FORM 10-KSB
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

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

                   For the Fiscal Year Ended December 31, 1997

                           Commission File No. 0-24624
                          ----------------------------
                         U.S.-CHINA INDUSTRIAL EXCHANGE
                 (Name of small business issuer in its charter)

           NEW YORK                                         13-3097642
 (State or other jurisdiction of                        (I.R.S. Employer
  incorporation or organization)                         Identification No.)

                              7201 Wisconsin Avenue
                            Bethesda, Maryland, 20814
                                 (301) 215-7777

Securities registered pursuant to Section 12(b) of the Act: NONE

        Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.01 par value
                         Class A Warrants
                         Class B Warrants

Check 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 [    ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of  registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ x ].

The issuer's revenue for its most recent fiscal year was $24,381,000.

The aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold, the average bid and asked
prices of such stock, as of March 26, 1998 was approximately $13,124,000.

The number of shares outstanding of each of the issuer's class of common equity,
as of March 26, 1998, was 4,772,500 shares of Common Stock and 2,000,000 shares
of Class B Common Stock.

Documents Incorporated by Reference:  Part III:  Proxy Statement


<PAGE>

PART I
Item 1.  Business

General

     The Company, founded in 1981, is an established independent marketing and
sales organization in China for certain Western products.  The Company provides
United States, European and other manufacturers with access to the Chinese
marketplace and offers a wide range of marketing, sales and technical services
for its products. The Company conducts its marketing and sales and provides its
services exclusively to buyers located in China, Hong Kong and Macau.  The
Company principally serves as the exclusive sales representative for several
major manufacturers of high-technology diagnostic medical equipment and
consumable medical supplies.  The Company also sells certain products
on a non-exclusive basis.  The Company's national sales and technical support
staff operates from its office in Beijing and regional offices in Shanghai,
Guangzhou, Tianjin and Hong Kong.  The Company also operates a private hospital
in Beijing, China, which began seeing patients on a limited basis in 1997.  In
addition to its sales and health services activities, the Company also provides
marketing research and consulting services to its manufacturers for a variety
of business activities in China.

     During 1997, the Company continued its business of selling Western products
to the China market and expanded its activities through the initiation of its
health services business, Beijing United Family Hospital, providing Western
style primary care health services including a family practice clinic,
obstetrics, gynecology, birthing services and executive health care.  The
Company also expanded its offerings in 1997 in the area of consumable products.
It also hired additional staff and continued extending financing terms to
selected buyers of capital medical equipment.

     In order to concentrate and consolidate its efforts and eliminate
unprofitable and low growth product areas the Company has decided to undertake
a significant restructuring of its operations.  During 1998 the Company intends
to phase out its sale of construction, mining and other industrial machinery
and scientific research instrumentation, as well as some less profitable medical
equipment lines and will concentrate its efforts on the health care sector,
including both sales of medical equipment and consumables and provision of
health services.

     In order to meet increased competition and difficult market conditions
caused by a restriction of credit available to domestic Chinese organizations
and to continue to expand its markets, the Company continued to offer certain
customers extended payment terms on purchases.  These sales were to familiar and
qualified purchasers and were structured to reduce the Company's risk of non-
payment.  In most cases the Company's suppliers participate in extending
reciprocal payment terms to the Company for a significant portion of these
extended payment arrangements. The Company believes that its decision to
undertake this financing initiative contributed to the overall increase in sales
in 1997 and 1996, although there can be no assurance that this financial
initiative will continue to offset or reduce the continuing impact of credit
restrictions.

     In 1997, the Company's subsidiary in Hong Kong, Chindex Hong Kong Limited,
continued its business in the sale of medical products into the Hong Kong
market.  This subsidiary initially has focused on the sale of Acuson ultrasound
machines to end-users in Hong Kong.  In 1997 the subsidiary began to sell
medical consumable products in Hong Kong as well.  Chindex Hong Kong Limited
currently has five employees.

     In 1997, the Company's wholly foreign-owned subsidiary, Chindex Holdings
International Trade (Tianjin) Ltd., which is registered in the special economic
Tianjin Free Trade Zone and which was established in 1995, continued its planned
expansion in the import, warehousing and distribution of products.  This
subsidiary supplies certain medical products and consumables directly to
hospitals in China for domestic currency and is serving as a platform for the
Company's growing distribution activities.

    In 1997, the Company's distribution activities, principally involving the
sale of medical consumable products and off-the-shelf medical equipment,
continued to expand.  The Company has established a dedicated team of sales
professionals located in Beijing, Shanghai, Guangzhou and Hong Kong.  Sales of
products by this team in mainland China are denominated in local currency, the
Renminbi, via a network of value-added sub-distributors who cover city-based
territories.  For the most part, the Company requires payment in advance for
the consumable products which it sells.  The Company has established such sub-
distributor relationships in the majority of the market and anticipates
achieving nationwide coverage in 1998.  The Company intends to establish an
additional foreign-owned subsidiary in a Foreign Trade Zone in Shanghai in 1998.
To date, the Company's distribution activities have involved sales to hospitals.
In 1998, the Company intends to initiate distribution into the retail market.

     In 1997, the Company began distribution of pharmaceutical products in
China.  The initial pharmaceutical product distributed by the Company is a
contrast agent used in diagnostic ultrasound studies.  The Company plans to add
additional pharmaceuticals to its portfolio in 1998, concentrating on family
health care related product offerings.

     In 1995, the Company began work on bringing much needed western standard
health care services to specific, targeted segments of China by establishing the
Beijing United Family Hospital (Beijing United) a 90/10 joint venture between
the Company and the Chinese Academy of Medical Sciences Union Medical &
Pharmaceutical General Corporation (Chinese Academy of Medical Sciences).
Beijing United opened for outpatient services in September of 1997 and has
opened for inpatient services in March of 1998.  Beijing United has begun
providing the expatriate business and diplomatic community in Beijing, as well
as the growing affluent segment of the local population, with complete western
standard primary care hospital services including family practice, obstetrics,
gynecology, neonatology and men's health.  The facility treats both medical and
surgical outpatients and in-patients.  The Company will consider establishing a
series of similar hospitals in other major metropolitan centers in China over
the next several years and has undertaken the initial evaluation and planning
process for that undertaking.  The Company also has plans to establish satellite
clinics which will serve as referral sites for the hospital as well as draw
upon the resources of the hospital for treating patients.

     The Company believes that Beijing United is the first foreign managed joint
venture hospital in operation with the full necessary authorizations to operate
in Beijing by China's ministry of health and other relevant governmental
offices.  There can be no assurances that the requisite approvals will be
forthcoming for additional facilities and the hospital must pass periodic
inspections and review for the requisite approvals to be continued in effect as
necessary for hospital operations.

     The provision of health care services entails the risk of potential medical
malpractice and similar claims which may be asserted against Beijing United
and/or against the Company in the event that services rendered by Beijing United
or procedures performed at the Beijing United facility are alleged to have
resulted in injury or other adverse effects.  Although the Company has obtained
liability insurance for itself and Beijing United that it believes will be
adequate as to both risk and amounts, there can be no assurance that successful
malpractice claims will not exceed the limits of the Company's insurance and
thus have a material adverse effect on the Company's business, financial
condition or operating results.

Marketing

     China, with more than one billion people, contains approximately one-fifth
of the world's population. It is the third largest economy in the world
according to the International Monetary Fund's (IMF) calculation methods for
Gross Domestic Product (GDP).  Using the IMF's Purchasing Power Parity method of
calculation, China's GDP is over $3 trillion, behind only the United States and
Japan.  China has expanding trade relations with the United States and,
according to the World Bank is now the tenth largest trading nation in the
world.  From 1992 to 1996 disposable income per capita in China has more than
doubled nationally, with urban income growth levels exceeding even these
increases.  The Company believes that there exists a substantial and expanding
market for its products in the China marketplace and the further integration of
the Chinese foreign trade system into the established global economy through its
application to the World Trade Organization and other initiatives to further
open the Chinese economy to foreign participation will further enhance the
market for the Company's products.

     The Company has decided to focus its efforts exclusively in the health
sector.  The size of the market for medical equipment in China has been
estimated to be in the range of $800 million to $1 billion U.S. dollars per
year.  The market is growing at a fast rate.   China's imports of medical
equipment from all sources has been in the range of $400 to $500 million
annually over the past few years.

     The medical equipment products which the Company sells are marketed to
hospitals, through hospital administrators and the doctors who are the ultimate
users of the products.  There is virtually no private practice of medicine in
China and all physicians are affiliated with hospitals or similar institutions.
Each hospital also has various economic and administrative forces at work
determining hospital policy and practice.  A hospital's decision to purchase the
Company's products depends on those economic and administrative forces.  The
Company's marketing is addressed to all relevant participants in the purchasing
decision, including the doctors and hospital administrators.

