China Biologic Products, Inc. (Form: 10-Q, Received: 08/04/2016 16:34:54)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10−Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 001-34566

CHINA BIOLOGIC PRODUCTS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		75-2308816
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

18th Floor, Jialong International Building

19 Chaoyang Park Road
Chaoyang District, Beijing 100125
People’s Republic of China

(Address of principal executive offices, Zip Code)

(+86) 10-6598-3111

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of each of the issuer’s classes of common stock, as of August 04, 2016 is as follows:

Class of Securities		Shares Outstanding
Common Stock, $0.0001 par value		26,892,701

Quarterly Report on Form 10-Q

Three Months Ended June 30, 2016

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3. Quantitative and Qualitative Disclosures About Market Risk	22
Item 4. Controls and Procedures	23

PART II
OTHER INFORMATION

Item 1. Legal Proceedings	24
Item 1A. Risk Factors	25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3. Defaults Upon Senior Securities	26
Item 4. Mine Safety Disclosures	26
Item 5. Other Information	26
Item 6. Exhibits	26

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Contents		Page
Unaudited Condensed Consolidated Balance Sheets		1
Unaudited Condensed Consolidated Statements of Comprehensive Income		2
Unaudited Condensed Consolidated Statements of Cash Flows		3
Notes to the Unaudited Condensed Consolidated Financial Statements		5

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	Note		June 30, 2016			December 31, 2015
			USD			USD
ASSETS
Current Assets
Cash and cash equivalents				204,033,989			144,937,893
Time deposits				-			38,032,593
Accounts receivable, net of allowance for doubtful accounts		2		38,258,676			25,144,969
Inventories		3		136,038,217			126,395,312
Prepayments and other current assets, net of allowance for doubtful accounts				21,587,018			24,545,597
Deposits related to land use rights, current portion		5		4,901,341			10,056,200
Total Current Assets				404,819,241			369,112,564

Property, plant and equipment, net		4		126,417,723			105,364,251
Land use rights, net				24,227,992			23,576,300
Equity method investment				8,579,872			8,718,133
Loan receivable		6		45,240,000			39,834,173
Other non-current assets				2,445,957			4,861,075
Total Assets				611,730,785			551,466,496

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable				6,525,540			9,681,835
Other payables and accrued expenses				49,276,574			57,462,563
Income tax payable				8,689,920			4,510,986
Total Current Liabilities				64,492,034			71,655,384

Deferred income				4,180,364			4,525,867
Other liabilities				7,538,073			8,323,446
Total Liabilities				76,210,471			84,504,697

Stockholders’ Equity
Common stock:
par value $0.0001;
1,000,000,000 shares and 100,000,000 shares authorized at June 30, 2016 and December 31, 2015, respectively;
29,061,130 and 28,835,053 shares issued at June 30, 2016 and December 31, 2015, respectively;
26,806,426 and 26,580,349 shares outstanding at June 30, 2016 and December 31, 2015, respectively				2,906			2,884
Additional paid-in capital				117,265,271			105,079,845
Treasury stock: 2,254,704 shares at June 30, 2016 and December 31, 2015, at cost				(56,425,094	)		(56,425,094	)

Retained earnings				390,654,384			333,704,094
Accumulated other comprehensive income				(8,889,230	)		(18,605	)
Total equity attributable to China Biologic Products, Inc.				442,608,237			382,343,124

Noncontrolling interest				92,912,077			84,618,675

Total Stockholders’ Equity				535,520,314			466,961,799

Commitments and contingencies		6 and 11		-			-

Total Liabilities and Stockholders’ Equity				611,730,785			551,466,496

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

			For the Three Months Ended						For the Six Months Ended
	Note		June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
			USD			USD			USD			USD
Sales		10		91,421,155			79,068,452			177,008,866			149,422,783
Cost of sales				31,482,146			27,054,626			65,525,581			51,516,201
Gross profit				59,939,009			52,013,826			111,483,285			97,906,582

Operating expenses
Selling expenses				3,026,457			2,604,660			4,254,127			4,555,348
General and administrative expenses				12,573,683			8,121,390			23,901,696			15,974,585
Research and development expenses				1,303,815			1,046,985			2,398,538			2,389,307
Income from operations				43,035,054			40,240,791			80,928,924			74,987,342

Other income (expenses)
Equity in income (loss) of an equity method investee				259,850			(666,233	)		43,535			(761,300	)
Interest expense				(88,528	)		(675,860	)		(177,078	)		(1,432,681	)
Interest income				1,292,069			1,467,135			3,043,209			2,843,982
Total other income, net				1,463,391			125,042			2,909,666			650,001

Earnings before income tax expense				44,498,445			40,365,833			83,838,590			75,637,343

Income tax expense		7		7,006,764			6,123,661			13,613,867			11,739,811

Net income				37,491,681			34,242,172			70,224,723			63,897,532

Less: Net income attributable to noncontrolling interest				6,738,646			7,518,213			13,274,433			14,011,101

Net income attributable to China Biologic Products, Inc.				30,753,035			26,723,959			56,950,290			49,886,431

Net income per share of common stock:		12
Basic				1.12			1.05			2.08			1.96
Diluted				1.10			0.99			2.05			1.86
Weighted average shares used in computation:		12
Basic				26,698,996			25,019,039			26,642,461			24,918,517
Diluted				27,152,560			26,320,773			27,145,470			26,265,857

Net income				37,491,681			34,242,172			70,224,723			63,897,532

Other comprehensive income:
Foreign currency translation adjustment, net of nil income taxes				(13,267,360	)		1,463,605			(10,697,608	)		609,243

Comprehensive income				24,224,321			35,705,777			59,527,115			64,506,775

Less: Comprehensive income attributable to noncontrolling interest				4,468,767			7,831,571			11,447,450			14,286,683

Comprehensive income attributable to China Biologic Products, Inc.				19,755,554			27,874,206			48,079,665			50,220,092

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Six Months Ended
	June 30,			June 30,
	2016			2015
	USD			USD
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		70,224,723			63,897,532
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		4,590,028			4,123,599
Amortization		438,916			415,231
Loss on sale of property, plant and equipment and land use rights		115,075			313,529
Allowance for doubtful accounts - accounts receivable, net		6,604			35,372
Allowance for doubtful accounts - other receivables and prepayments		-			796
Allowance for doubtful accounts - other non-current assets		1,225,200			-
Write-down of obsolete inventories		61,497			16,750
Deferred tax (benefit) expense		(1,584,958	)		167,921
Share-based compensation		9,307,099			4,033,482
Equity in (income) loss of an equity method investee		(43,535	)		761,300
Excess tax benefits from share-based compensation arrangements		-			(288,681	)
Change in operating assets and liabilities:
Accounts receivable		(13,856,209	)		(18,835,493	)
Prepayment and other current assets		2,433,998			(1,165,997	)
Inventories		(12,522,807	)		(25,272,719	)
Accounts payable		(3,001,361	)		10,123,561
Other payables and accrued expenses		(4,465,594	)		(2,391,597	)
Deferred income		(255,394	)		(149,708	)
Income tax payable		4,339,536			(1,223,601	)
Net cash provided by operating activities		57,012,818			34,561,277

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for property, plant and equipment		(25,222,545	)		(16,486,212	)
Payment for intangible assets and land use rights		(1,351,789	)		(4,205,678	)
Refund of deposits related to land use right		6,461,924			-
Proceeds from sale of property, plant and equipment and land use rights		100,424			559,029
Long-term loan lent to a third party		(6,331,518	)		-
Net cash used in investing activities		(26,343,504	)		(20,132,861	)

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

	For the Six Months Ended
	June 30,			June 30,
	2016			2015
	USD			USD
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock option exercised		2,364,952			771,164
Repayment of short-term bank loans		-			(97,910,360	)
Maturity of deposit as security for bank loans		37,756,405			31,985,122
Excess tax benefits from share-based compensation arrangements		-			288,681
Dividend paid by subsidiaries to noncontrolling interest shareholders		(7,921,952	)		-
Net proceeds from reissuance of treasury stock		-			80,583,959
Dividend to the trial court to be held in escrow as to dispute with Jie’an		-			(3,690,814	)
Net cash provided by financing activities		32,199,405			12,027,752

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH		( 3,772,623	)		(661,684	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		59,096,096			25,794,484

Cash and cash equivalents at beginning of period		144,937,893			80,820,224

Cash and cash equivalents at end of period		204,033,989			106,614,708

Supplemental cash flow information
Cash paid for income taxes		10,841,209			12,829,660
Cash paid for interest expense		-			1,428,614
Noncash investing and financing activities:
Acquisition of property, plant and equipment included in payables		9,312,476			231,397

See accompanying notes to Unaudited Condensed Consolidated Financial Statements.

CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016 AND 2015

NOTE 1 – BASIS OF PRESENTATION, SIGNIFICANT CONCENTRATION AND RISKS

(a)

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The December 31, 2015 consolidated balance sheet was derived from the audited consolidated financial statements of China Biologic Products, Inc. (the “Company”). The accompanying unaudited consolidated financial statements should be read in conjunction with the December 31, 2015 audited consolidated financial statements of the Company included in the Company’s annual report on Form 10-K for the year ended December 31, 2015.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of June 30, 2016, the results of operations for the three and six months ended June 30, 2016 and 2015, and cash flows for the six months ended June 30, 2016 and 2015, have been made. All significant intercompany transactions and balances are eliminated on consolidation.

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment and intangibles with definite lives, the allowances for doubtful accounts, the fair value determinations of stock compensation awards, the realizability of deferred tax assets and inventories, the recoverability of intangible assets, land use rights, property, plant and equipment, equity method investment and loan receivable, and accruals for income tax uncertainties and other contingencies.

(b)

Significant Concentration and Risks

The Company’s operations are carried out in the People’s Republic of China (the “PRC”) and are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other matters.

The Company maintains cash and deposit balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for its bank accounts located in the United States or may exceed Hong Kong Deposit Protection Board insured limits for its bank accounts located in Hong Kong or may exceed the insured limits for its bank accounts in China established by China Deposit Insurance Fund Management Institution.

Total cash at banks and deposits as of June 30, 2016 and December 31, 2015 amounted to $203,421,844 and $182,291,723, respectively, of which $2,946,043 and $3,020,569 are insured, respectively. The Company has not experienced any losses in uninsured bank deposits and does not believe that it is exposed to any significant risks on cash held in bank accounts.

The Company’s two major products are human albumin and human immunoglobulin for intravenous injection (“IVIG”). Human albumin accounted for 41.2% and 35.7% of the total sales for the three months ended June 30, 2016 and 2015, respectively, and 39.7% and 36.9% of the total sales for the six months ended June 30, 2016 and 2015, respectively. IVIG accounted for 33.6% and 43.1% of the total sales for the three months ended June 30, 2016 and 2015, respectively, and 36.6% and 44.8% of the total sales for the six months ended June 30, 2016 and 2015, respectively. If the market demands for human albumin and IVIG cannot be sustained in the future or the price of human albumin and IVIG decreases, the Company’s operating results could be adversely affected.

Substantially all of the Company’s customers are located in the PRC. There were no customers that individually comprised 10% or more of the total sales during the three months and six months ended June 30, 2016 and June 30, 2015. There was no customer represented more than 10% of accounts receivables as at June 30, 2016 and December 31, 2015, respectively. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers.

There was one supplier, namely, Xinjiang Deyuan Bioengineering Co., Ltd. (“Xinjiang Deyuan”), that comprised 10% or more of the total purchases for the three months and six months ended June 30, 2016. No supplier that comprised 10% or more of the total purchases for the three months and six months ended June 30, 2015. There was one supplier that represented more than 10% of accounts payables as at June 30, 2016 and December 31, 2015, respectively.

NOTE 2 – ACCOUNTS RECEIVABLE

Accounts receivable at June 30, 2016 and December 31, 2015 consisted of the following:

	June 30, 2016			December 31, 2015
	USD			USD
Accounts receivable		38,699,584			25,588,593
Less: Allowance for doubtful accounts		(440,908	)		(443,624	)
Total		38,258,676			25,144,969

The activity in the allowance for doubtful accounts-accounts receivable for the six months ended June 30, 2016 and 2015 are as follows:

	For the Six Months Ended
	June 30, 2016			June 30, 2015
	USD			USD
Beginning balance		443,624			433,948
Provisions		6,604			35,372
Recoveries		-			-
Write-offs		-			-
Foreign currency translation adjustment		(9,320	)		1,872
Ending balance		440,908			471,192

NOTE 3 – INVENTORIES

Inventories at June 30, 2016 and December 31, 2015 consisted of the following:

	June 30, 2016		December 31, 2015
	USD		USD
Raw materials		68,089,945		57,418,230
Work-in-process		32,894,873		27,401,062
Finished goods		35,053,399		41,576,020
Total		136,038,217		126,395,312

An inventory write-down of $1,937 and $12,174 was recorded during the three months ended June 30, 2016 and 2015, respectively. An inventory write-down of $61,497 and $16,750 was recorded during the six months ended June 30, 2016 and 2015, respectively.

NOTE 4 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at June 30, 2016 and December 31, 2015 consisted of the following:

	June 30, 2016			December 31, 2015
	USD			USD
Buildings		35,384,230			31,505,133
Machinery and equipment		54,090,284			54,640,502
Furniture, fixtures, office equipment and vehicles		7,961,117			7,859,951
Total property, plant and equipment, gross		97,435,631			94,005,586
Accumulated depreciation		(34,659,056	)		(31,521,859	)
Total property, plant and equipment, net		62,776,575			62,483,727
Construction in progress		50,951,052			26,115,927
Prepayment for property, plant and equipment		12,690,096			16,764,597
Property, plant and equipment, net		126,417,723			105,364,251

Depreciation expense for the three months ended June 30, 2016 and 2015 was $2,322,405 and $1,922,579, respectively. Depreciation expense for the six months ended June 30, 2016 and 2015 was $4,590,028 and $4,123,599, respectively.

