UNITED STATES
                       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 quarterly period ended September 30, 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.
                 ______________________________________________
             (exact name of registrant as specified in its charter)

           NEVADA                                           88-0437644
    _______________________________                      ___________________
    (State or other jurisdiction of                        (IRS Employer
     incorporation or organization)                      Identification No.)


                         YuanJia International Apartment
                             Building #1, Suite 304
                             No. 40 Dongzhong Street
                    Dongcheng District, Beijing China 100027
             _______________________________________________________
               (Address of principal executive offices) (Zip Code)


                                 86-10-64168816
                           ___________________________
               (Registrant's telephone number including area code)

Indicate by check mark 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 check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.

       Large accelerated filer   [ ]  Accelerated filer         [ ]

       Non-accelerated filer     [ ]  Smaller Reporting Company [X]

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


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 November 12,
2008:

Class
Common Stock                  142,899,008

Transitional Small Business Disclosure Format (Check one): __ Yes X No


<PAGE>




                                XINHUA CHINA LTD.

                                    FORM 10-Q

                                TABLE OF CONTENTS


                          PART I FINANCIAL INFORMATION

Item 1.  Financial Statements.                                                 2

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.                                               24

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.          26

Item 4T. Controls and Procedures.                                             27


                            PART II OTHER INFORMATION

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.         28


Item 6.  Exhibits.                                                            28

         Signatures                                                           29


<PAGE>


FORWARD LOOKING STATEMENTS

Statements made in this form 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 U.S. 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.


                                       1

<PAGE>


                        PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



                                XINHUA CHINA LTD.

                   UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                      SEPTEMBER 30, 2008 AND JUNE 30, 2008

                             (STATED IN US DOLLARS)

















                                       2


<PAGE>


                                XINHUA CHINA LTD.


CONTENTS                                                                   PAGES

Report of Registered Independent Public Accounting Firm                       4

Consolidated Balance Sheet                                                    5

Consolidated Statement of Income                                              6

Consolidated Statement of Stockholders' Equity                                7

Consolidated Statement of Cash Flows                                          8

Notes to the Financial Statements                                             9

















                                       3


<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 September 30, 2008 and June 30, 2008, and the
related  statements  of  income,  stockholders'  equity,  and cash flows for the
three-months  ended  September  30, 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
October 17, 2008                                    Certified Public Accountants




                                       4

<PAGE>

<TABLE>
<CAPTION>

                                XINHUA CHINA LTD.
                           CONSOLIDATED BALANCE SHEET
                   AS OF SEPTEMBER 30, 2008 AND JUNE 30, 2008
                             (STATED IN US DOLLARS)


                                                      NOTES     SEPTEMBER 30, 2008     JUNE 30, 2008
                                                      _____     __________________     _____________
<S>                                                   <C>          <C>                  <C>

ASSETS

   CURRENT ASSETS
      Cash and Cash Equivalents                         3D              14,783               38,733
      Accounts Receivable, NET                          3E              74,130              411,782
      Note Receivable                                    4                   -            1,625,000
      Other Receivables and Prepayments                  5             224,043              223,231
                                                                   ___________          ___________

         Total Current Assets                                          312,956            2,298,746

   LONG-TERM ASSETS
      Property, Plant & Equipment, NET                3F,6              68,550               73,786
      Investment in Subsidiary - BoHeng                              1,625,000                    -
                                                                   ___________          ___________

         Total Long-term Assets                                      1,693,550               73,786
                                                                   ___________          ___________

         Total Assets                                              $ 2,006,506          $ 2,372,532
                                                                   ===========          ===========

LIABILITIES & STOCKHOLDERS' EQUITY

   LIABILITIES
      CURRENT LIABILITIES
         Accounts Payable and Accrued Liabilities        7             588,854            1,095,538
         Deferred Revenue                                                    -               18,355
         Current portion of Loans Payable                8           1,591,443            1,635,443
                                                                   ___________          ___________

            Total Current Liabilities                                2,180,297            2,749,336

      LONG-TERM LIABILITIES
         Loans Payable                                   8           1,058,261            1,058,261
         Loans from Shareholders                         9           5,611,104            5,410,256
                                                                   ___________          ___________

            Total Long-term Liabilities                              6,669,365            6,468,517
                                                                   ___________          ___________

            Total Liabilities                                        8,849,662            9,217,853


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

</TABLE>

                                       5
<PAGE>

<TABLE>
<CAPTION>

                                XINHUA CHINA LTD.
                           CONSOLIDATED BALANCE SHEET
                   AS OF SEPTEMBER 30, 2008 AND JUNE 30, 2008
                             (STATED IN US DOLLARS)


