The following discussion should be read in conjunction with China Pharma Holdings, Inc.'s ("China Pharma" or "the Company) consolidated financial statements and related notes included elsewhere in this Current Report on Form 10-Q.

This filing contains forward-looking statements. The words "anticipated", "believe", "expect", "plan", "intend", "seek", "estimate", "project", "could", "may" and similar expressions are intended to identify forward-looking statements. These statements include, among others, information regarding future operations, future capital expenditures, and future net cash flow. Such statements reflect management's current views with respect to future events and financial performance and involve risks and uncertainties, including but not limited to changes in general economic and business conditions, changes in foreign, political, social, and economic conditions, regulatory initiatives and compliance with governmental regulations, the ability to increase market share, and various other matters, many of which are beyond China Pharma's control. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated or otherwise indicated. Consequently, all of the forward-looking statements made in this filing are qualified by these cautionary statements and there can be no assurance of the actual results or developments.

1. Business Overview

China Pharma Holdings, Inc. is a rapidly growing specialty pharmaceutical company that develops, manufactures, and markets treatments for a wide range of high incidence and high mortality conditions in China, including cardio and cerebral vascular, Central Nervous System (CNS), infectious, and digestive diseases. The Company's cost-effective, high margin business model is driven by market demand and supported by 8 scalable GMP (good manufacturing practice)-certified production lines covering the major dosage forms. In addition, the Company has a broad and expanding distribution network across 30 provinces, municipalities and autonomous regions in China and possesses strong research and development resources from numerous well-established collaborations with prestigious universities. The Company is registered in Delaware, USA. Hainan Helpson Medical & Biotechnology Co., Ltd (Helpson), located in Haikou City in Hainan Province, China, is a wholly owned subsidiary of China Pharma Holdings, Inc.

Proven Record of Success

• 2008: granted GMP 5-year re-certification

• January 2008: Bumetanide was approved by the SFDA and taken to market

• May 2008: completed $10 million PIPE financing

October 2008: New antibiotic formula received SFDA approval to enter
• clinical trials, clinical trials initiated

January 2009: Liver disease product, Tiopronin, received SFDA production
• approval

• February 2009: Anti-hypertension drug, Candesartan, received SFDA approval to enter clinical trials, clinical trials initiated

Strategy for Growth - We are positioned in a rapidly growing industry with leading branded off-patent (generic) products. Directed by market needs, we combine our manufacturing expertise with strategic R&D alliances and co-operation with laboratories, to promote new and improved products targeting China's most prevalent diseases such as CNS disease, cardio-/cerebral vascular disease, digestive disease, and infectious diseases. In addition, we produce medicine in a variety of forms which target specific patient groups, and develop new or improved dosage-forms of existing products. Through strategic merger and acquisition (M&A) and through capitalization of this fragmented market, we will improve our product portfolio and push our integrated growth, maintain and develop new marketing channels, and use our existing retailing network in the newly expanded market to raise our overall market share.

Strong Revenue Growth and High Margins - We have experienced a compounded, annual growth-rate of over 68% in sales of our therapeutics since 2003. Our Gross Profit Margin remained at 45%-55%. We are able to compete in this highly fragmented pharmaceutical industry through our diversified therapeutics line, cost control and strong sales network. Our experienced management team, market insights, and strong R&D resources enable us to develop and launch new and improved generic products based on market demand.

2. Recent Development

As of March 31st, 2009, in addition to the 19 products and 30 specifications that we have in the market, our Tiopronin drug for hepatitis B received State Food and Drug Administration (SFDA) approval for production in January 2009. The newly approved product "Tiopronin Enteric-Coated Capsule" has less harmful side effects on the stomach which makes it more likely for wide use. Our new product thus has better differentiation and competitive advantage. We expect to launch the product in the second quarter of 2009. Additionally, we have eight other new products in different developmental stages. Two products passed SFDA technical review and entered clinical trials (3 phases of clinic trials for an innovative anti-drug resistance antibiotic for the indication of the third generation "Cephalosporin" which is expected to take approximately two and half years to complete, and the clinic trials initiated in early 2009 for our anti-hypertension product Candesartan). Two other products indicated for Gastric Ulcer and Alzheimer disease are waiting for the SFDA approval for production.

3. Market Trends

The growth of China's pharmaceutical market is driven by China's rapid economic growth, the highest in economic history. Increased healthcare spending by the Chinese Government to reform the healthcare system has already greatly improved the accessibility to and desire for medical care. Important additional factors include: the aging of the population and the resulting increase in age-related disorders; the urban migration of the population; and improved awareness of self-health care. According to Intercontinental Marketing Services (IMS) forecasts, China will become the seventh largest pharmaceutical market in the world in 2009 and the second largest in 2020, with a market capacity of US$220 billion.