NOTE 5 – DEPOSITS RELATED TO LAND USE RIGHTS

In 2012, Guizhou Taibang made a refundable payment of RMB83,400,000 (approximately $12,576,720) to the local government in connection with the public bidding for a land use right in Guizhou Province. Given the decrease of the land area to be provided by the local government, RMB13,000,000 (approximately $1,960,400) and RMB10,000,000 (approximately $1,508,000) was refunded by the local government in December 2013 and January 2014, respectively. Guizhou Taibang completed the bidding and purchased the land use right in December 2015. In April and June 2016, RMB16,082,462 (approximately $2,425,235) and RMB18,015,279 (approximately $2,716,704) was refunded by the local government, respectively. The remaining deposit is expected to be refunded by the end of 2016.

NOTE 6 – LOAN RECEIVABLE

In August 2015, the Company entered into a cooperation agreement with Xinjiang Deyuan and the controlling shareholder of Xinjiang Deyuan. Pursuant to the agreement, Guizhou Taibang agreed to provide Xinjiang Deyuan with interest-bearing loans at an interest rate of 6% per annum with an aggregate principal amount of RMB300,000,000 (approximately $45,240,000). The loans are due July 31, 2018 and secured by a pledge of Deyuan Shareholder’s 58.02% equity interest in Xinjiang Deyuan. Interest will be paid on the 20th day of the last month of each quarter. For the year ended December 31, 2015, RMB258,663,461 (approximately $39,006,450) was lent to Xinjiang Deyuan. The remaining RMB41,336,539 (approximately $6,331,518) was lent during the three months period ended March 31, 2016.

Interest income of $694,839 and $1,347,145 was accrued and received by Guizhou Taibang for the three months and six months period ended June 30, 2016.

NOTE 7 – INCOME TAX

In October 2014, Shandong provincial government granted Shandong Taibang the High and New Technology Enterprise certificate. This certificate entitled Shandong Taibang to enjoy a preferential income tax rate of 15% for a period of three years from 2014 to 2016.

According to Cai Shui [2011] No. 58 dated July 27, 2011, Guizhou Taibang, being a qualified enterprise located in the western region of PRC, enjoys a preferential income tax rate of 15% effective retroactively from January 1, 2011 to December 31, 2020.

The Company’s effective income tax rates were 16% and 15% for the three months ended June 30, 2016 and 2015. The Company’s effective income tax rates were 16% and 16% for the six months ended June 30, 2016 and 2015, respectively.

As of and for the three months ended June 30, 2016, the Company did not have any unrecognized tax benefits and thus no interest and penalties related to unrecognized tax benefits were recorded. In addition, the Company does not expect that the amount of unrecognized tax benefits to change significantly within the next 12 months.

NOTE 8 – OPTIONS AND NONVESTED SHARES

Options

A summary of stock options activity for the six months ended June 30, 2016 is as follow:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years		Aggregate Intrinsic Value
				USD				USD
Outstanding at December 31, 2015		651,897			10.44		5.24		86,064,461
Granted		-
Exercised		(215,452	)		10.98				(22,481,288	)
Forfeited and expired		-
Outstanding at June 30, 2016		436,445			10.17		4.75		41,962,999

Vested and expected to vest		436,445			10.17		4.75		41,962,999
Exercisable at June 30, 2016		315,195			10.30		4.20		30,266,012

For the three months ended June 30, 2016 and 2015, the Company recorded stock compensation expense of $243,578 and $337,789, respectively, in general and administrative expenses. For the six months ended June 30, 2016 and 2015, the Company recorded stock compensation expense of $487,156 and $630,838, respectively, in general and administrative expenses.

At June 30, 2016, approximately $162,048 of stock compensation expense with respect to the non-vested stock options is expected to be recognized over approximately 0.17 years.

Nonvested shares

A summary of nonvested shares activity for the six months ended June 30, 2016 is as follows:

	Number of nonvested shares			Grant date weighted average fair value
				USD
Outstanding at December 31, 2015		669,100			77.49
Granted		31,800			114.42
Vested		(10,625	)		41.81
Forfeited		-			-
Outstanding at June 30, 2016		690,275			79.74

For the three months ended June 30, 2016 and 2015, the Company recorded stock compensation expense of $4,494,126 and $1,725,724 respectively in general and administrative expenses. For the six months ended June 30, 2016 and 2015, the Company recorded stock compensation expense of $8,819,943 and $3,402,644 respectively in general and administrative expenses.

At June 30, 2016, approximately $39,859,443 of stock compensation expense with respect to nonvested shares is expected to be recognized over approximately 2.32 years.

NOTE 9 – FAIR VALUE MEASUREMENTS

Management used the following methods and assumptions to estimate the fair value of financial instruments at the relevant balance sheet dates:

• Short-term financial instruments (including cash and cash equivalents, time deposits, accounts receivable, other receivables, accounts payable, and other payables and accrued expenses) – The carrying amounts of the short-term financial instruments approximate their fair values because of the short maturity of these instruments.

• Loan receivable – The carrying amounts of loan receivable approximate their fair value. The fair value is estimated using discounted cash flow analysis based on the Company’s incremental borrowing rates for similar borrowing.

NOTE 10 – SALES

The Company’s sales are primarily derived from the manufacture and sale of Human Albumin and Immunoglobulin products. The Company’s sales by significant types of product for the three months ended June 30, 2016 and 2015 are as follows:

	For the Three Months Ended
	June 30, 2016		June 30, 2015
	USD		USD
Human Albumin		37,707,805		28,202,452
Immunoglobulin products:
Human Immunoglobulin for Intravenous Injection		30,673,660		34,075,251
Other Immunoglobulin products		8,205,752		6,650,652
Placenta Polypeptide		10,890,493		7,735,830
Others		3,943,445		2,404,267
Total		91,421,155		79,068,452

The Company’s sales by significant types of product for the six months ended June 30, 2016 and 2015 are as follows:

	For the Six Months Ended
	June 30, 2016		June 30, 2015
	USD		USD
Human Albumin		70,336,659		55,095,482
Immunoglobulin products:
Human Immunoglobulin for Intravenous Injection		64,831,422		66,941,041
Other Immunoglobulin products		17,106,067		10,984,774
Placenta Polypeptide		16,598,897		12,288,034
Others		8,135,821		4,113,452
Total		177,008,866		149,422,783

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Commitments

As of June 30, 2016, commitments outstanding for the purchase of property, plant and equipment approximated $25.4 million.

As of June 30, 2016, commitments outstanding for the purchase of plasma from 2016 to 2018 approximated $64.5 million.

Legal proceedings

Dispute with Jie’an over Certain Capital Injection into Guizhou Taibang

In May 2007, a 91% majority of Guizhou Taibang’s shareholders approved a plan to raise additional capital from qualified strategic investors through the issuance of an additional 20,000,000 shares of Guizhou Taibang. The plan required all existing Guizhou Taibang shareholders to waive their rights of first refusal to subscribe for the additional shares. The remaining 9% minority shareholder of Guizhou Taibang’s shares, Guizhou Jie’an Company, or Jie’an, did not support the plan and did not waive its right of first refusal. In May 2007, Guizhou Taibang signed an Equity Purchase Agreement with certain alleged strategic investors (who concealed their background), pursuant to which such investors agreed to invest an aggregate of RMB50,960,000 (approximately $7,684,768) in exchange for 21.4% of Guizhou Taibang’s equity interests. Such Equity Purchase Agreement was not approved or ratified by over two-thirds supermajority of Guizhou Taibang’s shareholders, which approval or ratification is required under the PRC Company Law. At the same time, as an existing shareholder, Jie’an also subscribed for 1,800,000 shares, representing its pro rata share of the 20,000,000 shares being offered. In total, Guizhou Taibang received RMB50,960,000 (approximately $7,684,768) from the investors and RMB6,480,000 (approximately $977,184) from Jie’an.

In June 2007, Jie’an brought a lawsuit against Guizhou Taibang, alleging that it had a right to acquire the 18,200,000 shares offered to the investors under the Equity Purchase Agreement. The trial court denied Jie’an’s request, and the PRC Supreme Court ultimately sustained the original ruling in May 2009 and denied the rights of first refusal of Jie’an over the 18,200,000 shares.

During the second quarter of 2010, Jie’an requested that Guizhou Taibang register its 1.8 million shares of additional capital injection with the local administration of industry and commerce, or AIC. Guizhou Taibang’s board of directors withheld its required ratification of Jie’an’s request, pending the outcome of the ongoing litigation. In March 2012, Jie’an brought another lawsuit against Guizhou Taibang for refusing to register the shares. In July 2013, the trial court dismissed the lawsuit for lack of jurisdiction. Jie’an did not appeal the dismissal.

In December 2013, Jie’an brought a third lawsuit against Guizhou Taibang, requesting Guizhou Taibang to register 1.8 million shares under its name with the local AIC. In July 2014, the trial court denied Jie’an’s request to register such shares. Despite the denial of Jie’an’s share registration request, the trial court, however, in its ruling, ordered Guizhou Taibang to pay accumulated dividends of RMB13,809,197 (approximately $2,082,427) associated with these shares and the related interest expenses to Jie’an. Guizhou Taibang and Jie’an subsequently filed a cross-appeal. In December 2014, the appellate court ruled in favor of Jie’an supporting its request to register 1.8 million shares and ordered Guizhou Taibang to pay Jie’an its share of accumulated dividends of RMB18,339,227 (approximately $2,765,555) associated with these shares plus the related interest expenses to Jie’an. In the first half of 2015, Guizhou Taibang paid an aggregate of RMB22,639,227 (approximately $3,413,995) to the trial court held in escrow pending further appeal of this case. In June 2015, Guizhou Taibang appealed to the High Court of Guizhou, which overruled the decision of the appellate court and remanded the case to the trial court for retrial in September 2015.

In November 2013, Guizhou Taibang held a shareholders meeting and the shareholders passed resolutions, or the November 2013 Resolutions, that, inter alia, (i) determined that it was no longer necessary for Guizhou Taibang to obtain additional capital from investors; (ii) rejected Jie’an’s request that Jie’an subscribe for additional shares of Guizhou Taibang alone and one or more other shareholders reduce their shareholding in Guizhou Taibang; and (iii) approved the issuance of a total of 20,000,000 new shares to all existing shareholders on a pro rata basis. Jie’an subsequently filed a fourth lawsuit against Guizhou Taibang in December 2013, requesting that the court declare the November 2013 Resolutions void. The trial court denied Jie’an’s request. In May 2016, the appellate court vacated the trial court’s decision to uphold Guizhou Taibang’s shareholders resolution, and remanded the case for retrial.

In March 2014, Guizhou Taibang held another shareholders meeting and the shareholders passed resolutions, or the March 2014 Resolutions, that, inter alia, re-calculated the ownership percentage in Guizhou Taibang based on the November 2013 Resolutions and the additional capital injections from existing shareholders. Guizhou Taibang subsequently updated the registration with the local AIC regarding the additional capital injections in August 2014. In September 2014, Jie’an and another minority shareholder of Guizhou Taibang filed a lawsuit against Guizhou Taibang, requesting that the court declare both the November 2013 Resolutions and the March 2014 Resolutions void and instruct Guizhou Taibang to withdraw the AIC registration. In November 2014, the trial court suspended this case pending the final outcome of the third lawsuit filed by Jie’an. In October 2015, the trial court denied their request. In May 2016, the appellate court vacated the trial court’s decision to uphold Guizhou Taibang’s shareholders resolution, and remanded the case for retrial.

If the pending cases with Jie’an are ultimately ruled in Jie’an’s favor, the ownership interest in Guizhou Taibang may be diluted to 84% and Jie’an may be entitled to receive accumulated dividends of RMB18,339,227 (approximately $2,765,555) , being its claimed share of Guizhou Taibang’s accumulated dividend distributions associated with the 1.8 million shares, and the related interest expenses from Guizhou Taibang. As of June 30, 2016, Guizhou Taibang had maintained, on its balance sheet, payables to Jie’an in the amounts of RMB5,040,000 (approximately $760,032) as received funds in respect of the 1.8 million shares in dispute, RMB1,440,000 (approximately $217,152) for the over-paid subscription price paid by Jie’an and RMB3,836,151 (approximately $578,492) for the accrued interest. As these cases are closely interlinked to the outcome of the disputes with certain individual investor described below, based on its PRC litigation counsel’s assessment, the Company does not expect Jie’an to prevail.

Dispute with Certain Individual Investor over Certain Capital Injection into Guizhou Taibang

In part due to the invalidity of the Equity Purchase Agreement with certain alleged strategic investors in May 2007, which was never approved or ratified by Guizhou Taibang’s shareholders, such investors’ equity ownership in Guizhou Taibang and the related increase in registered capital of Guizhou Taibang have never been registered with the local AIC. In January 2010, one individual among such investors brought a lawsuit against Guizhou Taibang requesting to register his 14.35% ownership interest in Guizhou Taibang with the local AIC and seeking the distribution of his share of Guizhou Taibang’s dividends declared since 2007.

In October 2010, the trial court denied such individual investor’s right as shareholder of Guizhou Taibang and his entitlement to share the dividends, which ruling was reaffirmed after a re-trial by the same trial court in December 2012. After such ruling, Guizhou Taibang attempted to return the originally received fund of RMB34,160,000 (approximately $5,151,328) to such investor by wiring the fund back to his bank account but was unable to do so due to the closure of his bank account. Another investor, however, accepted the returned fund of RMB11,200,000 (approximately $1,688,960) from Guizhou Taibang in November 2010. In 2013, the same individual investor appealed the case to the PRC Supreme Court, which also denied his claims for shareholder status in Guizhou Taibang and the related dividend distribution and accrued interest in September 2013. Such investor subsequently attempted to seek a re-trial by the PRC Supreme Court, which request was denied by the PRC Supreme Court in January 2014. He then applied to the PRC Supreme Procuratorate to request for a review of the PRC Supreme Court’s decision and seek an appeal by the PRC Supreme Procuratorate to the PRC Supreme Court for an ultimate re-trial on his behalf. In July 2015, the PRC Supreme Procuratorate rejected his request for review.

