China Architectural Engineering Revises Fourth Quarter Guidance

China Architectural Engineering, Inc. (CAE) (NASDAQ/GS:CAEI), a leader in the design, engineering, fabrication and installation of high-end building envelope systems, today announced that it is negatively revising its guidance for its fourth quarter ending December 31, 2008 due to increased cost estimates for certain running projects and an expected $2.5 million bad debt provision.

The Company uses, in compliance with US GAAP, the percentage-of-completion accounting method, under which revenues are measured by the percentage-of-costs incurred to date divided by the total budgeted costs. At the beginning of certain running projects, the expected revenues, costs and gross profits on each project were projected by CAE management based on the expected contract revenues and budgeted cost. As is standard in the construction industry, a recent interim review by CAE management of actual incurred and further projected costs versus budgeted costs related to these projects has caused management to review its estimates and decrease the gross profit related to these projects primarily as a result of higher than expected startup, transportation, material and labor costs. In accordance with the "balance sheet approach and accumulative catch up" accounting for these revised estimates, the impact of this change of best estimates from management on the running projects during 2008, will be entirely accounted for in the fourth quarter of 2008.

The Company also reported that it will be following a more prudent accounting practice due to the global economic downturn which has caused slowing customer payments. Accordingly, the Company expects to record a bad debt provision of approximately $2.5 million during its fourth quarter.

Despite the adjustments and impact thereof on the fourth quarter, the Company expects earnings for 2008 to be between $18 million and $20 million, or $0.34 to $0.37 per basic earnings per share for the full year 2008, which represents an increase of 46% to 58% compared to the year 2007.

Ken Yi Luo, Chairman and Chief Executive Officer of China Architectural Engineering, said, "CAE has grown rapidly in recent years and largely transformed itself through a period of significant international expansion, during which the Company has been awarded a number of major projects. As a result of management's interim review of running projects, we have decided to adjust the estimated gross profit related to certain projects which, together with our provision for bad debt, will negatively impact our fourth quarter financial results and our 2008 results. We believe the continued demand for our specialized products and services globally, highlighted by our strong backlog of projects and consequent visibility for our revenues in 2009, will enable us to achieve continued growth and expansion as we head into a new year in a challenging economic environment."

Bert Grisel, the Company's recently announced CFO said, "These prudent accounting measures demonstrates management is committed to following effective internal control procedures, including, but not limited to, regular reviews of our budgeted costs. Our status as a public company requires that we adhere to the highest quality of financial reporting standards and we will continue to focus and review our internal and external control where necessary, to ensure we meet these requirements."

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