Share Pledge Agreement

SHARE PLEDGE AGREEMENT


THIS SHARE PLEDGE AGREEMENT (this " Agreement" ) dated as of this 16th day of November, 2007 is made between Hanqiao Zheng (the " Pledgor" ) and Carlyle Asia Growth Partners III, L.P., a limited partnership organized under the laws of the Cayman Islands (" CAGP" ), and CAGP III Co-Investment, L.P., a limited partnership organized under the laws of the Cayman Islands (together with CAGP, the " Secured Party" ).

RECITALS

WHEREAS, pursuant to that certain Stock and Notes Purchase Agreement, dated as of November 16, 2007, by and among the of China Recycling Energy Corporation, a Nevada corporation (the " Company" ), and the Secured Party, among others (the " Purchase Agreement" ), it is anticipated that the Secured Party shall purchase a 10% Senior Secured Convertible Promissory Note in the principal amount of US$5,000,000 (the " First Note" ), and subsequently, a 5% Senior Secured Convertible Promissory Note in the principal amount of US$15,000,000 (the " Second Note" and together with the First Note, the " Notes" ) of the Company;

WHEREAS, it is a condition to the obligations of the Secured Party under the Purchase Agreement and a condition precedent of the Secured Party purchasing the Notes that the Pledgor pledge the Collateral and deliver this Agreement as security for the full and punctual observance and performance of the covenants and agreements contained herein and in the Notes; and

WHEREAS, the Pledgor is the owner of the number Common Shares set forth Exhibit A beside Pledgor' s name in the column titled " Pledgor Shareholdings" (" Pledgor Shares" ).

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, hereby agree as follows:

AGREEMENT

Section 1.

Definitions .

Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Notes. As used herein, the following words and phrases shall have the following meanings:

" Additional Collateral" has the meaning provided in Section 4 hereto.

" Agreement" has the meaning provided in the preamble hereto.

" Collateral" means (i) the Pledged Shares; (ii) all additions to and substitutions for such Pledged Shares (including, without limitation, any securities, cash or instruments or other property delivered or pledged pursuant to Section 2(b)); (iii) all income, proceeds and collections received or to be received, or derived or to be derived, now or any time hereafter (whether before or after the commencement of any proceeding under applicable bankruptcy, insolvency or similar law, by or against the Pledgor, with respect to the Pledgor) from or in connection with the Pledged Shares (including, without limitation, any capital shares issued by the Company in respect of any Common Shares constituting Collateral or any cash, securities or other property distributed in respect of or exchanged for any Common Shares constituting Collateral, or into which any such Common Shares is converted, in connection with any Fundamental Transaction, and any security entitlements in respect of any of the foregoing); and (iv) all powers and rights now owned or hereafter acquired under or with respect to the Pledged Shares, as provided herein.

" Common Shares" means the common shares, par value $0.001 per share, of the Company.

" Company" has the meaning provided in the recitals hereto.

" Event of Default" has the meaning provided in the Notes.

" Federal Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C. a7 101 - 1330).

" Federal Securities Laws" has the meaning provided in Section 7 hereto.

" First Note" has the meaning provided in the recitals hereto.

" Fundamental Transaction" has the meaning provided in the Notes.

" Investment Company Act" has the meaning provided in Section 5(c) hereto.

" Location" means, with respect to any party, the place such party is " deemed located" within the meaning of Section 9-307(b)(1) of the UCC.

" Notes" has the meaning provided in the recitals hereto.

" Obligations" has the meaning provided in Section 2 hereto.

" Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

" Pledged Shares" means the number of Common Shares set beside the Pledgor' s name in the column titled " Number of Pledged Shares" on Exhibit A hereto and any Additional Collateral pledged pursuant to Section 3 hereto, to be pledged to the Secured Party in respect of this Agreement as set forth in Section 2 hereto.

" Pledgor" has the meaning provided in the preamble hereto.

" Pledgor Shares" has the meaning provided in the recitals hereto.

" Purchase Agreement" has the meaning provided in the recitals hereto. 2


" Second Note" has the meaning provided in the recitals hereto.

" Secured Party" has the meaning provided in the preamble hereto.

" Securities Act" has the meaning provided in Section 7 hereto.

" Security Interests" means the security interests in the Collateral created hereby.

" UCC" means the Uniform Commercial Code as in effect in the State of New York.

Section 2.