As of June 30, 2016, Guizhou Taibang had maintained, on its balance sheet, payables to the investors of RMB34,160,000 (approximately $5,151,328) as originally received funds from such individual investor in respect of the shares in dispute, RMB18,486,868 (approximately $2,787,820) for the interest expenses, and RMB341,600 (approximately $51,513) for the 1% penalty imposed by the Equity Purchase Agreement for any breach in the event that Guizhou Taibang is required to return the original investment amount to such investor.

NOTE 12 - NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share for the periods indicated:

	For the Three Months Ended
	June 30, 2016			June 30, 2015
	USD			USD

Net income attributable to China Biologic Products, Inc.		30,753,035			26,723,959
Earnings allocated to participating nonvested shares		(775,050	)		(573,820	)
Net income used in basic/diluted net income per common stock		29,977,985			26,150,139

Weighted average shares used in computing basic net income per common stock		26,698,996			25,019,039
Diluted effect of stock options		453,564			1,301,734
Weighted average shares used in computing diluted net income per common stock		27,152,560			26,320,773

Net income per common stock – basic		1.12			1.05
Net income per common stock – diluted		1.10			0.99

During the three months ended June 30, 2016 and 2015, no option was antidilutive or excluded from the calculation of diluted net income per common stock.

The following table sets forth the computation of basic and diluted net income per share for the periods indicated:

	For the Six Months Ended
	June 30, 2016			June 30, 2015
	USD			USD

Net income attributable to China Biologic Products, Inc.		56,950,290			49,886,431
Earnings allocated to participating nonvested shares		(1,422,528	)		(1,076,448	)
Net income used in basic/diluted net income per common stock		55,527,762			48,809,983

Weighted average shares used in computing basic net income per common stock		26,642,461			24,918,517
Diluted effect of stock options		503,009			1,347,340
Weighted average shares used in computing diluted net income per common stock		27,145,470			26,265,857

Net income per common stock – basic		2.08			1.96
Net income per common stock – diluted		2.05			1.86

During the six months ended June 30, 2016 and 2015, no option was antidilutive or excluded from the calculation of diluted net income per common stock.

Note 13 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which modified lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and disclosing key information about leasing arrangements. ASU 2016-02 is effective for public companies for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the timing of its adoption and the impact of adopting ASU 2016-02 on its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplified certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification in the statement of cash flows. This standard will be effective for public companies for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU 2016-09 on its consolidated financial statements.

NOTE 14 – SUBSEQUENT EVENT

In June 2016, the Company entered into a RMB40,000,000 (approximately $6,032,000) loan agreement with Xinjiang Deyuan. Pursuant to the agreement, Guizhou Taibang agreed to provide Xinjiang Deyuan with interest-bearing loans at an interest rate of 6% per annum. The loan is unsecured and due on the earlier of 1) within five days after Xinjiang Deyuan obtaining other loans from financial institutions, or 2) September 20, 2016. Interest will be paid on the last day of each month. On July 1, 2016, RMB40,000,000 (approximately $6,032,000) was lent to Xinjiang Deyuan.

On July 31, 2016, Guiyang Dalin Biologic Technologies Co., Ltd. (“Guiyang Dalin”), Guizhou Taibang and Jie’an and Shenzhen Yigong Shengda Technology Co., Ltd. (“Yigong Shengda”), two noncontrolling interest holders of Guizhou Taibang, entered into an agreement, pursuant to which Jie’an and Yigong Shengda agreed to withdraw all of their capital contribution in Guizhou Taibang for an aggregate consideration of RMB415.0 million (approximately US$62.6 million). On August 1, 2016, Guizhou Taibang paid the first installment of RMB90.0 million (approximately US$13.6 million) to Jie’an and Yigong Shengda. As part of the capital withdrawal plan, Jie'an and Yigong Shengda also had the obligation to terminate all of their claims against Guizhou Taibang. Jie’an’s and Yigong Shengda’s obligations under this agreement are guaranteed by a third-party company pursuant to a guarantee agreement dated July 31, 2016. The consummation of the transactions contemplated under these agreements is subject to the completion of the requisite legal and administrative procedures.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry growth and demand and acceptance of new and existing products; expectations regarding governmental approvals of our new 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; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A “Risk Factors” described in our Annual Report on Form 10-K filed on February 25, 2016, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Use of Terms

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:

“China Biologic,” “we,” “us,” the “Company” or “our” are to the combined business of China Biologic Products, Inc., a Delaware corporation, and its direct and indirect subsidiaries;

“China” or “PRC” are to the People’s Republic of China, excluding, for the purposes of this report only, Taiwan and the special administrative regions of Hong Kong and Macau;

“Exchange Act” are to the Securities Exchange Act of 1934, as amended;

“Guizhou Taibang” are to our majority owned subsidiary Guizhou Taibang Biological Products Co., Ltd., a PRC company;

“Huitian” are to Xi’an Huitian Blood Products Co., Ltd., a PRC company in which we hold a minority equity interest;

“RMB” are to the legal currency of China;

“SEC” are to the Securities and Exchange Commission;

“Securities Act” are to the Securities Act of 1933, as amended;

“Shandong Taibang” are to our majority owned subsidiary Shandong Taibang Biological Products Co. Ltd., a PRC company; and

“U.S. dollars,” “USD” and “$” are to the legal currency of the United States.

Overview of Our Business

We are a biopharmaceutical company principally engaged in the research, development, manufacturing and sales of human plasma-based biopharmaceutical products, or plasma products, in China. We operate our business through two majority owned subsidiaries, Shandong Taibang, a company based in Tai’an, Shandong Province and Guizhou Taibang, a company based in Guiyang, Guizhou Province. We also hold a minority equity interest in Huitian, a plasma products company based in Xi’an, Shaanxi Province.

We have a strong product portfolio with over 20 different dosage forms of plasma products and other biopharmaceutical products across nine categories. Our principal products are human albumin and immunoglobulin for intravenous injection, or IVIG. Albumin has been used for almost 50 years to treat critically ill patients by assisting the maintenance of adequate blood volume and pressure. IVIG is used for certain disease prevention and treatment by enhancing specific immunity. These products use human plasma as their principal raw material. Sales of human albumin products represented approximately 41.2% and 35.7% of our total sales for the three months ended June 30, 2016 and 2015, respectively, and 39.7% and 36.9% of our total sales for the six months ended June 30, 2016 and 2015, respectively. Sales of IVIG products represented approximately 33.6% and 43.1% of our total sales for the three months ended June 30, 2016 and 2015, respectively, and 36.6% and 44.8% of our total sales for the six months ended June 30, 2016 and 2015, respectively. All of our products are prescription medicines administered in the form of injections.

Our sales model focuses on direct sales to hospitals and inoculation centers and is complemented by distributor sales. For the three months ended June 30, 2016 and 2015, our top five customers accounted for approximately 16.7% and 13.2%, respectively, of our total sales. For the six months ended June 30, 2016 and 2015, our top five customers accounted for approximately 16.4% and 13.3%, respectively, of our total sales.

We operate and manage our business as a single segment. We do not account for the results of our operations on a geographic or other basis.

Our principal executive offices are located at 18 ^th Floor, Jialong International Building, 19 Chaoyang Park Road, Chaoyang District, Beijing 100125, People’s Republic of China. Our corporate telephone number is (8610) 6598-3111 and our fax number is (8610) 6598-3222. We maintain a website at http://www.chinabiologic.com that contains information about the Company, but that information is not part of this report or incorporated by reference herein.

Recent Developments

Operating approval for Xinglong plasma collection station

In June 2016, Shandong Taibang received the operating permit for the newly-built plasma collection station in Xinglong County of Chengde City, Hebei Province and expects to commence commercial plasma collection immediately at the new Xinglong station. We expect the new station to reach its designed annual collection capacity in approximately three years.

Entry into agreement to withdraw capital contribution in Guizhou Taibang by noncontrolling interest holders

On July 31, 2016, Guiyang Dalin Biologic Technologies Co., Ltd., or Guiyang Dalin, Guizhou Taibang and Guizhou Jie’an Company, or Jie’an, and Shenzhen Yigong Shengda Technology Co., Ltd., or Yigong Shengda, two noncontrolling interest holders of Guizhou Taibang, entered into an agreement, pursuant to which Jie’an and Yigong Shengda agreed to withdraw all of their capital contribution in Guizhou Taibang for an aggregate consideration of RMB415.0 million (approximately US$62.6 million). On August 1, 2016, Guizhou Taibang paid the first installment of RMB90.0 million (approximately US$13.6 million) to Jie’an and Yigong Shengda. As part of the capital withdrawal plan, Jie'an and Yigong Shengda also had the obligation to terminate all of their claims against Guizhou Taibang. Jie’an’s and Yigong Shengda’s obligations under this agreement are guaranteed by a third-party company pursuant to a guarantee agreement dated July 31, 2016. The consummation of the transactions contemplated under these agreements is subject to the completion of the requisite legal and administrative procedures.

Second Quarter Financial Performance Highlights

The following are some financial highlights for the three months ended June 30, 2016:

Sales : Sales increased by $12.3 million, or 15.5%, to $91.4 million for the three months ended June 30, 2016, from $79.1 million for the same period in 2015.

Gross profit : Gross profit increased by $7.9 million, or 15.2%, to $59.9 million for the three months ended June 30, 2016, from $52.0 million for the same period in 2015.

Income from operations : Income from operations increased by $2.7 million, or 6.7%, to $43.0 million for the three months ended June 30, 2016, from $40.3 million for the same period in 2015.

Net income attributable to the Company : Net income increased by $4.1 million, or 15.4%, to $30.8 million for the three months ended June 30, 2016, from $26.7 million for the same period in 2015.

Diluted net income per share : Diluted net income per share was $1.10 for the three months ended June 30, 2016, as compared to $0.99 for the same period in 2015.

Results of Operations

Comparison of Three Months Ended June 30, 2016 and June 30, 2015

The following table sets forth key components of our results of operations in thousands of U.S. dollars for the periods indicated.

	For the Three Months Ended June 30,
	2016						2015
	Amount			% of Total Sales			Amount			% of Total Sales
	(U.S. dollars in thousands, except percentage and per share data)
Sales		91,421			100.0			79,068			100.0
Cost of sales		31,482			34.4			27,055			34.2
Gross margin		59,939			65.6			52,013			65.8
Operating expenses:
Selling expenses		3,026			3.3			2,605			3.3
General and administrative expenses		12,574			13.8			8,121			10.3
Research and development expenses		1,304			1.4			1,047			1.3
Total operating expenses		16,904			18.5			11,773			14.9
Income from operations		43,035			47.1			40,240			50.9
Other income (expenses):
Equity in income (loss) of an equity method investee		260			0.3			(666	)		(0.8	)
Interest expense		(89	)		(0.1	)		(676	)		(0.9	)
Interest income		1,292			1.4			1,468			1.8
Total other income, net		1,463			1.6			126			0.1
Earnings before income tax expense		44,498			48.7			40,366			51.0
Income tax expense		7,007			7.7			6,124			7.7
Net income		37,491			41.0			34,242			43.3
Less: Net income attributable to noncontrolling interest		6,738			7.4			7,518			9.5
Net income attributable to the Company		30,753			33.6			26,724			33.8
Net income per share of common stock
Basic		1.12						1.05
Diluted		1.10						0.99

Sales

Our sales increased by $12.3 million, or 15.5%, to $91.4 million for the three months ended June 30, 2016, compared to $79.1 million for the same period in 2015. Excluding the foreign exchange impact resulting from the depreciation of the RMB against the U.S. dollar, our sales would have increased by 23.4% for the three months ended June 30, 2016 as compared to the same period in 2015. The increase in sales for the three months ended June 30, 2016 was primarily attributable to the price increase in human tetanus immunoglobulin products and sales volume increases in human albumin products, human tetanus immunoglobulin products and placenta polypeptide products.

The following table summarizes the breakdown of sales by significant types of product:

	For the Three Months Ended June 30,								Change
	2016				2015
	Amount		%		Amount		%		Amount			%
	(U.S. dollars in millions, except percentage)
Human albumin		37.7		41.2		28.2		35.7		9.5			33.7
Immunoglobulin products:
IVIG		30.7		33.6		34.1		43.1		(3.4	)		(10.0	)
Other immunoglobulin products		8.2		9.0		6.7		8.5		1.5			22.4
Placenta polypeptide		10.9		11.9		7.7		9.7		3.2			41.6
Others		3.9		4.3		2.4		3.0		1.5			62.5
Totals		91.4		100.0		79.1		100.0		12.3			15.5

During the three months ended June 30, 2016 as compared to the three months ended June 30, 2015:

the average price for our approved human albumin products, which accounted for 41.2% of our total sales for the three months ended June 30, 2016, increased by 2.4% in RMB term and decreased by 4.0% in USD term, respectively; and

the average price for our approved IVIG products, which accounted for 33.6% of our total sales for the three months ended June 30, 2016, increased by 4.4% in RMB term and decreased by 2.1% in USD term, respectively.

The average sales price of our human albumin products and IVIG products increased in RMB term for the three months ended June 30, 2016 as compared to the same period in 2015 following the removal of the retail price ceiling for drug products effective on June 1, 2015, backed by the market demand.

