electric Power Group Co., Ltd. ("Electric Power Group"). Heat Power will, therefore, be operating two processes, one for heating and one for co-generation of electricity supply.

Heat Power supplies heating to private dwellings, factories as well as municipal facilities.

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|Results of operations
|---------------------

The following is an analysis of our revenues and gross profit, details and analysis of components of expenses, and variance; for the three and six month periods ended May 31, 2007 compared to May 31, 2006.

|              | Six Month Period Ended May 31,
|------------- | ------------------------------
|              | 2007                          
|             
|Revenue       | $ 9,181,538                   
|Cost of Sales | 5,549,079                     
|Gross Profit  | $ 3,632,459                   



|Coal Group
|----------

For the six month period ended May 31, revenues for Coal Group were $ 5,929,401 in 2007 compared to $ 4,816,714 in 2006. The $ 1,112,687 increase was a result of the significant increase in demand in the market for coal, allowing for the increase in price per ton of coal.

For the three month period ended May 31 revenues for Coal were $ 3,290,778 in 2007 compared to $ 3,328,813. The $ 38,035 decrease was mostly attributed to a longer holiday by our customers as a result of the Chinese New Year holiday. The holiday began mid February and businesses are closed up to 2 months during this time.

Coal Group revenues are determined by Government regulation as a minimum price per ton is enforced. Coal Group's selling price per ton has consistently been above this minimum set standard. A significant amount of revenues were generated from the coal mine. In addition we met the demands of customers by supplementing coal mine production with outside purchases.

Coal Group does not typically sign contracts to fix its prices per ton. This allows Coal Group to sell its products at the going market rate which, to the best of management's knowledge, will continue its upward trend in price. Locking in a fixed price does not allow Coal Group to capitalize on the increase in demand for its products.



|Heat Power
|----------

For the six month period ended May 31, revenues generated by Heat Power in 2007 were $ 3,252,137 compared to $ 1,014,505 in 2006. For the three month period ended May 31, revenues generated by Heater Power in 2007 were $ 1,484,072 compare to $ 353,091 in 2006. The increase for both periods was attributed to income generated from newly constructed thermoelectric plant in XueJiaWan completed September 2006.

The increase was also attributed to the increase in the prices of heat supply in response to increased cost of raw materials. Revenues generated are a function of Government regulation as the prices charged are approved by the Government. The Government reviews the pricing of heating from time to time as market conditions change. Also, the cost of raw materials being coal are also regulated by the Government as the price point which we obtain from suppliers is controlled as the Government ensures that such prices are affordable for utility companies. The incentive for the supplier to supply at such prices is that transportation routes are guaranteed and arranged by the Government, thereby saving transportation costs on part of the supplier. Such savings outweigh the reduction in the selling price for the supplier.

For the six month period ended May 31, 2007 and 2006, cost of sales increased, net by $ 3,107,194 as a result of the change in the following expense:

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|                         | Six Month Period Ended May 31,
|------------------------ | ------------------------------
|                         | 2007                          
|Salaries                 | 283,033                       
|Operating supplies       | 134,342                       
|Depreciation & depletion | 766,352                       
|Repairs                  | 24,724                        
|Coal & freight           | 4,151,892                     
|Utilities                | 156,948                       
|Other                    | 31,787                        
|Total                    | $5,549,079                    

Our gross margin decreased significantly this quarter as a result of the increase in coal and freight prices incurred by Heat Power. The price of coal is expected to increase on an upward trend and with the new operations of the thermoelectric plant put into operation in September 2006; we expect our gross margins to decline unless we obtain approval for increasing our set prices to our heat consumers.

