Harbin Electric Responds to Citron Research Report Posted Today at Citronresearch.com

HARBIN, China, Aug. 3, 2011 /PRNewswire-Asia-FirstCall/ -- Harbin Electric, Inc. ("Harbin Electric" or the "Company") (NASDAQ: HRBN) today responded to allegations made by Citron Research ("Citron") in a posting on Citronresearch.com today, August 3, 2011 (the "Report").

"We are not really surprised by this most recent attempt by the short sellers to drive our share price down," said Mr. Tianfu Yang, Chairman and CEO of the Company. "Ever since the Company announced on June 20, 2011 that it has entered into a merger agreement for the Company to go private, management has been advised by many market professionals, including many of our highly supportive long-term investors, that attacks on the credibility of the Company would continue, and may even increase, in order to drive its share price down for the benefit of short sellers. In our view, this report, like the preceding ones, is a patchwork of fabricated evidence, falsehoods, selective use of information, and clearly biased and dishonest reporting, showing that the authors' only intention is to drive our stock price down. We are aware that there are over 7 million shares of short interest outstanding as publicly reported. We condemn this attempt to further hurt our shareholders and want to reassure them, once again, that we stand by the accuracy of all our filings with the Securities and Exchange Commission ("SEC")," added Chairman Yang.

Listed below are just a few examples reflecting the poor quality, and clear bias, of the Report:

• The Company confirms that Daqing, Jiangsu Liyang, and Guiyang Putian remain among its major customers. Given the confidential agreements between customers and suppliers, the Company does not believe that its customers would provide specific information to any short sellers or to the public without the Company's consent. During the Company's "going-private" process, the Company has undergone multiple due diligence processes by different parties, including investors, as disclosed in the preliminary proxy statement filed with SEC on July 13, 2011. In the course of their review of the Company's business, these parties did contact the Company's major customers. The Company doubts that the author/authors of this Citron report had legitimate means to obtain accurate data from its customers.

• The Company exports its products from all of its manufacturing facilities which are located in Harbin, Shanghai, Xi'an and Weihai and exported products include linear motors, micro motors and rotary motors. However, the Report failed to account for all export sales.

• The Company believes that Citron used doctored SAIC reports. The Company has recently reconciled its PRC tax filings on a consolidated basis with its financial statements reported in its SEC filings for fiscal year 2009 and has not found any inconsistency in any material respect. Its SAIC filings are largely in line with its tax filings in the PRC.

• The allegation that Mr. Boyd Plowman is a Director of Abax is simply not correct. Mr. Plowman resigned as a Director of Abax on December 16, 2010, just a few days after Abax acquired 5% of the Company on December 9, 2010. This information has been disclosed in the preliminary proxy statement filed with SEC on July 13, 2011. Mr. Boyd Plowman confirm that he is not a director of Kilometre Growth either as alleged by the Report.

As far as most other allegations in the Report, such as claims regarding material weaknesses in the Company's internal controls over financial reporting, the Company has fully disclosed such information in its filings with the SEC and is in compliance with all disclosure requirements.

On July 13, 2011, the Company filed a Preliminary Proxy Statement with the SEC indicating its intention to call a special meeting of its shareholders at a still to be specified date to vote on the merger agreement for the Company to go private.

The Company believes that short sellers' attempts to drive down the stock price and harm the Company's shareholders are likely to increase as the Company moves closer to the completion of the going private process. In this context, the Company believes that an important way to protect shareholder value is to limit short sellers' ability to borrow stocks and shareholders can contribute by reviewing whether their custodians or brokers are lending their shares to third parties.

"Sometimes investors, and in particular individual investors, are not aware of the fact that their broker or custodian is lending their stock to third parties, since investors may have approved this in a blanket agreement they signed when opening their accounts. This activity can be extremely profitable for the broker or the custodian, not to mention short-sellers, but may go against the interest of the holders of our shares. We call on our shareholders who have been very loyal to the Company, and have unfairly suffered, to be vigilant and make sure that they are in full control of the economic benefits of their ownership in our Company," concluded Chairman Yang.

The Company reserves the right to bring legal actions against the author(s) of the Report for their erroneous allegations.

This press release is not a proxy statement or a solicitation of proxies from the holders of common stock of the Company. Any solicitation of proxies will be made only by the proxy statement that will be provided to the Company's stockholders. Investors and security holders of the Company are urged to read the proxy material because it contains important information about the Company and the proposed going private transaction.

About Harbin Electric, Inc.

Harbin Electric, headquartered in Harbin, China, is a leading developer and manufacturer of a wide array of electric motors with a focus on innovative, customized, and value-added products. Its major product lines include industrial rotary motors, linear motors, and specialty micro-motors. The Company's products are purchased by a broad range of domestic and international customers, including those involved in the energy industry, factory automation, food processing, packaging, transportation, automobile, medical devices, machinery and tool manufacturing, chemical, petrochemical, as well as in the metallurgical and mining industries. The Company operates four manufacturing facilities in China located in Xi'an, Weihai, Harbin, and Shanghai.

Harbin Electric has built a strong research and development capability by recruiting talent worldwide and through collaboration with top scientific institutions. The Company owns numerous patents in China and has developed award-winning products for its customers. Relying on its own proprietary technology, the Company developed an energy efficient linear motor driven oil pump, the first of its kind in the world, for the largest oil field in China. Its self-developed linear motor propulsion system is powering China's first domestically-made linear-motor-driven metro train. As China continues to grow its industrial base, Harbin Electric aspires to be a leader in the industrialization and technology transformation of the Chinese manufacturing sector. To learn more about Harbin Electric, visit www.harbinelectric.com.

Safe Harbor Statement

The actual results of Harbin Electric, Inc. could differ materially from those described in this press release. Detailed information regarding factors that may cause actual results to differ materially from the results expressed or implied by statements in this press release may be found in the Company's periodic filings with the U.S. Securities and Exchange Commission, including the factors described in the section entitled "Risk Factors" in its annual report on Form 10-K for the year ended December 31, 2010. The Company does not undertake any obligation to update forward-looking statements contained in the press release. This press release contains forward-looking information about the Company that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, and statements about industry trends and the Company's future performance, operations and products.

A number of the matters discussed herein that are not historical or current facts deal with potential future circumstances and developments, in particular, whether and when the transactions contemplated by the Merger Agreement will be consummated. The discussion of such matters is qualified by the inherent risks and uncertainties surrounding future expectations generally and also may materially differ from actual future experience involving any one or more of such matters.  Such risks and uncertainties include: any conditions imposed on the parties in connection with consummation of the transactions described herein; adoption of the Merger Agreement by our shareholders; satisfaction of various other conditions to the closing of the transactions described herein; and the risks that are described from time to time in our reports filed with the SEC.

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SOURCE Harbin Electric, Inc.