                                                      NOTES     SEPTEMBER 30, 2008     JUNE 30, 2008
                                                      _____     __________________     _____________
<S>                                                   <C>          <C>                  <C>

   STOCKHOLDERS' EQUITY

      Common Stock $0.00001 Par Value
         500,000,000 Shares Authorized;
         131,499,008 and 98,655,733 shares
         issued and outstanding at September
         30, 2008 and June 30, 2008, accordingly.       10               1,315                  987
      Additional Paid-In Capital                                    11,029,490           10,903,997
      Accumulated Other Comprehensive Income                            38,645               38,149
      Accumulated Deficit                                          (17,912,606)         (17,788,454)
                                                                   ___________          ___________

         Total Stockholders' (Deficit)/Equity                       (6,843,156)          (6,845,321)

                                                                   ___________          ___________

         Total Liabilities & Stockholders' Equity                  $ 2,006,506          $ 2,372,532
                                                                   ===========          ===========


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

</TABLE>







                                       6
<PAGE>

<TABLE>
<CAPTION>

                                XINHUA CHINA LTD.
                        CONSOLIDATED STATEMENT OF INCOME
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
                             (STATED IN US DOLLARS)


                                                      NOTES     SEPTEMBER 30, 2008     JUNE 30, 2008
                                                      _____     __________________     _____________
<S>                                                   <C>          <C>                  <C>

REVENUE

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

OPERATING EXPENSES

    Selling, General, and Administrative
    Expenses                                                           226,867               78,301
                                                                   ___________          ___________

      Total Operating Expense                                          226,867               78,301
                                                                   ___________          ___________

   Operating Income/(Loss)                                            (226,867)             (78,301)
                                                                   ___________          ___________

OTHER INCOME (EXPENSES)
   Other Income                                                        179,621                    -
   Interest Income                                                          26                   11
   Gain on disposal of Beijing BoHeng                                   73,427                    -
   Interest Expense                                                    150,360               83,243
                                                                   ___________          ___________

      Loss before minority interest and income tax                    (124,153)            (161,534)

   Minority interest in net loss of
   consolidated subsidiaries                                                 -                    -
                                                                   ___________          ___________

Loss before Income Tax                                                (124,153)            (161,534)


Income Tax                                           3M,14                   -                    -

Accumulated Deficits of Boheng                                        (124,153)                   -
                                                                   ___________          ___________

Net Loss                                                           $  (124,153)         $  (161,534)
                                                                   ===========          ===========

Basic & Diluted Earnings Per Share                   3N,17         $     (.001)         $  ( 0.0028)
                                                                   ___________          ___________

Weighted Average Shares Outstanding                                111,928,254           57,723,668
                                                                   ___________          ___________


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

</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>


                                XINHUA CHINA LTD.
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                  FOR THE THREE MONTHS ENDED SEPTEMBER 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                 -         -        13,768                -             -                 -    (1,581,328)
Imputed interest on interest
   free advances from
   related party                           -         -       111,725                -             -                 -        81,821
Issuance of shares to
   Highgate                       32,843,275       328             -                -             -                 -           328
Foreign Currency translation               -         -             -              496           496                 -           496
Net Loss for quarter                       -         -             -         (124,152)            -          (124,152)     (124,152)
                                 ___________    ______    __________    _____________        ______       ___________    __________

Balance, September 30, 2008      131,499,008     1,315    11,029,490      (17,873,960)       38,645       (17,912,606)   (8,468,156)
                                 ===========    ======    ==========    =============        ======       ===========    ==========




                                                                SEPTEMBER 30, 2008     JUNE 30, 2008
                                                                __________________     _____________

            COMPREHENSIVE INCOME(LOSS)

            Net Loss                                                $ (124,152)         $ (690,924)

            OTHER COMPREHENSIVE INCOME

            Foreign Currency Translation Adjustment                        496              29,400
                                                                    __________          __________

            Total Comprehensive Income                              $ (123,656)         $ (661,524)
                                                                    ==========          ==========


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

</TABLE>

                                       8
<PAGE>

<TABLE>
<CAPTION>

                                XINHUA CHINA LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
                             (STATED IN US DOLLARS)


                                                                 SEPTEMBER 30, 2008       SEPTEMBER 30, 2007
                                                                 _________________        __________________
<S>                                                                 <C>                      <C>