The recent healthcare reform program announced by the Chinese Government will have real and significant impact on all healthcare related industries in China, including the pharmaceutical industry. While the plans are still in draft format, we think the principal strategy is fairly clear. Over all, the government plans to provide a basic "universal" healthcare system to all citizens of China. Pharmaceutical companies will be impacted most by the proposed Essential Drug List on which the government will publish the most often used drugs. It is assumed that there will be strict price control on these basic drugs, although the volume of sales will likely increase. We believe the effect of the reform will be significant if not immediate. We are making ourselves more nimble and are ready to adjust our marketing and product strategy according to the new environment when it becomes a reality. We are adjusting our sales and marketing strategy, to further penetrate the lower-tier healthcare facilities market which is one of the focuses of the current healthcare reform.

The following table presents the results of operations of the Company for the three months ended March 31, 2009 and March 31, 2008; both are given in USD.

                                             Three Months Ended March 31st
                                               2009                 2008
Revenue                                       12,991,982           11,717,045
Cost of Revenue                                7,063,227            5,909,768
Gross profit                                   5,928,755            5,807,277
Selling expenses                                 602,760              337,792
General and administrative expenses              488,047              342,818
Bad debt expense                                 774,932              472,975
Income from operations                         4,063,016            4,653,692
Interest income                                   10,589                   --
Interest expense                                 (38,236 )            (45,273 )
Income tax (expense) benefit                    (357,722 )           (417,878 )
Net income                                     3,677,647            4,190,541

Revenue

We generated approximately $13 million revenue for the three months ended March 31, 2009, an increase of $1.27 million, which is a 10.9% increase compared to $11.72 million of the corresponding period in 2008. The rise in revenue was due to both increase sales of existing products as well as expanding sales from new products. In the first quarter of 2009, Clarithromycin continued its strong growth pace, producing revenue of $809,500 (6.23% of total Q1 Revenue), which is an increase of 57% from the same period last year. In addition to Clarithromycin, other major revenue producers for the quarter were Roxithromycin which brought in revenue of $953,292 (7.34% of total) an increase of 51% from last year, and Alginic Sodium Diester which produced $714,339 in revenue (5.5% of total) showing a year over year increase of 43%.

While we saw both new and existing product sales increasing compared to a year ago, our 2009 first quarter performance was offset by uncertainty related to China's healthcare reform plan, as bulk buyers delayed purchase orders in anticipation of lower pricing and subsidies from the new insurance catalogue and essential drug list, which are not yet published. In addition, management believes that the unusually early Chinese New Year in January of 2009 caused some sales to occur at the end of 2008, rather than 2009. The earlier than usual Chinese New Year appears to have prompted some hospitals to complete orders early before going on holiday vacation during the early to middle of January. The third reason for our first quarter performance was the fact that the global financial/economic crisis hit China the hardest during late Q4 of 2008 and Q1 of 2009. Many export-oriented factories went out of business, and farmer workers went back home. This had an effect of slower hospital traffic in some of the regions covered by China Pharma. Management sees the results of Q1 as an anomaly and is already seeing the trend reversing during late Q1 and early Q2.

Cost of Revenue

For the three months ended March 31, 2009, Cost of Revenue was approximately $7.06 million or 54% of total revenue, compared to the corresponding period of 2008, which was $5.91 million or 50% of total revenue. The higher total cost of revenue was mainly due to a higher volume of lower margin products sold.

Gross Profit for the three months ended March 31, 2009 was $5.93 million, or 45.6% of total revenue. It has increased by 2.09%, or $0.12 million, compared to $5.81 million or 49.6% of total revenue of the first quarter of 2008. The lower gross margin in the first quarter of 2009 was mainly due to a higher volume of lower margin products sold.

Selling Expense

The selling expense of the three months ended March 31, 2009 was approximately $0.6 million, an increase of approximately $0.26 million, or 78%, compared to approximately $0.34 million of the three months ended March 31, 2008. The main reason for this increase was our investing in our distribution channels and marketing of our products.

G & A Expenses

The general and administrative expenses of the three months ended March 31st, 2009 has increased to approximately $0.49 million, an increase of $0.15 million, or 42%, compared to $0.34 million of the same period of 2007. The main reason for this increase was the expansion of our business which causes expenditure on each item to correspondingly rise.

Collection of Bad Debt

For the three months ended March 31, 2009, bad debt expense was approximately $0.77 million compared to $0.47 million for the three months ended March 31st, 2008. This is an increase of 64%.

As to the peculiarity of the Chinese pharmaceutical market environment, deferred payments to pharmaceutical companies by state-owned hospitals are a normal phenomenon. Over 90% of our drugs are sold to state-owned hospitals, which creates seemingly slow collections of our trade receivables. Since they are backed by the government, all the deferred payments from state-owned hospitals are secure and will eventually be collected and have been in the past..

Following conservative, US GAAP accounting principles, we accrue an allowance for doubtful receivables. The percentage of trade receivables that is deemed doubtful is as follows: 100% after 720 days; 50% after 360 days; and 7.5% up to 360 days. During the 15 years of operating history, the company has never had any uncollected receivables.

Income from Operation

The operating income for the three months ended March 31, 2009 is approximately $4.06 million, compared to $4.65 million of the same period of 2008, a decrease of $0.59 million, or 12.7%. The main reasons for the lower number were increases in selling expenses and bad debt expenses.

