Special Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q, including the following "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements that are based on the beliefs of our management, and involve risks and uncertainties, as well as assumptions, that, if they ever materialize or prove incorrect, could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will" or similar expressions are intended to identify forward-looking statements. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including statements regarding new and existing products, technologies and opportunities; statements regarding market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; and any statements of belief or intention. As such, they are subject to risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward looking statements. Such risks and uncertainties include any of the factors and risks mentioned in the "Risk Factors" sections of our Annual Report on Form 10-K for the year ended December 31, 2011and subsequent SEC filings, and any statements of assumptions underlying any of the foregoing. All forward-looking statements included in this report are based on information available to us on the date of this report. We assume no obligation and do not intend to update these forward-looking statements, except as required by law.

Certain Terms

Except where the context otherwise requires and for the purposes of this report only:

º "BVI" refers to the British Virgin Islands;
º "China," "Chinese" and "PRC" refer to the People's Republic of China and do not include Taiwan and special administrative regions of Hong Kong and Macao;
º "China TransInfo," "the Company," "we," "us," and "our" refer to China TransInfo Technology Corp., its subsidiaries, and, in the context of describing our operations and business, and consolidated financial information, include our VIE;
º "Exchange Act" refers to the Securities Exchange Act of 1934, as amended;
º "RMB" refers to Renminbi, the legal currency of China;
º "SEC" refers to the United States Securities and Exchange Commission;
º "Securities Act" refers to the Securities Act of 1933, as amended;
º "U.S. dollar," "$" and "US$" refer to the legal currency of the United States; and
º "VIE" means our consolidated variable interest entities, including China TransInfo and its subsidiaries as depicted in our organization chart included in our Annual Report on Form 10-K for the year ended December 31, 2011.

The following discussion and analysis of our financial condition and results of operations includes information with respect to our plans and strategies for our business and should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes included herein and our consolidated financial statements and related notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Form 10-K for the year ended December 31, 2011.

Overview of Our Business

We are a leading provider of end-to-end intelligent transportation systems ("ITS") and related comprehensive technology solutions servicing the transportation industry in China. Our goal is to become the largest provider of intelligent transportation system products and related comprehensive technology solutions in China, as well as a major operator and provider of value-added ITS and location based services ("LBS") to commercial clients and consumers in China. Substantially all of our operations are conducted through our VIEs that are PRC domestic companies owned principally or entirely by our PRC affiliates. Through our VIEs, we are involved in developing multiple applications in highway ITS, urban ITS, commercial vehicles ITS plus LBS, and to a lesser degree, in digital city, and land and resource filling systems based on Geographic Information Systems ("GIS") technologies which are used to service both the public and private sector.

First Quarter Financial Performance Highlights

We continued to experience consistent demand for our products and services during the first quarter of 2012, which resulted in sustained growth in our project backlog. In the first quarter of 2012, the Company won new contracts worth $57.85 million, compared to $13.44 million in the same period prior year. The transportation information industry in China is experiencing a rapid and continued development along with a sustained increase in the Chinese government and public demand for advanced transportation information products and services to support more effective and efficient transportation networks within China. This trend is supported by steady governmental spending in the transportation sector. We believe this trend will continue to benefit our business operations.

The following are some financial highlights for the first quarter of 2012:

º Net sales - Our net sales were approximately $28.93 million for the first quarter of 2012, a decrease of 20.74% from the same quarter of the previous year.

º Gross Margin - Gross margin was 33.12% for the first quarter of 2012, as compared to 28.47% for the same period in 2011.

º Operating Profit - Operating profit was approximately $2.65 million for the first quarter of 2012, a decrease of 35.03% from $4.07 million for the same quarter of the previous year.

º Net Income - Net income was approximately $2.42 million for the first quarter of 2012, a decrease of 18.47% from $2.97 million for the same quarter of the previous year.

Critical Accounting Estimates

As discussed in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, we consider our estimates on revenue recognition, vendor allowances and amortization of intangibles to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements. There have been no significant changes to these estimates in the three months ended March 31, 2012.

Recently Issued Accounting Guidance

See Note 2 to condensed consolidated financial statements included in Item 1, Financial Information, of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

The following table sets forth selected items from our unaudited condensed
consolidated statements of income by dollar and as a percentage of our net sales
for the periods indicated:

                                      Three Months Ended            Three Months Ended
                                        March 31, 2012                March 31, 2011
                                                     % of                          % of
                                     Amount        Net Sales       Amount        Net Sales
Net sales                        $  28,928,717       100.00%   $  36,499,159       100.00%
Cost of sales                      (19,346,112 )     (66.88% )   (26,106,038 )     (71.53% )
Gross profit                         9,582,605        33.12%      10,393,121        28.47%
Total operating expenses            (6,937,046 )     (23.98% )    (6,321,059 )     (17.32% )
Income from operations               2,645,559         9.15%       4,072,062        11.15%
Non-operating income                   724,433         2.50%          60,255         0.17%
Income before income taxes,          3,369,992        11.65%       4,132,317        11.32%
non-controlling interests, and
gain on equity investment
Income taxes                          (578,268 )      (2.00% )      (501,125 )      (1.37% )