For the three month period ended May 31, the increase of the cost of sales by $ 1,594,259 was primarily as a result of the increase in the price of coal and freight.

|Selling Expenses            |                                |          |           
|--------------------------- | ------------------------------ | -------- | ----------
|                           
|                            | Six month period ended May 31, |         
|                            | 2007                           | 2006     | Variance  
|Salaries and wages          | 6,462                          | 4,914    | (1,548)   
|Sales tax                   | 145,477                        | 145,275  | 202       
|Travel                      | -                              | 63,678   | (63,678)  
|Professional and other fees | -                              | 62,423   | (62,423)  
|Total Expenses              | $151,939                       | $276,165 | ($124,226)

For the three month period ended May 31, 2007 and 2006, our selling expenses were $ 93,689 and $ 23,417, respectively. These expenses consisted mostly of salaries and sales tax and the increase was attributed to the increase in sales taxes as a result of the increase in revenues as discussed above.

|General and Administrative Expenses |                                |            |           
|----------------------------------- | ------------------------------ | ---------- | ----------
|                                   
|                                    | Six Month Period Ended May 31, |           
|                                    | 2007                           | 2006       | Variance  
|Salaries and wages                  | 166,819                        | 75,549     | 91,270    
|Depreciation                        | 248,794                        | 205,920    | 42,874    
|Office                              | 183,217                        | 114,149    | 69,068    
|Travel                              | 137,770                        | 68,257     | 69,513    
|Repairs                             | 65,270                         | 7,971      | 57,299    
|Professional and other fees         | 76,308                         | 27,791     | 48,517    
|Other expenses                      | 58,059                         | 31,109     | 26,950    
|Exploration                         | -                              | 542,947    | (542,947) 
|Total Expenses                      | $936,236                       | $1,073,693 | $(137,457)

Salaries and Wages.Salaries and wages increased as a result of retaining additional staff in our thermoelectric plant operations. We also retained additional staff in our Project Management departments of Heat Power, overseeing operations in XueJiaWan and technical staff such as engineers.

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Office.The increase was primarily as a result of posting by our sales staff promotional materials to potential customers of Coal Group. We expect such expenses to increase for the foreseeable future as such efforts have been effective in increasing Coal Group's revenues.

Travel.Travel expense increased as a result of expenses incurred by members of our senior management to attend trade conferences. Travel costs were also incurred by new employees operating the thermoelectric plant for training. Coal Group also incurred costs for training new employees in coal mine operation. We expect to incur training costs whenever new employees are hired.

Repairs.Repairs were made mostly to Coal Group's office building as the facilities required repairs after flooding occurred during the last quarter in 2006. To date all repairs to our office building have been made.

Professional and other Fees.Professional fees consist of fees paid to engineer professionals to evaluate the overall efficiencies of the LaiYeGou coal mine. Fees were also incurred in to retain environmental professionals which assisted in the implementation of environmental protection policies and procedures for the LaiYeGou Coal mine and also for our thermoelectric plant operations. Fees paid to environmental professionals is expected to be an ongoing expense during the expansion of LaiYeGou and after new mining methods are put into operation and during the expansion of thermoelectric plant operations with construction of new boilers and conversion of existing heating plants to heat transfer stations.

Exploration.The $ 542,947 expense incurred in 2006 was the cost of geological exploration in search of a new coal field that could be mined. We did not incur such expenses in 2007.

The coal field is located in Dalu and was tested to determine whether acquisition of this mine is commercially viable and a worthy investment. Coal Group has not obtained any mining rights and such rights can only be granted to registered owners of the mine. Costs for exploration are not recoverable. To date Coal Group has not made any decisions to purchase this mine and is currently evaluating whether such an investment should be made at this time. Exploration efforts are contracted to No. 4 Geology Team Co., Ltd.

For the three month period ended May 31, 2007 and 2006, general and administrative expenses were $ 479,619 and $ 497,015, respectively. Expenses listed above did not vary significantly and the decrease was primarily as a result of decrease in salaries and wages as a result of employees opting to take additional holiday time as a result of the Chinese New Year.



|Finance Expense
|---------------

For the six month period ended May 31, 2007 and 2006, finance expenses amounted to $ 929,193 and $ 62,909, respectively. Coal Group obtained a loan from the Agriculture bank amounting to $ 6,392,021. The loan assists in funding our working capital needs in Heat Power's operations and Coal Group's expansion of the LaiYeGou coal mine. The interest rate on this loan is 7.344% . Please refer to "Sources of Capital" below.

