U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                For the six month period ended December 31, 2008

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934


        For the transition period from ______ to _______


                        COMMISSION FILE NUMBER: 000-33195


                                XINHUA CHINA LTD.
                 ______________________________________________
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)


            NEVADA                                               88-0437644
_______________________________                              ___________________
(STATE OR OTHER JURISDICTION OF                               (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                              IDENTIFICATION NO.)


                    B-26F, ORIENTAL KENZO DONGCHENG DISTRICT
                                 BEIJING 100027
                           PEOPLE'S REPUBLIC OF CHINA
                    ________________________________________
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                        86-10-64168816 OR 86-10-64168916
                        ________________________________
                           (ISSUER'S TELEPHONE NUMBER)


             SUITE 304, BUILDING #1, YUANJIA INTERNATIONAL APARTMENT
                    NO. 40 DONGZHONG ST., DONGCHENG DISTRICT
                                 BEIJING 100027
                           PEOPLE'S REPUBLIC OF CHINA
             _______________________________________________________
              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                         IF CHANGED SINCE LAST REPORT)


SECURITIES REGISTERED PURSUANT TO SECTION         NAME OF EACH EXCHANGE ON WHICH
            12(b) OF THE ACT:                              REGISTERED:
                  NONE


          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                        COMMON STOCK, $0.00001 PAR VALUE
                        _________________________________
                                (TITLE OF CLASS)


Indicate by checkmark whether the issuer:  (1) has 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 checkmark  whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer.

Large  accelerated  filer [ ]  Accelerated filer [ ]  Non-accelerated filer [X]

Indicate by checkmark  whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Act). [ ] Yes [X] No

    APPLICABLE ONLY TO ISSUER INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
                             PRECEDING FIVE YEARS.
                                       N/A


<PAGE>


Indicate by  checkmark  whether the issuer has filed all  documents  and reports
required to be filed by Section 12, 13 and 15(d) of the Securities  Exchange Act
of 1934 after the  distribution of securities under a plan confirmed by a court.
Yes[ ] No[ ]

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares
outstanding of each of  the issuer's
classes of common stock, as of the
most practicable date:                       Outstanding as of February 13, 2009

             Class
Common Stock, $0.00001 par value                        148,999,008
































































                                       2


<PAGE>


                                XINHUA CHINA LTD.

                                    FORM 10-Q

PART I - FINANCIAL INFORMATION

     Item 1.   Financial Statements                                            5

     Item 2    Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                       7

     Item 3.   Quantitative and Qualitative Discloses About Market Risk       12

     Item 4.   Controls and Procedures                                        12

     Item 4T.  Controls and Procedures                                        13

PART II - OTHER INFORMATION

     Item 1.   Legal Proceedings                                              13

     Item 1A.  Risk Factors                                                   13

     Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds    14

     Item 3.   Defaults Upon Senior Securities                                14

     Item 4.   Submission of Matters to a Vote of Security Holders            14

     Item 5.   Other Information                                              14

     Item 6.   Exhibits                                                       14














































                                       3


<PAGE>


                           FORWARD LOOKING STATEMENTS

Statements  made in this Form 10-Q that are not  historical or current facts are
"forward-looking  statements"  made  pursuant to the safe harbor  provisions  of
Section  27A of the  Securities  Act of 1933 (the  "Act") and Section 21E of the
Securities Exchange Act of 1934. These statements often can be identified by the
use  of  terms  such  as  "may,"  "will,"  "expect,"  "believe,"   "anticipate,"
"estimate," "approximate" or "continue," or the negative thereof. We intend that
such  forward-looking  statements  be  subject  to the  safe  harbors  for  such
statements.  We wish to caution  readers not to place undue reliance on any such
forward-looking  statements,   which  speak  only  as  of  the  date  made.  Any
forward-looking  statements represent  management's best judgment as to what may
occur in the future. However,  forward-looking  statements are subject to risks,
uncertainties  and important  factors beyond our control that could cause actual
results and events to differ  materially from  historical  results of operations
and events  and those  presently  anticipated  or  projected.  We  disclaim  any
obligation  subsequently  to revise any  forward-looking  statements  to reflect
events or  circumstances  after the date of such  statement  or to  reflect  the
occurrence of anticipated or unanticipated events.

AVAILABLE INFORMATION

Xinhua China Ltd. files annual,  quarterly,  current reports,  proxy statements,
and  other  information  with  the  Securities  and  Exchange   Commission  (the
"Commission").  You may read and copy  documents  referred to in this  Quarterly
Report on Form 10-Q that have been filed with the Commission at the Commission's
Public Reference Room, 450 Fifth Street, N.W.,  Washington,  D.C. You may obtain
information  on the  operation  of the  Public  Reference  Room by  calling  the
Commission  at  1-800-SEC-0330.  You can also  obtain  copies of our  Commission
filings by going to the Commission's website at http://www.sec.gov.
















































                                       4


<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS














                                XINHUA CHINA LTD.

                   UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 2008 AND JUNE 30, 2008

                             (STATED IN US DOLLARS)






















































                                       5


<PAGE>


                                XINHUA CHINA LTD.



CONTENTS                                                                   PAGES

Report of Registered Independent Public Accounting Firm                      F-1

Consolidated Balance Sheets                                                F-2-3

Consolidated Statements of Income                                            F-4

Consolidated Statements of Stockholders' Equity                              F-5

Consolidated Statements of Cash Flows                                        F-6

Notes to the Financial Statements                                         F-7-20





























































                                       6


<PAGE>


Board of Directors and Stockholders
Xinhua China Ltd.


             REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM

We have reviewed the accompanying  interim consolidated Balance Sheets of Xinhua
China Ltd.  ("the  Company") as of December 31, 2008 and June 30, 2008,  and the
related  statements  of  income,  stockholders'  equity,  and cash flows for the
three-months  and the six-months ended December 31, 2008 and 2007. These interim
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.

We conducted our review in accordance  with the standards of the Public  Company
Accounting  Oversight  Board  (United  States).  A review of  interim  financial
information  consists  principally of applying analytical  procedures and making
inquiries of persons  responsible  for financial and accounting  matters.  It is
substantially  less in scope  than an audit  conducted  in  accordance  with the
standards of the Public Company  Accounting  Oversight  Board,  the objective of
which is the expression of an opinion  regarding the financial  statements taken
as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to the accompanying interim  consolidated  financial statements for them
to be in conformity with U.S. generally accepted accounting principles.







South San Francisco, California                     Samuel H. Wong & Co., LLP
January 23, 2009                                    Certified Public Accountants












































                                      F-1


<PAGE>

<TABLE>
<CAPTION>

                                XINHUA CHINA LTD.
                           CONSOLIDATED BALANCE SHEETS
                    AS OF DECEMBER 31, 2008 AND JUNE 30, 2008
                             (STATED IN US DOLLARS)

                                                    NOTES     DECEMBER 31, 2008     JUNE 30, 2008
                                                              _________________     _____________
<S>                                                              <C>                 <C>

ASSETS
     CURRENT ASSETS
       Cash and Cash Equivalents                      3D              1,814               38,733
       Accounts Receivable, NET                       3E             69,666              411,782
       Note Receivable                                 4                  -            1,625,000
       Other Receivables and Prepayments               5            224,446              223,231
                                                                 __________          ___________
          Total Current Assets                                      295,926            2,298,746

     LONG-TERM ASSETS
       Property, Plant & Equipment, NET             3F,6             63,157               73,786
                                                                 __________          ___________
          Total Long-term Assets                                     63,157               73,786

                                                                 __________          ___________
          Total Assets                                           $  359,083          $ 2,372,532
                                                                 ==========          ===========

LIABILITIES & STOCKHOLDERS' EQUITY

     LIABILITIES
       CURRENT LIABILITIES
       Accounts Payable and Accrued Liabilities        7            619,888            1,095,538
       Deferred Revenue                                                   -               18,355
       Current portion of Loans Payable                8          1,573,943            1,635,443
                                                                 __________          ___________
          Total Current Liabilities                               2,193,831            2,749,336

       LONG-TERM LIABILITIES
       Loans Payable                                   8          1,058,261            1,058,261
       Loans from Shareholders                         9          5,682,660            5,410,256
                                                                 __________          ___________
          Total Long-term Liabilities                             6,740,921            6,468,517

                                                                 __________          ___________
          Total Liabilities                                       8,934,752            9,217,853


   SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS AND ACCOUNTANT'S REPORT

</TABLE>


























                                      F-2

<PAGE>

<TABLE>
<CAPTION>

                                                         NOTE     DECEMBER 31, 2008     JUNE 30, 2008
<S>                                                                <C>                  <C>

STOCKHOLDERS' EQUITY

  Common Stock $0.00001 Par Value 500,000,000 Shares
     Authorized; 148,999,008 and 98,655,733 shares
     issued and outstanding at December 31, 2008 and
     June 30, 2008, accordingly.                          10               1,489                  987
  Additional Paid-In Capital                                          11,132,749           10,903,997
  Accumulated Other Comprehensive Income                                  38,774               38,149
  Accumulated Deficit                                                (19,748,680)         (17,788,454)
                                                                   _____________        _____________
      Total Stockholders' (Deficit)/Equity                            (8,575,668)          (6,845,321)

                                                                   _____________        _____________
  Total Liabilities & Stockholders' Equity                         $     359,083        $   2,372,532
                                                                   =============        =============


















   SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS AND ACCOUNTANT'S REPORT

</TABLE>





































                                      F-3

<PAGE>

<TABLE>
<CAPTION>

                                XINHUA CHINA LTD.
                        CONSOLIDATED STATEMENTS OF INCOME
          FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008 AND 2007
                             (STATED IN US DOLLARS)


                                                           Three-months ended                 Six-months ended
                                                      _____________________________     _____________________________
                                             NOTE      12/31/2008       12/31/2007       12/31/2008       12/31/2007
                                                      ____________     ____________     ____________     ____________
<S>                                                   <C>              <C>              <C>              <C>