CASH FLOW FROM OPERATING ACTIVITIES:
   Net (Loss)                                                       $  (124,153)             $  (161,534)
   Adjustments to reconcile net earnings(loss) to net cash
      used in operating activities:
         Depreciation                                                     5,632                      822
         Imputed interest expense                                       111,725                   83,213
         Amortization of deferred imputed interest from
            note receivable                                              13,768                   13,768

   CHANGES IN ASSETS AND LIABILITIES:
      Decrease/(Increase) Accounts receivable                           337,652                  (25,463)
      Decrease/(Increase) Other receivables and prepayments                (812)                  (2,868)
      Decrease/(Increase) Accounts Payable and accrued
         liabilities                                                   (506,684)                  39,395
      Decrease/(Increase) in Deferred Revenue                           (18,355)                 (13,768)
                                                                    ___________              ___________

   Cash Sourced/(Used) in Operating Activities                         (181,227)                 (66,435)
                                                                    ___________              ___________

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds of note receivable - Boheng                               1,625,000                        -
   Purchase of plant and equipment                                         (396)                       -
   Investment in subsidiary - Boheng                                 (1,625,000)                       -
                                                                    ___________              ___________

   Cash Used/(Sourced) in Investing Activities                             (396)                       -
                                                                    ___________              ___________

CASH FLOWS FROM FINANCING ACTIVITIES:
   Stock Issue to Highgate on debt conversion                               328                        -
   Repayment of Loan to Highgate                                        (44,000)                       -
   Loans from shareholders                                              200,848                   63,801
                                                                    ___________              ___________
   Cash Sourced/(Used) in Financing Activities                          157,176                   63,801
                                                                    ___________              ___________

NET INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS FOR
   THE YEAR                                                             (24,447)                     529

EFFECT OF CURRENCY TRANSLATION                                              496                   (3,163)

CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR                             38,733                    2,733

                                                                    ___________              ___________

CASH & CASH EQUIVALENTS AT END OF YEAR                              $    14,782              $     3,262
                                                                    ===========              ===========

Cash paid for interest expenses                                     $         -              $        30
                                                                    ===========              ===========


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

</TABLE>

                                       9
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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 Suite 304,  Building  #1,
     YuanJia  International   Apartment,  No.  40  Dongzhong  Street,  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  September  30,  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>

                                                                    Sales and
     Beijing Joannes Information       PRC, a company with       distribution of       Registered capital
     Technology Co., Ltd.               limited liability           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 September  30, 2008,  the Company had no working  capital but current
     liabilities  exceeding  current  assets by  $1,867,341  and an  accumulated
     deficit of $17,912,606  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.

                                       10
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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
          on   managements'   assessment   of  known   requirements,   aging  of
          receivables,   payment   history,   the   customer's   current  credit
          worthiness, and the economic environment.

                                       11
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008
                             (STATED IN US DOLLARS)


     (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

                                       12
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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 year ended
          September 30, 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
          period ended September 30, 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

                                       13
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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  131,499,008  and  98,655,733 of
          common  stock at September  30, 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.

<TABLE>
<CAPTION>


          EXCHANGE RATES                                  SEPTEMBER 30,     JUNE 30,     SEPTEMBER 30,
                                                               2008           2008           2007
                                                          _____________     ________     _____________
<S>                                                           <C>            <C>            <C>

          Period/year end RMB : US$ exchange rate             6.8551         6.8718         7.5176
          Average period/year RMB : US$ exchange rate         6.8529         7.0726         7.6757

</TABLE>

                                       14
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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:

          |X|  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.

          |X|  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.

          |X|  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.

                                       15
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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.

                                       16
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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.   NOTE RECEIVABLE

     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  and
     recorded as Note  Receivable.  After such set-off,  the Note Receivable was
     considered cleared.


5.   OTHER RECEIVABLES AND PREPAYMENT

                        SEPTEMBER 30, 2008            JUNE 30, 2008
                        __________________            _____________

     Prepayments        $          224,043            $     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:

                                        SEPTEMBER 30, 2008     JUNE 30, 2008
                                        __________________     _____________

     Equipment and machinery                 $  53,301           $  53,108
     Motor vehicles                             39,602              39,458
     Leasehold Improvement                      16,270              16,211
                                             _________           _________

                                               109,173             108,777
     LESS: Accumulated Depreciation            (40,623)            (34,991)
                                             _________           _________

                                             $  68,550           $  73,786
                                             =========           =========

     Depreciation  expense for  September 30, 2008 and June 30, 2008 were $5,632
     and $10,157, respectively.