For the three month period ended May 31, 2007 and 2006, finance expenses amounted to $ 474,618 and $ 43,678, respectively. The increase was as a result of the loan Coal Group obtained as discussed above. Such loan was granted during the 3rdquarter ended in 2006.



|Current trends in the Industry
|------------------------------

Given the increase in demand for coal production for electricity and heating production, the Central Government is encouraging sectors to build more power stations, coking factories, calcium carbide factories and silicon iron factories across the country. The coal industry is expected to grow at a rate of 9.5% per year. Sources: China Daily. A challenge in meeting this demand is transporting coal to nearby regions, such as Shanxi and Hebei Provinces, as transportation routes are currently inefficient or non existent. These routes are expected to be completed in the next 5 years. As a result, sales to these regions during this period may not be at levels we desire.

For Coal Group, methods of circumventing transportation challenges are to receive contracts granted by the Government where transportation is guaranteed from LaiYeGou coal mine to the final destination. Where contracts are privately arranged, transportation is arranged through the hiring of 3rdparty transporters or by



|- 13 -
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customers. In some instances, coal is purchased by 3rdparties in close proximity to train stations where transportation to customer destinations is more efficiently arranged. However, transportation to destinations is limited to those for which routes are in place.

For Heat Power, transportation of coal to our facility is provided by its supplier, Guanbanwusu.

Coal Group does not have competition in the usual sense of the term that most other businesses experience. There are approximately 30,000 coal mining companies throughout China; however, since demand currently exceeds supply, competition is not a variable which warrants concern in the operations of our business.

China's coal industry remains large and growing. Its customer base is chronically under-supplied. There are pressures from the Government to use nuclear power instead of coal due to environmental concerns; however, coal reserves in China are abundant and less expensive and a switch to other forms of resources to generate energy is unlikely. China's coal reserves are expected to last approximately 40 years. Source: China Daily.

The electricity and heating supply industry is also growing; however, the government is taking steps to monitor and control economic growth in the rural areas to ensure that the economy is developing at a stable rate.



|Liquidity and Capital Resources
|-------------------------------

As of May 31, 2007 we had a working capital deficit of $ 11,745,890.

Not including funds required for expansion of our facilities, we estimate our cash requirements for the next 12 months Coal Group will require approximately $ 4,000,000 and Heat Power will require approximately $ 2,070,000, a total of $ 6,070,000 in order to cover our working capital needs.

We currently are able to sustain our working capital needs through profits we generate and bank and shareholder loans.

We anticipate sales will generate the cash flow from collection of accounts receivables, customer deposits and proceeds from bank and shareholder loans to be sufficient to sustain our working capital needs. However we may require other sources of capital.

We do not know of any trends, events or uncertainties that are likely to have a material impact on our short-term or long-term liquidity other than those factors discussed below.



|Sources of Capital
|------------------

If additional capital is needed, we will explore financing options such as shareholder loans. Shareholder loans are payable on demand and interest is calculated at 6.31% per annum.

Coal Group obtained further loans from the Agriculture bank amounting to $ 6,392,021. The terms and principle amount of the loans granted are as follows:

|Term                         | Interest rate | Principle  
|---------------------------- | ------------- | -----------
|Sep 26, 2006 to Sep 25, 2007 | 7.344%        | 2,301,128  
|Oct 19, 2006 to Oct 18, 2007 | 7.344%        | 1,534,085  
|Apr 11, 2006 to Apr 11, 2008 | 7.254%        | 2,556,808  
|Total                        |               | $ 6,392,021

Shareholders loans are granted from time to time as required to meet current working capital needs. We have no formal agreement that ensures that we will receive such loans. We may exhaust this source of funding at any time.

We may also receive capital contributions from our shareholders.