     Most purchases of the Company's equipment products (as opposed to its off-
the-shelf medical products and consumable products), regardless of the nature
of the end-user, are made through foreign trade corporations (FTCs).  Although
the purchasing decision is made by the end-user, which may be an individual or
a group having the required approvals from their administrative organizations,
the Company enters into formal purchase contracts with FTCs.  The FTCs make
purchases on behalf of the end-users and are legally authorized by the Chinese
government to conduct import business. These organizations are chartered and
regulated by the government and are formed to facilitate foreign trade.  The
Company markets its products directly to end-users, but in consummating a sale
the Company also must interact with the particular FTC representing the end-
user.  For this reason, the Company seeks to maintain ongoing relationships with
the FTCs in its industries.  By virtue of its direct contractual relationship
with the FTC, rather than the end-user, the Company is to some extent dependent
upon the continuing existence of and contractual compliance by the FTC until the
particular transaction has been completed.

     Although the Company remains optimistic about the marketplace, there
continues to be uncertainties as to the direction of China's on-going political
and economic reforms, the possibility for future devaluation of the Chinese or
Hong Kong currencies as well as China's relationship with the United States.
This uncertainty may influence the budgeting and purchasing process in China.
Any of the foregoing circumstances may impede trade with China, thus impairing
the ability of the Company's customers to purchase the Company's products.

    Events in Asia could further impact the Company in 1998.  While China has
not been impacted directly, there are aspects of the Asian economic situation
which can impact China and thus the Company's business.  Although Chinese
leaders have consistently denied any plan to have a currency devaluation during
1998, such a devaluation, if it happened, could serve to make the products which
the Company sells in China more expensive.  Other impacts could include
decreased funds available to Chinese end users as a result of a general economic
slowdown and increased competition from other American and European companies
attempting to deal with the declining markets for their products in other Asian
countries by increasing efforts in China.

Manufacturers and Products

     Acuson Corporation (Acuson), which manufactures only ultrasound imaging
devices, is the Company's largest supplier.  Sales by the Company of Acuson
products represented over half of total revenues during 1997 and 1996.  The
Company has an exclusive distribution agreement for China and Hong Kong with
Acuson.

     Other medical products which the Company sells in China include machines
and consumables manufactured by Johnson & Johnson Clinical Diagnostics that
utilize "dry slide" clinical chemistry technology, products manufactured by
Leibinger GmbH (a Pfizer company), a leading German manufacturer of
radiosurgical treatment planning and stereotactic systems, medical laboratory
analysis equipment manufactured by Nova Biomedical, Inc., sterilizers and other
medical equipment such as special lights and tables for operating rooms
manufactured by Steris Corporation, systems and equipment for stereotactical
operations manufactured by Carl Zeiss Far East Company Limited, and bone
densitometry systems manufactured by Lunar Corporation.

     During 1997, the Company initiated marketing of the products of three new
medical manufacturers.  The first of these, Kendall Healthcare Products Company,
is a major worldwide producer of disposable medical supplies and Chindex is
marketing select Kendall products through the Chindex distribution network for
consumable products.  The second new medical manufacturer is Medex, Inc., a
major producer of medical equipment and supplies used primarily in critical
care environments.  The Medex products are also being marketed through the
Chindex distribution network.  The third new medical manufacturer for 1997 is
Schering Limited Hong Kong, a wholly-owned subsidiary of Schering AG, for which
Chindex will be engaged in the distribution of pharmaceutical products.

Distribution Arrangements

     Where the Company functions as the exclusive sales representative of a
manufacturer, the contracts between the Company and each of its manufacturers do
not represent long-term obligations of the manufacturer and there can be no
assurance that the Company's manufacturers will not elect to change their method
of distribution into the China marketplace to a format that does not utilize the
services of the Company.

     Acuson Corporation

     The Company commenced its contractual relationship with Acuson in 1987.
Under the terms of its current agreements, the Company is the authorized
distributor of Acuson diagnostic ultrasound equipment in China and Hong Kong.
In addition, the Company's responsibilities include the training of all
customers, the maintenance and servicing of Acuson products and various
promotional activities within China and Hong Kong.  Acuson provides customers of
the Company with a parts warranty of up to thirteen months from the date of
product shipment from the United States.  In accordance with such guarantee,
Acuson will replace or repair any parts defective as a result of original
materials used or workmanship.  Servicing this warranty is the responsibility of
the Company.  The agreement with Acuson has been renewed regularly since 1987.
The current agreement with Acuson is automatically renewed for successive one
year periods from each January 1st, unless either party gives timely notice of
intent not to renew.

Competition

     In the sale of products, the Company competes with other independent
distributors in China that market similar products.  Although the Company
believes that it is one of the largest independent distributors in its markets,
there may be other distributors with greater resources or other competitive
advantages over the Company.

     In addition to other independent distributors, the Company faces more
significant competition from direct distribution of established manufacturers.
In the medical products field, for example, the Company competes with Hewlett-
Packard, which maintains its own direct sales force in China.  In addition,
since certain manufacturers, such as Hewlett-Packard, market under one brand
name a wide variety of products in China to different market sectors, those
manufacturers may be better able than the Company to establish name recognition
across industry lines.  For example, Hewlett-Packard also manufactures and
markets computers in China as well as other medical instruments not sold by the
Company.  The Company believes that Hewlett-Packard, ATL, and Siemens
Corporation are the largest such direct competitors in the medical products
field.  The Company believes that its products incorporate technologies that are
more advanced than those available in products currently available from domestic
Chinese manufacturers.

     In the sales and distribution of off-the-shelf medical products,
consumables and pharmaceuticals, the Company's sales, marketing and logistical
distribution networks also compete with similar distribution operations of other
independent distributors, both foreign and Chinese, joint ventures and foreign
manufacturers. In addition, the products themselves supplied by the Company to
the China market compete with similar products of foreign, joint venture and
domestic manufacturers.

     The Company's competitive position for product sales depends in part upon
its ability to attract and retain qualified personnel in sales, technical and
administrative capacities.  In addition, many of the Company's various
competitors have greater resources, financial or otherwise, than does the
Company.

     In response to increased competition, and, in an effort to expand its
business, the Company has entered into agreements with certain customers to
provide extended payment terms for purchase of goods.  These arrangements,
limited to selected purchasers qualified by the Company, have assisted the
Company in competing with financing offered by competing manufacturers and
governments.  See "Management's Discussion and Analysis or Plan of Operations-
Liquidity and Capital Resources" below.

     The Company's subsidiary, Chindex Holdings International Trade (Tianjin)
Ltd., sells goods and receives payment in local Chinese currency and uses the
currency to pay for local expenses.  Payments are generally required to be made
in advance for consumable products.  The Company recognizes that any devaluation
in the local currency may have a negative impact on the results of operations
but does not believe any loss would be significant.

     The Company has no direct competition for its hospital, Beijing United
Family Hospital, in catering to the expatriate and diplomatic market.  One other
Western owned hospital venture has been approved but construction has not yet
started.

Employees

     At December 31, 1997, the Company had 237 full-time salaried employees, 222
of whom are in China and Hong Kong.  Of the full-time personnel in China and
Hong Kong, 20 are expatriates and 202 are Chinese or third country nationals.
Of the Company's non-USA based employees, 91 are considered administrative
personnel, 27 are engineering, 58 are employed by Beijing United, and the
remainder are sales personnel.  No employee of the Company currently is
represented by a labor union.  Management considers its employee relations to
be good.

Forward-Looking Statements

     With the exception of historical information, the matters discussed or
incorporated by reference in this Report on Form 10-KSB and, if any, in the
Company's 1997 Annual Report to Shareholders are forward-looking statements that
involve risks and uncertainties.  These forward-looking statements include, but
are not limited to, statements about the Company's (i) performance goals, (ii)
future revenues and earnings, (iii) markets and (iv) proposed new operations.
Actual results could differ materially from such forward-looking statements
because of, among other things, the following factors: developments relating to
conducting business in China (including political, economic and legal matters),
the timing of the Company's revenues, risks relating to commencement and early
operation of healthcare services, dependence on certain suppliers, and
extension of credit terms.

Item 2.     Facilities

     The Company's representative headquarters in China are located at a 12,000
square foot facility in Beijing pursuant to a lease expiring June 30, 2001.  The
Company also leases regional offices in the Chinese cities of Shanghai,
Guangzhou and Tianjin comprised of approximately 2,400, 810 and 700 square feet,
respectively, each lease expiring yearly. The Company's executive and
administrative offices are located in Bethesda, Maryland, which provides access
to nearby Washington, D.C.  The lease for the Bethesda office, which consists of
approximately 3,800 square feet, expires on July 31, 2001.

