China America Holdings, Inc. (OTCBB:CAAH) is a diversified global holdings company with operations in the U.S. and China. China America Holdings has three operating divisions. Shanghai Aohong Chemical Co., based in Shanghai, China, is a distributor of assorted liquid coolants which are utilized in a variety of applications, primarily as refrigerants in air conditioning systems for automobiles, residential and commercial air conditioning systems, and a manufacturer of steel non-refillable cylinders. For more information, please visit http://www.shanghaiaohong.com/English/index.asp. Web site: http://www.chinaamericaholdings.com

1. MARKET SNAPSHOT
China America Holdings, Inc.
OTCBB : CAAH
China America Holdings, Inc. (CAH) is a holding company that owns a 56% stake in Shanghai Aohong
Chemical Co., Ltd. based in Shanghai, China. Shanghai Aohong Chemical Co., Ltd. is a distributor of
distributes hydrofluorocarbon (HFC) refrigerants and assorted liquid coolants which are utilized in a variety
of applications, primarily as refrigerants in air conditioning systems for automobiles, residential and
commercial air conditioning systems. The Company’s customers include manufacturers of automobiles,
refrigeration and air conditioning systems, as well as bulk coolant distributors in China. As a result of the
Montreal Protocol, as well as China’s desire to reduce harmful emissions, CAH’s primary focus now is
distributing and marketing environmentally friendly products, as substitutes for harmful
hydrochlorofluorocarbons (HCFCs), hydrofluorocarbons, (HFCs) and chlorofluorocarbons (CFCs),
worldwide to multiple markets.
Refrigerants - A Primer
There are a large number of refrigerants and foaming agents in use today. Some of these are single or pure
substances, but many are blends of two or more substances. Sometimes pure substances are referred to
using their chemical group name, for example, HCFC-22, HFC-134a and HCFC-141b. Refrigerant blends
are referred to by their so-called “R-numbers” (developed by DuPont), which are internationally recognized
classifications for particular mixtures of substances. For example, R-410a is a mixture of 50% HFC-32 and
50% HFC-125. Therefore, “HFC” and “R” are often used interchangeably. 1
Commonly used refrigerants are HCFCs (R-22, used in most homes today) and HFCs (R-134a, used in
most cars) have replaced most CFC use. HCFCs in turn are being phased out under the Montreal Protocol
and replaced by hydrofluorocarbons (HFCs), such as R-410a, which lack chlorine. These fluorinated gases
have very high GWPs and are dangerous greenhouse gases. 2
According to our research, the most common refrigerants are indeed R-22, R-134a and R-410a. As with
many environmental issues, there is still some debate as to the atmospheric harmfulness of various
refrigerants. While it is common knowledge that CFCs and R-22 are bad for the ozone layer, there are
questions as to the damage caused by others, such as R-134a. Furthermore, it appears that certain
refrigerants, while better for the environment in one aspect, might be harmful in another. What can be
generally agreed upon, however, are the important characteristics of refrigerants (the order of importance
would be debated though):
1. Efficacy – how cool a refrigerant is, under what conditions, and in what quantities
2. Cost – supply and demand
1
Preparing for HCFC phase-out: Fundamentals of uses, alternatives, implications and funding for Article 5
countries, United Nations Industrial Development Organization
2
whatsyourimpact.eu.org

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3. Toxicity – if there is a leak or damage to a cooling unit (particularly important with transportation)
4. Flammability
5. Atmospheric Life
Hydrofluorocarbons or “HFCs” have been increasingly used in the last decade or so as an alternative to
ozone damaging CFCs in refrigeration systems. Unfortunately, though they provide an effective alternative
to CFCs (now banned under the Montreal Protocol), they can also be powerful greenhouse gases with long
atmospheric lives.