REVENUE
   Revenue, NET                                3H     $          -     $          -     $          -     $          -
   Cost of Sales, NET                          3I                -                -                -                -
                                                      ____________     ____________     ____________     ____________
      Gross Profit                                               -                -                -                -

OPERATING EXPENSES
   Selling, General, and Administrative
      Expenses                                             110,942           92,452          337,808          170,754
                                                      ____________     ____________     ____________     ____________
      Total Operating Expense                              110,942           92,452          337,808          170,754

                                                      ____________     ____________     ____________     ____________
   Operating Income/(Loss)                                (110,942)         (92,452)        (337,808)        (170,754)
                                                      ____________     ____________     ____________     ____________

OTHER INCOME (EXPENSES)
   Other Income                                                  -                -          179,621                -
   Interest Income                                               5           13,789                -           13,800
   Gain on disposal of Beijing BoHeng                            -                -           73,427                -
   Interest Expense                                       (100,137)          146,507        (250,466)          153,496
   Impairment loss on Boheng investment         4       (1,625,000)                -      (1,625,000)                -
                                                      ____________     ____________     ____________     ____________
      Loss before minority interest and
         income tax                                     (1,836,074)        (225,170)      (1,960,227)        (310,450)

   Minority interest in net loss of
   consolidated subsidiaries                          ____________     ____________     ____________     ____________

Loss before Income Tax                                  (1,836,074)        (225,170)      (1,960,227)        (310,450)

Income Tax                                  3M,14

                                                      ____________     ____________     ____________     ____________
Net Loss                                              $ (1,836,074)    $   (225,170)    $ (1,960,227)    $   (310,450)
                                                      ============     ============     ============     ============
Basic & Diluted Earnings Per Share          3N,17            (.013)            .003            (.014)           (.005)

Weighted Average Shares Outstanding                    142,941,399       57,723,668      142,941,399       57,723,668
                                                      ____________     ____________     ____________     ____________


   SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS AND ACCOUNTANT'S REPORT

</TABLE>



















                                      F-4

<PAGE>

<TABLE>
<CAPTION>

                                XINHUA CHINA LTD.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
          FOR THE SIX MONTHS ENDED DECEMBER 31, 2008 AND JUNE 30, 2008
                             (STATED IN US DOLLARS)

                                                     ADDITIONAL                       OTHER
                               NUMBER OF    COMMON    PAID IN     COMPREHENSIVE   COMPREHENSIVE   ACCUMULATED
                                SHARES       STOCK    CAPITAL      INCOME(LOSS)   INCOME(LOSS)      DEFICIT        TOTAL
                              ___________   ______   __________   _____________   _____________   ___________    __________
<S>                            <C>             <C>   <C>            <C>               <C>         <C>            <C>

Balance, July 1, 2007          54,638,890      546   10,423,526     (17,088,780)      8,749       (17,097,530)   (6,664,709)
Additional Paid-in Capital              -        -      151,760               -           -                 -       151,760
Imputed interest on
   interest free advances
   from related party                   -        -      328,711               -           -                 -       328,711
Issuance of shares to
   Highgate                    44,016,843      441            -               -           -                 -           441
Foreign Currency
   translation                          -        -            -          29,400      29,400                 -        29,400
Net Loss for year                       -        -            -        (690,924)          -          (690,924)     (690,924)
                              ___________   ______   __________   _____________   _____________   ___________    __________
Balance, June 30, 2008         98,655,733      987   10,903,997     (17,750,304)     38,149       (17,788,454)   (6,845,321)
                              ===========   ======   ==========   =============      ======       ===========    ==========

Balance, July 1, 2008          98,655,733      987   10,903,997     (17,750,304)     38,149       (17,788,454)   (6,845,321)
Additional Paid-in Capital              -        -        5,302               -           -                 -         5,302
Imputed interest on
   interest free advances
   from related party                   -        -      223,450               -           -                 -       223,450
Issuance of shares to
   Highgate                    50,343,275      502            -               -           -                 -           502
Foreign Currency
   translation                          -        -            -             625         625                 -           625
Net Loss for quarter                                                 (1,960,226)                   (1,960,226)   (1,960,226)
                              ___________   ______   __________   _____________   _____________   ___________    __________
Balance, December 31, 2008    148,999,008    1,489   11,132,749     (25,415,157)     38,774       (19,748,680)   (8,575,668)
                              ===========   ======   ==========   =============      ======       ===========    ==========




                                                              DECEMBER 31, 2008       JUNE 30, 2008
                                                              _________________       _____________

                COMPREHENSIVE INCOME(LOSS)
                Net Loss                                          (1,960,226)           $ (690,924)

                OTHER COMPREHENSIVE INCOME
                Foreign Currency Translation Adjustment                  625                29,400
                                                                  __________            __________

                   Total Comprehensive Income                     (1,959,601)           $ (661,524)
                                                                  ==========            ==========


   SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS AND ACCOUNTANT'S REPORT

</TABLE>

















                                      F-5

<PAGE>

<TABLE>
<CAPTION>

                                XINHUA CHINA LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008 AND 2007
                             (STATED IN US DOLLARS)


                                                        THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                    ___________________________      ___________________________
                                                     12/31/2008      12/31/2007       12/31/2008      12/31/2007
                                                    ___________      __________      ___________      __________
<S>                                                 <C>              <C>             <C>              <C>

CASH FLOW FROM OPERATING ACTIVITIES:
   Net (Loss)                                       $(1,836,074)     $ (225,170)     $(1,960,227)     $ (310,450)
   Adjustments to reconcile net earnings/(loss)
   to net cash used in operating activities:
        Depreciation                                      5,394           1,732           10,629           2,554
        Imputed interest expense                        100,137         116,446          211,862         199,659
        Amortization of deferred imputed
        interest from note receivable                         -               -           13,768          13,768

   CHANGES IN ASSETS AND LIABILITIES:
        Decrease/(Increase) in accounts
        receivable                                        4,464         (42,271)         342,116         (67,734)
        Decrease/(Increase) in other
        receivables and prepayments                           -          (5,678)            (812)         (8,546)
        Increase /( Decrease) in accounts
        payable and accrued liabilities                  16,831         112,108         (489,853)        151,503
        Increase/(Decrease) in deferred revenue               -         (13,767)         (18,355)        (27,535)
                                                    ___________      __________      ___________      __________
   Cash Sourced/(Used) in Operating Activities       (1,709,248)        (56,600)      (1,890,872)        (46,781)
                                                    ___________      __________      ___________      __________

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of plant and equipment                            -         (57,031)               -         (57,031)
   Loss on impairment of asset                        1,625,000                        1,625,000
                                                    ___________      __________      ___________      __________
   Cash Used/(Sourced) in Investing Activities        1,625,000         (57,031)       1,625,000         (57,031)
                                                    ___________      __________      ___________      __________

CASH FLOWS FROM FINANCING ACTIVITIES:
   Stock Issue to Highgate on debt conversion                 -               -              502               -
   Repayment of loan from Highgate                            -               -          (44,174)              -
   Repayment of loans from shareholders                       -               -                -               -
   Loans from shareholders                               71,553          22,987          272,404          86,788
                                                    ___________      __________      ___________      __________
   Cash Sourced/(Used) in Financing Activities           71,553          22,987          228,732          86,788
                                                    ___________      __________      ___________      __________

NET INCREASE/(DECREASE) IN CASH & CASH
EQUIVALENTS FOR THE YEAR                                (12,969)        (90,644)         (36,918)        (17,024)

EFFECT OF CURRENCY TRANSLATION                              274          37,463              211          34,300

CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR             14,783          73,190           38,733           2,733
                                                    ___________      __________      ___________      __________

CASH & CASH EQUIVALENTS AT END OF YEAR              $     1,814      $   20,009      $     1,814      $   20,009
                                                    ===========      ==========      ===========      ==========

Cash paid for interest expenses                     $         -      $        -      $         -      $        -
                                                    ===========      ==========      ===========      ==========


   SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS AND ACCOUNTANT'S REPORT


</TABLE>








                                      F-6

<PAGE>

                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


1.   ORGANIZATION AND BUSINESS BACKGROUND

     Xinhua  China Ltd.  (the  "Company",  formerly  Camden  Mines  Limited) was
     incorporated in the State of Nevada, United States of America, on September
     14, 1999.  Until  September  2004,  the Company was a  non-operating  shell
     company  and  considered  as  a  development  stage  enterprise  since  its
     inception.  Effective  from  October 12, 2004,  the Company  changed to its
     current  name.  The Company  established  an office in  Vancouver,  Canada;
     however,  this  office  was  closed  down in  December  2006.  The  Company
     established  its  principal  executive  office  at B-26F,  Oriental  Kenzo,
     Dongcheng District, Beijing, 100027, People's Republic of China.

     As of May 31, 2006, the Company  reduced its equity  interest in Xinhua C&D
     from 56.14% to 7.98%.  Subsequent to the deconsolidation of Xinhua C&D, the
     Company commenced the internet book  distribution  business through Beijing
     Joannes Information Technology Co., Ltd. ("Joannes").

     Details of the Company's subsidiaries as of December 31, 2008 are described
     below:

<TABLE>
<CAPTION>
                                             PLACE OF
                                          INCORPORATION                                       PARTICULARS OF        EFFECTIVE
                                           AND KIND OF            PRINCIPAL ACTIVITIES       ISSUED/REGISTERED      INTEREST
                  NAME                    LEGAL ENTITY           AND PLACE OF OPERATION        SHARE CAPITAL          HELD
     ___________________________     _______________________     ______________________     ___________________     _________
<S>                                  <C>                         <C>                        <C>                       <C>

     Beijing Joannes Information     PRC, a company with         Sales and distribution     Registered capital
     Technology Co., Ltd.            limited liability           of books, PRC              US $1,250,000             100%

     Beijing Boheng Investments      PRC, a company with         Investment holding,        Registered capital
     and Management Co., Ltd.        limited liability           PRC                        US $17,142,500             95%

                                     British Virgin Islands,                                10,000,000 ordinary
     Pac-Poly Investment Ltd.        a company with limited      Investment holding,        shares of US $1 par
                                     liability                   PRC                        value                     100%

</TABLE>

2.   GOING CONCERN UNCERTAINTIES

     These  consolidated  financial  statements have been prepared assuming that
     Company  will  continue  as  a  going  concern,   which   contemplates  the
     realization of assets and the discharge of liabilities in the normal course
     of business for the foreseeable future.