The sales volume of our products depends on market demand and our production volume. The production volume of our human albumin products and IVIG products depends primarily on the general plasma supply. The production volume of our hyper-immune products, which include human rabies immunoglobulin, human hepatitis B immunoglobulin and human tetanus immunoglobulin products, is subject to the availabilities of specific vaccinated plasma and our production capacity. The supply of specific vaccinated plasma requires several months of lead time. Our production facilities currently can only accommodate the production of one type of hyper-immune products at any given time and we rotate the production of different types of hyper-immune products from time to time in response to market demand. As such, the sales volume of any given type of hyper-immune products may vary significantly from quarter to quarter.

The sales volume of our human albumin products and IVIG products increased by 39.3% and decreased by 8.0%, respectively, for the three months ended June 30, 2016 as compared to the same period in 2015. The sales growth of human albumin products was primarily attributable to the increased production volume at Shandong Taibang and Guizhou Taibang as a result of increased plasma supply volume. The decrease in the sales of IVIG products for the three months ended June 30, 2016 as compared to the same period in 2015 was primarily due to the depletion of IVIG pastes we reserved from previous years to be processed and sold in 2015 and the allocation of more production facilities to human tetanus immunoglobulin products, which had higher margin, in the three months ended June 30, 2016.

The sales increase of other immunoglobulin products for the three months ended June 30, 2016 as compared to the same period in 2015 was mainly attributable to the increase in both sales volume and sales price of human tetanus immunoglobulin products. The sales of human tetanus immunoglobulin products increased by $5.3 million for the three months ended June 30, 2016 as compared to the same period in 2015. The average sales price of human tetanus immunoglobulin products increased significantly for the three months ended June 30, 2016 as compared to the same period in 2015 due to the robust market demand coupled by the removal of the retail price ceiling for drug products effective on June 1, 2015.

The sales increase of placenta polypeptide for the three months ended June 30, 2016 as compared to the same period in 2015 was mainly in line with the sales volume of placenta polypeptide. The sales volume of placenta polypeptide increased by 45.3% for the three months ended June 30, 2016 primarily because we increased our market penetration into more hospitals through our improved sales capabilities.

The sales increase of other products for the three months ended June 30, 2016 as compared to the same period in 2015 was mainly due to the increase in sales volume of human prothrombin complex concentrate, or PCC and factor VIII. We launched PCC to the market in early 2015 and experienced the sales ramp-up for the three months ended June 30, 2016.

Cost of sales and gross profit

	For the Three Months Ended June 30,						Change
	2016			2015			Amount		%
	(U.S. dollars in millions, except percentage)
Cost of sales		31.5			27.1			4.4		16.2
as a percentage of total sales		34.4	%		34.2	%				0.2
Gross Profit		59.9			52.0			7.9		15.2
Gross Margin		65.6	%		65.8	%				(0.2	)

Our cost of sales was $31.5 million, or 34.4% of our sales for the three months ended June 30, 2016, as compared to $27.1 million, or 34.2% of our sales for the same period in 2015. Our gross profit was $59.9 million and $52.0 million for the three months ended June 30, 2016 and 2015, respectively, representing gross margins of 65.6% and 65.8%, respectively. For the three months ended June 30, 2016 and 2015, the sales derived from the raw material purchased from Xinjiang Deyuan Bioengineering Co., Ltd., or Xinjiang Deyuan, whose cost is moderately higher than plasma from our own collection stations, accounted for 6.7% and nil of total plasma product sales, respectively. Excluding this impact, our gross margin would have been slightly higher for the three months ended June 30, 2016 as compared to the same period in 2015.

Our cost of sales and gross margin are affected by the product pricing, raw material costs, product mix, yields and inventory provisions, etc. In an effort to increase plasma collection volume and expand our donor base, we increased the nutrition fees paid to donors consistent with the industry practice. We expected the nutrition fees to be paid to donors continue to increase as a result of improving living standards in China. Consequently, future improvements on margins will need to be derived from increases in product pricing, product mix, yields and manufacturing efficiency.

The increase in cost of sales for the three month ended June 30, 2016 as compared to the same period in 2015 was generally in line with the increases in sales volume and cost of plasma. The increase in cost of sales as a percentage of sales remained consistent for the three months ended June 30, 2016 as compared to the same period in 2015 mainly due to the higher cost of plasma purchased from Xinjiang Deyuan, which was partially offset by the increase in the average sales price of certain plasma products and the adjustment of our product mix to achieve higher profit margin.

Operating expenses

	For the Three Months Ended June 30,						Change
	2016			2015			Amount		%
	(U.S. dollars in millions, except percentage)
Operating expenses		16.9			11.7			5.2		44.4
as a percentage of total sales		18.5	%		14.9	%				3.6

Our total operating expenses increased by $5.2 million, or 44.4%, to $16.9 million for the three months ended June 30, 2016, from $11.7 million for the same period in 2015. As a percentage of sales, total expenses increased by 3.6% to 18.5% for the three months ended June 30, 2016, from 14.9% for the same period in 2015. The increase of the total operating expenses was mainly due to the increase of general and administrative expenses as discussed below.

Selling expenses

	For the Three Months Ended June 30,						Change
	2016			2015			Amount		%
	(U.S. dollars in millions, except percentage)
Selling expenses		3.0			2.6			0.4		15.4
as a percentage of total sales		3.3	%		3.3	%				-

Our selling expenses increased by $0.4 million, or 15.4%, to $3.0 million for the three months ended June 30, 2016, from $2.6 million for the same period in 2015. As a percentage of sales, our selling expenses remained stable for the three months ended June 30, 2016 as compared to the same period in 2015. The increase of the selling expenses was mainly in line with the sales growth in the three months ended June 30, 2016 as compared to the same period in 2015.

General and administrative expenses

	For the Three Months Ended June 30,						Change
	2016			2015			Amount		%
	(U.S. dollars in millions, except percentage)
General and administrative expenses		12.6			8.1			4.5		55.6
as a percentage of total sales		13.8	%		10.3	%				3.5

Our general and administrative expenses increased by $4.5 million, or 55.6%, to $12.6 million for the three months ended June 30, 2016, from $8.1 million for the same period in 2015. General and administrative expenses as a percentage of sales increased by 3.5% to 13.8% for the three months ended June 30, 2016, from 10.3% for the same period in 2015. The increase in general and administrative expenses was mainly due to the increase of share-based compensation expenses totaling $2.7 million and a prepayment provision of $1.2 million.

Research and development expenses

	For the Three Months Ended June 30,						Change
	2016			2015			Amount		%
	(U.S. dollars in millions, except percentage)
Research and development expenses		1.3			1.0			0.3		30.0
as a percentage of total sales		1.4	%		1.3	%				0.1

Our research and development expenses increased by $0.3 million, or 30.0%, to $1.3 million for the three months ended June 30, 2016, from $1.0 million for the same period in 2015. In May 2015, we received a government grant of $0.9 million and recognized it as a reduction of research and development expenses for the three months ended June 30, 2015. Excluding this impact, our research and development expenses would have decreased by $0.6 million, or 31.6%, to $1.3 million for the three months ended June 30, 2016, from $1.9 million for the same period in 2015. The decrease in research and development expenses was mainly due to the completion of certain clinical trial programs in late 2015. As a percentage of total sales, our research and development expenses, excluding the impact of the government grant, would have decreased by 1.0% to 1.4% for the three months ended June 30, 2016 from 2.4% for the same period in 2015.

Income tax

	For the Three Months Ended June 30,						Change
	2016			2015			Amount		%
	(U.S. dollars in millions, except percentage)
Income tax		7.0			6.1			0.9		14.8
as a percentage of total sales		7.7	%		7.7	%				-

Our income tax expenses increased by $0.9 million, or 14.8%, to $7.0 million for the three months ended June 30, 2016, from $6.1 million for the same period in 2015. Our effective income tax rates were 15.7% and 15.2% for the three months ended June 30, 2016 and 2015, respectively. The statutory tax rate applicable to our major operating subsidiaries in the PRC for 2016 and 2015 is 15.0%.

Comparison of Six Months Ended June 30, 2016 and June 30, 2015

The following table sets forth key components of our results of operations in thousands of U.S. dollars for the periods indicated.

	For the Six Months Ended June 30,
	2016						2015
	Amount			% of Total Sales			Amount			% of Total Sales
	(U.S. dollars in thousands, except percentage and per share data)
Sales		177,009			100.0			149,423			100.0
Cost of sales		65,526			37.0			51,516			34.5
Gross margin		111,483			63.0			97,907			65.5
Operating expenses:
Selling expenses		4,254			2.4			4,555			3.0
General and administrative expenses		23,902			13.5			15,975			10.7
Research and development expenses		2,399			1.4			2,389			1.6
Total operating expenses		30,555			17.3			22,919			15.3
Income from operations		80,928			45.7			74,988			50.2
Other income (expenses):
Equity in income (loss) of an equity method investee		44			(0.0	)		(761	)		(0.5	)
Interest expense		(177	)		(0.1	)		(1,433	)		(1.0	)
Interest income		3,043			1.8			2,843			2.0
Total other income, net		2,910			1.7			649			0.5
Earnings before income tax expense		83,838			47.4			75,637			50.7
Income tax expense		13,614			7.7			11,740			7.9
Net income		70,224			39.7			63,897			42.8
Less: Net income attributable to noncontrolling interest		13,274			7.5			14,011			9.4
Net income attributable to the Company		56,950			32.2			49,886			33.4
Net income per share of common stock
Basic		2.08						1.96
Diluted		2.05						1.86

Sales

Our sales increased by $27.6 million, or 18.5%, to $177.0 million for the six months ended June 30, 2016, compared to $149.4 million for the same period in 2015. Excluding the foreign exchange impact resulting from the depreciation of the RMB against the U.S. dollar, our sales would have increased by 26.2% for the six months ended June 30, 2016 as compared to the same period in 2015. Such increase of sales was mainly due to the price increase in human tetanus immunoglobulin products and sales volume increases in human albumin products, human tetanus immunoglobulin products and placenta polypeptide products.

The following table summarizes the breakdown of sales by significant types of product:

	For the Six Months Ended June 30,								Change
	2016				2015
	Amount		%		Amount		%		Amount			%
	(U.S. dollars in millions, except percentage)
Human albumin		70.3		39.7		55.1		36.9		15.2			27.6
Immunoglobulin products:
IVIG		64.8		36.6		66.9		44.8		(2.1	)		(3.1	)
Other immunoglobulin products		17.1		9.7		11.0		7.4		6.1			55.5
Placenta polypeptide		16.6		9.4		12.3		8.2		4.3			35.0
Others		8.2		4.6		4.1		2.7		4.1			100.0
Totals		177.0		100.0		149.4		100.0		27.6			18.5

During the six months ended June 30, 2016 as compared to the six months ended June 30, 2015:

the average price for our approved human albumin products, which accounted for 39.7% of our total sales for the six months ended June 30, 2016, increased by 2.6% in RMB term and decreased by approximately 3.7% in USD term , respectively; and

the average price for our approved IVIG products, which accounted for 36.6% of our total sales for the six months ended June 30, 2016, increased by 3.5% in RMB term and decreased by 2.8% in USD term, respectively.

The average sales price of our human albumin products and IVIG products increased in RMB term for the six months ended June 30, 2016 as compared to the same period in 2015 following the removal of the retail price ceiling for drug products effective on June 1, 2015, backed by the market demand.

The sales volume of our human albumin products and IVIG products increased by 32.6% and remained consistent, respectively, for the six months ended June 30, 2016 as compared to the same period in 2015. The sales growth of human albumin products was primarily attributable to the increased production volume at Shandong Taibang and Guizhou Taibang as a result of increased plasma supply volume. The sales volume of IVIG products remained consistent for the six months ended June 30, 2016 as compared to the same period in 2015. The impact from the depletion of IVIG pastes reserved from previous years has been offset by the increased plasma volume we consumed in the six months ended June 30, 2016 as compared to the same period in 2015.

The sales increase of other immunoglobulin products for the six months ended June 30, 2016 as compared to the same period in 2015 was mainly attributable to the increase in both sales volume and sales price of human tetanus immunoglobulin products. The sales of human tetanus immunoglobulin products increased by $10.3 million for the six months ended June 30, 2016 as compared to the same period in 2015. The average sales price of human tetanus immunoglobulin products increased significantly for the six months ended June 30, 2016 as compared to the same period in 2015 due to the robust market demand coupled by the removal of the retail price ceiling for drug products effective on June 1, 2015.

The sales increase of placenta polypeptide for the six months ended June 30, 2016 as compared to the same period in 2015 was mainly in line with the sales volume of placenta polypeptide. The sales volume of placenta polypeptide increased by 39.7% for the six months ended June 30, 2016 primarily because we increased our market penetration into more hospitals through our improved sales capabilities.

The sales increase of other products for the six months ended June 30, 2016 as compared to the same period in 2015 was mainly due to the increase in sales volume of PCC and factor VIII. We launched PCC to the market in early 2015 and experienced the sales ramp-up for the six months ended June 30, 2016.

Cost of sales and gross profit

	For the Six Months Ended June 30,						Change
	2016			2015			Amount		%
	(U.S. dollars in millions, except percentage)
Cost of sales		65.5			51.5			14.0		27.2
as a percentage of total sales		37.0	%		34.5	%				2.5
Gross Profit		111.5			97.9			13.6		13.9
Gross Margin		63.0	%		65.5	%				(2.5	)

Our cost of sales was $65.5 million, or 37.0% of our sales for the six months ended June 30, 2016, as compared to $51.5 million, or 34.5% of our sales for the same period in 2015. Our gross profit was $111.5 million and $97.9 million for the six months ended June 30, 2016 and 2015, respectively, representing gross margins of 63.0% and 65.5%, respectively. For the six months ended June 30, 2016 and 2015, the sales derived from the raw material purchased from Xinjiang Deyuan, whose cost is moderately higher than plasma from our own collection stations, accounted for 16.1% and nil of total plasma product sales, respectively. Excluding this impact, our gross margin would have been slightly higher for the six months ended June 30, 2016 as compared to the same period in 2015.