                                       17
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008
                             (STATED IN US DOLLARS)


7.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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

                                        SEPTEMBER 30, 2008     JUNE 30, 2008
                                        __________________     _____________

     Accounts Payable                        $ 387,098          $1,095,538

     Other Payables                            201,756                   -
                                             _________          __________

                                             $ 588,854          $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
                              ===========          =========

                                       18
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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  September
     30,  2008,  the  debenture  holders  converted  32,843,275  shares  against
     outstanding  loan at a total  conversion  price of $44,000.

     Loans Payable  outstanding as of September 30, 2008 amount to $2,649,704 of
     which  $1,591,443 and  $1,058,261  were  attributed to current  portion and
     long-term, respectively.

9.   LOANS FROM SHAREHOLDERS

     The total  outstanding  amount of $5,611,104  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 September 30, 2008, there was $81,821
     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.

                                       19
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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 $ 6,791 and $23,854, for
     the quarter  ended  September  30,  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
     Agreement (the "Securities  Purchase  Agreement")  entered into between the
     Company and the  Investors on November  23,  2005,  as amended on March 23,

                                       20
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008
                             (STATED IN US DOLLARS)


     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
                                                         ___________

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

                                       21
<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008
                             (STATED IN US DOLLARS)


     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 September 30, 2008.

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

     As of  September  30,  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  $15,377 and $51,261 for the period  ended  September  30, 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
          ____        ______

          2008       $ 9,634
          2009        80,035
                     _______
                     $89,669
                     =======

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<PAGE>


                                XINHUA CHINA LTD.
                          NOTES TO FINANCIAL STATEMENTS
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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 year indicated:

     Basic and diluted net loss per share calculation:

                                              SEPTEMBER 30,      SEPTEMBER 30,
                                                  2008               2007
     (a). Numerator:
            Net loss used in computing
            basic net loss per share               124,153            161,534

     (b). Denominator:
            Weighted-average ordinary
            shares outstanding                 111,928,254         57,723,668

     Basic and diluted net loss per share      $     0.001        $    0.0028

     For the year  ended  June 30,  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.

                                       23
<PAGE>

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

Our Business and Plans-Summary

Our company, Xinhua China Ltd. ("Company") was incorporated September 14, 1999
under the laws of the State of Nevada, USA. 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.

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 the upcoming New Year of 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 of our Company
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.

                                       24
<PAGE>

                              RESULTS OF OPERATIONS

Three months ended September 30,2007 and 2008.

REVENUES AND GROSS MARGIN

Our revenues and gross margin for the three-month comparable periods were both
zero given little if any sales activities without any revenues associated.

COST OF SALES

Our cost of sales for the three-month comparable periods were both zero given
little if any sales activities without any costs associated.

OPERATING EXPENSES

Our total operating expenses were $226,867 for the three-month period ended
September 30, 2008 as compared to total operating expenses of $78,301 for the
three-month period ended September 30, 2007. The increase in operating expenses
was due to a variety of expenditures relating to restructuring effort.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased from $78,301 during the
three-month period ended September 30, 2008 to $226,867 during the three-month
period ended September 30, 2008. This primarily resulted from the increase of
fees to our consultants and professionals in relation to our fund raising and
and other legal and financial matters.

INTEREST

We incurred $150,360 in interest expense during the three-month period ended
September 30, 2008 as compared to $83,243 incurred as interest expense during
the three-month period ended September 30, 2007. Interest expense incurred
consisted primarily of interest charged on loans from related parties and
increased due to loan activity increasing.

                            LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2008 our total assets were $2,006,506 compared to $2,054,158
for the three month period ended September 30,2007 representing little change.
Total current assets was $1,418,025 for September 30,2007 compared to
$313,956,for the period in 2008 resulting primarily from the removal of a note
receivable of $1 million dollars.

Cash and cash equivalents increased from $3,262 to $14,783, compared from the
prior period to September 30,2008.


OPERATING ACTIVITIES

We have not generated positive cash flows from operating activities. The net
cash flow for the September, 30, 2008 quarter was significant less then the
comparable quarter in 2007. The net loss for the 2008 quarter was significantly
greater than the comparable quarter in 2007. We have incurred more losses from
expenditures with third party advisors and accountants.

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.

                                       25
<PAGE>

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.

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 three-month period
ended March 31, 2008, an aggregate of 18,707,077 shares of our common stock were
issued pursuant to conversion of the debt.