     On November 8, 1995, the Company entered into a lease of a four story
building of approximately 43,500 square feet in Beijing.  On November 26, 1996
this lease was extended to 15 years, expiring on December 24, 2010.  The Company
renovated the first two floors of the building for the Beijing United Family
Hospital, a family health center with birthing, pediatric and family medicine
capabilities.  The Hospital is a joint venture formed by the Company and the
Chinese Academy of Medical Sciences.  The Company has subleased the remaining
two floors. The sublease expires on January 31, 1999, with the tenant having an
option to extend the term of the sublease for an additional two years.

     On November 1, 1997, Chindex Hong Kong Limited entered into a two year
lease, expanding the Hong Kong office space to approximately 1,100 square feet.
This lease replaced the previous lease entered into in 1996.

     The Company believes that these facilities will be sufficient to satisfy
the Company's current requirements.  The Company believes that, in the event
any of the existing leases that expire within five years are not renewed,
adequate alternative space will be available in the same areas at comparable
rates.

Item 3.   Legal Proceedings

     There are no pending material legal proceedings to which the Company or any
of its properties is subject.

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

		None

PART II

Item 5.     Market for Registrant's Common Equity and Related Stockholder
Matters

     The Company's Units (one share of Common Stock, one Class A Warrant and one
Class B Warrant), Common Stock, Class A Warrants and Class B Warrants have been
listed on the National Association of Securities Dealers Automated Quotation
Market ("NASDAQ") under the symbols CHDXU, CHDX, CHDXW, CHDXZ, respectively.
The following table shows the high and low common stock bid quotations in the
over-the-counter market, as quoted by NASDAQ.  Such quotations reflect inter-
dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.

          Quarter Ended                      High Bid         Low Bid

          March 31, 1996                       5-1/2              4
          June 30, 1996                        4-15/16          3-1/4
          September 30, 1996                   5-1/8            3-7/8
          December 31, 1996                    5-1/4            3-1/8

          March 31, 1997                       5-1/2            3-1/8
          June 30, 1997                        4-3/4              2
          September 30, 1997                     5              3-1/2
          December 31, 1997                    5-1/4            1-1/4

     The Company's Common Stock is listed on The NASDAQ National Market, while
its Units, Class A Warrants and Class B Warrants trade on the NASDAQ SmallCap
Market.

     As of March 27, 1998, there were 13 record holders and there is estimated
to be approximately 1,000 beneficial owners of the Company's Common Stock, and
three owners of the Company's Class B Common Stock.
     The Company has not paid any cash dividends on its Common Stock since
inception, and it does not anticipate paying any cash dividends in the
foreseeable future.  The Company expects to retain earnings for use in its
business.


Item 6.  Management's Discussion and Analysis or Plan of Operation

Results of Operations

Fiscal year 1997 compared to 1996

     The Company's revenues are derived in two ways: net sales by the Company
for its own account and net commission income consisting of commissions on sales
made by manufacturers that are represented by the Company.  The Company often
elects the form of each transaction based on the circumstances of the
transaction, including the nature of the products and parties involved.
Consequently, the Company does not believe that the changes over the periods in
the mix comprising total gross profit on sales and net commission income
necessarily reflect any trends.

     The Company's net sales for the year ended December 31, 1997 increased
$1,789,000 or 8%, and net commission income for 1997 decreased $309,000 or 37%
over the year ended December 31, 1996.  The increase in net sales over the
period was due to increased marketing efforts and continued offering of
extended payment terms to customers.  In 1996 sales benefited from an
$8.4 million loan facilitated by the Export-Import Bank financing to certain
Chinese organizations for the purchase of equipment sold by the Company.
Revenues from Beijing United began in late 1997 but were minimal.

     The Company's gross profit on sales as a percentage of net sales for 1997
was 27% compared to 32% for 1996.  This decrease is attributable primarily to
the fact that the 1996 results reflected improved pricing achieved on the
Export-Import Bank financed sales and, to a lesser extent, to pricing pressures
in the recent year, which are anticipated to continue for the foreseeable
future.  The Company's total gross profit on sales and net commission income
was $6,894,000 for 1997. Of that amount $6,362,000 or 92% consisted of gross
profit on sales and $532,000 or 8% consisted of net commission income.  The
Company's total gross profit on sales and net commission income was $7,823,000
for 1996.  Of that amount $6,982,000 or 89% consisted of gross profit on sales
and $841,000 or 11% consisted of net commission income.  Since the Company
often elects the form of each transactions it does not believe that the changes
over periods in the mix comprising total gross profit on sales and net
commission income necessarily reflect any trends.

     The Company believes that total gross profit on sales and net commission
income continued to be negatively impacted during the year by restrictions
imposed by the Chinese government on the availability of credit from the
Chinese banking system to the Company's customers.  The Company believes the
restrictions on the availability of credit will continue to impact operations
for the immediate future.  The 1996 financing arrangement from the Export-Import
Bank was the first of its kind for the Company and, the Company believes, for
purchasers in China.  While the Company continues to explore additional
financing opportunities, the Company has not received any further Export-Import
Bank financing commitments and there can be no assurance that any similar
financing will be obtained in the future.

     Selling, general and administrative expenses for 1997 and 1996 were
$12,592,000 ($11,120,000 without restructuring) and $7,896,000 respectively,
representing an increase of $4,696,000 ($1,472,000 of which related to a
restructuring charge) or 59% (41% without the restructuring charge).  These
expenses represent costs associated with increased personnel hirings, increased
startup expenses related to the opening of the Beijing United facility and
increased travel and entertainment related to expanded selling efforts.

     The Company recorded a restructuring expense during 1997 of $1,472,000
related to a realignment of its business representations of unprofitable and
low growth products and to concentrate and consolidate all efforts on health
care industries.  Approximately 30 people, mostly from the industrial group will
be phased out over the current year.

     Miscellaneous income of $554,000 for the year 1997 represents principally
the net sub-lease income received from sub-lease of a portion of the building
leased to house the Beijing United facility, net of proportionate rent expense.

     The Company experienced a significant loss in 1997.  This was due
principally to the Company's personnel increases and related expense in its
growth program combined with increased pricing pressure in its core business
operations.  The Company also incurred significant expense in connection with
Beijing United Family Hospital and the expansion of its consumable healthcare
products distribution business.  The Company did not anticipate and did not
realize significant revenues in 1997 to offset these expenses from the hospital
or consumable healthcare product sales.  With respect to the Company's core
business operations, additional staffing and related expenses did not result in
comparable increases in revenues due to competitive pressures and credit
restrictions for Chinese purchasers.

    In addition, the Company had anticipated raising additional funding in
early 1998 in order to continue with its expansion plans at a rapid pace.
However, the Asian financial crisis has created an atmosphere of uncertainty
with respect to raising capital for companies operating in Asia.

    In light of the foregoing, to address the problems and in an effort to bring
operating expenses in line with current and projected revenues, the Company has
undertaken a restructuring charge, eliminating all non-health care related lines
of business as well as several of our less profitable medical equipment lines
and reducing the number of China based non-hospital employees by approximately
18%.  This results in a concentration and consolidation of efforts on health
care industries.  In addition, the Company has increased its cost controls in
order to further reduce operating expenses.  The Company may have to make
further adjustments to the organization to bring operating costs in line with
anticipated revenues in the future.

Liquidity and Capital Resources

     As of December 31, 1997, the Company had working capital of $8,711,000,
including cash and cash equivalents of $6,228,000, as compared to working
capital of $15,950,000 with cash and cash equivalents of $13,374,000 as of
December 31, 1996.  During 1997, the Company spent approximately $2.7 million
toward equipment and building improvements for the Beijing United Family
Hospital (Beijing United) for a total investment of approximately $4.0 million.

     Trade receivables increased $2,194,000 over prior year. This principally
relates to sales with extended payment terms.  These extended payment terms have
been provided to select customers in the Company's more familiar markets and
under circumstances designed to reduce risk.  These terms have involved the
extension to a later date or dates of the payment in full on product purchases.
A substantial payment is required at the time of delivery, on a prepayment or
letter of credit basis.  Later payments are subject to each user's availability
of funds.  The Company has experienced delays in receiving timely payments.  As
a result of these delays the Company has increased the reserve for doubtful
accounts.  The extension of payment terms has the effect of postponing the
receipt of cash by the Company, thereby negatively impacting cash flow and
liquidity in the short term.

     The availability of capital resources and liquidity continues to be
important as a result of continuing restrictions by the Chinese government on
the availability of credit from the Chinese banking system to the Company's
customers.  These restrictions, which were implemented in 1993 in response to
inflationary concerns and other economic factors, continue to negatively impact
the Company's operations.  Although the Company believes that its offering of
extended payment terms contributed to its results of operations during 1996 and
1997 there can be no assurances that the extended payment terms will continue
to offset or reduce the continued impact of the restrictions on credit in China.