     As of December  31,  2008,  the Company had no working  capital but current
     liabilities  exceeding  current  assets by  $1,897,905  and an  accumulated
     deficit of $19,748,680  because the Company  continued to incur losses over
     the past several  years.  Management has taken certain action and continues
     to implement  changes designed to improve the Company's  financial  results
     and  operating  cash  flows.   The  actions  involve  certain   cost-saving
     initiatives and growing  strategies,  including (a) reductions in headcount
     and  corporate  overhead  expenses;   and  (b)  development  of  e-commerce
     business. Management believes that these actions will enable the Company to
     improve future  profitability  and cash flow in its  continuing  operations
     through June 30, 2009. As a result, the financial statements do not include
     any   adjustments   to  reflect  the   possible   future   effects  on  the
     recoverability   and   classification   of  assets  or  the   amounts   and
     classification  of  liabilities  that may  result  from the  outcome of the
     Company's ability to continue as a going concern.










                                      F-7


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (A.) BASIS OF PRESENTATION

          These  accompanying   consolidated   financial  statements  have  been
          prepared in accordance with generally accepted  accounting  principles
          in the United States of America ("US GAAP").

     (B.) USE OF ESTIMATES

          In preparing these consolidated financial statements, management makes
          estimates and assumptions  that affect the reported  amounts of assets
          and liabilities in the balance sheets and revenues and expenses during
          the year reported. Actual results may differ from these Estimates.

     (C.) BASIS OF CONSOLIDATION

          The interest of the Company in the  subsidiaries was acquired by means
          of  exchange of shares in the  Company  pursuant  to a share  exchange
          agreement  on September  14, 2004.  The  transaction  is  considered a
          transfer between entities under common control,  within the meaning of
          US GAAP. Accordingly, the assets and liabilities transferred have been
          accounted for at historical  cost or at their "fair value" at the date
          of their original  acquisition and have been included in the foregoing
          financial statements as of the beginning of the periods presented.

          The consolidated financial statements include the financial statements
          of the Company and its  subsidiaries.  Subsidiaries are those entities
          in which the Company,  directly or indirectly,  controls more than one
          half of the voting  power;  has the power to govern the  financial and
          operating  policies;  to appoint or remove the majority of the members
          of the board of directors; or to cast majority of votes at the meeting
          of directors. All significant  inter-company balances and transactions
          within the Company have been eliminated on consolidation.

     (D.) CASH AND CASH EQUIVALENTS

          Cash and cash  equivalents  are carried at cost and represent  cash on
          hand,   demand   deposits   placed  with  banks  or  other   financial
          institutions  and all  highly  liquid  investments  with  an  original
          maturity  of  three  months  or less as of the  purchase  date of such
          investments.

     (E.) ACCOUNTS RECEIVABLE, NET

          Accounts  receivable  are recorded at the  invoiced  amount and do not
          bear interest.  The Company extends  unsecured credit to its customers
          in the ordinary course of business, but mitigates the associated risks
          by performing  credit checks and actively  pursuing past due accounts.
          An allowance for doubtful accounts is established and determined based






















                                      F-8


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


          on   managements'   assessment   of  known   requirements,   aging  of
          receivables,   payment   history,   the   customer's   current  credit
          worthiness, and the economic environment.

     (F.) PROPERTY, PLANT, AND EQUIPMENT, NET

          Property,  plant,  and equipment  are stated at cost less  accumulated
          depreciation and accumulated  impairment losses, if any.  Depreciation
          is calculated on the straight-line  basis over the following  expected
          useful lives from the date on which they become fully operational.

               ASSET CLASSIFICATION              DEPRECIABLE LIFE

               Land Use right                         50 years
               Buildings                              50 years
               Motor Vehicles                       8-10 years
               Equipment and Machinery               5-8 years
               Leasehold Improvement                   2 years

          Expenditure for  maintenance and repairs is expensed as incurred.  The
          gain or loss on the disposal of property,  plant, and equipment is the
          difference  between the net sales proceeds and the carrying  amount of
          the relevant assets and is recognized in the consolidated statement of
          operations.

     (G.) IMPAIRMENT OF LONG-LIFE ASSETS

          In accordance  with SFAS No. 121,  "ACCOUNTING  FOR THE  IMPAIRMENT OF
          LONG-LIVED  ASSETS AND FOR  LONG-LIVED  ASSETS TO BE  DISPOSED  OF', a
          long-lived assets and certain identifiable  intangible assets held and
          used by the Company are reviewed  for  impairment  whenever  events or
          changes in circumstances indicate that the carrying amount of an asset
          may  not  be   recoverable.   For  the  purposes  of  evaluating   the
          recoverability  of  long-lived  assets,  the  recoverability  test  is
          performed using  undiscounted net cash flows related to the long-lived
          assets.  The Company reviews  long-lived  assets, if any, to determine
          whether the carrying values are not impaired.

     (H.) REVENUE RECOGNITION

          Sales revenue is recognized when persuasive evidence of an arrangement
          exists, the price is fixed and final,  delivery has occurred and there
          is  reasonable  assurance of  collection  of the sales  proceeds.  The
          Company generally obtains purchase  authorizations  from its customers
          for a specified  amount of products at a specified price and considers
          delivery to have  occurred when the customer  takes  possession of the
          products.  Net  sales  incorporate  offsets  for  discounts  and sales
          returns.  Revenue is recognized  upon delivery,  risk and ownership of
          the title is  transferred  and a reserve for sales returns is recorded
          even  though   invoicing  may  not  be  completed.   The  Company  has






















                                      F-9


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


          demonstrated the ability to make reasonable and reliable  estimates of
          products returns in accordance with SFAS No. 48, "REVENUE  RECOGNITION
          WHEN RIGHT OF RETURN EXISTS".

          Shipping and handling  fees billed to customers are included in sales.
          Costs  related to shipping and handling are part of selling,  general,
          and  administrative   expenses  in  the  consolidated   statements  of
          operations. EITF No. 00-10, "ACCOUNTING FOR SHIPPING AND HANDLING FEES
          AND COSTS"  allows  for the  presentation  of  shipping  and  handling
          expenses in line items other than cost of sales. For the three and six
          months ended  December  31, 2008,  there were no shipping and handling
          costs included in selling,  general and administrative expenses in the
          accompanying consolidated statements of operations.

     (I.) COST OF SALES

          Cost of sales includes depreciation of property,  plant, and equipment
          and purchase costs to publishers.

     (J.) VALUE-ADDED TAX

          The Company is subject to value  added tax ("VAT")  imposed by the PRC
          on sales.  The output VAT is charged to customers  who purchase  books
          from the Company and the input VAT is paid when the Company  purchases
          books  from  publishers.  The VAT rate is 13%.  The  input  VAT can be
          offset against the output VAT.

     (K.) ADVERTISING EXPENSES

          The Company expenses  advertising costs as incurred in accordance with
          the  American  Institute  of Certified  Public  Accountants  ("AICPA")
          Statement of Position 93-7, "REPORTING FOR ADVERTISING COSTS". For the
          three and six months ended  December 31,  2008,  advertising  expenses
          amount to zero.

     (L.) COMPREHENSIVE INCOME

          SFAS No. 130, "REPORTING COMPREHENSIVE INCOME",  establishes standards
          for reporting and display of comprehensive income, its components, and
          accumulated  balances.  Comprehensive  income as defined  includes all
          changes in equity during a period from non-owner sources.  Accumulated
          comprehensive  income,  as presented in the accompanying  statement of
          changes in owners' equity consists of changes in unrealized  gains and
          losses on foreign currency  translation.  This comprehensive income is
          not included in the computation of income tax expense or benefit.

     (M.) INCOME TAXES

          The Company accounts for income tax using SFAS No. 109 "ACCOUNTING FOR
          INCOME  TAXES",  which  requires the asset and liability  approach for
          financial  accounting  and  reporting  for  income  taxes.  Under this
          approach,  deferred income taxes are provided for the estimated future




















                                      F-10


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


          tax effects  attributable to temporary  differences  between financial
          statement  carrying  amounts  of  assets  and  liabilities  and  their
          respective  tax bases,  and for the expected  future tax benefits from
          loss  carry-forwards  and provisions,  if any. Deferred tax assets and
          liabilities  are measured  using the enacted tax rates expected in the
          years of  recovery  or  reversal  and the effect  from a change in tax
          rates is recognized in the statement of operations  and  comprehensive
          (loss)  income in the period of  enactment.  A valuation  allowance is
          provided  to  reduce  the  amount  of  deferred  tax  assets  if it is
          considered  more likely  than not that some  portion of, or all of the
          deferred tax assets will not be realized.

     (N.) LOSS PER SHARE

          The Company calculates loss per share in accordance with SFAS No. 128,
          "EARNINGS PER SHARE". Basic loss per share is computed by dividing the
          net loss by the weighted-average  number of common shares outstanding.
          Diluted  loss per share is  computed  similar to basic loss per share,
          except  that the  denominator  is  increased  to include the number of
          additional  common  shares  that  would have been  outstanding  if the
          potential  common  stock  equivalents  had  been  issued  and  if  the
          additional  common  shares were  dilutive.  The effect of  outstanding
          stock options,  stock  purchase  warrants and  convertible  debenture,
          which could result in the issuance of  148,999,008  and  98,655,733 of
          common stock at December 31, 2008 and June 30, 2008, respectively, are
          anti-dilutive.  As a  result,  diluted  loss per  share  data does not
          include  the assumed  exercise of  outstanding  stock  options,  stock
          purchase warrants, or conversion of convertible debenture and has been
          presented jointly with basic loss per share.