The increase in cost of sales for the six month ended June 30, 2016 as compared to the same period in 2015 was generally in line with the increases in sales volume and cost of plasma. The increase in cost of sales as a percentage of sales increased for the six months ended June 30, 2016 as compared to the same period in 2015 mainly due to the higher cost of plasma purchased from Xinjiang Deyuan, which was partially offset by the increase in the average sales price of certain plasma products and the adjustment of our product mix to achieve higher profit margin.

Operating expenses

	For the Six Months Ended June 30,						Change
	2016			2015			Amount		%
	(U.S. dollars in millions, except percentage)
Operating expenses		30.6			23.0			7.6		33.0
as a percentage of total sales		17.3	%		15.3	%				2.0

Our total operating expenses increased by $7.6 million, or 33.0%, to $30.6 million for the six months ended June 30, 2016, from $23.0 million for the same period in 2015. As a percentage of sales, total expenses increased by 2.0% to 17.3% for the six months ended June 30, 2016, from 15.3% for the same period in 2015. The increase of the total operating expenses was mainly in line with the increase of the general and administrative expenses as discussed below.

Selling expenses

	For the Six Months Ended June 30,						Change
	2016			2015			Amount			%
	(U.S. dollars in millions, except percentage)
Selling expenses		4.3			4.6			(0.3	)		(6.5	)
as a percentage of total sales		2.4	%		3.0	%					(0.6	)

Our selling expenses decreased by $0.3 million, or 6.5%, to $4.3 million for the six months ended June 30, 2016, from $4.6 million for the same period in 2015. Excluding the foreign exchange impact, our selling expenses would have remained consistent in RMB term for the six months ended June 30, 2016 as compared to the same period in 2015. As a percentage of sales, our selling expenses decreased by 0.6% to 2.4% for the six months ended June 30, 2016, from 3.0% for the same period in 2015, primarily due to the promotion activities on human rabies immunoglobulin products we carried out in the six months ended June 30, 2015.

General and administrative expenses

	For the Six Months Ended June 30,						Change
	2016			2015			Amount		%
	(U.S. dollars in millions, except percentage)
General and administrative expenses		23.9			16.0			7.9		49.4
as a percentage of total sales		13.5	%		10.7	%				2.8

Our general and administrative expenses increased by $7.9 million, or 49.4%, to $23.9 million for the six months ended June 30, 2016, from $16.0 million for the same period in 2015. General and administrative expenses as a percentage of sales increased by 2.8% to 13.5% for the six months ended June 30, 2016, from 10.7% for the same period in 2015. The increase in general and administrative expenses was mainly due to the increase of share-based compensation expenses totaling $5.3 million and a prepayment provision of $1.2 million.

Research and development expenses

	For the Six Months Ended June 30,						Change
	2016			2015			Amount		%
	(U.S. dollars in millions, except percentage)
Research and development expenses		2.4			2.4			0.0		0.0
as a percentage of total sales		1.4	%		1.6	%				(0.2	)

Our research and development expenses remained consistent for the six months ended June 30, 2016 as compared to the same period in 2015. In the six months ended June 30, 2016 and 2015, we received a government grant of $0.1 million and $0.9 million, respectively, and recognized it as a reduction of research and development expenses for each relevant period. Excluding this impact, our research and development expenses would have decreased by $0.8 million, or 24.2%, to $2.5 million for the six months ended June 30, 2016, from $3.3 million for the same period in 2015. As a percentage of total sales, our research and development expenses, excluding the impact of the government grant, would have decreased by 0.8% to 1.4% for the six months ended June 30, 2016 from 2.2% for the same period in 2015. The decrease in research and development expenses was mainly due to the completion of certain clinical trial programs in late 2015.

Income tax

	For the Six Months Ended June 30,						Change
	2016			2015			Amount		%
	(U.S. dollars in millions, except percentage)
Income tax		13.6			11.7			1.9		16.2
as a percentage of total sales		7.7	%		7.9	%				(0.2	)

Our income tax expenses increased by $1.9 million, or 16.2%, to $13.6 million for the six months ended June 30, 2016, from $11.7 million for the same period in 2015. Our effective income tax rates were 16.2% and 15.5% for the six months ended June 30, 2016 and 2015, respectively. The statutory tax rate applicable to our major operating subsidiaries in the PRC for 2016 and 2015 is 15.0%.

Liquidity and Capital Resources

To date, we have financed our operations primarily through cash flows from operations, augmented by bank borrowings and equity contributions by our stockholders. As of June 30, 2016, we had $204.0 million in cash and cash equivalents, primarily consisting of cash on hand and demand deposits.

The following table provides the summary of our cash flows for the periods indicated:

	For the Six Months Ended June 30,
	2016			2015
	(U.S. dollars in millions)
Net cash provided by operating activities		57.0			34.6
Net cash used in investing activities		(26.3	)		(20.1	)
Net cash provided by financing activities		32.2			12.0
Effects of exchange rate change on cash		(3.8	)		(0.7	)
Net increase in cash and cash equivalents		59.1			25.8
Cash and cash equivalents at beginning of the period		144.9			80.8
Cash and cash equivalents at end of the period		204.0			106.6

Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2016 was $57.0 million, as compared to $34.6 million for the same period in 2015. The increase in net cash provided by operating activities was largely consistent with the improvements in our results of operations, the speed-up of accounts receivable collection, the shortened inventory cycle and the increase of net non-cash operating expenses for the six months ended June 30, 2016 as compared to the same period in 2015.

Accounts receivable

We sped up our collection of accounts receivable for the six months ended June 30, 2016 as compared to the same period in 2015. The accounts receivable turnover days for plasma products were 42 days and 49 days for the six months periods ended June 30, 2016 and 2015, respectively. For the six months ended June 30, 2015, in order to penetrate the market for human rabies immunoglobulin product, we granted credit terms of up to six months to the distributors rather than requiring them to make full payments prior to deliveries. We no longer implemented such credit policy in the six months ended June 30, 2016.

Inventories

We shortened our inventory cycle for the six months ended June 30, 2016 as compared to the same period in 2015. We purchased less plasma from Xinjiang Deyuan in the six months ended June 30, 2016 as compared to the same period in 2015, and began to sell plasma products derived from the raw material purchased from Xinjiang Deyuan in late 2015. As a result, the inventory turnover days decreased to 363 days for the six months ended June 30, 2016 from 399 days for the same period in 2015.

Net non-cash operating expenses

Net non-cash operating expenses increased by $4.5 million during the six months ended June 30, 2016, as compared to the same period in 2015, primarily due to the increase of share-based compensation expenses totaling $5.3 million.

Investing Activities

Our use of cash for investing activities is primarily for the acquisition of property, plant and equipment, and intangibles.

Net cash used in investing activities for the six months ended June 30, 2016 was $26.3 million, as compared to $20.1 million for the same period in 2015. During the six months ended June 30, 2016 and 2015, we paid $26.6 million and $20.7 million, respectively, for the acquisition of property, plant and equipment, intangible assets and land use rights for Shandong Taibang and Guizhou Taibang. During the six months ended June 30, 2016, we granted a loan of $6.3 million to Xinjiang Deyuan pursuant to a cooperation agreement we entered into with Xinjiang Deyuan in August 2015. In addition, we received a refund of $6.5 million from the local government of Guiyang with respect to deposits of land use rights.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2016 was $32.2 million, as compared to $12.0 million for the same period in 2015. The net cash provided by financing activities for the six months ended June 30, 2016 mainly consisted of the proceeds of $2.4 million from stock option exercised and the maturity of a $37.8 million time deposit as a security for a 24-month loan which was fully repaid in June 2015, partially offset by a dividend of $7.9 million paid to the minority shareholder by Shandong Taibang. The net cash provided by financing activities for the six months ended June 30, 2015 mainly consisted of net proceeds of $80.6 million from a follow-on offering of the Company’s stock in June 2015 and proceeds of $32.0 million from the maturity of a deposit used as security for short-term bank loan, partially offset by repayments of bank loans totaling $97.9 million and a dividend of $3.7 million held in escrow by a trial court in connection with disputes with a minority shareholder of Guizhou Taibang.

Management believes that the Company has sufficient cash on hand and will continue to have positive cash inflow for its operations from the sale of its products in the PRC market.

Obligations under Material Contracts

The following table sets forth our material contractual obligations as of June 30, 2016:

	Payments Due by Period
Contractual Obligations	Total		Less than one year		One to three years		Three to five years		More than five years
	(U.S. dollars in millions)
Operating lease commitment		1.3		0.4		0.7		-		0.2
Purchase commitment		64.5		27.2		37.3		-		-
Capital commitment		25.4		22.9		2.5		-		-
Total		91.2		50.5		40.5		-		0.2

Seasonality of Our Sales

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.

Inflation

Inflation does not materially affect our business or the results of our operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

Critical Accounting Policies

Critical accounting policies are those we believe are most important to portraying our financial conditions and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our operations are carried out in the PRC and we are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. Accordingly, our business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. Our results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Interest Rate Risk

We are exposed to interest rate risk primarily with respect to our bank loans. We have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. However, our future interest expenses may increase due to changes in market interest rates.

Management monitors the banks’ prime rates in conjunction with our cash requirements to determine the appropriate level of debt balances relative to other sources of funds. We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk.

Foreign Exchange Risk

All of our consolidated revenues and consolidated costs of sales and majority of expenses are denominated in RMB. All of our assets are denominated in RMB, except certain cash balances. However, our reporting currency is U.S. dollars. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between U.S. dollars and RMB. If RMB depreciates against the U.S. dollars, the value of our RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. Assets and liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and shareholders’ equity is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in determining other comprehensive income, a component of stockholders’ equity. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

RMB is currently freely convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment. In addition, beginning in July 2005, China reformed its exchange rate regime by changing to a managed floating exchange rate regime based on market supply and demand with reference to a basket of major foreign currencies. Under the managed floating exchange rate regime, RMB is no longer pegged to U.S. dollars. The People’s Bank of China announces the closing prices of foreign currencies such as U.S. dollars traded against RMB in the inter-bank foreign exchange market after the closing of the market on each business day, and makes such prices the central parity for trading against RMB on the following business day. On March 17, 2014, the People’s Bank of China announced a policy to further expand the maximum daily floating range of RMB trading prices against U.S. dollars in the inter-bank spot foreign exchange market to 2.0%. In the long term, RMB may appreciate or depreciate more significantly in value against U.S. dollars or other foreign currencies, depending on the market supply and demand with reference to a basket of major foreign currencies. On August 10, 2015, the People’s Bank of China announced that it had changed the calculation method for RMB’s daily central parity exchange rate against U.S. dollars, which resulted in an approximately 2.0% depreciation of RMB on that day. RMB continued to depreciate against U.S. dollars throughout the remainder of 2015 and the six months ended June 30, 2016.

Account Balances

We maintain balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits for the banks located in the United States, Hong Kong Deposit Protection Board insured limits for the banks located in Hong Kong, or China Deposit Insurance Scheme insured limits for the banks located in the PRC. Total cash at banks and restricted cash deposits as of June 30, 2016 and December 31, 2015 amounted to $203.4 million and $182.3 million, respectively, $2.9 million and $3.0 million of which are covered by insurance, respectively. We have not experienced any losses in such accounts and we do not believe that we are exposed to any significant risks on our cash at banks and deposits.

Inflation

Inflationary factors such as increases in the cost of our sales and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net sales if the selling prices of our products do not increase with these increased costs.

Market for Human Albumin and IVIG

Our two major products, human albumin and IVIG, accounted for 39.7% and 36.6% of the total sales for the six months ended June 30, 2016, respectively. If the market demands for human albumin or IVIG cannot be sustained in the future or if there is substantial price decrease in either or both products, our operating results could be materially and adversely affected.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer, Mr. David (Xiaoying) Gao and our Chief Financial Officer, Mr. Ming Yang, of the effectiveness of the design and operation of our disclosure controls and procedures, as of June 30, 2016. Based on that evaluation, Mr. Gao and Mr. Yang concluded that our disclosure controls and procedures were effective as of June 30, 2016.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the six months ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings arising in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. Other than the legal proceedings set forth below, we are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

Dispute with Jie’an over Certain Capital Injection into Guizhou Taibang

In May 2007, a 91% majority of Guizhou Taibang’s shareholders approved a plan to raise additional capital from qualified strategic investors through the issuance of an additional 20,000,000 shares of Guizhou Taibang. The plan required all existing Guizhou Taibang shareholders to waive their rights of first refusal to subscribe for the additional shares. The remaining 9% minority shareholder of Guizhou Taibang’s shares, Jie’an, did not support the plan and did not waive its right of first refusal. In May 2007, Guizhou Taibang signed an Equity Purchase Agreement with certain alleged strategic investors (who concealed their background), pursuant to which such investors agreed to invest an aggregate of RMB51.0 million (approximately $7.7 million) in exchange for 21.4% of Guizhou Taibang’s equity interests. Such Equity Purchase Agreement was not approved or ratified by over two-thirds supermajority of Guizhou Taibang’s shareholders, which approval or ratification is required under the PRC Company Law. At the same time, as an existing shareholder, Jie’an also subscribed for 1,800,000 shares, representing its pro rata share of the 20,000,000 shares being offered. In total, Guizhou Taibang received RMB51.0 million (approximately $7.7 million) from the investors and RMB6.5 million (approximately $1.0 million) from Jie’an.