     The Company continues to pursue alternative financing sources for its
customers, including Export-Import Bank financing programs and private lenders.
There can be no assurances that these efforts will be successful.

     Accounts payable increased $1,618,000 over the prior year as a result of
the Company's ability to negotiate its extended term sales with its suppliers
and receiving reciprocal payment terms.  During 1995, the Company developed a
unique escrow agreement with one supplier to help provide a future payment
guarantee without burdening current working capital, allowing the Company to
continue to expand the extended payment term program.  There can be no
assurance, however, that the Company's suppliers will continue to so participate
in the future, which would have a negative impact on the Company's short-term
cash flow.

     Inventories rose by $681,000 during the year as the Company continued to
build up inventories in response to recently announced agreements to market
medical consumables.

     On June 26, 1997, the Company increased its existing credit facility with
First National Bank of Maryland from $1,300,000 to $1,750,000 for short-term
working capital needs, standby letters of credit, and spot and forward foreign
exchange transactions.  This facility is payable on demand, fully secured and
collateralized by government securities acceptable to the Bank having an
aggregate fair market value of not less than $1,945,000. As of December 31,
1997, the Company had available approximately $1,247,000 under the credit
facility.  Generally, since the Company's assets principally are located in
China, the Company may not readily be able to obtain asset-based financing.

     The Company has financed its recent operations from the net proceeds of
its 1996 public offering, cash flow from operations, and its credit facility.

Timing of Revenues

     The timing of the Company's revenues is affected by several significant
factors. Many end-users of the products sold by the Company depend to a certain
extent upon the allocation of funds in the budgeting processes of the Chinese
government and the availability of credit from the Chinese banking system. These
processes and the availability of credit are based on policy determinations by
the Chinese government and are not necessarily subject to fixed time schedules.
In addition, the sales of certain products often require protracted sales
efforts, long lead times and other time-consuming steps. Further, in light of
the dependence by purchasers on the availability of credit, the timing of sales
may depend upon the timing of the Company's or its purchasers' abilities to
arrange for credit sources. As a result, the Company's operating results have
varied  and  are  expected  to  continue  to  vary  significantly from period to
period and year to year. In addition, a relatively limited number of orders and
shipments may constitute a meaningful percentage of the Company's revenue in any
one period. Correspondingly, a relatively small reduction in the number of
orders can have a material impact on the Company's revenues in any year.
Further, because the Company recognizes revenues and expenses relating to
certain contracts as products are shipped, the timing of shipments could affect
the Company's operating results for a particular period.

     The Company cash flow is impacted by various issues related to the Company
growth program of granting extended payment terms to customers.  (Please refer
to accounts receivable and accounts payable discussions under Liquidity and
Capital Resources).

     During 1996, the Company recognized $8.4 million in sales as a result of
the shipment of goods sold to end-users under an Export-Import Bank financing
arrangement. This financing arrangement was the first of its kind for the
Company and, the Company believes, was the first of its kind for purchasers in
China. The increase in the Company's sales in 1996 was facilitated by this
financing. Accordingly, the Company's results of operations for the twelve
months ended December 31, 1996 were significantly and positively impacted by the
timing of the payments from the financing.  The Company has not received any
further Export-Import Bank financing commitments and there can be no assurance
that any such commitments will be obtained in the future by the Company or the
end-users of its products.

     In addition, the short-term cash flow implications on the Company were
also minimized by obtaining reciprocal payment terms from the Company's
suppliers. There can be no assurance, however, that the Company's suppliers will
continue to so participate in the future, which would have a negative impact on
the Company's short-term cash flow.

Foreign Currency Exchange and Impact of Inflation

      The results of operations of the Company for the periods discussed have
not been significantly affected by inflation or foreign currency fluctuation. To
date, substantially all of the Company's purchases and sales have been made in
U.S. dollars. Thus, the Company has not had extensive foreign currency risk.
However, changes in the valuation of the Chinese Renminbi or Hong Kong Dollar
may have an impact on the Company's results of operations in the future. The
Company's subsidiaries, Chindex Tianjin and Beijing United, sells products and
services in Renminbi. The Renminbi is not a freely convertible currency and
accordingly exchange risks cannot be hedged.

     Also, the Company has purchased and will continue to purchase some products
in currencies other than U.S. dollars and has sold and will continue to sell
such products in China for U.S. dollars. To the extent that the value of the
U.S. dollar declines against such a currency, the Company could experience a
negative impact on profitability. The Company anticipates hedging transactions
wherever possible to minimize such negative impacts.


Item 7.   Consolidated Financial Statements

          The consolidated financial statements are shown after this page
numbered as follows:

                                                                Pages
          Report of Ernst & Young LLP, Independent Auditors      F-1

          Consolidated financial statements
             Consolidated Balance Sheets                         F-2
             Consolidated Statements of Operations               F-3
             Consolidated Statements of Cash Flows               F-4
             Consolidated Statements of Shareholders' Equity     F-5
             Notes to Consolidated Financial Statements       F-6 to F-13



<PAGE>

                Report of Ernst & Young LLP, Independent Auditors


The Board Of Directors and Shareholders
U.S.-China Industrial Exchange, Inc.

We have audited the accompanying consolidated balance sheets of U.S.-China
Industrial Exchange, Inc. as of December 31, 1997 and 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of U.S.-China
Industrial Exchange, Inc. at December 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for the years then ended in
conformity with U.S. generally accepted accounting principles.




                                             Ernst & Young, LLP

Vienna, Virginia
March 11, 1998

                                      F-1


<PAGE>
                      U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                   DECEMBER 31,    DECEMBER 31,
                                                       1996            1997
                                                  ------------     -------------
                                    ASSETS
<S>                                               <C>             <C>
Current assets:
  Cash & cash equivalents........................  $ 13,374,000     $ 6,228,000
  Receivables:
    Trade accounts, less allowance for doubtful
    accounts of $115,000(1996) and $604,000(1997)     4,626,000       5,796,000
    Current portion -- long term trade accounts..     3,612,000       4,123,000
    Commissions receivable.......................       449,000          84,000
  Inventories....................................     2,188,000       2,761,000
  Other current assets...........................       623,000         794,000
                                                   ------------    -------------
       Total current assets......................    24,872,000      19,786,000
  Property & equipment, net .....................     1,783,000       3,824,000
  Trade accounts receivable, long term...........     2,068,000       2,092,000
  Other..........................................       241,000         878,000
                                                   ------------    -------------
       Total assets..............................  $ 28,964,000     $26,580,000
                                                   ============    =============
</TABLE>

<TABLE>
<CAPTION>

                        LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                               <C>             <C>
Current liabilities:
  Accounts payable and accrued expenses..........  $  6,118,000     $ 6,836,000
  Accrued contract training......................       724,000         924,000
  Current portion-long term accounts payable, net     1,615,000       2,171,000
  Short term loan payable .......................             0         467,000
  Income taxes payable...........................       465,000         208,000
  Accrued restructuring..........................             0         469,000
                                                   ------------    -------------
       Total current liabilities.................     8,922,000      11,075,000
  Long term accounts payable, net................     1,126,000       1,270,000
                                                   ------------    -------------
       Total liabilities.........................    10,048,000      12,345,000

Shareholders' equity:
  Preferred stock, $.01 par value: Authorized --
    5,000,000 shares, none issued
  Common stock, $.01 par value
    Authorized -- 30,000,000 shares (including
    2,000,000 designated Class B);
    Common shares issued and outstanding; 1995 -
    1,840,000 shares, 1996 - 4,772,500 shares...         48,000          48,000
    Class B -- 2,000,000 shares issued and
    outstanding in each year....................         20,000          20,000
  Additional capital............................     17,278,000      17,235,000
  Foreign currency equity translation adjustment         (8,000)          2,000
  Retained earnings.............................      1,578,000      (3,070,000)
                                                   ------------    -------------
    Total shareholders' equity..................     18,916,000      14,235,000
                                                   ------------    -------------
    Total liabilities and shareholders' equity..   $ 28,964,000     $26,580,000
                                                   ============    =============
</TABLE>
                                 See accompanying notes

                                      F-2


<PAGE>
                      U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                -------------------------------
                                                       1996            1997
                                                   -----------     ------------


<S>                                               <C>              <C>
Net sales.......................................   $22,060,000      $23,849,000
Cost of goods sold..............................    15,078,000       17,487,000
                                                   -----------      -----------
Gross profit on sales...........................     6,982,000        6,362,000
Net commission income...........................       841,000          532,000
                                                   -----------      -----------
TOTAL GROSS PROFIT ON SALES AND
  NET COMMISSION INCOME.........................     7,823,000        6,894,000