The three main HFCs are HFC-23, HFC-134a and HFC152a, with HFC-134a being the most widely used
refrigerant. Since 1990, when it was almost undetectable, concentrations of HFC-134a have risen
massively. HFC-134a has an atmospheric lifetime of about 14 years and its abundance is expected to
continue to rise in line with its increasing use as a refrigerant around the world.
The production and consumption of HCFCs in developing countries, particularly in air conditioning, the
refrigeration sector and foam industries, have also grown significantly over the past five years, and without
action this growth is expected to continue. It is use in these developing countries, many of which do not
subscribe to, or are behind in, the Montreal Protocol, that is of primary concern to environmentalists.
Based on 2006 consumption trends, The Multilateral Fund estimates that global production and
consumption of HCFCs could double by 2015, adding to the dual challenges of ozone depletion and climate
change. The level of HCFCs and their emissions therefore poses a significant challenge to the reduction of
ozone depletion.
In the U.S., beginning in 2010, two important federal rules took effect regarding the use of certain HCFCs.
The regulations’ main purpose is to further restrict the use of substances that allegedly harm the earth’s
protective ozone layer and contribute to climate change. The restrictions are required both by an
international treaty and federal law. The targeted chemicals are HCFCs primarily used as refrigerants,
specifically R-22, -142b, -123, -124, -225ca, and -225cb.
As with any phase out that affects business and industry on such a massive scale, however, it is likely to be
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a slow process. First, most countries’ laws choose installed equipment of a certain age for a given ban.
The U.S. with R-22, for example, is anything in use before the end of 2009. There are also exceptions for
certain medical equipment and reclaimed and recycled R-22. Therefore, as evidenced below, demand for
R-22 is and will remain strong for the foreseeable future. And in rapidly developing countries such as
China, likely even more so.
Chinese Environmental Policies
China is in fact part of the Montreal Protocol on Substances That Deplete the Ozone Layer, an international
treaty designed to protect the ozone layer by phasing out the production of a number of ozone depleting
substances (ODSs), including CFCs and some HCFCs used as refrigerants. It is believed that if the
international agreement is adhered to, the ozone layer is expected to recover by 20503 .
Over the past five years, China’s central government has undertaken aggressive policies to improve
pollution, with new and revised pollution control laws and open information measures creating more
transparency and pressure for many industries. Each province, autonomous region and municipality has
made increasing efforts in environmental protection, phased out a range of out-of-date productivity with
high consumption of resources and heavy pollution, accelerated pollution control and construction of urban
environmental infrastructure. Indeed, Beijing's allocation of more than $220 billion of its $586 billion
stimulus package to green projects seems proof that China as a whole is concerned with reducing harmful
emissions.
China is now in its 11th “Five-Year Plan” (2006-2010) to reduce ODSs and certain harmful emissions.
During the 10th plan, overall societal investment in environmental protection doubled that of the “9th Five-
Year Plan” period, exceeding 1% of GDP for the first time.
Huge Demand for Alternatives
All of this leads to huge demand for alternative refrigerants in the coming years. Many alternatives to
HFCs, such as hydrocarbon (HCs) based coolants, are already commercially available, but the cost
effectiveness is the issue. Phasing out of HFC and HCFC use, and careful collection and disposal of
existing refrigerants, seems the best option now available in the context of limiting their greenhouse gas
impact. But scientists are constantly developing new refrigerants that will likely replace the existing menu
eventually.
3
Speth, J. G. 2004. Red Sky at Morning: America and the Crisis of the Global Environment New Haven: Yale
University Press, pp 95.
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4. MARKET REPORT
Chinese Automotive Market
It’s no surprise that China is one of
the most lucrative and rapidly
expanding economic markets in the
world. Even in the midst of the
global economic downturn, China's
retail sales hit ¥12.5 trillion ($1.8
trillion) in 2009, up 15.5% over the
previous year. China's booming
retail sales are underpinned by the
steady rise of household income. In
2009, the per capita disposable
income in urban areas reached
¥17,175 ($2,515), nearly triple what
it was a decade ago. Within the
retail market, personal transportation
(motor vehicles, motorcycles, fuel,
and auto parts) is among the most lucrative retail businesses in China (see Table 1 above). These businesses
contributed over 39% of China's total retail revenue in 2008. A natural consequence of the rise in income
comes the increased desire for personal transportation rather than public.