LOANS FROM SHAREHOLDERS

During fiscal year 2007/8, a material commitment for us relates to the loans
from shareholders. The outstanding amount of $5,181,361 represents cash advanced
to us from our shareholders. These shareholder loans are unsecured,
interest-free and not repayable within the next twelve months. For the
nine-month period ended March 31, 2008, we calculated imputed interest expense
of $154,546 in relation to interest-free 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. In 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.
Other changes may apply but we don't think they have a material effect.

As Renminbi is the functional currency of Xinha C&D 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 our business is denominated in Renminbi, the net income effect of
appreciation and devaluation of the currency against the US Dollar should be
limited to the net operating results of the subsidiary companies attributable to
us.

INTEREST RATE

Normally 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. Most of our third party loan obligations 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.

Keep in mind that the current unusual world wide economic problems may alter the
above information or make the information subject to uncertainty since interest
rates, currency exchange, and such financial related matters are in flux and
difficult to track to make a fair assessment of the situations.

                                       26
<PAGE>

ITEM 4T. CONTROLS AND PROCEDURES.

An evaluation was conducted under the supervision and with the participation of
our Management, including our Chief Executive Officer/Chief Financial Officer of
the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the subject quarter. Based on that evaluation, our
Chief Executive Officer/Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of such date to ensure that
information required to be disclosed in the reports that we file or submit under
the Exchange Act, is recorded, processed, summarized and reported within the
time periods specified in SEC rules and forms. Such officers also confirmed that
there was no change in our internal control over financial reporting during the
period that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

We maintain "disclosure controls and procedures," as such term is defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"),
that are designed to ensure that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission rules and
forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer/Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. We
conducted an evaluation (the "Evaluation"), under the supervision and with the
participation of our Chief Executive Officer/Chief Financial Officer of the
effectiveness of the design and operation of our disclosure controls and
procedures ("Disclosure Controls") as of the end of the period covered by this
report pursuant to Rule 13a-15 of the Exchange Act. The evaluation of our
disclosure controls and procedures included a review of the disclosure controls'
and procedures' objectives, design, implementation and the effect of the
controls and procedures on the information generated for use in this report. In
the course of our evaluation, we sought to identify data errors, control
problems or acts of fraud and to confirm the appropriate corrective actions, if
any, including process improvements, were being undertaken. Our Chief Executive
Officer/Chief Financial Officer concluded that, as of the end of the period
covered by this report, our disclosure controls and procedures were effective
and were operating at the reasonable assurance level. Please note we are
considering engaging a dedicated financial officer other than our CEO and the
current person is an interim officer in such position as financial officer.

Our management is responsible for establishing and maintaining adequate control
over financial reporting (as defined in Rules 13a-15(f) promulgated under the
Exchange Act. The term internal control over financial reporting is defined as a
process designed by, or under the supervision of, the issuer's principal
executive and principal financial officers, or persons performing similar
functions, and effected by the issuer's board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:

                                       27
<PAGE>

         Pertain to the maintenance of records that in reasonable detail
         accurately and fairly reflect the transactions and dispositions of the
         assets of the issuer;

         Provide reasonable assurance that transactions are recorded as
         necessary to permit preparation of financial statements in accordance
         with generally accepted accounting principles, and that receipts and
         expenditures of the issuer are being made only in accordance with
         authorizations of management and directors of the issuer; and

         Provide reasonable assurance regarding prevention or timely detection
         of unauthorized acquisition, use or disposition of the issuer's assets
         that could have a material effect on the financial statements.

Our management, including our chief executive officer and chief financial
officer, do/does not expect that our disclosure controls and procedures or our
internal controls will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Due to the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.

Our management, with the participation of the chief executive officer and chief
financial officer, assessed the effectiveness of our internal control over
financial reporting as of the end of the subject period. In making this
assessment, our management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO") in INTERNAL
CONTROL-INTEGRATED FRAMEWORK. Our management has concluded our internal control
over financial reporting is effective.

This report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management's report
in this annual report.


                              PART II - OTHER INFORMATION

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

During the three-month period ended September 30, 2008, we issued shares of our
common stock in accordance with conversion of a certain portion of debt. These
transactions were conducted under one or more possible exemptions from
registration such as Section 4(2) of the Securities Act of 1933, as amended, or
Regulation D of the Commission. Securities were marked as restricted securities.


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.


                                       28
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                XINHUA CHINA LTD.


Dated: November 14, 2008          By: /s/ XIANPING WANG
                                  _____________________________________
                                  Xianping Wang
                                  President(principal executive officer)



Dated: November 14, 2008          By: /s/ XIANPING WANG
                                  _____________________________________
                                  Xianping Wang
                                  Acting as Interim Chief Financial
                                  Officer (principal financial officer)




                                       29