     (O.) FOREIGN CURRENCIES TRANSLATION

          The  functional  and  reporting  currency of the Company is the United
          States  dollars  ("U.S.  dollars").   The  accompanying   consolidated
          financial   statements  have  been  expressed  in  U.S.  dollars.  The
          functional  currency  of the  Company's  foreign  subsidiaries  is the
          Renminbi  Yuan ("RMB").  The balance  sheet is translated  into United
          States  dollars  based on the rates of exchange  ruling at the balance
          sheet date. The statement of operations is translated using a weighted
          average rate for the year.  Translation  adjustments  are reflected as
          cumulative translation adjustments in stockholders' equity.

                                       DECEMBER 31,     JUNE 30,    DECEMBER 31,
               EXCHANGE RATES              2008           2008         2007
          ________________________     ____________     ________    ____________

          Period/year end RMB:
             US$ exchange rate            6.8542         6.8718         7.3141

          Average period/year RMB:
             US$ exchange rate           6.85307         7.0726         7.5063





















                                      F-11


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


     (P.) FAIR VALUE OF FINANCIAL INSTRUMENTS

          The  carrying  value of the  Company's  financial  instruments,  which
          include cash and cash equivalents, accounts receivables, other payable
          and  accrued  liabilities,  approximate  their fair  values due to the
          short-term maturity of these instruments.

     (Q.) RELATED PARTIES

          For the purposes of these financial statements, parties are considered
          to be related if one party has the ability, directly or indirectly, to
          control the party or exercise significant  influence over the party in
          making financial and operating decisions,  or vice versa, or where the
          Company  and the  party  are  subject  to  common  control  or  common
          significant  influence.  Related  parties may be  individuals or other
          entities.

     (R.) CONVERTIBLE DEBENTURE ISSUED WITH STOCK PURCHASE WARRANTS

          The Company  accounts  for the  issuance of and  modifications  to the
          convertible  debt issued with stock  purchase  warrants in  accordance
          with APB No. 14,  ACCOUNTING FOR CONVERTIBLE DEBT AND DEBT ISSUED WITH
          STOCK PURCHASE  WARRANTS , EITF No. 98-5,  ACCOUNTING FOR  CONVERTIBLE
          SECURITIES  WITH  BENEFICIAL   CONVERSION   FEATURES  OR  CONTINGENTLY
          ADJUSTABLE CONVERSION RATIOS, and EITF No. 00-27, APPLICATION OF ISSUE
          NO.  98-5  TO  CERTAIN  CONVERTIBLE   INSTRUMENTS  and  SFAS  No.  15,
          ACCOUNTING BY DEBTORS AND CREDITORS FOR TROUBLED DEBT  RESTRUCTURINGS.

          Due to the indeterminate number of shares, which might be issued under
          the  embedded  convertible  host  debt  conversion  feature  of  these
          debentures,  the Company is required to record a liability relating to
          both the detachable  warrants and embedded  convertible feature of the
          notes  payable   (included  in  the   liabilities   as  a  "derivative
          liability").

          The accompanying consolidated financial statements comply with current
          requirements   relating  to  warrants  and  embedded   derivatives  as
          described in SFAS 133 as follows:

          o    The Company  treats the full fair market value of the  derivative
               and warrant liability on the convertible  secured debentures as a
               discount on the  debentures  (limited to their face  value).  The
               excess,  if any, is  recorded  as an  increase in the  derivative
               liability and warrant liability with a corresponding  increase in
               loss on adjustment  of the  derivative  and warrant  liability to
               fair value.

          o    Subsequent to the initial recording, the change in the fair value
               of the detachable  warrants,  determined under the  Black-Scholes
               option  pricing  formula  and the change in the fair value of the
               embedded derivative  (utilizing the Black-Scholes  option pricing
               formula) in the conversion feature of the convertible  debentures
               are recorded as  adjustments  to the  liabilities as of September
               30, 2006.

          o    The  expense  relating  to the  change  in the fair  value of the
               Company's  stock reflected in the change in the fair value of the
               warrants and  derivatives is included in interest  expense in the
               accompanying consolidated statements of operations.













                                      F-12


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


     (S.) RECENTLY ISSUED ACCOUNTING STANDARD

          In March  2008,  the FASB  issued  SFAS No.  161,  "Disclosures  about
          Derivative  Instruments and Hedging  Activities,  an amendment of FASB
          Statement  No. 133" ("SFAS 161").  SFAS 161 applies to all  derivative
          instruments and related hedged items accounted for under SFAS No. 133,
          "Accounting for Derivative  Instruments and Hedging Activities" ("SFAS
          133").  SFAS 161  requires  entities to provide  greater  transparency
          about (a) how and why an entity uses derivative  instruments,  (b) how
          derivative  instruments  and related  hedged items are  accounted  for
          under SFAS 133 and its related interpretations, and (c) how derivative
          instruments  and related  hedged  items  affect an entity's  financial
          position,  results of operations and cash flows. SFAS 161 is effective
          for financial  statements  issued for fiscal years and interim periods
          beginning after November 15, 2008.

          In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
          Accepted Accounting  Principles" ("SFAS 162"). SFAS 162 identifies the
          sources of accounting  principles  and the framework for selecting the
          principles  used  in  the  preparation  of  financial   statements  of
          nongovernmental   entities  that  are  presented  in  conformity  with
          generally  accepted   accounting   principles  (the  GAAP  hierarchy).
          Statement  162 will  become  effective  60 days  following  the  SEC's
          approval of the Public Company  Accounting  Oversight Board amendments
          to AU Section 411, "The Meaning of Present  Fairly in Conformity  With
          Generally  Accepted  Accounting  Principles."  In May  2008,  the FASB
          issued FSP Accounting  Principles  Board ("APB") 14-1  "Accounting for
          Convertible  Debt  Instruments  That  May  Be  Settled  in  Cash  upon
          Conversion  (Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP
          APB 14-1 requires the issuer of certain  convertible  debt instruments
          that may be  settled  in cash  (or  other  assets)  on  conversion  to
          separately  account for the  liability  (debt) and equity  (conversion
          option)  components  of the  instrument  in a manner that reflects the
          issuer's   non-convertible  debt  borrowing  rate.  FSP  APB  14-1  is
          effective  for fiscal  years  beginning  after  December 15, 2008 on a
          retroactive basis.

          In  September   2008,   FASB  issued  FSP  No.  133-1  and  FIN  45-4,
          "Disclosures  about Credit  Derivatives  and Certain  Guarantees",  an
          amendment of FASB  Statement No. 133 and FASB  Interpretation  No. 45;
          and  Clarification  of the Effective  Date of FASB  Statement No. 161.
          This FSP is intended to improve  disclosures about credit  derivatives
          by requiring more information  about the potential  adverse effects of
          changes  in  credit  risk  on  the   financial   position,   financial
          performance,  and cash flows of the sellers of credit derivatives. The
          provisions  of  the  FSP  that  amend  Statement  133  and  FIN 45 are
          effective  for  reporting  periods  (annual or interim)  ending  after
          November 15, 2008.

          This FSP amends FASB  Statement  No. 133,  ACCOUNTING  FOR  DERIVATIVE
          INSTRUMENTS AND HEDGING ACTIVITIES,  to require disclosures by sellers
          of credit derivatives, including credit derivatives embedded in hybrid
          instruments.  This FSP also amends FASB  Interpretation  (FIN) No. 45,
          GUARANTOR'S  ACCOUNTING AND DISCLOSURE  REQUIREMENTS  FOR  GUARANTEES,
          INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS TO OTHERS, to require an
          additional    disclosure    about   the   current    status   of   the
          payment/performance  risk of a guarantee.  The  provisions  of the FSP
          that  amend  Statement  133 and  FIN 45 are  effective  for  reporting
          periods (annual or interim) ending after November 15, 2008.













                                      F-13


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


          Finally,  this FSP clarifies the effective  date in FASB Statement No.
          161, DISCLOSURES ABOUT DERIVATIVE  INSTRUMENTS AND HEDGING ACTIVITIES.
          The  disclosures  required by Statement 161 should be provided for any
          reporting  period  (annual  or  quarterly   interim)  beginning  after
          November  15,  2008.  For  example,  an entity  with a March 31 fiscal
          year-end should provide the disclosures for its fourth quarter interim
          period ending March 31, 2009, in its 2009 annual financial statements.
          This clarification of the effective date of Statement 161 is effective
          upon issuance of the FSP.

          The Company is currently  evaluating the potential  impact, if any, of
          the  adoption of the above  recent  accounting  pronouncements  on its
          consolidated results of operations and financial condition.


4.   BEIJING BOHENG INVESTMENTS AND MANAGEMENT CO. LTD.

     As a  result  of the  termination  of the  acquisition  of  Beijing  Boheng
     Investments and Management Co., Ltd. by Purchaser,  the Company repossessed
     Boheng as its 95%  interest  subsidiary  on August  25,  2008 at a value of
     $1,625,000  equal to the unpaid purchase price due by the Purchaser.  After
     the  repossession  of Boheng,  the Company  conducted an  evaluation of its
     carrying  value  and  determined  that  an  impairment  loss in  amount  of
     $1,625,000 was incurred;  this impairment loss was accordingly reflected in
     the income statement for the quarter ended December 31, 2008.

5.   OTHER RECEIVABLES AND PREPAYMENT

                              DECEMBER 31, 2008     JUNE 30, 2008
                              _________________     _____________

     Advance to suppliers         $ 224,446           $ 223,231
                                  _________           _________
                                  $ 224,446           $ 223,231
                                  =========           =========

     The carrying amounts of prepayments approximate their fair value.


6.   PROPERTY, PLANT, AND EQUIPMENT, NET

     Property, plant, and equipment consist of the following:

                              DECEMBER 31, 2008     JUNE 30, 2008
                              _________________     _____________

     Equipment and machinery      $  53,397           $  53,108
     Motor vehicles                  39,673              39,458
     Leasehold Improvement           16,299              16,211
                                  _________           _________
                                    109,369             108,777
     LESS: Accumulated
        Depreciation                (46,212)            (34,991)
                                  _________           _________
                                  $  63,157           $  73,786
                                  =========           =========

     Depreciation  expense for  December 31, 2008 and June 30, 2008 were $10,629
     and $10,157, respectively.