Selling, general and administrative
Salaries and payroll taxes......................     3,536,000        4,726,000
Travel and entertainment........................     1,796,000        2,214,000
Other...........................................     2,564,000        4,180,000
Restructuring...................................         --           1,472,000
                                                   -----------      -----------
                                                       (73,000)      (5,698,000)
Other income and expenses
Interest expense................................      (119,000)         (31,000)
Interest income.................................       408,000          452,000
Miscellaneous income - net......................       501,000          554,000
                                                   -----------      -----------
Income/(loss) before (provision for)/
  benefit from income taxes.....................       717,000       (4,723,000)
(Provision for)/benefit from income taxes.......      (141,000)          75,000
                                                   -----------      -----------
NET INCOME/(LOSS)...............................   $   576,000      $(4,648,000)
                                                   ===========      ===========
NET INCOME/(LOSS) PER COMMON SHARE..............   $      0.15      $     (0.74)
                                                   ===========      ===========
Weighted average shares outstanding.............     3,809,078        6,322,500
                                                   ===========      ===========


</TABLE>

                            See accompanying notes


                                      F-3

<PAGE>
                      U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                     ------------------------
                                                      1996              1997
                                                   ----------       -----------
<S>                                             <C>                <C>
OPERATING ACTIVITIES
Net income (loss).............................    $   576,000       $(4,648,000)
Adjustments to reconcile net income (loss) to
  net cash provide by (used in) operating
  activities:
  Depreciation................................        130,000           262,000
  Provision for doubtful accounts.............         20,000           489,000
  Provision for deferred taxes................       (161,000)           46,000
  Inventory write-down........................        134,000           106,000

Changes in operating assets and liabilities:
  Trade receivable............................     (1,857,000)       (2,194,000)
  Commissions receivable......................        513,000           365,000
  Inventories.................................     (1,107,000)         (679,000)
  Other current assets........................        133,000          (217,000)
  Other assets................................        (52,000)         (637,000)
  Accounts payable and accrued expenses.......      2,844,000         1,618,000
  Income taxes payable........................        279,000          (257,000)
  Restructuring...............................          --              469,000
                                                  -----------       -----------
Net cash provided by / (used in)
  operating activities........................      1,452,000        (5,275,000)

INVESTING ACTIVITIES
  Purchase of property and equipment..........     (1,508,000)       (2,303,000)
                                                  -----------       -----------
Net cash (used in) investing activities.......     (1,508,000)       (2,303,000)

FINANCING ACTIVITIES
  Proceeds(fees) from issuance of common stock      9,831,000           (43,000)
  Proceeds from short term borrowings.........              0           467,000
                                                  -----------       -----------
Net cash provided by financing activities.....      9,831,000           424,000

Effect of foreign exchange rate changes on cash
  and cash equivalents........................          --               10,000
                                                  -----------       -----------
Net increase (decrease) in cash and
  cash equivalents............................      9,775,000        (7,146,000)
Cash and cash equivalents at beginning of period    3,599,000        13,374,000
                                                  -----------       -----------
Cash and cash equivalents at end of period....    $13,374,000       $ 6,228,000
                                                  ===========       ===========
Supplemental disclosure of cash flow information:
Cash paid for interest........................    $         0       $    23,000
                                                  ===========       ===========
Cash paid for income taxes....................    $    54,000       $   174,000
                                                  ===========       ===========
</TABLE>
                               See accompanying notes

                                       F-4


                     U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                   YEARS ENDED DECEMBER 31, 1996 AND  1997


<TABLE>
<CAPTION>
                                 COMMON STOCK       COMMON STOCK -- CLASS B
                               ------------------   ------------------------- ADDITIONAL  RETAINED     TRANSLATION
                               SHARES    AMOUNT     SHARES         AMOUNT      CAPITAL    EARNINGS     ADJUSTMENT      TOTAL
                              --------  --------   --------      ---------    ----------  ----------   ----------     -------
<S>                         <C>        <C>       <C>           <C>         <C>           <C>          <C>         <C>
Balance at December 31, 1995 1,840,000   18,000   2,000,000         20,000    7,477,000     1,002,000     (8,000)    8,509,000

Issuance of common stock     2,932,500   30,000       --               --     9,801,000         --           --      9,831,000

Net income for 1996             --         --         --               --        --           576,000        --        576,000

                             ---------  -------  ----------     ----------   ----------    ----------    -------    ----------
Balance at December 31, 1996 4,772,500   48,000   2,000,000         20,000   17,278,000     1,578,000     (8,000)   18,916,000

Additional offering expense     --         --         --               --       (43,000)         --          --        (43,000)

Net loss for 1997               --         --         --               --        --        (4,648,000)    10,000    (4,638,000)

                             ---------  -------  ----------     ----------   ----------    ----------    -------    ----------
Balance at December 31, 1997 4,772,500  $48,000   2,000,000     $   20,000  $17,235,000   $(3,070,000)  $  2,000   $14,235,000
                             =========   ======   =========     ==========   ==========     =========   ========   ===========

</TABLE>

                             See accompanying notes

                                      F-5

<PAGE>
                      U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

Organization and Description of Business

  U.S.-China Industrial Exchange, Inc. (the Company) is a sales representative
in China and Hong Kong for several major U.S., European, and other manufacturers
of high-technology medical equipment, construction, mining and other industrial
machinery and scientific research instrumentation. The Company markets and sells
these products in China and Hong Kong, and provides marketing, sales and
technical services for the products. Substantially all sales, commissions and
purchases are denominated in U.S. dollars.

  In 1996 the Company established the Beijing United Family Hospital, a 90%
-owned contractual joint venture between the Company and a company controlled
by the Chinese Academy of Medical Sciences.  This Hospital provides much-
needed Western primary family care health services including maternity,
birthing services as well as pediatric and executive health care.  There were
no operations of the clinic in 1996. Operations commenced late 1997.

  The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

Principles of Consolidation

  The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries, Chindex, Inc., Chindex Holdings International Trade
(Tianjin), Chindex Hong Kong and its 90% interest in the Beijing United Family
Hospital. Significant intercompany accounts and transactions have been
eliminated in consolidation.

Revenue Recognition

  Sales and most commissions are recognized upon product shipment. Costs
associated with installation, after-sale servicing and warranty are not
significant and are recognized in cost of sales as they are incurred.

Inventories

  Inventory purchased to fill signed sales contracts and purchase orders that
remain undelivered at year-end (merchandise inventory), service parts and
inventory of peripheral components are stated at the lower of cost or market
using the specific identification method.  Certain items are purchased for
demonstration purposes and subsequent sale (Demonstration inventory). Management
monitors the salability of such demonstration inventory and reduces the carrying
amount to net realizable value when there is any impairment in value.

Property and Equipment

  Property and equipment are stated at cost. Depreciation is computed on the
straight line method over the estimated useful lives of the related assets.
Useful lives for office equipment, vehicles and furniture and fixtures range
from 5 to 7 years. Leasehold improvements are amortized by the straight-line
method over the shorter of the estimated useful lives of the improvements or the
lease term.  Certain medical equipment is depreciated over three years.

Long Term Receivables and Payables

  Long term receivables and payables are recorded at estimated present values
determined based on current rates of interest. Imputed interest is recognized
using the effective interest method.

Income Taxes

  Provisions for income taxes are based upon earnings reported for financial
statement purposes and may differ from amounts currently payable or receivable
because certain amounts may be recognized for financial reporting purposes in
different periods than they are for income tax purposes. Deferred income taxes
result from temporary differences between the financial statement amounts of
assets and liabilities and their respective tax bases.

Cash Equivalents

  The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Fair value of Financial Instruments

  The Company considers the recorded value of its financial instruments, which
consist of cash and cash equivalents, trade receivables, commissions receivable
and accounts payable, to approximate the fair value of the respective assets and
liabilities at December 31, 1996 and 1997.

Earnings Per Share

  In 1997, the Financial Accounting Standards Board issued Statement 128,
'Earnings per Share'.  Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities.  Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share.  All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements.

Stock Based Compensation

  In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
'Accounting for Stock-Based Compensation,' which was effective for the Company's
December 31, 1997 financial statements. SFAS No. 123 allows companies to either
account for stock-based compensation under the new provisions of SFAS No. 123 or
under the provisions of APB 25, but requires pro forma disclosure in the
footnotes to the financial statements as if the measurement provisions of SFAS
123 had been adopted.

Dividends

  The Company has not paid dividends to the shareholders of its common stock and
any dividends that may be paid in the future will depend upon the financial
requirements of the Company and other relevant factors.

New Accounting Pronouncements

  In February 1997, the Financial Accounting Standards Board issued SFAS No.
129, 'Disclosure of Information about Capital Structure' (Statement 129), which
establishes standards for disclosing information about an entity's capital
structure.  Statement 129 was effective for periods ending after December 15,
1997.  The adoption of Statement 129 did not impact the Company's capital
structure disclosures as the Company was already in compliance with Statement
129.