In December 2013, Jie’an brought a third lawsuit against Guizhou Taibang, requesting Guizhou Taibang to register 1.8 million shares under its name with the local AIC. In July 2014, the trial court denied Jie’an’s request to register such shares. Despite the denial of Jie’an’s share registration request, the trial court, however, in its ruling, ordered Guizhou Taibang to pay accumulated dividends of RMB13.8 million (approximately $2.1 million) associated with these shares and the related interest expenses to Jie’an. Guizhou Taibang and Jie’an subsequently filed a cross-appeal. In December 2014, the appellate court ruled in favor of Jie’an supporting its request to register 1.8 million shares and ordered Guizhou Taibang to pay Jie’an its share of accumulated dividends of RMB18.3 million (approximately $2.8 million) associated with these shares plus the related interest expenses to Jie’an. In the first half of 2015, Guizhou Taibang paid an aggregate of RMB22.6 million (approximately $3.4 million) to the trial court held in escrow pending further appeal of this case. In June 2015, Guizhou Taibang appealed to the High Court of Guizhou, which overruled the decision of the appellate court and remanded the case to the trial court for retrial in September 2015.

If the pending cases with Jie’an are ultimately ruled in Jie’an’s favor, our ownership interest in Guizhou Taibang may be diluted to 84% and Jie’an may be entitled to receive accumulated dividends of RMB18.3 million (approximately $2.8 million), being its claimed share of Guizhou Taibang’s accumulated dividend distributions associated with the 1.8 million shares, and the related interest expenses from Guizhou Taibang. As of June 30, 2016, Guizhou Taibang had maintained, on its balance sheet, payables to Jie’an in the amounts of RMB5.0 million (approximately $0.8 million) as received funds in respect of the 1.8 million shares in dispute, RMB1.4 million (approximately $0.2 million) for the over-paid subscription price paid by Jie’an and RMB3.8 million (approximately $0.6 million) for the accrued interest. As these cases are closely interlinked to the outcome of the disputes with certain individual investor described below, based on our PRC litigation counsel’s assessment, we do not expect Jie’an to prevail.

On July 31, 2016, Guiyang Dalin, Guizhou Taibang, Jie’an and Yigong Shengda entered into an agreement, pursuant to which Jie’an and Yigong Shengda agreed to withdraw all of their capital contribution in Guizhou Taibang for an aggregate consideration of RMB415.0 million (approximately US$62.6 million). On August 1, 2016, Guizhou Taibang paid the first installment of RMB90.0 million (approximately US$13.6 million) to Jie’an and Yigong Shengda. As part of the capital withdrawal plan, Jie'an and Yigong Shengda also had the obligation to terminate all of their claims against Guizhou Taibang. Jie’an’s and Yigong Shengda’s obligations under this agreement are guaranteed by a third-party company pursuant to a guarantee agreement dated July 31, 2016. The consummation of the transactions contemplated under these agreements is subject to the completion of the requisite legal and administrative procedures.

Dispute with Certain Individual Investor over Certain Capital Injection into Guizhou Taibang

In October 2010, the trial court denied such individual investor’s right as shareholder of Guizhou Taibang and his entitlement to share the dividends, which ruling was reaffirmed after a re-trial by the same trial court in December 2012. After such ruling, Guizhou Taibang attempted to return the originally received fund of RMB34.2 million (approximately $5.2 million) to such investor by wiring the fund back to his bank account but was unable to do so due to the closure of his bank account. Another investor, however, accepted the returned fund of RMB11.2 million (approximately $1.7 million) from Guizhou Taibang in November 2010. In 2013, the same individual investor appealed the case to the PRC Supreme Court, which also denied his claims for shareholder status in Guizhou Taibang and the related dividend distribution and accrued interest in September 2013. Such investor subsequently attempted to seek for a re-trial by the PRC Supreme Court, which request was denied by the PRC Supreme Court in January 2014. He then applied to the PRC Supreme Procuratorate to request for a review of the PRC Supreme Court’s decision and seek an appeal by the PRC Supreme Procuratorate to the PRC Supreme Court for an ultimate re-trial on his behalf. In July 2015, the PRC Supreme Procuratorate rejected his request for review.

As of June 30, 2016, Guizhou Taibang had maintained, on its balance sheet, payables to the investors of RMB34.2 million (approximately $5.2 million) as originally received funds from such individual investor in respect of the shares in dispute, RMB18.5 million (approximately $2.8 million) for the interest expenses, and RMB0.3 million (approximately $51,513) for the 1% penalty imposed by the Equity Purchase Agreement for any breach in the event that Guizhou Taibang is required to return the original investment amount to such investor.

ITEM 1A. RISK FACTORS.

As of the date of this filing, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K filed on February 25, 2016. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations. The risks, uncertainties and other factors set forth in the above-referenced Annual Report on Form 10-K may cause our actual results, performances and achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occurs, our business, financial condition or results of operations may be adversely affected.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any equity securities during the three months ended June 30, 2016 that were not previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K that was filed during this period. No repurchases of our common stock were made during the three months ended June 30, 2016.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

Disclosure pursuant to Section 13(r) of the Exchange Act

Pursuant to Section 13(r) of the Exchange Act, we may be required to disclose in our annual and quarterly reports to the SEC, whether we or any of our “affiliates” knowingly engaged in certain activities, transactions or dealings relating to Iran or with certain individuals or entities targeted by U.S. economic sanctions. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law. Because the SEC defines the term “affiliate” broadly, it includes any entity under common “control” with us (and the term “control” is also construed broadly by the SEC).

The description of the activities below has been provided to us by Warburg Pincus LLC, or WP, affiliates of which: (i) designated a member of our board of directors, (ii) beneficially own more than 10.0% of the equity interests of, and have the right to designate members of the board of directors of Santander Asset Management Investment Holdings Limited, or SAMIH. SAMIH may therefore be deemed to be under common “control” with us; however, this statement is not meant to be an admission that common control exists.

The disclosure below relates solely to activities conducted by SAMIH and its affiliates. The disclosure does not relate to any activities conducted by us or by WP and does not involve our or WP’s management. Neither we nor WP has had any involvement in or control over the disclosed activities, and neither we nor WP has independently verified or participated in the preparation of the disclosure. Neither we nor WP is representing as to the accuracy or completeness of the disclosure nor do we or WP undertake any obligation to correct or update it.

We understand that one or more SEC-reporting affiliates of SAMIH intends to disclose in its next annual or quarterly SEC report that:

a) Santander UK plc (“Santander UK”) holds two frozen savings accounts and two frozen current accounts for three customers resident in the United Kingdom (“UK”) who are currently designated by the United States (“US”) under the Specially Designated Global Terrorist (“SDGT”) sanctions program. The accounts held by each customer were blocked after the customer’s designation and have remained blocked and dormant through the first half of 2016. Revenue generated by Santander UK on these accounts in the first half of 2016 was £7.31 whilst net profits in the first half of 2016 were negligible relative to the overall profits of Banco Santander SA.

(b) An Iranian national, resident in the UK, who is currently designated by the US under the Iranian Financial Sanctions Regulations (“IFSR”) and the Weapons of Mass Destruction Proliferators Sanctions Regulations, held a mortgage with Santander UK that was issued prior to any such designation. The mortgage account was redeemed and closed on April 13, 2016. No further drawdown has been made (or would be allowed) under this mortgage although Santander UK continued to receive repayment instalments prior to redemption. In the first half of 2016, total revenue generated by Santander UK in connection with the mortgage was £434.64 whilst net profits were negligible relative to the overall profits of Banco Santander SA. Santander UK does not intend to enter into any new relationships with this customer, and any disbursements will only be made in accordance with applicable sanctions. The same Iranian national also held two investment accounts with Santander ISA Managers Limited. The funds within both accounts were invested in the same portfolio fund. The accounts remained frozen until the investments were closed on May 12, 2016 and checks issued to customer on May 13, 2016. Total revenue in the first half of 2016 generated by Santander UK in connection with the investment accounts was £7.60 whilst net profits in the first half of 2016 were negligible relative to the overall profits of Banco Santander SA.

(c) A UK national designated by the US under the SDGT sanctions program holds a Santander UK current account. The account remained in arrears through the first half of 2016 (£1,344.01 in debit) and is currently being managed by Santander UK Collections & Recoveries department.

(d) In addition, during the first half of 2016, Santander UK has identified an OFAC match on a power of attorney account. A party listed on the account is currently designated by the US under the SDGT and IFSR sanctions programs. During the first half of 2016, related revenue generated by Santander UK was £129.21 whilst net profits in the first half of 2016 were negligible relative to the overall profits of Banco Santander SA.

ITEM 6. EXHIBITS.

The list of exhibits in the Exhibit Index to this report is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 4, 2016	CHINA BIOLOGIC PRODUCTS, INC.


	By:	/s/ David (Xiaoying) Gao
		David (Xiaoying) Gao, Chief Executive Officer
		(Principal Executive Officer)

By:

/s/ Ming Yang

Ming Yang, Chief Financial Officer

(Principal Financial Officer and Principal

Accounting Officer)

EXHIBIT INDEX

Exhibit No.		Description

3.1		Third Amended and Restated Certificate of Incorporation of China Biologic Products, Inc.
3.2		Third Amended and Restated Bylaws of China Biologic Products, Inc. (incorporated by reference to Exhibit 3.2 of the Quarterly Report on Form 10-Q filed by the Company on August 5, 2014).
10.1		Summary English translation of settlement agreement dated July 31, 2016.
10.2		Summary English translation of guarantee agreement dated July 31, 2016.
10.3		Consulting agreement between the Company and David Li dated July 1, 2016.
10.4		Second amended and restated employment agreement between the Company and David (Xiaoying) Gao dated August 4, 2016.
31.1		Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		Interactive data filed pursuant to Rule 405 of Regulation S-T.

Exhibit 3.1

STATE OF DELAWARE

THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF CHINA BIOLOGIC PRODUCTS, INC.

China Biologic Products, Inc., a corporation organized and existing under the laws of the State of Delaware (the “ Corporation ”), hereby certifies as follows:

A. The name of the Corporation is China Biologic Products, Inc. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on January 10, 2007. The Amended and Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on August 3, 2012. The Second Amended and Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on June 23, 2014.

B. This Third Amended and Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of the General Corporation Law of the State of Delaware (the “ DGCL ”) by the Board of Directors and the stockholders of the Corporation.

C. Pursuant to Section 242 and Section 245 of the DGCL, this Third Amended and Restated Certificate of Incorporation amends and restates the provisions of the Second Amended and Restated Certificate of Incorporation of this Corporation.

D. The text of the Second Amended and Restated Certificate of Incorporation is hereby amended and restated in its entirety to read as set follows:

FIRST: The name of this Corporation shall be: CHINA BIOLOGIC PRODUCTS, INC.

SECOND: Its registered office in the State of Delaware is to be located at 850 New Burton Road, Suite 201 Dover, County of Kent, DE 19904 and its registered agent at such address is National Corporate Research, Ltd.

THIRD: The purposes of the Corporation shall be:

To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

FOURTH: (a) The total number of shares of stock which this Corporation is authorized to issue is: 1,010,000,000 shares, with a par value of $0.0001, of which 1,000,000,000 shall be Common Stock and 10,000,000 shall be Preferred Stock.

(b) The Preferred Stock may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the Board of Directors (authority to do so being hereby expressly vested in the Board of Directors). The Board of Directors is further authorized, subject to limitations prescribed by law, to fix by resolution or resolutions and to set forth in a certificate of designations filed pursuant to the DGCL the powers, designations, preferences and relative, participation, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, if any, of any wholly unissued series of Preferred Stock, including without limitation authority to fix by resolution or resolutions that dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), redemption price or prices, and liquidation preferences of any such series, and the number of shares constituting any such series and the designation thereof, or any of the foregoing. The Board of Directors is further authorized to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any series, the number of which was fixed by it, subsequent to the issuance of shares of such series then outstanding, subject to the powers, preferences and rights, and the qualifications, limitations and restrictions thereof stated in the Certificate of Incorporation or the resolution of the Board of Directors originally fixing the number of shares of such series. If the number of shares of any series is so decreased, then the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

(c) Any amendment, modification or repeal of Section (b) of this FOURTH Article shall require affirmative vote of stockholders holding at least two-thirds (2/3) of the combined voting power of the then outstanding shares of capital stock of the Corporation, voting together as a single class.

FIFTH: Except as otherwise expressly provided by the terms of any series of Preferred Stock permitting the holders of such series of Preferred Stock to act by written consent, any action required or permitted to be taken by stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders and may not be effected by written consent in lieu of a meeting.

Any amendments to this FIFTH Article shall require affirmative vote of stockholders holding at least two-thirds (2/3) of the combined voting power of the then outstanding shares of capital stock of the Corporation, voting together as a single class.

SIXTH: The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation unless otherwise specified for any particular provision in the Bylaws.

SEVENTH: No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts of omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article Seventh shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.

EIGHTH: (a) The business and affairs of the Corporation shall be managed by its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by this Certificate of Incorporation or by the Bylaws directed or required to be exercised or done by the stockholders.

(b) The Board of Directors shall consist of no more than nine members, the exact number of which shall be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting. Subject to the rights of holders of any series of preferred stock with respect to the election of directors, the directors of the Corporation shall be divided into three classes as nearly equal in size as is practicable, hereby designated Class I, Class II and Class III. The initial assignment of members of the Board of Directors to each such class shall be made by the Board of Directors. Initially, Class I directors shall be elected for a one-year term, Class II directors for a two-year term, and Class III directors for a three-year term. At each succeeding annual meeting of the stockholders beginning at the annual meeting after such first meeting, successors to the class of directors whose term expires at that meeting shall be elected for a three-year term. Subject to the rights of holders of any series of Preferred Stock with respect to the election of directors, if the number of directors that constitutes the Board of Directors is changed, any newly created directorships or decrease in directorships shall be so apportioned by the Board of Directors among the classes as to make all classes as nearly equal in number as is practicable, provided that no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class. A director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor shall be elected, subject, however, to his or her prior death, resignation, retirement or removal from office. Directors need not be residents of Delaware or stockholders of the Corporation. Subject to any additional requirement set forth in the Corporation’s corporate governance guidelines, in any election of directors held at a meeting of stockholders, the persons receiving a plurality of the votes cast by the stockholders entitled to vote thereon at such meeting who are present or represented by proxy, up to the number of directors to be elected in such election, shall be deemed elected.