Pledge . In order to secure to the Secured Party the full and punctual payment and performance of all of the obligations (the " Obligations" ) contained herein and in the Notes (including the payment of principal and interest thereunder), the Pledgor hereby transfers, grants, bargains, hypothecates, conveys, pledges, sets over, delivers and confirms unto the Secured Party, and grants to the Secured Party a first priority lien on, a security interest in and to, and a right of setoff against (a) any and all interest the Pledgor has in Pledged Shares and (b) any and all future proceeds of the Pledged Shares, including all cash, securities or other property at any time and from time to time receivable or otherwise distributed on, with respect to, or in exchange for any of or all the Pledged Shares TO HAVE AND TO HOLD the Collateral, together with all rights, titles, interests, powers, privileges and preferences pertaining or incidental theret o, unto the Secured Party, its successors and assigns, for security purposes only, until payment in full of the Obligations.

Section 3.

Distributions . Any future distributions (other than a distribution in respect of any tax permitted under the Notes) with respect to the Pledged Shares, or any portion thereof, whether paid or payable in cash or otherwise, whether resulting from a reclassification of the Pledged Shares or received in exchange for the Pledged Shares or any part thereof, shall be applied by the Secured Party in accordance with the terms of the Notes and used to reduce any and all outstanding Obligations. If any distributions are received by the Pledgor, except as may be permitted under the Notes, such distributions shall not be commingled by the Pledgor with any of his other funds or property but shall be held separate and apart therefrom, in trust for the benefit of the Secured Party, and shall be forthwith delivered to the Secured Party as Collateral, in the same form as received but with any necessary endorsements, to be applied by the Secured Party to the Obligations in accordance with the first sentence of this Section 3 .

Section 4.

Additional Collateral . If the Pledgor acquires any additional Common Shares after the date of this Agreement, the Pledgor shall pledge fifty-percent (50%) of such additional shares of Common Shares (" Additional Collateral" ) to the same extent as if such shares were held by the Pledgor as of the date hereof and subject to Section 2 (with any fractional shares rounded up to the nearest shares). If any Additional Collateral is required to be delivered pursuant to this Section 4 , the Pledgor shall deliver such Additional Collateral to the Secured Party within five (5) business days of receipt by the Pledgor of such Additional Collateral. Concurrently with the delivery of any Additional Collateral, the Pledgor shall deliver to the Secured Party a certificate substantially in the form of Exhibit B hereto and dated the date of such delivery, (A) identifying the additional items of the Additional Collateral bein g pledged and (B) certifying that with respect to such items of Additional Collateral the applicable representations and warranties contained in Section 12 (as specified in Exhibit B ) are true and correct with respect to such Additional Collateral and otherwise on and as of the date thereof. 3


Section 5.

Voting Rights in Collateral . Subject to Section 7(b) , the Pledgor shall have the right, from time to time, to vote and to give consents, ratifications and waivers with respect to the Collateral, and the Secured Party shall, upon receiving a written request from the Pledgor, accompanied by a certificate of the Company stating that no Event of Default has occurred and is continuing, deliver to the Pledgor, or as specified in such request, such proxies, powers of attorney, consents, ratifications and waivers in respect of any of the Collateral that is registered, or held through a securities intermediary, in the name of the Secured Party or its nominee, as shall be specified in such request, and shall be in form and substance satisfactory to the Secured Party.

Section 6.

Rights and Remedies Upon Default .

(a)

Generally . If an Event of Default shall have occurred and be continuing, the Secured Party may exercise all rights of a secured party under the UCC, and, in addition, the Secured Party shall have all of the rights and remedies provided for in this Agreement.

(b)

Registration in Nominee Name; Denominations . If an Event of Default shall have occurred and be continuing, the Secured Party shall have the right (in its sole and absolute discretion and without notice to the Pledgor) to transfer to, or to register the Pledged Shares in, its own name or the name of its nominee.

(c)

Sale of the Collateral .

(i)

If an Event of Default shall have occurred and be continuing, the Secured Party may sell the Collateral, or any part thereof, at any public or private sale or at any broker' s board or on any securities exchange, for cash, upon credit or for future delivery as the Secured Party shall deem appropriate. The Secured Party shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and investors who are " accredited investors" or " qualified purchasers" pursuant to Sections 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940 (the " Investment Company Act" ) and upon consummation of any such sale the Secured Party shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives (to the full extent permitted by applicable law) all rights of redemption, stay and appraisal which the Pledgor now has, or may have at any time in the future, under any applicable law. 4


(ii)

The Secured Party shall give the Pledgor ten (10) business days' written notice (which the Pledgor irrevocably agrees is reasonable notice within the meaning of the applicable provisions of the UCC) of the Secured Party' s intention to make any sale of Collateral. Such notice shall state the time and place for such sale and, in the case of sale at a broker' s board or on a securities exchange, shall state the board or exchange at which such sale is to be made ...