  In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
'Reporting Comprehensive Income' (Statement 130) which is effective for fiscal
years beginning after December 15, 1997.  The Company will adopt Statement 130
with the fiscal year beginning January 1, 1998.  Statement 130 will not have a
material impact on the financial results of financial condition of the Company,
but will result in certain changes in required disclosures.  Management is
evaluating the additional disclosure requirements for the Company upon the
implementation of Statement 130.

  In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, 'Disclosures about Segments of an
Enterprise and Related Information' (Statement 131), which is effective for
years beginning after December 15, 1997.  Statement 131 establishes standards
for the way public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports.  It also establishes standards for related disclosures about products
and services, geographic areas, and major customers.  Statement 131 is effective
for financial statements for fiscal years beginning after December 15, 1997, and
therefore the Company will adopt the new requirements retroactively in 1998.
Management has not completed its review of Statement 131, but does anticipate
the adoption of this statement will have significant effect on the Company's
reported segments.  The anticipated changes include reporting additional segment
information regarding the Company's medical products business and hospital
services operation.


Reclassifications
  Certain amounts for 1996 have been reclassified to conform to the 1997
presentation.

2. PROPERTY AND EQUIPMENT, NET

     Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
                                       DECEMBER 31, 1996    DECEMBER 31, 1997
                                       -----------------    ------------------

<S>                                       <C>                  <C>
Furniture and equipment..............      $1,358,000           $2,277,000
Vehicles.............................         124,000              124,000
Leasehold improvements...............         807,000            2,191,000
                                         -----------------    ----------------
                                            2,289,000            4,592,000
Less: accumulated depreciation
  and amortization...................         506,000              768,000
                                         -----------------    ----------------
                                           $1,783,000           $3,824,000
                                         =================    ================
</TABLE>


3. INVENTORIES

     Inventories consist of the following:

<TABLE>
<CAPTION>
                                       DECEMBER 31, 1996    DECEMBER 31, 1997
                                       ------------------   ------------------
<S>                                       <C>                  <C>
Merchandise inventory................      $   467,000           $  948,000
Demonstration inventory, net.........          769,000              698,000
Parts and peripheral inventory.......          952,000            1,115,000
                                       -----------------    ------------------
                                           $ 2,188,000           $2,761,000
                                       =================    ==================
</TABLE>

4. EXTENDED PAYMENT TERM SALES ARRANGEMENTS


     The Company has entered into agreements with certain customers to provide
extended payment terms related to the sale of high technology medical equipment.
In conjunction with these transactions the Company has negotiated agreements
with certain vendors to grant matching extended terms. Receivables and payables
under these arrangements were discounted  at 6.39% and 6.76% for the years
ended December 31, 1996 and 1997, respectively.

     At December 31, 1997, long-term receivables and payables under these
arrangements mature as follows:

<TABLE>
<CAPTION>
                                     ACCOUNTS RECEIVABLE    ACCOUNTS PAYABLE
                                     -------------------    ----------------
<S>                                   <C>                    <C>
1998.................................     $4,225,000           $2,238,000
1999.................................      1,880,000            1,172,000
2000.................................        466,000              246,000
                                     -------------------    ----------------
                                           6,571,000            3,656,000
Less: imputed interest...............        356,000              215,000
                                     -------------------    ----------------
                                           6,215,000            3,441,000
Less: current portion................      4,123,000            2,171,000
                                     -------------------    ----------------
                                         $ 2,092,000           $1,270,000
                                     ===================    ================
</TABLE>


Amortization of imputed interest on long-term accounts receivable was $164,000
and $50,000 for the years ended December 31, 1996 and 1997, respectively.
Amortization of imputed interest on long-term accounts payable was $119,000 and
$7,000 for the years ended December 31, 1996 and 1997, respectively.


5. SHAREHOLDERS' EQUITY

Common Stock

     The Class B common stock and the common stock are substantially identical
on a share-for-share basis, except that the holders of Class B common stock have
six votes per share on each matter considered by shareholders and the holders of
common stock have one vote per share on each matter considered by shareholders.
Each share of Class B common stock will convert at any time at the option of the
original holder thereof into one share of common stock and is automatically
converted into one share of common stock upon (i) the death of the original
holder thereof, or, if such shares are subject to a shareholders agreement or
voting trust granting the power to vote such shares to another original holder
of Class B common stock, then upon the death of such original holder, or (ii)
the sale or transfer to any person other than specified transferees.

      The holders of the outstanding 2,000,000 shares of Class B common stock
have placed 450,000 shares in escrow. These shares will not be assignable or
transferable (but may be voted) until such time as they are released from escrow
based upon the Company meeting certain earnings levels or the common stock
attaining certain price levels. All reserved shares remaining in escrow on March
31, 1999 will be forfeited and contributed to the Company's capital. In the
event the Company attains any of the earnings thresholds or stock prices for the
release of the escrowed shares to the original shareholders, the Company will
recognize compensation expense at such time based on the fair market value of
the shares released.

     On October 28, 1996, the shareholders of the Company voted to increase the
number of authorized shares of common stock from 18,000,000 to 28,000,000
(excluding common stock -- Class B).

Public Offering, Common Stock, Warrants

    On August 18, 1994 the Company completed its initial public offering selling
1,600,000 common stock units for net proceeds to the Company of approximately
$6,206,000.  Additionally, on September 13, 1994 the underwriters exercised
their overallotment option purchasing an additional 240,000 common stock units
for net proceeds to the Company of approximately $1,044,000.  Each unit
consisted of one common share, one Class A warrant and one Class B warrant.
Class A warrants entitle the holder to acquire one share of common stock and a
Class B warrant at an exercise price of $6.50.  Each Class B warrant entitles
the holder to acquire one share of common stock at an exercise price of $8.75.
Warrants are exercisable through August 18, 1999.  The underwriters and a
consultant have also been granted options to purchase an additional 144,000 and
16,000 units, respectively, at $6.75 per unit.  These options are exercisable at
any time during the four year period beginning August 18, 1995.

     On November 8, 1996 the Company completed a second underwritten public
offering of securities selling 2,550,000 common stock units and an November 21,
1996 the underwriters exercised their overallotment option purchasing an
additional 382,500 common stock units for net proceeds to the Company of
approximately $9,831,000.  Each unit is exactly the same as the original
offering described above.

    In April 1994 the Company issued 300,000 Class A and 300,000 Class B
warrants on a prorata basis to each shareholder of record.  The exercise prices
of these warrants are the same as  the warrants sold in the Company's initial
public offering.  These warrants are exercisable at any time through August 18,
1999.

Stock Option Plan

     In April 1994, the Board of Directors adopted and the shareholders approved
the Company's 1994 Stock Option Plan (the Plan).  On January 9, 1997, the Board
of Directors amended the Plan in accordance with changes to the rules and
regulations of the Securities and Exchange Commission governing such plans.  The
Plan provides for the grant, at the discretion of the Board of Directors, of (i)
options that are intended to qualify as incentive stock options (Incentive Stock
Options) within the meaning of Section 422A of the Internal Revenue Code to
certain employees, consultants and directors, and (ii) options not intended to
so qualify (Nonqualified Stock Options) to employees, consultants and directors.
The total number of shares of common stock for which options may be granted
under the Plan is 228,000 shares.

     The Plan is administered by the Board of Directors, which determines the
terms of options, including the exercise price, the number of shares subject to
the options and the terms and conditions of exercise. No option granted under
the Plan is transferable by the optionee other than by will or the laws of
descent and distribution and each option is exercisable during the lifetime of
the optionee only by such optionee.

     The exercise price of options granted under the Plan must be at least equal
to the fair market value of such shares on the date of grant. With respect to
any participant who owns stock possessing more than 10% of the voting rights of
the Company's outstanding capital stock, the exercise price of any Incentive
Stock Option may be not less than 110% of the fair market value on the date of
grant. With respect to any Incentive Stock Option granted to a participant who
owns stock possessing more than 10% of the total combined voting power of all
classes of the Company's outstanding capital stock, the maximum term is five
years.

     The following is a summary of stock option activity during the years ended
December 31, 1996 and 1997:

<TABLE>
<CAPTION>
                                                                   Exercise
                                            1996         1997        Price
                                           ------       ------     --------
<S>                                       <C>         <C>       <C>
Options outstanding, beginning of year:     97,060     168,060   $3.375 - $5.31
  Granted                                   73,000      82,500   $3.375 - $5.31
  Canceled                                  (2,000)    (10,000)
                                           -------     -------   --------------
Options outstanding, end of year           168,060     240,560   $3.375 - $5.31
                                           =======     =======   ==============

</TABLE>

The Company has not provided disclosures under FAS 123 for proforma net income
and proforma earnings per share, as such amounts are not materially different
from reported amounts.  The weighted average exercise price of options
outstanding is $4.36 and $4.38 and the weighted average remaining contractual
life of such options is 8.6 years and 8.1 years respectively for the years
ended December 31, 1996 and 1997.