(c) If any vacancy occurs in the Board of Directors caused by death, resignation, retirement, disqualification, or removal from office of any director, or otherwise, or if any new directorship is created by an increase in the authorized number of directors, a majority of the directors then in office, though less than a quorum, or a sole remaining director, may choose a successor or fill the newly created directorship; and a director so chosen shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected. Any director may be removed either for or without cause at any special meeting of stockholders duly called and held for such purpose.

(d) Any amendments to this EIGHTH Article shall require affirmative vote of stockholders holding at least two-thirds (2/3) of the combined voting power of the then outstanding shares of capital stock of the Corporation, voting together as a single class.

IN WITNESS WHEREOF, the Corporation has caused this Third Amended and Restated Certificate of Incorporation to be executed on its behalf this 20 ^th day of June, 2016.


		/s/ David (Xiaoying) Gao
		David (Xiaoying) Gao
		Chief Executive Officer

Exhibit 10.1

Settlement Agreement

(Summary Translation)

This settlement agreement (this “Agreement”) was entered into by and among the following parties (the “Parties,” and each a “Party”) in Yunyan District, Guiyang City, China on July 31, 2016:

Party A: Guizhou Taibang Biological Products Co., Ltd.

Party B: Guiyang Dalin Biologic Technologies Co., Ltd.

Party C: Guizhou Jie’an Company

Party D: Shenzhen Yigong Shengda Technology Co., Ltd.

WHEREAS:

Party B, Party C and Party D are shareholders of Party A registered with the administration of industry and commerce (“AIC”).

In December 2013, Party C commenced a lawsuit against Party A in relation to the validity of certain shareholders’ resolutions of Party A. Party C requested that the court (1) confirm the legitimacy and validity of the shareholders’ resolutions of Party A dated May 28, 2007 and April 23, 2010; and (2) order Party A to register Party C’s equity contribution of 1.8 million dollars, equivalent to 12.169% of the enlarged share capital of Party A (the “First Case”). On September 2, 2015, the Higher People's Court of Guizhou Province ruled that the decisions of the trial and appellate courts be rescinded and the First Case be remanded to the original people’s court for a retrial. The First Case is still being reviewed by the original people’s court and no judgment has been given.

In September 2014, each of Party C and Party D commenced a lawsuit against Party A in relation to the validity of certain shareholders’ resolutions of Party A. Party C and Party D requested that the court confirm that the shareholders’ resolutions of Party A dated November 13, 2013 and March 18, 2014 are invalid (the “Second Case”). The Intermediate People's Court of Guiyang City ruled that the original judgment be rescinded and the case be remanded to the people’s court for a retrial. The Second Case is still being reviewed by the people’s court and no judgment has been given.

In October 2014, each of Party C and Party D commenced a lawsuit against Party A in relation to certain AIC registrations. Party C and Party D requested that the court revoke the AIC registration in relation to changes in equity and registered capital (the “Third Case”). On May 19, 2015, the Intermediate People's Court of Guiyang City ruled that such AIC registration be revoked. Party A has applied to the Higher People's Court of Guizhou Province for review. The Third Case is still being reviewed by the higher people’s court and no judgment has been given.

In order to effectively resolve the disputes among the Parties, and maintain Party A’s stability and promote Party A’s development, the Parties unanimously agree to settle their disputes by way of withdrawal of equity investments in Party A by Party C and Party D and reduction of registered capital of Party A.

NOW THEREFORE, the Parties hereby agree as follows:

Article I Definitions

1.1.

Definitions. Except as otherwise provided in the text herein, the terms in this Agreement are defined as follows.

1.1.1.

Guizhou Eakan : means Guizhou Eakan Pharmaceutical Co., Ltd., a former shareholder of Party A.

1.1.2.

Equity transfer : means the transfer by Guizhou Eakan of all of its equity interests held in Party A to Party B pursuant to the Registered Equity Purchase Agreement and Unregistered Equity Purchase Agreement entered into by Party B and Guizhou Eakan on August 21, 2014.

1.1.3.

Registration Authority : means the Industrial and Commercial Bureau of Guiyang City.

1.1.4.

Law : means all the laws, regulations, rules, orders, codes and the rules, regulations and orders of any governmental organizations.

1.1.5.

Capital Reduction Documents : means legal documents signed by the Parties in relation to Party A’s reduction of registered capital.

1.1.6.

Capital Reduction Completion Date : means the date when Party A completes the AIC registration in relation to the Capital Reduction, and receives a renewed business license issued by the Registration Authority.

1.1.7.

Capital Reduction : means withdrawal of equity investments (including equity and associated interests) in Party A by each of Party C and Party D in exchange of the return of investment payments from Party A.

1.1.8.

Enforcement Fees : means RMB22,639,227.00 set aside from Party A’s bank account by court orders as a result of the original judgments of the First Case (overruled by the higher court of Guizhou) from February to May 2015 and the accrued interests (calculated based on the term loan interest rate published by the People’s Bank of China).

1.2.

The headings in this Agreement are for the sake of convenience and shall not affect the interpretation and understanding of the contents of this Agreement.

Article II Settlement

2.1.

Party C and Party D shall have no dispute as to the paid-in capital and the amount and percentage of capital contribution by each shareholder, and covenant that they shall have no claims against Party A after the date hereof.

2.2.

Within 5 days after the date hereof, each Party shall apply to the courts to withdraw their claims and terminate the proceedings.

2.3.

Party C and Party D shall withdraw all the investments in Party A, including all the equity and associated interests. Party A shall undergo the procedures of Capital Reduction and apply to the Registration Authority for AIC registration. After the Capital Reduction, Party B shall become Party A’s sole remaining shareholder.

Article III Paid-in Capital and Amount and Percentage of Capital Contribution

3.1.

Party C and Party D acknowledge that the Equity Transfer is valid and that Party B has legally received the equity interest initially transferred from Guizhou Eakan.

3.2.

The registered capital of Party A in the Registration Authority is RMB55 million. Party A has completed the following capital contributions, and the Parties acknowledge that such capital contributions are valid:

(1)

On May 30, 2007, Party A transferred the capital reserve of RMB10 million to the registered capital, resulting in the paid-in capital of RMB65 million.

(2)

According to the shareholders’ resolutions dated May 28, 2007, April 23, 2010, November 13, 2013, and March 18, 2014, Party A increased the registered capital by RMB16.4 million, in which Party B paid RMB10.8 million. Guizhou Eakan paid RMB3.8 million (which is already transferred to Party B), and Party C paid RMB1.8 million. Such capital contribution has been paid fully, resulting in the paid-in capital of RMB81.4 million.

(3)

According to the shareholders’ resolutions dated September 8, 2015 and November 20, 2015, Party A increased the registered capital by RMB25 million, which was paid by Party B. Such capital contribution has been paid fully, resulting in the paid-in capital of RMB106.4 million.

(4)

According to the shareholders’ resolutions dated September 8, 2015 and April 28, 2016, Party A increased the registered capital by RMB25 million, which was paid by Party B. Such capital contribution has been paid fully, resulting in the paid-in capital of RMB131.4 million.

Each of Party C and Party D acknowledge that the board resolutions, shareholders’ resolutions and other legal documents in relation to the above capital contributions of Party A are valid.

3.3.

The Parties unanimously acknowledge that the current paid-in capital of Party A is RMB131.4 million and the amount and percentage of capital contribution of each shareholder is as follows:

Shareholder	Method of Payment		Capital Contribution ( RMB: ten thousand dollars)		Percentage
Party B		Cash		11,205		85.274	%
Party D		Cash		1,170		8.904	%
Party C		Cash		765		5.822	%
Total				13,140		100	%

Article IV Termination of Legal Proceedings

4.1.

Within 5 days after the date hereof, Party C shall apply to the court to withdraw the First Case and the Second Case.

4.2.

Within 5 days after the date hereof, Party D shall apply to the court to withdraw the Second Case.

4.3.

Within 5 days after the date hereof, Party C and Party D shall apply to the Higher People's Court of Guizhou Province to withdraw the Third Case. If the Higher People's Court of Guizhou Province refuses the withdrawal, Party A shall apply to withdraw the retrial application in relation to the Third Case.

4.4.

The costs arising out from the legal proceedings (including litigation fee, attorney fee, etc.) shall be borne by each Party incurring such costs.

Article V Capital Reduction Plan

5.1.

Capital Reduction Amounts

Based on Party A’s owner’s equity as of June 30, 2016, Party A shall pay RMB164.07 million to Party C and RMB250.93 million to Party D for their withdrawal of investments (including equity and associated interests).

5.2.

Accounting Treatment

Party A’s paid-in capital shall reduce by RMB19.35 million, capital reserve shall reduce by RMB280.27 million, surplus reserve shall reduce by RMB7.84 million, undistributed profits shall reduce by RMB107.54 million. The total amount of Party A’s owner’s equity shall reduce by RMB415 million.

5.3.

Return and Setoff of Enforcement Fees

5.3.1.

Within 5 days after the date hereof, Party C shall return the Enforcement Fees to Party A.

5.3.2.

If Party C fails to return the entirety of the Enforcement Fees, Party A has the right to offset the outstanding amount of the Enforcement Fees (including interest) against the payment to be made in relation to the Capital Reduction.

5.4.

Procedures of Capital Reduction

After the date hereof, all Parties shall commence the procedures of Capital Reduction, including signing the relevant shareholders’ resolutions, issuing written notice to Party A’s creditors, publishing notices on newspapers, etc.

5.5.

Amendment to Business Registration

5.5.1.

Following 45 days after the publication of notice of Capital Reduction, Party A shall apply to the Registration Authority for registration of capital and registration of alteration of shareholders. All Parties agree that Party A shall apply for the registration of registered capital/paid-in capital of RMB112.05 million and the sole remaining shareholder shall be Party B.

5.5.2.

Party C and Party D shall assist Party A as soon as possible for the registration procedures so that Party B shall be the sole remaining shareholder of Party A. Party C and Party D covenant, in response to the demand of the Registration Authority or Party A, to sign or submit relevant documents within 5 days after being aware of such requirements and assist Party A in completing the AIC registration.

5.6.

Payment Methods

5.6.1.

Party A shall within 1 working day after the date hereof, pay the first installment of RMB35,581,395 to Party C and the first installment of RMB54,418,605 to Party D in relation to the Capital Reduction. The total amount of the first installment payment shall be RMB90 million.

5.6.2.

If Party A fails to complete the Capital Reduction within 2 months after the date hereof, the first installment payment shall be treated as shareholder loans to Party C and Party D, which (together with accrued interests, calculated based on the term loan interest rate published by the People’s Bank of China) shall be returned to Party A within 1 month.

5.6.3.

In the case the first installment payments are not repaid in full, Party A shall have the right to offset the outstanding amount from the distributable dividends in Party A to Party C and/or Party D, as applicable.

5.6.4.

Party A shall, within 5 working days after the Capital Reduction Completion Date, pay the balance of the amounts in relation to the Capital Reduction to Party C and Party D.

Article VI Other Arrangements

6.1.

Tax and Fees

6.1.1.

All fees and tax arising out or in connection with the Capital Reduction shall be borne by the Parties according to Laws.

6.1.2.

If any Party fails to pay the tax as required by Laws and causes actual financial loss to another Party, such Party shall fully indemnify the loss suffered by such other Party.

6.2.

Liabilities

6.2.1.

If Party A fails to pay the amounts in relation to the Capital Reduction in accordance with this Agreement, Party A shall be responsible for overdue payments and a penalty interest calculated at a daily rate of 0.03%.

6.2.2.

If Party C and Party D fail to apply to the court for withdrawal of legal proceedings or fail to sign or provide the requisite documentation which causes the failure of the completion of the Capital Reduction within 2 months after the date hereof, each of Party A and Party B shall have the right to rescind this Agreement, and hold Party C and Party D liable for breach of agreement.

6.3.

Capital Reduction Documents

The Parties shall separately sign Capital Reduction Documents, which shall not contradict with this Agreement, and shall not diminish or replace the legal effect of this Agreement.

Article VII Representations and Warranties

7.1.

Each of Party C and Party D represents and warrants that it is the legal owner of its equity interest in Party A and its equity in Party A is not pledged, mortgaged or otherwise encumbered, nor subject to any material legal, arbitral or administrative proceedings (other than the First Case, the Second Case and the Third Case). Party C and Party D shall be responsible for any disputes with third parties.

7.2.

Following the completion of the Capital Reduction, Party C and Party D shall have no more disputes with Party A or Party B, and shall make no claims against Party A or Party B other than the amounts in relation to the Capital Reduction under this Agreement.

Article VIII Applicable Laws and Dispute Resolution

8.1.

Applicable Laws

The entry, validity, interpretation, performance, implementation and dispute resolution of this Agreement shall be governed by the Laws of the People’s Republic of China and shall be interpreted accordingly.

8.2.

Dispute Resolution

Any disputes arising from this Agreement shall be resolved through amicable negotiation, failing which, any Party may submit and resolve the disputes at the Shanghai International Economic and Trade Arbitration Commission or the Shanghai International Arbitration Centre, according to the applicable arbitration rules. The venue of arbitration is Shanghai, China. The arbitral award is final and binding upon the Parties.

