ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of January 7, 2009 (the "Effective Date") by and betweenthe following Parties:

(1) SHOUGUANG CITY HAOYUAN CHEMICAL COMPANY LIMITED, a company validly existing under the laws of China ("SCHC"), a subsidiary of Gulf Resources, Inc.("GUFR"); and

(2) Fenqiu Yuan，Han Wang and Yufen Zhang, three individual residents of China who collectively own private land use rights located in the Shouguang City Renjiazhuangzi Village North Area (the “Sellers”)

WHEREAS: Fenqiu Yuan，Han Wang and Yufen Zhang wish to sell, transfer and convey certain assets listed on Schedule 1 hereto, to SCHC, and SCHC wishes to purchase and acquire the same from the Sellers.

NOW, THEREFORE, in consideration of the mutual promises contained herein, and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:

1. CERTAIN DEFINITIONS

"Ordinary Course of Business" shall mean an action taken by Fenqiu Yuan，Han Wang and Yufen Zhang if such action is taken in normal operation of the assets, consistent with past practices.

"Closing" The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at SCHC's offices, on or before January 30, 2009 and in no event later than January 30, 2009 (the "Closing Date").

"GUFR" shall mean Gulf Resources, Inc., a Delaware corporation and parent of SCHC.

"GUFR Common Stock" shall mean the common stock of GUFR.

"Person" shall mean any individual, entity or governmental body.

2. TRANSFER OF THE ASSETS

2.1 Fenqiu Yuan，Han Wang and Yufen Zhang agree that, upon the Closing, they will sell, transfer and deliver unto SCHC, its successors and assigns forever, by duly executed deed(s), bills of sale, assignment(s) or other instrument(s) of conveyance, for the consideration hereinafter provided, all of the Sellers’ right, title and interest in and to all assets owned by Fenqiu Yuan，Han Wang and Yufen Zhang located at the Shouguang City Renjiazhuangzi Village North Area, including, but not limited to, machinery, equipment, inventory (raw materials, work-in-progress and finished goods), and any warranties associated therewith; said assets to be limited to those listed and described on Schedule 1 attached hereto and incorporated herein by reference (the "Purchased Assets").

2.2 As full consideration for the sale, assignment, transfer and delivery of  Purchased Assets to SCHC and for the value of the rights to the Leased Property , and upon the terms and subject to all of the conditions contained herein,

(a) SCHC shall pay to the Sellers the sum of $10,000,000 in cash in the aggregate; and

(b) GUFR shall issue to the Sellers GUFR Common Stock in the principal amount of $1,500,000 in the aggregate (the “Purchase Price Shares”).

2.3The parties understand and acknowledge that the total purchase price for the Purchased Assets and the Leased Property is $11,500,000 (the "Purchase Price") and that the Purchase Price is based upon an approximate valuation of the Shouguang City Renjiazhuangzi Village North Area at $11,500,000. The number of "Purchase Price Shares" shall be equal to $1 per share, which is approximately five times the 2008 EPS of GUFR. So the number of Purchase Price Shares to be issued pursuant hereto is 1,500,000, in the aggregate and will be delivered to the sellers within 30 days after the closing date .

2.4 Upon execution of this Agreement by all of the parties, SCHC shall deliver to FENQIU YUANHAN WANG AND YUFEN ZHANG a security deposit of $2,000,000 (the "Security Deposit"). Three days after the date hereof, SCHC will establish an asset assessment team to assess the condition and the operation of  the Purchased Assets and the Leased Property for transfer and conveyance to SCHC for a period of 10 days thereafter.  SCHC shall pay the remainder of the cash portion within 10 days of the receipt of a report from the assessment team that is acceptable to SCHC with respect to the Purchased Assets and Leased Property.  If the reports concludes that the condition of the Purchased Assets is not acceptable, SCHC and the Sellers shall negotiate a reduction in the Purchase Price.  If such amount can not be mutually agreed, SCHC shall have the right to terminate this Agreement and the Security Deposit shall be returned to SCHC.  As of the date hereof, both parties have started the formal transfer procedures (including the related property lease contracts, etc.)

2.5 If SCHC cannot pay off the remainder of the cash portion within the time period provided in Section 2.4 above, the Sellers have the right to terminate this Agreement and to retain the Security Deposit with no further obligations or liabilities to SCHC or GUFR.

2.6 As a result of this Agreement, the Purchased Assets( schedule 1) including, without limitation, any and all bromine and crude salt that can be produced on the Leased Property, buildings, equipment, wells, pipelines, and power circuits will be acquired by SCHC; provided, however, that any and all debts, obligations and liabilities (the “’Obligations”) of FENQIU YUAN, HAN WANG AND YUFEN ZHANG relating to the Purchased Assets and the Leased Property are specifically excluded from such Purchased Assets and shall remain the Obligations of the Sellers after the Closing.

3. REPRESENTATIONS AND WARRANTIES

3.1 Each of FENQIU YUAN，HAN WANG AND YUFEN ZHANG represent and warrant to SCHC the following:

(a) Authority. FENQIU YUAN，HAN WANG AND YUFEN ZHANG each has the individual power and authority to execute and deliver this Agreement and to perform his respective obligations hereunder, and to consummate the transactions hereby, and upon the execution and delivery of the instruments and documents specified herein, except for the covenant by the Sellers to assist SCHC to sign a new 50 year land lease contract with the village for the Lease Property. no further action will be required of FENQIU YUAN，HAN WANG AND YUFEN ZHANG to vest legal title to and possession of the Purchased Assets and the Leased Property in the Purchaser, its successors and assigns forever.

(b) Title to Assets. FENQIU YUAN，HAN WANG AND YUFEN ZHANG has good and marketable title to the Purchased Assets and has the appropriate land use right certificates, or other required governmental approval evidencing the rights to use the Leased Property and ability to transfer the Leased Property, free and clear of liens or encumbrances of any kind and no person, firm or corporation has any undisclosed adverse interest therein.  The lease payment due under the 50-year land lease for