                                      F-14


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


7.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

     Accounts  payable and accrued  liabilities as of December 30, 2008 and June
     30, 2008 consists of the following:

                              DECEMBER 31, 2008     JUNE 30, 2008
                              _________________     _____________

     Accounts Payable             $ 383,305          $1,095,538

     Other Payables                 236,583                   -
                                  _________          __________
                                  $ 619,888          $1,095,538
                                  =========          ==========


8.   LOANS PAYABLE/CONVERTIBLE DEBENTURE

     On November 23, 2005, the Company  entered into a debt financing  agreement
     (the  "Agreement") with an institutional  investor,  and on March 23, 2006,
     the Agreement was modified to include an additional institutional investor,
     who  is  an  affiliate  of  the  original   institutional   investor  (both
     institutional  investors collectively referred to as "the Investors").  The
     Investors  committed to purchase up to $4,000,000 of a secured  convertible
     debenture ("the  debenture")  that shall be convertible  into shares of the
     Company's common stock.

     After two  closings on December  13, 2005 and March 23,  2006,  the Company
     received gross  proceeds of $3,250,000  (net proceeds  $2,989,460)  for the
     secured convertible  debenture.  The Company and debenture-holders  entered
     into a Forbearance and Settlement Agreement on December 29, 2006 because of
     default in debt  service,  whereby the Company  agreed to make cash payment
     and to grant  rights to the  creditors to cashless  purchase the  Company's
     common  stock by  exercising  the warrant at 200,000  shares in every three
     month  period  beginning on December  29, 2006  according to the  following
     payment plan:


                                                 CONVERSION OF
        PAYMENT DATE          CASH PAYMENT         DEBENTURE

     March 10, 2007           $   250,000            250,000

     September 30, 2007           375,000            375,000

     October 31, 2007             375,000            375,000

     January 31, 2008             250,000            250,000

     July 31, 2008                625,000            625,000
                              ___________          _________

                              $ 1,875,000          1,875,000
                              ============         =========


















                                      F-15


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


     The  Company  paid  $250,000  for the  payment  due March 10,  2007 and the
     debenture  holders  exercised 100,000 shares and 125,000 shares on March 1,
     2007 and April 18, 2007, respectively. During the period ended December 31,
     2008, the debenture holders converted 50,343,275 shares against outstanding
     loan at a total conversion price of $61,500.

     Loans Payable  outstanding  as of December 31, 2008 amount to $2,632,204 of
     which  $1,573,943 and  $1,058,261  were  attributed to current  portion and
     long-term, respectively.

9.   LOANS FROM SHAREHOLDERS

     The total  outstanding  amount of $5,682,660  represents cash advanced from
     shareholders of the Company.

     These  shareholders'  loans are unsecured and not repayable within the next
     twelve months.  For the quarter ended December 31, 2008, there was $211,862
     imputed  interest,  at 6.00% annum,  recorded.  For the year ended June 30,
     2008, there was $328,711 imputed interest, at 6.00% per annum, recorded.

10.  COMMON STOCK AND WARRANTS

     A.   COMMON STOCK

          During 2005,  the  authorized  capital stock of the Company  increased
          from $1,000  consisting of  100,000,000  shares of common stock of par
          value  $0.00001  each to $5,000  consisting of  500,000,000  shares of
          common stock of par value $0.00001 each.

     B.   WARRANTS

          (1)  The Company  completed a private  placement  in 2005 with certain
               individuals  for  622,690  units at $3.25 per unit for total cash
               proceeds of $2,023,800. Each unit consists of one share of common
               stock  and  one-half  of  one  non-transferable   share  purchase
               warrant. The warrant will expire on the earlier of:

               (i)  two years from the date of issuance; and

               (ii) fifteen  business  days from date that the Company  provides
                    notice  in  writing  to the  subscriber  that the  Company's
                    common  shares have been  trading or traded at a price of $7
                    or more for a period of ten days.

               The  warrant  shares  shall have an  exercise  price of $4.50 per
               warrant share for the first twelve months, and if still available
               after twelve  months,  the warrant  shares shall have an exercise
               price of $4.60 per warrant share starting on the first day of the
               second  twelve month period and  increasing by $0.10 on the first
               day of each subsequent  month  thereafter until expiration of the
               warrants.





















                                      F-16


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


          (2)  SHARE PURCHASE WARRANT ISSUED FROM CONVERTIBLE DEBENTURE

               On December  13,  2005,  the Company  issued to the holder of the
               convertible  debenture  1,035,000  warrants.  One share  purchase
               warrants is  exercisable  for one common  share at  $0.00001  per
               share,  until  expiration  on November 22,  2010.  As of June 30,
               2008,  835,000 warrants issued to convertible  debenture  holders
               were  outstanding  which will lead to the  issuance of a total of
               213,554,987  additional shares of common stock if fully exercised
               at June 30, 2008.

          (3)  SHARE WARRANT ISSUED FOR SERVICE

               On May 1, 2006, the Company issued 100,000  warrants at $1.47 per
               share to Mr.  Peter  Shandro,  the VP  Business  Strategy  of the
               Company,  in  association  with the planning and execution of the
               on-line ecommerce initiative of the Company. Compensation expense
               of $94,775 was recorded with the issuance of these warrants.

11.  CHINA CONTRIBUTION PLAN

     Full-time  employees of the Company are entitled to staff welfare  benefits
     including  medical  care,  welfare  subsidies,  unemployment  insurance and
     pension benefits through a China government-mandated multi-employer defined
     contribution  plan.  The Company is  required to accrue for these  benefits
     based  on  certain  percentages  of  the  employees'  salaries.  The  total
     contributions made for such employee benefits were $10,500 and $23,854, for
     the  quarter  ended  December  31,  2008 and the year ended June 30,  2008,
     respectively.

12.  STATUTORY RESERVES

     The  Company  is  required  to  make   appropriations  to  reserves  funds,
     comprising the statutory surplus reserve, statutory public welfare fund and
     discretionary surplus reserve,  based on after-tax net income determined in
     accordance with generally  accepted  accounting  principles of the People's
     Republic of China (the "PRC GAAP").  Appropriation to the statutory surplus
     reserve  should be at least 10% of the after-tax  net income  determined in
     accordance  with  the PRC GAAP  until  the  reserve  is equal to 50% of the
     Company's registered capital. Appropriation to the statutory public welfare
     fund is 10% of the after-tax net income  determined in accordance  with the
     PRC GAAP.  Appropriations to the discretionary  surplus reserve are made at
     the discretion of the Board of Directors. The statutory public welfare fund
     is  established  for providing  employee  facilities  and other  collective
     benefits  to  the  employees  and  is   non-distributable   other  than  in
     liquidation.  The Company made no appropriations to the statutory  reserve,
     as it did not have a pre-tax profit.

13.  GAIN ON DEBT RESTRUCTURING

     On December 29, 2006, the Company completed a debt  restructuring  with its
     Investors,  namely Cornell Capital Partners,  L.P. ("Cornell") and Highgate
     House  Funds,  Ltd.  ("Highgate")  under  the  Forbearance  and  Settlement
     Agreement (the  "Forbearance  and Settlement  Agreement").  Pursuant to the
     Forbearance  and Settlement  Agreement,  the Company agreed to make certain
     payments  to  the  Investors,  with  respect  to  the  Securities  Purchase
















                                      F-17


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


     Agreement (the "Securities  Purchase  Agreement")  entered into between the
     Company and the  Investors on November  23,  2005,  as amended on March 23,
     2006,  on the  convertible  debentures  in the  amounts of  $1,250,000  (to
     Highgate  on November  23,  2005) and  $2,000,000  (to Cornell on March 23,
     2006)  (the  "Convertible  Debentures")  in  accordance  with the terms and
     conditions set forth in the Forbearance and Settlement Agreement.

     In accordance with the Forbearance  and Settlement  Agreement,  the Company
     agrees  to use the  proceeds  from the  disposal  of  Boheng  to repay  the
     principal  and  interest  due  to  the  Investors   under  the  Convertible
     Debentures in exchange for the Investors agreeing to:

               (i)  Waive  on a  one-time  basis  only  any  accrued  liquidated
                    damages owing to the Investors;

               (ii) Not  apply  the   redemption   premium   on  the   scheduled
                    repayments;

               (iii) Converting the Convertible Debentures in an amount equal to
                    at least the  amount of a  scheduled  repayment  subject  to
                    certain conditions;

               (iv) No additional liquidated damages accruing during the term of
                    the Forbearance and Settlement Agreement;

               (v)  Permitting   the  Company  to  withdraw   the   Registration
                    Statement filed on March 28, 2006 with the SEC in connection
                    with the Convertible Debentures;

               (vi) During the term of the Forbearance and Settlement Agreement,
                    waiving the  requirement  for the Company to receive written
                    consent  of each  Buyer for any  organizational  change  (as
                    defined in the Securities Purchase Agreement) to be directly
                    or  indirectly  consummated  by the  Company,  and  that the
                    company  will not  effectuate  any stock splits for at least
                    nine months without the consent of the Investors; and

               (vii) Terminate the provisions  for security  shares as set forth
                    in Section 9 of the  Securities  Purchase  Agreement  and in
                    Section 2 of the Transfer Agent Instructions upon receipt by
                    the Investors of the first scheduled repayment amount.

     As  a  result  of  the  debt  restructuring   arrangement,   the  Company's
     liabilities on warrants,  conversions,  discounts were discharged resulting
     to a net gain of $1,500,132 attributable as follows:

     o    Liabilities on Conversion discharged      $ 2,334,198
     o    Liabilities on Warrants discharged            891,537
     o    Loans discharged                              225,000
     o    Unamortized discounts                      (1,950,603)
                                                    ___________
                                                    $ 1,500,132
                                                    ===========



















                                      F-18


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


14.  INCOME TAX

     The Company is subject to U.S.  corporate taxes at a rate of 35%.  Pac-Poly
     is a BVI company and is not  subject to income  taxes.  Pursuant to the PRC
     Income Tax Laws, the PRC subsidiaries  are generally  subject to enterprise
     income tax ("EIT") at a statutory rate of 33% (30% national income tax plus
     3% local income tax).  Effective January 1, 2008, PRC government  adopted a
     new uniform tax rate of 25% applicable to domestic and foreign enterprise.