- 14 -

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|Cash FlowsOperating Activities:
|-------------------------------

Our cash flows provided by operating activities were $ 649,576 and $ 4,792,710 for six month period ended May 31, 2007 and 2006, respectively. The following summarizes the inflow and outflow of cash for these periods:

|                                               | 2007        | 2006       
|---------------------------------------------- | ----------- | -----------
|Net income                                     | $ 1,159,736 | $ 1,127,578
|Decrease (increase) in accounts receivable     | 368,656     | (203,948)  
|Increase in other receivables                  | (3,337,843) | (862,475)  
|Increase (decrease) in advances from customers | 2,025,668   | 39,944     
|Increase in advances to suppliers              | (1,228,974) | (2,613,268)
|Decrease (increase) in inventory               | 85,869      | (519,480)  
|Increase (decrease) in accounts payable        | 2,450,880   | 54,970     
|Other                                          | (874,416)   | 7,769,389  
|Net Cash Provided By Operating Activities      | $ 649,576   | $ 4,792,710

Accounts Receivable.The majority of accounts receivables relate to Heat Power's operations wherein collection of user fees were outstanding for less than 6 months. Coal Group's operations sales on account were also outstanding for less than 6 months.

Advances from customers.Deposits on sales of coal are a normal business practice that ensures that the customer obtains Coal Group's Product at the market price determined on the date of purchase.

Advances to Suppliers.Advances were made to suppliers of materials required for the construction and completion of Heat Power's expansion plan and Coal Group's Laiyegou coal mine expansion. Prepayment is also a common business practice in China as it allows for a determined price and in some instances will grant us discounts on purchases.

Inventory.Inventory mainly consists of operating supplies used by Heat Power for heat generation.

Accounts Payable.These amounts consist of accruals made for freight, repairs and maintenance of heating plants, labor union fees, social insurance, and technical training for our employees.



|Investing Activities:
|---------------------

Our cash consumed by investing activities were $ 989,162 and $ 7,473,476 for the six month period ended May 31, 2007 and 2006, respectively. The change was mainly attributed to the amounts expended on Heat Power's construction of its thermoelectric plant wherein construction in progress costs were subsequently transferred to fixed assets as the plant was completed September 2006. Construction in progress charges incurred were as a result of funding for Coal Group Laiyegou coal mine expansion and also Heat Power construction of additional boilers and conversion of existing heating plants previously used in exclusive heat supply operations prior to construction of the thermoelectric plant.



|Financing Activities:
|---------------------

Our cash flows provided by financing activities were $ 157,761 and $ 4,474,750 for the six month period ended May 31, 2007 and 2006, respectively.

All land in the China belongs to the PRC. To extract resources from land, Coal Group is required to obtain a mining right. The jurisdiction responsible for issuing such rights is the Provincial Bureau of National Land and



|- 15 -
|------

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Resource, a division of the PRC Government. In December 2005, Coal Group's mining right was assessed to be approximately $ 3,656,730 for a period of 14 years commencing November 2005. This mining right is regarded as an Intangible Asset to be amortized over a period of 14 years.



|The payment schedule is as follows:
|-----------------------------------

|- | Installment | #1: | $ | 1,105,830 due on or before December 1, 2006
|- | ----------- | --- | - | -------------------------------------------
|- | Installment | #2: | $ | 510,180 due on or before December 1, 2007  
| 
|- | Installment | #3: | $ | 510,180 due on or before December 1, 2008  
|- | Installment | #4: | $ | 510,180 due on or before December 1, 2009  
|- | Installment | #5: | $ | 510,180 due on or before December 1, 2010  
|- | Installment | #6: | $ | 510,180 due on or before December 1, 2011  

A total of $ 2,040,720 (Installment # 3-#6 of $ 510,180*4) has been allocated to long term obligations. As of May 31, 2007, we have depreciated a total of $ 444,901 and the net book value is $ 3,211,829.

A substantial portion of the cost of construction of the thermoelectric plant has been provided by shareholder loans. The outstanding balance of these loans at November 30, 2006 was $ 7,734,345. An additional $ 145,187 was advanced during the quarter ended May 31, 2007. The May 31, 2007 balance was $ 8,400,806.