CAH is also heavily focused on the automotive market and is expected to increase that focus over time.
China’s sales of passenger cars grew by almost two-thirds in March to 1.26 million after surging over 85%
in the first two months of this year. Chinese consumers are forecast to buy a record 15 million vehicles in
2010, shattering the record 13.5 million in 2009 that made the country the world's top car buyer. China has
approximately 35 million cars on the road today and experts predict that there will be 120 million cars by
2020. In addition, Chinese automakers are seeing demand surge like never before, currently enjoying an
approximate 25% global market share and second in the world after Japan. China’s biggest automaker
SAIC said that the booming domestic auto sales boosted its first-quarter net profit which more than
quadrupled to ¥627 million from a year ago.
Source: www.fourin.com
Competition
As most industries in China, the refrigerant industry both within China and globally is increasingly
competitive and very fragmented. The Company’s competitors include the hundreds, if not thousands, of
smaller independent suppliers, as well as large chemical companies that are eager to enter the Chinese
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5. MARKET REPORT
market and who would most likely have significantly more financial resources to penetrate. In addition,
large companies are constantly developing alternative coolants, addressing the burgeoning demand alluded
to previously.
Honeywell (NYSE:HON) and DuPont (NYSE:DD), for example, recently announced a joint venture to
manufacture a new, environmentally friendly automotive air conditioning refrigerant called HFO-1234yf.
The companies state that this new product has 99.7% lower global warming potential (GWP) than R-134a.
This is likely not the last of new developments in this industry.
Furthermore, DuPont recently announced its intent to acquire a minority share in Changshu 3F Zhonghao
New Chemical Materials Co., Ltd., a Chinese company and incidentally CAH’s largest customer.
According to DuPont, the relationship is expected to “enable a faster response to rapidly growing regional
markets for our broad portfolio of fluorochemicals across all applications. This applies for existing and
future chemistries for refrigerants or for our specialty fluorochemicals markets.” Clearly DuPont sees
getting a foothold in China as smart (and necessary) business.
One advantage for CAH, however is that it is a distributor, not a manufacturer. Therefore, the Company
relies largely on relationships as much as product. There are many bulk distributors that can supply
product, so to separate itself from the major players, as well as the myriad smaller competitors, the
Company needs to maintain a competitive advantage through building relationships, custom mixing,
superior delivery and top-notch customer service.
CAH Key Competitive Advantages
Advantage Explanation
The Company fills a unique wholesale link in the supply chain,
with one of China’s largest refrigerant manufacturers, Changshu
Unique Supply Chain Position 3F Zhonghao New Chemical Materials Co., Ltd. This shows that
not only can CAH distribute directly to end user manufacturers
(mobile air conditioning systems, appliances, etc.), but also can
provide raw material to other refrigerant manufacturers.
As China moves toward ever stricter environmental policy,
Key Government Relationships relationships with federal, provincial and local policymakers and
enforcement agencies will be crucial.
With unique access to raw materials, the Company has a leading
Custom Mixing market position with custom chemical mixing for the various
constituents within its target markets.
As a chemical distributor, CAH has proven its ability to timely
deliver products of correct properties in the right quantities.
Superior Customer Service Failure to do so can quickly jeopardize or eliminate a company
from a fragmented industry of this type.
By being well-connected in the industry among users,
manufacturers and technological innovators, the Company has
distinctive access to market intelligence not enjoyed by all
R&D / Market Intelligence
members in the supply chain. Within the Chinese business
environment, this is absolutely vital in maintaining a leading
position.
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