FORBEARANCE AND SETTLEMENT AGREEMENT

Exhibit 10.1

FORBEARANCE AND SETTLEMENT AGREEMENT

          THIS FORBEARANCE AND SETTLEMENT AGREEMENT (the “Agreement”) is made and entered into effective as of December 29, 2006, between XINHUA CHINA LTD., a Nevada corporation (the “Company”), CORNELL CAPITAL PARTNERS, L.P. (“Cornell”), and HIGHGATE HOUSE FUNDS, LTD. (“Highgate”).  Cornell and Highgate are collectively referred to herein as the “Buyers.” All terms not otherwise defined herein shall have the meaning ascribed to them in the Securities Purchase Agreement (as defined below).

          WHEREAS, in connection with the Securities Purchase Agreement among the Company and the Buyers entered into on November 23, 2005, as amended on March 23, 2006 (“Securities Purchase Agreement”) the Company has issued to the Buyers the following convertible debentures (the “Convertible Debentures”), which, as of December 29, 2006, have outstanding principal and accrued and unpaid interest stated in table below:

          WHEREAS, in connection with the Securities Purchase Agreement, on November 23, 2005, as amended on March 23, 2006 the Company and the Buyers also entered in (a) an Investor Registration Rights Agreement (the “Registration Rights Agreement”), (b) a Security Agreement (the “Security Agreement”), and (c) along with Pacific Stock Transfer, Irrevocable Transfer Agent Instructions (the “Transfer Agent Instructions”).  The Convertible Debentures, the Securities Purchase Agreement, the Registration Rights Agreement, Security Agreement, the Transfer Agent Instructions, and all other agreements entered into between the Company and Buyers in connection therewith are collectively referred to herein as the “Transaction Documents”. 

          WHEREAS, the Company has an opportunity to sell its Beijing Boheng Investments subsidiary (the “Subsidiary”) for a purchase price which will be paid to the Company periodically over the course of approximately two years and which sale of the Subsidiary requires the consent of Cornell and Highgate. 

          WHEREAS, the Company wishes to use the proceeds from the sale of the Subsidiary as received to repay principal and accrued and unpaid interest due to the Buyers under the Convertible Debentures under the terms and conditions as set forth herein.

          WHEREAS, in connection with the Securities Purchase Agreement, on November 23, 2005, the Company issued to Highagte a warrant (the “Warrant”) to purchase 1,035,000 shares of the Company’s common stock (the “Warrant Shares”). 

          WHEREAS, the Company acknowledges that it has failed to obtain effectiveness of the Registration Statement within 120 days after filing thereof (the Registration Statement was filed on March 28, 2006), which requires the Company to pay to the holders of the Convertible Debentures as liquidated damages and not as a penalty, a cash amount equal to two percent (2%) per month of the outstanding principal amount of the Convertible Debentures outstanding starting within three (3) business days from the end of the month in which the Scheduled Effective Deadline occurred.

          NOW, THEREFORE, in consideration of the mutual promises, conditions and covenants contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:

1.       The Company hereby acknowledges, confirms and agrees:

a.	That amounts owed, together with interest accrued and accruing thereon (collectively, the “Obligations”) now or hereafter payable by the Company to the Buyers under the Convertible Debentures and the Transaction Documents are unconditionally owing by the Company to the Buyers, without offset, setoff, defense or counterclaim of any kind, nature or description whatsoever.
b.	That: (1) each of the Transaction Documents to which it is a party has been duly executed and delivered to the Buyers by the Company, and each is in full force and effect as of the date hereof, (2) the agreements and obligations of the Company contained in such documents and in this Agreement constitute the legal, valid and binding obligations of the Company, enforceable against it in accordance with their respective terms, and the Company has no valid defense to the enforcement of such obligations, (3)  the Buyers are and shall be entitled to the rights, remedies and benefits provided for in the Transaction Documents and applicable law, without offset, setoff, defense or counterclaim of any kind, nature or descriptions whatsoever, and (4) it has no claims, actions, cause of action, suits, judgments, and demands whatsoever, in law, admiralty or equity, against the Buyers or their affiliates.
c.	That the Buyers have and shall continue to have valid, enforceable and perfected first-priority liens upon and security interests in the Pledged Property (as defined in the Transaction Documents) heretofore granted pursuant to the Security Agreement, or otherwise granted to or held by the Buyer.
d.	That as of November 28, 2006, the Company owes to the Buyers liquidated damages pursuant to Section 2(c) of the Registration Rights Agreement in an amount equal to $260