Interest Income

The interest income for the three months ended March 31, 2009 is $10,589 from our bank deposit. We did not have interest income during the first quarter of 2008.

Interest Expense

Interest expense for the three months ended March 31, 2009 is approximately $38,236, compared to $45,273 of the same period of 2008. The main reason is the payment on the company's working capital loan during first quarter 2008, leading to a corresponding reduction in the interest on the loan.

Income Tax Expense

Enterprise income tax expense for the three months ended March 31, 2009 was $357,722, while the first quarter 2008 income tax expense was $417,878. We have been granted a 'tax holiday' with a favorable rate of 50% of the tax rate. This year we pay our enterprise income tax at the rate of 10% while our tax rate in 2008 was 9%.

The net income for the three months ended March 31, 2009, excluding the effect of foreign exchange transactions, was approximately $3.68 million, which was $0.51 million lower than that for the three months ended March 31, 2008, of approximately $4.19 million. It has decreased by 12.24%. For the three months ended March 31, 2009, earnings per common share decreased 22.6% to $0.09 per share compared to $0.11 per share for the three months ended March 31, 2008. The decrease was due to lower total net income and increase in issued shares in the first quarter of 2009 compared to the same period in 2008.

5. Liquidity and Capital Resources

Our principal sources of liquidity include cash from operations, notes payable from local commercial banks and proceeds from our May 2008 PIPE offering our equity units. As of March 31, 2009, cash and cash equivalents were $5,151,882, a decrease of $1,775,267 from $6,927,149 as of December 31, 2008. This was primarily due to our investing activities being more than the cash generated from operating activities.

Based on our current operating plan, cash forecasted by management to be generated by operations and borrowings from existing credit facilities will be sufficient to meet our working capital and capital requirements for at least the next 12 months. However, if events or circumstances occur and we do not meet our operating plan as expected, we may be required to seek additional capital and/or reduce certain discretionary spending, which could have a material adverse effect on our ability to achieve our business objectives. We may seek additional financing, which may include debt and/or equity financing. There can be no assurance that any additional financing will be available on acceptable terms, if at all. Any equity financing may result in dilution to existing stockholders and any debt financing may include restrictive covenants.

                                                                    Three Months Ended March 31st
                                                                      2009                 2008
Net cash provided by / (used in) operating
activities                                                            1,117,135            1,521,278
Net cash used in investing activities                                (2,899,929 )         (2,343,864 )
Net cash provided by financing activities                                    --             (376,271 )
Effect of exchange rate change on cash                                    7,527               50,539
Net increase in cash and cash equivalents                            (1,775,267 )         (1,148,318 )
Cash and cash equivalents, beginning balance                          6,927,149            1,830,335
Cash and cash equivalents, ending balance                             5,151,882              682,017

Operating Activities:

Net Cash provided by operating activities was $1,117,135 in the quarter ended March 31, 2009 compared to $1,521,278 for the same period in 2008, a decrease of $404,143. The difference was mostly due to the lower net income for the first three months in 2009.

Investing Activities:

Net cash used in investing activities in the three months ended March 31, 2009 was $2,899,929, mainly for our investment in a number of new drug formulas during the first three months of 2009. This is an increase of $556,065 from the same period in 2008 of $2,343,864.

Financing Activities:

We did not have any financing activities during the three months ended March 31, 2009.

There were no off-balance sheet arrangements during the three months ended March 31, 2009.

7. Commitments

At March 31, 2009, the Company had no material commitments for capital expenditures other than for those expenditures incurred in the ordinary course of business.

8. Recently Enacted Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued FASB Staff Position (FSP FIN) No. 157-2 which extended the effective date for certain nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. The Company does not expect the adoption of SFAS No. 157 to have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not expect the adoption of SFAS No. 159 to have a material impact on our consolidated financial statements.

In June 2007, the Emerging Issues Task Force of the FASB issued EITF Issue No. 07-3, "Accounting for Nonrefundable Advance Payments for Goods or Services to be Used in Future Research and Development Activities", ("EITF 07-3") which is effective for fiscal years beginning after December 15, 2007. EITF 07-3 requires that nonrefundable advance payments for future research and development activities be deferred and capitalized. Such amounts will be recognized as an expense as the goods are delivered or the related services are performed. EITF 07-3 is not expected to have a material impact on our results of operations or financial position.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141(R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a non-controlling interest in a subsidiary should be reported as equity in the consolidated financial statements, consolidated net income shall be adjusted to include the net income attributed to the non-controlling interest and consolidated comprehensive income shall be adjusted to include the comprehensive income attributed to the non-controlling interest. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141(R) and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company has not yet determined the effect on our consolidated financial statements, if any, upon adoption of SFAS No. 141(R) or SFAS No. 160.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. SFAS No. 161 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities to require enhanced disclosures concerning the manner in which an entity uses derivatives (and the reasons it uses them), the manner in which derivatives and related hedged items are accounted for under SFAS No. 133 and interpretations thereof, and the effects that derivatives and related hedged items have on an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements of fiscal years and interim periods beginning after November 15, 2008. The Company has not yet determined the effects on its consolidated financial statements, if any, that may result upon the adoption of SFAS 161.