     Neither the Company nor its subsidiaries had any assessable  income for the
     period and so neither  provision  nor benefit for EIT was  recorded for the
     quarter ended December 31, 2008.

     Subject to the approval of the relevant  tax  authorities,  the Company had
     tax losses carry-forward against future years' taxable income.

     As of  December  31,  2008,  no  valuation  allowance  was  provided to the
     deferred tax assets due to the uncertainty surrounding their realization.

15.  CONCENTRATION OF RISK

     (A). MAJOR CUSTOMERS AND VENDORS

          100% of the Company's  revenues were derived from customers located in
          the PRC, and there are no customers and vendors who account for 10% or
          more of revenues and purchases.  The Company's  assets are all located
          in the PRC.

     (B). CREDIT RISK

          There are no concentrations of credit risk because the Company,  while
          in  operation,  entered  into large  number of cash sale  transactions
          without deploying financial  instruments,  which may potentially drive
          to significant concentrations.

16.  COMMITMENT AND CONTINGENCIES

     The Company leases an office premise under a non-cancelable operating lease
     for a term of two years from January 1, 2008 to December 31, 2009. The cost
     incurred  under this  operating  lease is  recorded  as rental  expense and
     totaled $30,755 and $51,261 for the period ended December 31, 2008 and year
     ended June 30,  2008,  respectively.  Future  minimum  rental  payments due
     according to the  operating  lease until  termination  at December 31, 2009
     are:

          Year            Amount

          2009            80,035
                         _______
                         $80,035
                         =======





















                                      F-19


<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008
                             (STATED IN US DOLLARS)


17.  NET LOSS PER SHARE

     Basic net loss per share is computed  using the weighted  average number of
     the ordinary shares outstanding during the year. Diluted net loss per share
     is  computed  using the  weighted  average  number of  ordinary  shares and
     ordinary share equivalents outstanding during the year.

     The  following  table sets forth the  computation  of basic and diluted net
     loss per share for the periods indicated:

         Basic and diluted net loss
            per share calculation:       DECEMBER 31, 2008     DECEMBER 31, 2007


         (a). Numerator:
                Net loss used in com-
                puting basic net loss
                per share                    (1,960,227)            (310,450)


         (b). Denominator:
                Weighted-average
                ordinary shares
                outstanding                 142,941,399           57,723,668

         Basic and diluted net loss
            per share                             (.014)               (.005)

     For the period ended December 31, 2008 in which the Company had a net loss,
     inclusion  of  warrants  outstanding  would  have  been  anti-dilutive  and
     therefore not included in the computation of diluted losses per share.









































                                      F-20


<PAGE>


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

BUSINESS DEVELOPMENT

Xinhua  China Ltd.  was  incorporated  September  14, 1999 under the laws of the
State of Nevada as Camden Mines Limited ("Camden").  On October 12, 2004, Camden
changed its name from  "Camden  Mines  Limited" to its  current  corporate  name
"Xinhua  China Ltd." We have  certain  digital  media  distribution  and related
rights in "China" where we mostly  operate and seek to pursue our  business.  We
are in the development stage seeking to grow our Company.


SUBSIDIARIES

         PAC-POLY INVESTMENTS LIMITED/BEIJING BOHENG INVESTMENTS LIMITED

As of the date of this  Quarterly  Report,  we hold of record  100% of the total
issued and  outstanding  shares of Pac-Poly  Investments  Limited  ("Pac-Poly"),
which is our wholly-owned subsidiary. Pac-Poly is an investment holding company.
We maintain a 7.98% effective  interest in Xinhua C&D through  Pac-PolyAs of the
date of this  Quarterly  Report,  we hold of record 95% of the total  issued and
outstanding shares of Beijing Boheng Investments Limited ("Beijing Boheng").  We
re-acquired  our  interest  in Beijing  Boheng on August 25,  2008 at a value of
$1,625,000,  which  amount  was equal to the  unpaid  purchase  price due by the
original purchaser.

         BEIJING JOANNES INFORMATION TECHNOLOGY CO. LT.

On May 9,  2006,  we formed  Beijing  Joannes  Information  Technology  Co.  Lt.
("Beijing Joannes"), as our Chinese wholly owned subsidiary, to launch a digital
media  content  initiative.  We held of  record  100% of the  total  issued  and
outstanding  shares of  Beijing  Joannes.  Beijing  Joannes  was  formed for the
purpose  of  launching  a digital  media  content  initiative  with the web site
branded  WWW.GEEPIP.COM.  The business focus is building online communities with
connectivity  to an ecommerce  engine,  which allows for the online  purchase of
e-books,  e-audio, and computer games. Hard copies of books can also be purchase
through the portal. A unique customer loyalty program and digital  redemption or
trade-in   strategy  will  be  a  market   differentiator.   Subsequent  to  the
deconsolidation of Xinhua C&D as discussed below, we have commenced the internet
book distribution business through Beijing Joannes.

RECENT BUSINESS OPERATIONS

We are  focused  to  develop  a plan for  funding,  sales,  marketing  and other
benefits relating to China and this plan may include other related pursuits such
as  assisting  one or  more  USA or  international  companies  to  navigate  the
regulatory  demands of doing related business in China and to possibly join with
us by joint  venture or similar  arrangement  to pursue  business  in one of the
world's  if  not  the  world's  most  rapidly  growing  financial  and  consumer
population environments. As part of this we still seek to establish ourselves as
a  leader  in the  digital  media  industry  first in  China  and then  possibly
elsewhere.  We intend to  maximize  our  strategic  position  in the  publishing
industry.

We are  developing  a new  business  plan focused on fiscal year 2009 to achieve
several key areas or goals:  restructure certain aspects of our organization and
relationships  after  careful  consideration  as  part of our  plan to grow  our
Company and revenues; focus on market awareness primarily making those investors
in the USA stock markets aware of us, given our  arrangements,  discussed below,
with the People's  Republic of China (China) seek how we can expand our business
in both our core license rights and to possibly  obtain other benefits or rights
similar in nature,  and seek  acquisitions  of mainly China  companies or assets
that may be the subject of registrations  or "spin-off"  transactions in the USA
markets,  both stock and business trade,  given the extensive  energy,  time and
expense we have been through in learning about the markets.  These plans need to
be  developed  and  approved  by the Board of  Directors,  which we also plan to
restructure by adding Directors to expand.

We are subject to many risks and there is no assurance of success in our plans.


                                       7


<PAGE>


RESULTS OF OPERATION

The  summarized  consolidated  financial  data set forth in the tables below and
discussed in this section  should be read in conjunction  with our  consolidated
financial  statements and related notes for the six-month  period ended December
31, 2008 and 2007,  which  financial  statements are included  elsewhere in this
Quarterly Report.

                                          FOR QUARTER ENDED    FOR QUARTER ENDED
                                          DECEMBER 31, 2008    DECEMBER 31, 2007
                                             (UNAUDITED)          (UNAUDITED)
                                          _________________    _________________
REVENUE
   Net revenue                                        -0-              -0-
   Cost of Sales                                      -0-              -0-
GROSS PROFIT                                          -0-              -0-

OPERATING EXPENSES
   Selling, general and administrative
      expenses                                     $337,808         $170,754
OPERATING INCOME (LOSS)                            (337,808)        (170,754)

OTHER INCOME (EXPENSES)
   Other Income                                     179,621            -0-
   Interest income                                    -0-            13,800
   Gain on disposal of Beijing Boheng                73,427            -0-
   Interest expense                                (250,466)        (153,496)
   Impairment loss on Boheng investment           (1,625,000)          -0-
NET LOSS                                          (1,960,227)        (310,450)


RESULTS OF OPERATION

FOR SIX MONTH PERIOD ENDED  DECEMBER 31, 2008 COMPARED TO SIX MONTH PERIOD ENDED
DECEMBER 31, 2007.

     REVENUES AND GROSS MARGIN AND COST OF SALES

We had net sales of $-0- for both six month periods ended  December 31, 2008 and
December  31, 2007.  Our cost of sales for both six month period ended  December
31, 2008 and December 31, 2007 was $-0-. Cost of sales decreased proportionately
with the  decrease in revenues to $-0- during both the six month  periods  ended
December 31, 2008 and December 31, 2007 due to the divesture of certain interest
in our assets.

     OPERATING EXPENSES

Our total  operating  expenses  were  $337,808  for the six month  period  ended
December  31, 2008 as compared to total  operating  expenses of $170,754 for the
six month period ended  December  31, 2007.  The increase in operating  expenses
during the six month period ended December 31, 2008 as compared to the six month
period ended December 31, 2007 was due to a variety of expenditures  relating to
our restructuring efforts.

Selling,  general and administrative  expenses increased to $337,808 for the six
month  period  ended  Decemebr  31,  2008  compared  to  selling,   general  and
administrative  expenses of $170,754 for the six month period ended December 31,
2007. The increase in selling,  general and administrative expenses was a result
of an increase of fees to our consultants and professional,  including legal and
accounting, in relation to our fund raising and restructuring.

     INTEREST EXPENSE

We incurred  $250,466  in interest  expense  during the six month  period  ended
December 31, 2008 as compared to $153,496  incurred as interest  expense  during
the six  month  period  ended  December  31,  2007.  Interest  expense  incurred
consisted  primarily  of  interest  charged on loans from  related  parties  and
increased due to the increase in loan activity relating to our restructuring.

     OTHER INCOME/IMPAIRMENT LOSS ON INVESTMENT

We earned  other income of $179,621  during the six month period ended  December
31, 2008 as compared to other  income of $-0- during the six month  period ended
December 31, 2007.  We,  however,  recognized an  impairment  loss on the Boheng
investment of  ($1,625,000)  during the six month period ended December 31, 2008
compared to $-0- during the six month period ended December 31, 2007.