Shares of Common Stock Reserved

     At  December 31, 1997 the Company has reserved 12,378,000 shares of common
stock for issuance upon exercise of stock options and purchase warrants.

6. EARNINGS PER SHARE

     The following is an illustration of the reconciliation of the numerators
and denominators of the basic and diluted EPS computations for "income before
extraordinary item and accounting change" and other related disclosures:

<TABLE>
<CAPTION
                                               For the Year Ended 1997
                                  -------------------------------------------
                                     Loss             Shares         Per-Share
                                  (Numerator)      (Denominator)       Amount

<S>                              <C>               <C>                <C>
Basic EPS
Loss available to common
 stockholders                     $(4,648,000)       6,322,500          $(.74)

Effect of Dilutive Securities
Warrants and Options                                      --
                                  -----------        ---------          -----
Diluted EPS
Loss available to common
 stockholders                     $(4,648,000)       6,322,500          $(.74)
                                  ===========        =========          =====
</TABLE>

Options to purchase 240,560 shares of common stock between $3.375 and $5.31
were outstanding during most of 1997 but were not included in the computation
of diluted EPS because the options would have been antidilutive.  See note 5.

<TABLE>
<CAPTION
                                               For the Year Ended 1996
                                  -------------------------------------------
                                    Income            Shares         Per-Share
                                  (Numerator)      (Denominator)       Amount

<S>                              <C>               <C>                <C>
Basic EPS
Income available to common
 stockholders                     $   576,000        3,809,078          $ .15

Effect of Dilutive Securities
Warrants                                                  --
Options                                                  8,956             --
                                  -----------        ---------          -----
Diluted EPS
Income available to common
 stockholders                     $   576,000        3,818,034          $ .15
                                  ===========        =========          =====
</TABLE>



7. INCOME TAXES

     The benefit from/(provision for) income taxes consists of the following:

<TABLE>
<CAPTION>
                                              YEAR ENDED DECEMBER 31,
                                            --------------------------
                                                1996           1997
                                            ------------   -----------
<S>                                         <C>           <C>
Current:
     Federal.................................$ (165,000)   $ 367,000
     Foreign.................................   (94,000)    (174,000)
     State...................................   (43,000)      43,000
                                            ------------   -----------
                                               (302,000)     236,000
Deferred:
     Federal.................................   133,000     (133,000)
     State...................................    28,000      (28,000)
                                            ------------   -----------
                                                161,000     (161,000)
                                            ------------   -----------
                                             $ (141,000)      75,000
                                            ============  ============
</TABLE>

     The net deferred tax asset is included in other current assets and consists
of the following as of December 31:

<TABLE>
<CAPTION>
                                                1996       1997
                                              --------   --------
<S>                                          <C>        <C>
Allowance for doubtful accounts.............  $ 43,000   $   150,000
Inventory write downs.......................   105,000        89,000
Restructuring costs.........................      --         283,000
Net operating loss carry forwards...........      --       1,273,000
Other.......................................    12,000         3,000
                                              --------    ----------
                                               161,000     1,798,000
Less valuation allowance....................         0    (1,798,000)
                                              --------    ----------
Net deferred tax asset......................  $161,000    $        0
                                              ========    ==========
</TABLE>

     The  Company's effective income tax rate  varied from the statutory federal
income tax rate for the year ended December 31 as follows:

<TABLE>
<CAPTION>
                                                            1996       1997
                                                            ----       ----
<S>                                                       <C>        <C>
Statutory federal income tax rate.......................    34.0%     (34.0%)
Adjustments:
     State income taxes, net of federal tax benefit.....     4.0       (3.6)
     Foreign tax rate differential                         ( 9.0)        .4
     Change in valuation allowance                         (14.0)      39.8
     Other, including permanent differences.............     4.7       (4.2)
                                                           -----      -----
Effective income tax rate...............................    19.7%      (1.6%)
                                                           =====      =====

</TABLE>

     A valuation allowance has been recorded as of December 31, 1997 as the
realization of the Company's net deferred tax assets is not certain.

     The Company and its subsidiaries file separate income tax returns; the
Company on a June 30  fiscal year and its subsidiaries on a December 31 fiscal
year.

     The Company has U.S. Federal net operating losses of approximately $2.4
million that expires principally in 2012.  The Company also has foreign losses
from China of approximately $1.0 million that expire in 2002.

8. COMMITMENTS

Employment Agreements

     The Company has entered into three-year employment agreements with four key
executives which, as amended or revised to date, provide for annual base
salaries amounting to an aggregate of $621,000 per year until May 1998.

Leases

     The Company leases office space and space for the Beijing United Family
Health Center under operating leases.  Future minimum payments under these
noncancelable operating leases consist of the following:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
-----------------------
<S>                                                       <C>
       1998.............................................   $  892,000
       1999.............................................      814,000
       2000.............................................      681,000
       2001.............................................      604,000
       2002.............................................      413,000
       Thereafter.......................................    3,508,000
                                                            ----------
                                                            6,912,000
       Less total minimum sublease rentals............ .   (  617,000)
                                                           ----------
       Net minimum rental commitments...................   $6,295,000
                                                           ==========

</TABLE>

     The above leases require the Company to pay certain pass through operating
expenses and rental increases based on inflation.

     Included in miscellaneous (expenses)/income for the year ended December 31,
1996 and 1997 is net sublease income of $540,000.

     Rental expense was approximately $929,000 and $689,000 for the years ended
December 31, 1996 and 1997, respectively.

9. CONCENTRATIONS OF CREDIT RISK

     Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents,
trade receivables and commission receivables. Substantially all of the Company's
cash and cash equivalents at December 31, 1996 and 1997 were held by two U.S.
financial institutions. All of the Company's sales during the year were to end-
users located in China or Hong Kong.  Most of the Company's sales are
accompanied by down payments of either cash or letters of credit with one
Chinese financial institution. Sales on extended payment terms usually have down
payments in the form of a letter of credit and additional payments are secured
through several methods. Before extended payment terms are provided, the Company
performs a thorough review of the local operation, secures a guarantee from
higher authorities than the end-user, and performs other steps as needed.

     Extended payment term transactions are entered  into in the context of  the
Company's  sales activities in China and, as  such, the risks attendant to doing
business in  China  apply  to  such  transactions as  well.  The  absence  of  a
comprehensive  and  effective  legal  system  in  China,  among  other concerns,
requires alternative arrangements in order to reduce the Company's credit risks.
Guarantees from higher governmental authorities, for  example, usually  involve
requiring  customers to have a provincial or municipal governmental organization
sign a statement that the payment obligations will be satisfied. This  political
commitment  is,  in the  Company's experience,  an  effective method  in helping
ensure payment of obligations in China.  These commitments, however, are
different from traditional commercial guarantees in the United States, which
guarantees are not available in China for transactions of the type engaged in by
the Company.

    The Company has a $1,750,000 credit facility with First National Bank of
Maryland for short-term working capital needs, standby letters of credit, and
spot and forward foreign exchange transactions. Balances outstanding under the
facilities are payable on demand, fully secured and collateralized by government
securities acceptable to the Bank having an aggregate fair market value of not
less than $1,945,000. As of December 31, 1997 net borrowings outstanding under
the credit facility were $503,000.  Use of the credit facility will bear
interest at 1% over three month London Interbank Offered Rate ("LIBOR").

    The Company conducts its marketing and sales and provides its services
exclusively to buyers located in China, Hong Kong and Macau. The Company's
results of operations and its ability to obtain financing could be adversely
affected if there was a deterioration in trade relations between the United
States and China.

    Of the Company's net assets at December 31, 1997, approximately $4,931,000
of such assets are located in China, consisting principally of inventories,
property improvements and equipment.

See also Note 10.

10. SIGNIFICANT CUSTOMERS/SUPPLIERS

     Substantially all China purchases of the Company's products, regardless of
the end-user, are made through Chinese foreign trade corporations (FTCs).
Although the purchasing decision is made by the end-user, which may be an
individual or a group having the required approvals from their administrative
organizations, the Company enters into formal purchase contracts with FTCs. The
FTCs make purchases on  behalf of  the end-users  and are  authorized by  the
Chinese  government to conduct import business. FTCs are chartered and regulated
by the government and are  formed  to  facilitate  foreign trade.  The  Company
markets  its products directly to end-users, but in consummating a sale the
Company must also interact with the particular FTC representing the end-user.
By virtue of its direct contractual relationship with the FTC, rather than the
end user, the Company is to some extent dependent on the continuing existence of
and contractual compliance by the FTC until a particular transaction has been
completed.