Net income before
non-controlling interests and
gain
on equity investments in             2,791,724         9.65%       3,631,192         9.95%
affiliates
Gain on investments in                 379,253         1.31%         332,636         0.91%
affiliates due to proportional
shares of the affiliates net
income
Net income before                    3,170,977        10.96%       3,963,828        10.86%
non-controlling interests
Non-controlling interests in net      (751,681 )      (2.60% )      (996,552 )      (2.73% )
income of subsidiary

Net income                       $   2,419,296         8.36%   $   2,967,276         8.13%

Net Sales - Net sales decreased by $7.57 million, or 20.74%, to $28.93 million for the three months ended March 31, 2012, from $36.50 million during the same period of 2011. Approximately 95.25% of this decrease is attributable to the decrease of our transportation business in the first quarter of 2012. As compared to the same period of 2011, net sales of our transportation business decreased by approximately 20.52%. Such a decrease predominantly resulted from a temporary fluctuation of the execution process of existing contracts in our ITS business. Because our ITS business is conducted on a contract basis, progress towards contract completion could vary from quarter to quarter, which would affect our revenue recognition. However, we expect the demand for our products and services to be generally steady and consistent over the years.

The following table illustrates the revenues from the major Chinese government sectors and regulated industries in which we sell our products and services for the periods indicated. The table also provides the percentage of total revenues represented by each listed sector.

                        Three Months Ended           Three Months Ended
                          March 31, 2012               March 31, 2011
                                     % of Net                     % of Net
                      Net Sales       Sales        Net Sales       Sales
Transportation     $  27,928,735       96.54%   $  35,139,327       96.27%
Digital City              78,741        0.27%           6,363        0.02%
Land and resources             -            -           3,045        0.01%
Other                    921,241        3.19%       1,350,424        3.70%
Net sales          $  28,928,717      100.00%   $  36,499,159      100.00%

Gross Profit - Our gross profit decreased approximately $0.81 million, or 7.80%, to approximately $9.58 million for the three months ended March 31, 2012, from approximately $10.39 million during the same period of 2011. Our gross profit decrease was mainly attributable to the decrease in revenue in the first quarter compared to the same period of prior year. However, our gross profit decrease was proportionally less than our revenue decrease from the same period of 2011 to 2012, which resulted in an increase in our gross margin by 4.65% from 28.47% during the same period of 2011 to 33.12% for the three months ended March 31, 2012. This increase in gross margin was mainly due to the projects we performed in the first quarter of 2012 required less purchased hardware and subcontracting services than the ones that we performed in the same period of prior year.

Our marketing expenses therefore were relatively low in comparison to our competitors who do not have a record of performance and brand recognition or well-established government contacts. Since 2011, we have enhanced our marketing efforts by organizing various industry trade exhibitions and conferences in order to further promote our corporate image and brand recognition within the transportation information industry in China.

Total operating expenses increased by $0.62 million, or 9.74%, to $6.94 million for the three months ended March 31, 2012, from $6.32 million during the same period of 2011. The increase is due to the following:

º Our selling expenses including sales representative commissions, promotion fees and marketing expenses, increased approximately $0.24 million, or 29.54%, to $1.06 million for the three months ended March 31, 2012, from $0.82 million during the same period of 2011. As a percentage of net sales, selling expenses increased to 3.68% for the three months ended March 31, 2012, from 2.25% during the same period of 2011. The increase of selling expenses was mainly attributable to the fact that the Company was more active in new contract bidding and as a result, incurred more expenses in connection with selling activities including travelling, lodging, and sales related administration. The increase in selling expenses as a percentage of net sales for the three months ended March 31, 2012 is mainly attributed to the fact that the Company won more new contracts, while the execution of existing contracts was relatively slower due to temporary fluctuations which resulted in lower revenue recognition as compared to the same period of prior year.

º Our general and administrative expenses were approximately $5.87 million (20.30% of total sales) and approximately $5.50 million (15.07% of total sales) for the three months ended March 31, 2012 and 2011, respectively. The increase in administrative expenses was mainly attributable to the development of Beijing Transwiseway's commercial vehicle LBS business which resulted in higher labor and administration expenses compared to the same period of prior year.

Income Taxes - For the three months ended March 31, 2012, we recognized income tax expense of $0.58 million and effective tax rate of 17.16% while in the same period of 2011, we recognized income tax expense of $0.50 million and effective tax rate of 12.13% . We paid more income taxes with lower net sales mainly because some VIEs with relatively higher tax rates contributed more to the income before taxes than other VIEs with lower tax rates as compared to the same period of last year.

Liquidity and Capital Resources

Our principal liquidity requirements are for working capital, capital expenditures and cash dividends to non-controlling shareholders of subsidiaries. We fund our liquidity requirements primarily through cash on hand, cash flow from operations and borrowings from our revolving credit facility. We believe our cash on hand, future funds generated from operations and borrowings from our revolving credit facility will be sufficient to fund our cash requirements for at least the next twelve months. There is no assurance, however, that we will be able to generate sufficient cash flow or that we will be able to maintain our ability to borrow under our revolving credit facility.

As of March 31, 2012, we had cash and cash equivalents (excluding restricted cash) of approximately $31.83 million and restricted cash of approximately $4.70 million. The following table provides detailed information about our net cash flow for all financial statements periods presented in this report.