                                       8


<PAGE>


Thus,  we incurred a net loss of  ($1,960,227)  for the six month  period  ended
December 31, 2008 compared to a net loss of ($310,450)  incurred  during the six
month period ended December 31, 2007.  This difference  resulted  primarily from
recognition  of the  impairment  on the Boheng  investment  and the  increase in
selling,  general and  administrative  expenses resulting from the restructuring
efforts.

FOR THREE MONTH  PERIOD ENDED  DECEMBER 31, 2008  COMPARED TO THREE MONTH PERIOD
ENDED DECEMBER 31, 2007.

     REVENUES AND GROSS MARGIN AND COST OF SALES

We had net sales of $-0- for both three month  periods  ended  December 31, 2008
and  December  31,  2007.  Our cost of sales for both three month  period  ended
December  31,  2008 and  December  31,  2007 was $-0-.  Cost of sales  decreased
proportionately  with the  decrease  in  revenues  to $-0- during both the three
month periods ended December 31, 2008 and December 31, 2007 due to the divesture
of certain interest in our assets.

     OPERATING EXPENSES

Our total  operating  expenses  were  $110,942  for the three month period ended
December  31, 2008 as compared  to total  operating  expenses of $92,452 for the
three month period ended December 31, 2007.  The increase in operating  expenses
during the three month period  ended  December 31, 2008 as compared to the three
month  period  ended  December  31,  2007 was due to a variety  of  expenditures
relating to our restructuring efforts.

Selling, general and administrative expenses increased to $110,942 for the three
month  period  ended  Decemebr  31,  2008  compared  to  selling,   general  and
administrative expenses of $92,452 for the three month period ended December 31,
2007. The increase in selling,  general and administrative expenses was a result
of an increase of fees to our consultants and professional,  including legal and
accounting, in relation to our fund raising and restructuring.

     INTEREST EXPENSE

We incurred  $100,137 in interest  expense  during the three month  period ended
December 31, 2008 as compared to $146,507  incurred as interest  expense  during
the three month  period  ended  December 31,  2007.  Interest  expense  incurred
consisted  primarily  of  interest  charged on loans from  related  parties  and
increased due to the increase in loan activity relating to our restructuring.

     INTEREST INCOME/IMPAIRMENT LOSS ON INVESTMENT

We earned interest income of $5 during the three month period ended December 31,
2008 as  compared to interest  income of $13,789  during the three month  period
ended  December  31,  2007.  We  recognized  an  impairment  loss on the  Boheng
investment of ($1,625,000) during the three month period ended December 31, 2008
compared to $-0- during the three month period ended December 31, 2007.

Thus,  we incurred a net loss of  ($1,836,074)  for the three month period ended
December 31, 2008 compared to a net loss of ($225,170) incurred during the three
month period ended December 31, 2007.  This difference  resulted  primarily from
recognition  of the  impairment  on the Boheng  investment  and the  increase in
selling,  general and  administrative  expenses resulting from the restructuring
efforts.

LIQUIDITY AND CAPITAL RESOURCES

SIX MONTH PERIOD ENDED DECEMBER 31, 2008

Our financial  statements have been prepared assuming that we will continue as a
going  concern  and,  accordingly,  do not include  adjustments  relating to the
recoverability  and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation.

As at the six month period ended  December  31,  2008,  our current  assets were
$295,926 and our current  liabilities  were  $2,193,831,  resulting in a working
capital  deficit of  $1,897,905.  As at the six month period ended  December 31,
2008, current assets were comprised of: (i) $1,814 in cash and cash equivalents;
(ii) $69,666 in net accounts receivable; and (iii) $224,446 in other receivables
and prepayments. As at the six month period ended December 31, 2008, our current
liabilities  were  comprised  of: (i)  $619,888 in accounts  payable and accrued
liabilities;  and (ii) $1,573,943 in current  portion of loans payable.  See " -
Material Commitments."


                                       9


<PAGE>


As at the six month  period  ended  December  31,  2008,  our total  assets were
$359,083  comprised of: (i) $295,926 in current assets;  and (ii) $63,157 in net
property, plant and equipment. The decrease in total assets during the six month
period  ended  December  31,  2008 from  fiscal  year  ended  June 30,  2008 was
primarily  due to the note  receivable  in the  amount of  $1,625,000.  The note
receivable  represented  the sales  proceeds of $1,875,000  from the disposal of
Beijing  Boheng in  accordance  with the terms and  provisions  of the  disposal
agreement.

As at the six month period ended December 31, 2008, our total  liabilities  were
$8,934,752 comprised of: (i) $2,193,831 in current liabilities;  (ii) $1,058,261
in loans payable;  and (iii) $5,682,660 in loans from  shareholders.  The slight
decrease in total  liabilities  during the six month period  ended  December 31,
2008 from fiscal year ended June 30, 2008 was  primarily  due to the decrease in
accounts payable and accrued liabilities.

Stockholders'   deficit  increased  from  ($6,845,321)  for  June  30,  2008  to
($8,575,668) for December 31, 2008.

     OPERATING ACTIVITIES

We have not generated positive cash flows from operating activities. For the six
month period ended December 31, 2008, net cash flow used in operating activities
was ($1,890,872)  compared to net cash used in operating activities of ($46,781)
during  the six  month  period  ended  December  31,  2007.  Net cash  flow from
operating  activities  during  the six month  period  ended  December  31,  2008
consisted  primarily  of a net  loss of  ($1,960,227)  adjusted  by  $10,629  in
depreciation,  $211,862 in imputed  interest expense and $13,768 in amortization
of  deferred  imputed  interest  from note  receivable.  Changes  in assets  and
liabilities consisted of a decrease of $342,116 in account receivable,  $489,853
in accounts payable and accrued liabilities and $18,355 in deferred revenue, and
an increase of $812 in other receivables and prepayments.

     INVESTING ACTIVITIES

During the six month  period  ended  December  31,  2008,  net cash flow used in
investing  activities  was  $1,625,000  compared to net cash flow  sourced  from
investing  activities of ($57,031)  for the six month period ended  December 31,
2007.  Net cash flow used in  investing  activities  during the six month period
ended  December 31, 2008 was  primarily  the result of  $1,625,000  as a loss on
impairment of asset.

     FINANCING ACTIVITIES

During the six month period ended  December 31, 2008,  net cash flow provided by
financing  activities  was  $228,732  compared  to net  cash  flow  provided  by
financing  activities  of $86,788 for the six month  period  ended  December 31,
2007.  Net cash flow provided  from  financing  activities  during the six month
period ended December 31, 2008 pertained  primarily to $272,404 received as loan
from  shareholders  and $502 in stock  issued  to  Highgate  on debt  conversion
(offset by $44,174 in repayment of long-term borrowings).

PLAN OF OPERATION

The local and  regional  distribution  business  for  books is  competitive  and
fragmented in the People's  Republic of China.  Estimates  range up to 500 as to
the number of  entrants  in this  field.  It is our plan that  economy of scale,
relationships  with  Chinese  publishers  and  also  with  sub-distributors  and
retailers and our nationwide scope which allows us the flexibility to distribute
books in any region will assist us in maintaining  and enhancing our competitive
position.

Our goal is to expand our  business to include  electronic  sales,  delivery and
distribution of media contents.  We also plan to partner with foreign publishers
to provide  foreign  media  contents in China.  We seek to achieve our goal on a
national  scale to  maximize  opportunities  in one of the  largest  and fastest
growing economies in the world.

To execute on our strategy to become a digital  media  company we formed our new
subsidiary, Beijing Joannes. Beijing Joannes is intended to be our digital media
company and it is expected to distribute all digital  content for Xinhua C&D and
others.  Beijing  Joannes has  anticipated in operating its business to consumer
(B2C)  e-commerce  portal as  www.geezip.com,  and expects to allow customers to
purchase electronic and hard copies of books on-line.

We expect  to also  establish  a  co-publishing  company  which  anticipates  on
co-publishing  agreements with both domestic and foreign publishers,  publishing
both hard copy and digital works.


                                       10


<PAGE>


Existing  working  capital,  further  advances  and possible  debt  instruments,
warrant exercises, further private placements,  monetization of existing assets,
and  anticipated  cash flow are  expected to be adequate to fund our  operations
over the next two  months.  We have no lines of credit or other  bank  financing
arrangements.  Generally,  we  have  financed  operations  to date  through  the
proceeds of the private  placement of equity and debt  securities and loans from
our  shareholders.  In connection with our business plan,  management will delay
additional increases in operating expenses and capital  expenditures.  We intend
to utilize our best  efforts to settle  current  finance  accounts  payables and
liabilities  with  further  issuances  of  securities,  debt  and  or  advances,
monetization of existing assets,  and revenues from operations.  We will need to
raise  additional  capital  and  increase  revenues  to meet both short term and
long-term  operating  requirements.

We have undertaken certain actions and continue to implement changes designed to
improve our financial  results and  operating  cash flows.  The actions  involve
certain  cost-saving   initiatives  and  growing  strategies,   including:   (i)
reductions in headcounts and corporate overhead  expenses;  and (ii) continue to
develop  e-commerce  business  through  Beijing  Joannes.  We believe that these
actions  will  enable us to improve  future  profitability  and cash flow in our
continuing operations through June 30, 2009.

The report of the independent registered public accounting firm that accompanies
our June 30, 2008 and June 30, 2007 consolidated  financial  statements contains
an  explanatory  paragraph  expressing  substantial  doubt  about our ability to
continue as a going concern.  The  consolidated  financial  statements have been
prepared "assuming that we will continue as a going concern," which contemplates
that we will realize our assets and satisfy our  liabilities  and commitments in
the ordinary course of business.

MATERIAL COMMITMENTS

LOANS PAYABLE/CONVERTIBLE DEBENTURE

During  2007/8,  a material  commitment  for us relates to the  Forbearance  and
Settlement  Agreement  with  Cornell and  Highgate.  On December  29,  2006,  we
completed the debt restructuring with Cornell and Highgate under the Forbearance
and Settlement Agreement.  Pursuant to the Forbearance and Settlement Agreement,
we agreed to make certain  payments to Cornell and Highgate  with respect to the
Securities  Purchase  Agreement  previously  entered into by us with Cornell and
Highgate  dated  November  23, 2005 and amended on March 23,  2006,  and the two
convertible  debentures in the amounts of $1,250,000 to Highgate  dated November
23, 2005 and  $2,000,000  to Cornell  dated March 23,  2006  (collectively,  the
"Convertible  Debentures") in accordance with the terms and conditions set forth
in the Forbearance and Settlement Agreement.