     Purchases from one supplier totaled approximately $7,568,000 and $9,055,000
for the years ended December 31, 1996 and 1997, respectively.  The Company has
entered into a security arrangement to ensure the payment of such supplier's
accounts payable.


11. RESTRUCTURING

     At the end of 1997 the Company decided to end its relationship with
certain suppliers and to concentrate and consolidate all of its efforts on
the health care industry.  The restructuring charge includes a write-down of
certain inventory and receivables associated with these suppliers.  The portion
of the $1,472,000 charge related to this write down of assets amounted to
$1,003,000.  In addition, the company has set up a reserve of $469,000 for the
phase out of approximately 30 people associated with these products and their
related severance benefits and certain other future costs of close-out.  The
Company expects this phase out to be completed by the end of 1998.


12. SEGMENT REPORTING

     During 1997 the Company spent approximately $2.7 million toward equipment
and building improvements for the Beijing United Family Hospital for a total
investment of approximately $4.0 million.  Revenues from Beijing United began
in late 1997 but were minimal.

     All other assets and sales relate to the Company's investment in medical
product sales.

13. IMPLICATIONS OF YEAR 2000 (Unaudited)

     The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year.  Any of the Company's
internal computer software that has time-sensitive programs may recognize a
date using "00" as the year 1900 rather than the year 2000.  This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.  Also, since
the Company is dependent on many suppliers, their inability to provide normal
business activities due to Year 2000 difficulties could impact the Company's
revenue.

     The Company began an assessment of the implications of the Year 2000 during
late 1997.  At December 31, 1997, the process of evaluating the Company's
services, products and internal systems was underway and is to be completed in
1998.  At this time, the actual impact of Year 2000 compliance on the Company's
future results of operations, capital spending, and business operations is not
known, but is not expected to be material.


Item 8.   Changes In and Disagreements with Accountants on Accounting and
          Financial Disclosure.

          None.



PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons

     The information relating to the directors, executive officers, promoters
and control persons of the Company will be included in the Company's Proxy
Statement (the "Proxy Statement") relating to its 1997 Annual Meeting of
Shareholders, which the Company intends to file with the Securities and Exchange
Commission on or prior to April 30, 1997, and is incorporated herein by
reference.


Item 10.   Executive Compensation

     Information required is set forth in the Proxy Statement, which is
incorporated herein by reference.

Item 11.   Security Ownership of Certain Beneficial Owners and Management
     Information required is set forth in the Proxy Statement, which is
incorporated herein by reference.

Item 12.   Certain Relationships and Related Transactions
     Information required is set forth in the Proxy Statement, which is
incorporated herein by reference.

Item 13.   Exhibits and Reports on Form 8-K

     a.    Exhibit listing:

          3.1  Restated Certificate of Incorporation of the Company.
               Incorporated by reference to Exhibit 3.1 to the Company's
               Registration Statement on Form SB-2 (No. 33-78446)(the "IPO
               Registration Statement").

          3.2  By-laws of the Company.  Incorporated by reference to Exhibit
               3.2 to the IPO Registration Statement.

          4.1  Form of Warrant Agreement (including forms of Class A and Class
               B Warrant Certificates).  Incorporated by reference to Exhibit
               4.1 to the IPO Registration Statement.

          4.2  Form of Amendment to Warrant Agreement.  Incorporated by
               reference to Exhibit 4.2 to the Company's Registration
               Statement on Form SB-2 (No. 333-12861)(the "Secondary
               Registration Statement").

          4.3  Form of Specimen Certificate of the Company's Common Stock.
               Incorporated by reference to Exhibit 4.2 to the IPO Registration
               Statement.

          4.4  Form of Specimen Certificate of Class B Common Stock
               Certificate.  Incorporated by reference to Exhibit 4.3 to the
               IPO Registration Statement.

          4.5  Form of Escrow Agreement.  Incorporated by reference to Exhibit
               4.6 to the IPO Registration Statement.

          10.1 The Company's 1994 Stock Option Plan, as amended.

          10.2 Lease Agreement, dated as of July 1, 1987, between the Company
               and the Yiqing Hotel, relating to the Company's Beijing, China
               Facility.*+  Incorporated by reference to Exhibit 10.3 to the
               IPO Registration Statement.

          10.3 Addendum to Lease Agreement between the Company and the Yiqing
               Hotel, relating to the Company's Beijing, China Facility.*+
               Incorporated by reference to Exhibit 10.3 to the IPO
               Registration Statement.

          10.4 Lease Agreement, dated as of March 1994, between the Company and
               Central Properties Limited Partnership, relating to the
               Company's Bethesda, Maryland facility.  Incorporated by
               reference to Exhibit 10.4 to the IPO Registration Statement.

          10.5 First Amendment to Lease, dated as of June 26, 1996, between
               the Company and Central Properties Limited Partnership, relating
               to additional space at the Company's Bethesda, Maryland
               facility.

          10.6 Employment Agreement, dated as of May 1, 1994, between the
               Company and Roberta Lipson.  Incorporated by reference to
               Exhibit 10.5 to the IPO Registration Statement.

          10.7 Employment Agreement, dated as of May 1, 1994, between the
               Company and Elyse Beth Silverberg.  Incorporated by reference to
               Exhibit 10.6 to the IPO Registration Statement.

          10.8 Employment Agreement, dated as of May 1, 1994, between the
               Company and Lawrence Pemble.  Incorporated by reference to
               Exhibit 10.7 to the IPO Registration Statement.

          10.9 Employment Agreement, dated as of May 1, 1994, between the
               Company and Robert C. Goodwin, Jr.  Incorporated by reference to
               Exhibit 10.8 to the IPO Registration Statement.

         10.10 Employment Agreement, dated as of September 6, 1994, between
               the Company and Ronald Zilkowski.  Incorporated by reference to
               Exhibit 10.11 to the Company's Annual Report on Form 10-KSB for
               the fiscal year ended December 31, 1994.

         10.11 Distribution Agreement dated as of January 1, 1998 between
               Acuson Corporation and the Company.

         10.12 Lease Agreement between the School of Posts and
               Telecommunications and the Company dated November 8, 1995.
               Incorporated by reference to Exhibit 10.14 to the Company's
               Annual Report on Form 10-KSB for the fiscal year ended December
               31, 1995.

         10.13 Amendments Numbers One, Two and Three to the Lease Agreement
               between the School of Posts and Telecommunications and the
               Company dated November 8, 1995, each such amendment dated
               November 26, 1996.

         10.14 Sublease Agreement between the Company and the Beijing
               International School dated March 4, 1996.  Incorporated by
               reference to Exhibit 10.15 to the Company's Annual Report on
               Form 10-K for the fiscal year ended December 31, 1995.

         10.15 Contractual Joint Venture Contract between the Chinese
               Academy of Medical Sciences Union Medical & Pharmaceutical
               Group Beijing Union Medical & Pharmaceutical General
               Corporation and the Company, dated September 27, 1995.
               Incorporated by reference to Exhibit 10.16 to the Company's
               Annual Report on Form 10-KSB for the fiscal year ended December
               31, 1995.

         10.16 First Investment Loan Manager Demand Promissory Note dated
               July 10, 1997 between First National Bank of Maryland and
               Chindex, Inc.

         21.1  List of subsidiaries. Incorporated by reference to Exhibit 21.1
               to the Secondary Registration Statement.

         27.1  Financial Data Schedules.

-------------------

*   Confidential treatment has been granted as to a portion of this Exhibit.
+   English translation of summary from Chinese original.




         b.    Reports on Form 8-K

               None.



                              SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                              U.S.-CHINA INDUSTRIAL EXCHANGE, INC.


Dated:  March 30, 1998        By: /S/ Roberta Lipson
                              Roberta Lipson
                              President and Chief Executive Officer





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


Dated:  March 30, 1998        By: /S/ Roberta Lipson
                              Roberta Lipson
                              Chairperson of the Board of Directors,
                              Chief Executive Officer and President


Dated:  March 30, 1998        By: /S/ Elyse Beth Silverberg
                              Elyse Beth Silverberg
                              Executive Vice President, Secretary and Director


Dated:  March 30, 1998        By: /S/ Lawrence Pemble
                              Lawrence Pemble
                              Executive Vice President-Finance and Director


Dated:  March 30, 1998        By: /S/ Robert C. Goodwin, Jr.
                              Robert C. Goodwin, Jr.
                              Executive Vice President of Operations,
                              Treasurer, General Counsel and Director


Dated:  March 30, 1998        By: /S/ Ronald Zilkowski
                              Ronald Zilkowski
                              Vice President Finance and Controller










<PAGE>