All of these shareholder loans detailed below bear interest at 6.31% and are due on demand:

|Zhiyang Guo                                               |       | $ 1,269,842
|--------------------------------------------------------- | ----- | -----------
|WenHua Ding                                               |       | 521,274    
|Hangzhou Dayovan Group, Ltd.                              |       | 4,890,520  
|Xinghe County Haifu Coal Transportation & Sales Co., Ltd. |       | 1,719,170  
|                                                          | Total | $ 8,400,806



|Material Commitments
|--------------------

We committed to payment of bank loans, shareholder loans and payment of mining rights as mentioned above. Our expansion plans for the LaiYeGou mine will require approximately $ 10,353,195. We have title to all our capital assets consisting of production equipment, automobiles, and office equipment.

Heat Power's offices are currently leased on a month to month basis and Coal Group occupies space purchased in 1998. Coal Group holds title to this property in the form of a 50 year lease from the Government. There are no amounts owing.



|Seasonal Aspects
|----------------

Coal Group's business is seasonal in that sales are particularly low in February up to mid March, due to the Chinese New Year holiday. During this time our business is closed for 2 weeks. As a result, sales in March are usually higher.

Heat Power sales level relating to heat generation is not provided from April through October as the climate in the region is high, reducing heating requirements.



|Off Balance Sheet ArrangementsWe have no off balance sheet arrangements.
|------------------------------------------------------------------------

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|ITEM 3.   CONTROLS AND PROCEDURES
|---------------------------------

(A) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's Chief Executive Officer/Chief Accounting Officer of the effectiveness of the design and operation of the Company's disclosure controls and procedures. The Company's disclosure controls and procedures are designed to provide a reasonable level of assurance of achieving the Company's disclosure control objectives. The Company's Chief Executive Officer/Chief Accounting Officer has concluded that the Company's disclosure controls and procedures are, in fact, effective at this reasonable assurance level as of the period covered. In addition, the Company reviewed its internal controls, and there have been no significant changes in its internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation or from the end of the reporting period to the date of this Form 10-QSB.

(B) Changes in Internal Controls Over Financial Reporting

In connection with the evaluation of the Company's internal controls during the Company's 2nd fiscal quarter ended May 31, 2007, the Company's Chief Executive Officer/Chief Accounting Officer has determined that there are no changes to the Company's internal controls over financial reporting that has materially affected, or is reasonably likely to materially effect, the Company's internal controls over financial reporting.

|PART II.          |                                                                    |                              
|----------------- | ------------------------------------------------------------------ | -----------------------------
|OTHER INFORMATION
|ITEM 1.           | Legal Proceedings-None.                                           
|ITEM 2.           | Unregistered Sales of Equity Securities and Use of Proceeds -None.
|ITEM 3.           | Defaults Upon Senior Securities -None.                            
|ITEM 4.           | Submission of Matters to a Vote of Security Holders -None         
|ITEM 5.           | Other Information -None.                                          
|ITEM 6.           | EXHIBITS                                                          
|Exhibit Number    | Description                                                       
|31.1              |                                                                    | CEO Section 302 Certification
|31.2              |                                                                    | CAO Section 302 Certification
|32.1              |                                                                    | CEO Section 906 Certification
|32.2              |                                                                    | CAO Section 906 Certification

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|SIGNATURES
|----------

In accordance with the Securities Exchange Act of 1934, this Quarterly Report on Form 10-QSB has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

|      |               |     | CHINA ENERGY CORPORATION            |  | 
|----- | ------------- | --- | ----------------------------------- |  | 
|Date: | July 13, 2007 |     |                                     |  | 
|     
|     
|      |               |     | /s/ WenXiang Ding                   |  | 
|      |               | By: |                                     |  | 
|      |               |     | WenXiang Ding                       |  | 
|      |               |     | President, Chief Executive Officer, |  | 
|      |               |     | Director & Secretary                |  | 
|     
|      |               |     | /s/ WuSheng Liu                     |  | 
|      |               | By: |                                     |  | 
|      |               |     | WuSheng Liu                         |  | 
|      |               |     | Chief Accounting Officer            |  | 

- 18 -

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