In further accordance with the Forbearance and Settlement  Agreement,  we agreed
to use the proceeds  from the disposal of Beijing  Boheng to repay the principal
and interest due to Cornell and Highgate  under the  Convertible  Debentures  in
exchange  for the  agreement of Cornell and Highgate to: (i) waive on a one-time
basis only any accrued liquidated damages owing to Cornell and Highgate; (ii) no
application  of the  redemption  premium  on  the  scheduled  repayments;  (iii)
conversion  of the  Convertible  Debentures  in an amount  equal to at least the
amount  of  a  scheduled  repayment  subject  to  certain  conditions;  (iv)  no
additional  liquidated  damages  accruing during the term of the Forbearance and
Settlement Agreement;  (v) permitting us to withdraw the registration  statement
filed on  March  28,  2006  with  the  Securities  and  Exchange  Commission  in
connection  with  the  Convertible  Debentures;  (vi)  during  the  term  of the
Forbearance and Settlement Agreement,  waiving the requirement for us to receive
written  consent of  Cornell  and  Highgate  for any  organizational  change (as
defined in the  Securities  Purchase  Agreement)  to be directly  or  indirectly
consummated by us, and that we will not effectuate any stock splits for at least
nine months without the consent of Cornell and Highgate;  and (vii)  terminating
the provisions  for security  shares as set forth in Section 9 of the Securities
Purchase  Agreement  and in Section 2 of the transfer  agent  instructions  upon
receipt by Cornell and Highgate of the first scheduled repayment amount.

The payment plan under the Forbearance and Settlement Agreement is as follows:

                                               CONVERSION OF
     PAYMENT DATE           CASH PAYMENT         DEBENTURE

     March 10, 2007         $   250,000            250,000
     June 30, 2007              375,000            375,000
     October 31, 2007           375,000            375,000
     January 31, 2008           250,000            250,000
     July 31, 2008              625,000            625,000
                            ___________          _________
                            $ 1,875,000          1,875,000
                            ===========          =========


                                       11


<PAGE>


As of March 31,  2008,  we paid  $250,000 for the payment due March 10, 2007 and
issued 100,000 shares of our common stock on March 1, 2007 and 125,000 shares on
April 18,  2007,  respectively,  pursuant  to  exercise  rights.  The  scheduled
payments  of  $375,000  due  on  September   30,  2007  and  October  31,  2007,
respectively,  were not paid as of March 31,  2008.  During the six month period
ended  December 31, 2008, an aggregate of 50,343,275  shares of our common stock
were issued  pursuant to conversion of the debt at a total  conversion  price of
$61,500. As of December 31, 2008,  an  aggregate of  $2,632,204  remains due and
owing.

LOANS FROM SHAREHOLDERS

During  fiscal year 2007/8,  a material  commitment  for us relates to the loans
from shareholders. The outstanding amount of $5,682,660 represents cash advanced
to us from our  shareholders.  These  shareholder  loans are unsecured,  and not
repayable within the next twelve months. For the six month period ended December
31, 2008,  we  calculated  imputed  interest  expense of $167,755 in relation to
shareholders  loans at its effective interest rate of 6% per annum and accounted
for it in the consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk represents the risk of loss that may impact our financial  position,
results of  operations or cash flows due to adverse  change in foreign  currency
and  interest  rates.

EXCHANGE  RATE

Our reporting  currency is United States Dollars  ("USD").  The Chinese Renminbi
("RMB")  has  been  informally  pegged  to the  USD.  However,  China  is  under
international pressure to adopt a more flexible exchange rate system. If the RMB
were no longer pegged to the USD, rate  fluctuations  may have a material impact
on the Company's  consolidated  financial  reporting and make realistic  revenue
projections difficult. Recently (July 2005) the Renminbi was allowed to rise 2%.
This has not had an  appreciable  effect on our operations and seems unlikely to
do so.

As Renminbi is the functional currency of Joannes and Boheng, the fluctuation of
exchange rates of Renminbi may have positive or negative  impacts on the results
of operations of the Company.  However,  since all sales revenue and expenses of
these two  subsidiary  companies  are  denominated  in Renminbi,  the net income
effect of  appreciation  and  devaluation of the currency  against the US Dollar
will be  limited  to the  net  operating  results  of the  subsidiary  companies
attributable to us.

INTEREST RATE

Interest rates in China are low and stable and inflation is well controlled, due
to the habit of the  population  to deposit  and save money in the banks  (among
with other reasons,  such as the People's  Republic of China's perennial balance
of trade  surplus).  Our loans  relate  mainly to trade  payables and are mainly
short-term. However our debt is likely to rise with physical plant in connection
with  expansion  and, were interest  rates to rise at the same time,  this could
become a significant impact on our operating and financing activities.

We have not entered into derivative  contracts either to hedge existing risks or
for speculative purposes.

ITEM 4.  CONTROLS AND PROCEDURES

FINANCIAL DISCLOSURE CONTROLS AND PROCEDURES

We maintain  disclosure controls and procedures that are designed to ensure that
information  required to be disclosed in our reports filed under the  SECURITIES
EXCHANGE  ACT OF 1934,  as  amended,  is  recorded,  processed,  summarized  and
reported  within the time  periods  specified  in the  Securities  and  Exchange
Commission's  rules and forms,  and that such  information  is  accumulated  and
communicated  to our  management,  including our  president  (also our principal
executive  officer) and our  secretary,  treasurer and chief  financial  officer
(also our  principal  financial  and  accounting  officer)  to allow for  timely
decisions regarding required disclosure.


                                       12


<PAGE>


As of December 31, 2008, the end of our second  quarter  covered by this report,
we carried out an evaluation,  under the supervision and with the  participation
of our  president  (also  our  principal  executive  officer  and our  principal
financial  and  accounting  officer),  of the  effectiveness  of the  design and
operation of our disclosure controls and procedures. Based on the foregoing, our
president (also our principal executive officer and chief financial officer also
our principal  financial and accounting  officer)  concluded that our disclosure
controls and procedures were effective in providing  reasonable assurance in the
reliability of our financial reports as of the end of the period covered by this
quarterly report.

INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS

Internal control over financial reporting has inherent limitations which include
but is not  limited  to the use of  independent  professionals  for  advice  and
guidance,  interpretation  of existing  and/or  changing  rules and  principles,
segregation of management duties, scale of organization,  and personnel factors.
Internal  control over  financial  reporting is a process which  involves  human
diligence  and  compliance  and is subject to lapses in judgment and  breakdowns
resulting from human failures.  Internal  control over financial  reporting also
can be circumvented by collusion or improper management override. Because of its
inherent limitations,  internal control over financial reporting may not prevent
or detect  misstatements on a timely basis,  however these inherent  limitations
are known  features  of the  financial  reporting  process and it is possible to
design into the process safeguards to reduce,  though not eliminate,  this risk.
Therefore,  even those  systems  determined  to be  effective  can provide  only
reasonable  assurance  with  respect  to  financial  statement  preparation  and
presentation.  Projections of any evaluation of  effectiveness to future periods
are subject to the risk that controls may become  inadequate  because of changes
in conditions,  or that the degree of compliance with the policies or procedures
may deteriorate.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no significant  changes in our internal  controls over financial
reporting  that occurred  during the quarter  ended  December 31, 2008 that have
materially or are reasonably likely to materially  affect, our internal controls
over financial reporting.

AUDIT COMMITTEE

Our Board of Directors has not  established an audit  committee.  The respective
role of an audit committee has been conducted by our Board of Directors.  We are
contemplating  establishment of an audit committee during fiscal year 2009. When
established,  the audit  committee's  primary function will be to provide advice
with  respect  our  financial  matters and to assist our Board of  Directors  in
fulfilling its oversight  responsibilities  regarding finance,  accounting,  and
legal compliance. The audit committee's primary duties and responsibilities will
be to: (i) serve as an independent  and objective party to monitor our financial
reporting  process and  internal  control  system;  (ii) review and appraise the
audit  efforts of our  independent  accountants;  (iii)  evaluate our  quarterly
financial performance as well as its compliance with laws and regulations;  (iv)
oversee  management's  establishment  and enforcement of financial  policies and
business  practices;  and (v) provide an open avenue of communication  among the
independent accountants, management and our Board of Directors.

ITEM 4T. CONTROLS AND PROCEDURES

Not applicable.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDING

Management  is  not  aware  of  any  legal   proceedings   contemplated  by  any
governmental  authority or any other party involving us or our properties.  None
of our  directors,  officers or affiliates  are (i) a party adverse to us in any
legal  proceedings,  or  (ii)  has  an  adverse  interest  to  us in  any  legal
proceedings.  Management is not aware of any other legal proceedings  pending or
that have been threatened against us or our properties.

ITEM 1A. RISK FACTORS

Not applicable.




                                       13


<PAGE>


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the six month period ended  December 31, 2008,  we issued an aggregate of
50,343,275  shares of our common stock to Highgate in accordance with conversion
of a certain portion on the Debt.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

The following exhibits are filed as part of this Quarterly Report:

Exhibit

31.1      Certification under Rule 13a-14(a).
31.2      Certification under Rule 13a-14(a).
32.1      Certification under Section 1350.
32.2      Certification under Section 1350.


















































                                       14


<PAGE>


                                   SIGNATURES

     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                       XINHUA CHINA LTD.


Dated: February 16, 2009               By: /s/ XIANPING WANG
                                       _________________________________________
                                       Xianping Wang
                                       President/Chief Executive Officer


Dated: February 16, 2009               By: /s/ XIANPING WANG
                                       _________________________________________
                                       Xianping Wang
                                       Acting as Interim Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities.

SIGNATURES                TITLE                                     DATE

/s/ XIANPING WANG         President, Chief Executive Officer        May 20, 2008
_________________         and a Director
    Xianping Wang















































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