[Signature page follows]

Party A : Guizhou Taibang Biological Products Co., Ltd. (Seal)

/s/ Yang Gang

(Authorized representative)

Party B : Guiyang Dalin Biologic Technologies Co., Ltd. (Seal)

/s/ Yang Ming

(Authorized representative)

Party C : Guizhou Jie’an Company (Seal)

/s/ Duan Gang

(Authorized representative)

Party D : Shenzhen Yigong Shengda Technology Co., Ltd. (Seal)

/s/ Duan Gang

(Authorized representative)

Exhibit 10.2

Guarantee Agreement

(Summary Translation)

This Guarantee Agreement (this “Agreement”) was entered into by the following parties (the “Parties,” and each a “Party”) at No.808 Meeting Room No. 3 Office Building of Guizhou Province Government in Guiyang City, China on July 31, 2016:

Party A: Guizhou Taibang Biological Products Co., Ltd. (“Guizhou Taibang”)

Party B: Guiyang Dalin Biologic Technologies Co., Ltd. (“Guiyang Dalin”)

Party C: Guizhou Jie’an Company (“Jie’an”)

Party D: Shenzhen Yigong Shengda Technology Co., Ltd. (“YGSD”)

Party E: Ding Sheng Xin Finance Guarantee Co., Ltd. (“DXS”)

WHEREAS, Guizhou Taibang, Guizhou Dalin, Jie’an and YGSD entered into a settlement agreement (the “Settlement Agreement”) on July 31, 2016.

NOW THEREFORE, in order to implement the Settlement Agreement, the Parties, through friendly negotiation, unanimously agree to and execute this Agreement:

If Guizhou Taibang fails to pay the capital reduction amounts to Jie’an and YGSD within the agreed timeline under the Settlement Agreement, Guizhou Taibang shall pay to Jie’an and YGSD liquidated damages in aggregate amount of RMB80 million, equivalent to 19.27% of the total transaction amount of RMB415 million.

If Jie’an and YGSD fail to apply to withdraw the legal proceedings or to execute and provide necessary documents as agreed under the Settlement Agreement, which causes the failure to complete the capital reduction within two months after effectiveness of the Settlement Agreement, Jie’an and YGSD shall jointly pay Guizhou Taibang liquidated damages in aggregate amount of RMB80 million, equivalent to 19.27% of the total transaction amount of RMB415 million.

If Guizhou Taibang fails to complete the capital reduction within two months after effectiveness of the Settlement Agreement, Jie’an and YGSD shall return the shareholders’ loans and accrued interests to Guizhou Taibang within one month.

DSX agrees to be jointly liable, as guarantor, for liabilities of Jie’an and YGSD in relation to all the obligations and liabilities of Jie’an and YGSD as provided under the Settlement Agreement until such time as Jie’an and YGSD fulfill all the obligations under the Settlement Agreement.

This Agreement supplements the Settlement Agreement.

[Signature page follows]

Party A: Guizhou Taibang Biological Products Co., Ltd. (Seal)

/s/ Yang Gang

(Authorized representative)

Party B: Guiyang Dalin Biologic Technologies Co., Ltd. (Seal)

/s/ Yang Ming

(Authorized representative)

Party C: Guizhou Jie’an Company (Seal)

/s/ Duan Gang

(Authorized representative)

Party D: Shenzhen Yigong Shengda Technology Co., Ltd. (Seal)

/s/ Duan Gang

(Authorized representative)

Party E: Ding Sheng Xin Finance Guarantee Co., Ltd. (Seal)

/s/ Guo Zhenhua

(Authorized representative)

2 \ 2

Exhibit 10.3

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (this “Agreement”) is entered into as of this July 1, 2016 (the “Effective Date”) by and between CHINA BIOLOGIC PRODUCTS, INC., a Delaware corporation (the “Company”) and Mr. Hui (David) Li (hereinafter referred to as the “Consultant”).

WHEREAS, the Company desires to appoint the Consultant as senior independent consultant to the Company and the Consultant desires to provide consulting services to the Company.

NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein, and for other valuable consideration the receipt and sufficiency of which are acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

1. Senior Strategic and Investment Consulting Agreement . The Company hereby agrees to employ Consultant as a consultant to perform the tasks and duties which are set forth on the Description of Duties attached hereto as Exhibit A , together with such additional duties and tasks upon which the Company and Consultant may agree (the “Consulting Services”) from time to time. The parties agree and intend that Consultant shall be an independent consultant. The Company shall not supervise Consultant's performance of services pursuant to this Agreement, but its representatives shall meet from time to time with Consultant to review and discuss Consultant's progress in performing specified services. Consultant may perform its services during such hours and at such locations reasonably requested by the Company; provided , however , that if Consultant renders services at the Company's place of business, Consultant shall observe the Company's normal business hours.

2. Term . Subject to Section 4 herein, the term of this Agreement shall be 36 months, commencing on the Effective Date (the “Term”) to July 1, 2019. The Term may be further extended upon mutual agreement by the parties.

3. Compensation . During the Term of this Agreement, the Company shall be obligated to compensate Consultant as follows:

(a) The Consultant shall be awarded 15,000 shares of the Company’s restricted stock, which will vest in three equal portions over 36 months with three vesting dates on July 2, 2017, July 2, 2018 and July 2, 2019, respectively. The restricted stock will be evidenced by a restricted stock agreement as contemplated by the Company’s 2008 Employee Incentive Plan (the “Plan”), in the form attached hereto as Exhibit B, both of which will govern the restricted stock, notwithstanding any other provision of this Agreement. The parties hereby confirm that the Consultant shall remain as an Employee of the Company as such term is defined in the Plan during the Term of this Agreement.

(b) Consultant hereby expressly and irrevocably release and forever discharges the Company, its officers, directors, employees, agents, counsels, accountants, affiliates (collectively, the “Releasees”) from any and all claims, demands, judgments, proceedings, causes of action, orders, obligations, contracts, agreements, liens, accounts, costs and expenses (including attorney’s fees and court costs), debts and liabilities whatsoever, whether known or unknown, suspected or unsuspected, matured or unmatured, both at law (including federal and state securities laws) and in equity, which the Consultant or any of the Consultant’s affiliates and/or heirs now have or have ever had against the Releasees arising out of being an Employee of the Company, except for its rights to receive the Company’s restricted stock so awarded under this Agreement and the right to receive shares of the Company’s common stock upon the vesting of such restricted stock as so awarded in accordance with the terms of the Plan and the applicable restricted stock agreement.

(c) Consultant hereby acknowledges that he shall be entitled to no compensation for rendering the Consulting Services other than the Company’s restricted stock so awarded in accordance with Section 3(a) above.

4. EXPENSES. The Company will reimburse the Consultant for pre-approved reasonable business related expenses incurred in good faith in the performance of the Consultant’s duties for the Company. Such payments shall be made by the Company upon submission by the Consultant of a signed statement itemizing the expenses incurred. Such statement shall be accompanied by sufficient documentary matter to support the expenditures.

5. Termination . The Term of this Agreement may be terminated by either party upon thirty (30) days’ prior written notice.

6. Adherence to Laws . Consultant represents and warrants that in carrying out the Consulting Services and his duties and responsibilities under this Agreement, he neither will undertake nor cause, nor permit to be undertaken, any activity which either (i) is illegal under any applicable laws, decrees, rules or regulations or (ii) would have the effect of causing Consultant to be in violation of any applicable laws, decrees, rules or regulations.

7. Limitation on Liability; Indemnification . Consultant’s liability for claims based on, or arising out of this Agreement shall not exceed the amount of all payments actually paid by Company to Consultant. Consultant shall not be liable for any indirect, special, incidental or consequential damage irrespective of whether Consultant has advance notice of the possibility of such damages. Company shall defend, indemnify and hold harmless Consultant from and against any and all damages, claims (contract or tort), liability, and expense whatsoever, including attorneys’ fees and related disbursements, incurred in connection with the Consulting Services provided by Consultant.

8. Amendment and Waiver . The terms of this Agreement may not be modified other than in a writing signed by the parties. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

9. Return of Materials . All documents, whether hard copy or electronic versions, and all data in Consultant’s possession or kept by Consultant in connection with the consulting services are the exclusive property of Company. Consultant shall return to Company, or destroy at the request of Company, all property (including hardware, office equipment, keys and the like) and all documents or other memorializations of Company upon termination of this Agreement, whether or not for cause and whatever the reason and regardless of whether any party has breached this Agreement. If requested by Company, Consultant will certify in writing such property, documents and other memorializations of data have been returned or destroyed.

10. Confidentiality . Consultant agrees to keep confidential any and all nonpublic information regarding the Company obtained through the provision of the Consulting Services (the “Confidential Information”). Notwithstanding the foregoing and subject to any restriction under applicable laws, Consultant shall be entitled to (i) disclose the Confidential Information to any of his attorneys or other professional advisors strictly on a need-to-know basis where such persons or entities are under appropriate non-disclosure obligations substantially similar to those set forth in this Section 9, and (ii) disclose any Confidential Information if such Confidential Information has become publicly available (other than by breach of this Agreement). In the event that Consultant is requested by any governmental authority or becomes legally required to disclose, under applicable laws, any Confidential Information, Consultant shall to the extent not prohibited by law provide the Company with prompt written notice of that fact (or where prior disclosure is not permitted, as soon as practicably possible after such disclosure) and shall consult with the Company regarding such disclosure. Consultant shall, to the extent possible and with the cooperation and reasonable efforts of the Company, seek a protective order, confidential treatment or other appropriate remedy. In such event, Consultant shall furnish only that portion of the information which is legally required to be disclosed and shall exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded such information.

11. Notices . All notices, demands, consents or other communications required or permitted hereunder shall be in writing and shall be deemed to have been given when personally delivered, sent postage prepaid by registered or certified mail, return receipt requested, such receipt showing delivery to have been made, or sent overnight by prepaid receipt courier to the address of the parties set forth on the signature page hereof, or to such other addresses as may hereafter be furnished in writing by the respective parties if given in the manner required above.

12. Entire Agreement . This Agreement, together with the exhibits hereto, incorporate the entire understanding among the parties relating to the subject matter hereof, recites the sole consideration for the promises exchanged and supersedes any prior agreements between Consultant and the Company with respect to the subject matter hereof. In reaching this Agreement, neither party has relied upon any representation or promise except those set forth herein.

13. No Assignment . Neither this Agreement, nor any right or interest hereunder, shall be assignable by Consultant, his beneficiaries or his legal representatives, without the prior written consent of the Company. Except as required by applicable law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process of assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect.

14. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to any otherwise applicable principle of conflicts of laws except as they maybe preempted by, or in conflict with, any federal laws, rules, regulations or regulatory action.

15. Counterparts/Facsimile . This Agreement may be executed by either of the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Agreement may be executed by facsimile.

16. Company Actions . Consultant acknowledges that in any action by the Company to enforce the provisions of this Agreement, claims asserted by Consultant against the Company arising out of this Agreement shall not constitute a defense to enforcement of Consultant’s obligations hereunder.

17. Non-Competition . During the course of the Term hereof, Consultant shall not without the prior approval of the Company engage or be concerned or interested directly or indirectly as principal, agent, employee or otherwise (except in his capacity employed hereunder) in the similar business or activities being carry on by the Company or be personally employed or engaged with or without any consideration in any capacity whatsoever in or in connection with any business whatsoever other than the business of the Company.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and signed as of the day and year first above written.

	CHINA BIOLOGIC PRODUCTS, INC.

	By:	/s/ David Gao
	David Gao
	Chairman & Chief Executive Officer

	CONSULTANT

		/s/ David Li
	David Li

	Address :

EXHIBIT A

Description of Duties

Consultant will mainly assist the Company and management on matters, including, but limited to:

advise CEO on the Company’s short-term and long-term strategies setting;

advise on potential merger and acquisition transactions;

advise on potential transactions including strategic partnership, technology partnership, joint ventures and alliances; and

assist CEO in potential financial and capital market activities.

EXHIBIT B

Form of Restricted Stock Agreement

Exhibit 10.4

Second Amended and Restated Employment Agreement

This Second Amended and Restated Employment Agreement (this “ Agreement ”), dated as of August 4, 2016, is entered into between China Biologic Products, Inc., a company established in the United States with its principal office located at 18th Floor, Jialong Int’l Tower, 19 Chaoyang Park Road, Beijing 100125, PRC (“ Company ”), and Xiaoying (David) Gao (the “ Executive ”).

WHEREAS, the Company and the Executive entered into an employment agreement dated as of May 11, 2012 (the “ 2012 Agreement ”), pursuant to which the Company engaged the Executive as, and the Executive agreed to serve as, Chief Executive Officer of the Company, upon the terms and conditions contained therein;

WHEREAS, the Company and the Executive entered into a renewal employment agreement dated as of May 11, 2014 (the “ 2014 Agreement ”) with terms and conditions substantially similar with those under the 2012 Agreement;

WHEREAS, the term of the 2014 Agreement expired on May 11, 2016; and

WHEREAS, the Company and the Executive desire to extend the term of the 2014 Agreement upon the terms and conditions contained herein, which shall have become effective retrospectively as of May 11, 2016.

NOW THEREFORE, for good and valuable consideration, the sufficiency of which is hereby acknowledged by the parties, the parties hereby agree as follows:

1.	EFFECTIVENESS OF AGREEMENT AND EFFECTIVE DATE

This Agreement shall have become effective retrospectively as of May 11, 2016. For the purpose of this Agreement, the term “ Effective Date ” means May 11, 2016.

2.	EMPLOYMENT AND DUTIES

2.1 General . The Executive will perform such duties and services for the Company as may be designated from time to time by the Board of Directors of the Company (the “ Board ”). The Executive agrees to serve the Company faithfully and to the best of his ability under the direction of the Board and to carry out the functions typically performed by a Chief Executive Officer. He further agrees to perform such duties in accordance with the general fiduciary duties of officers and directors arising under the Delaware General Corporation Law. The Executive is expected and required to devote substantially all of his time and attention during normal business hours to the affairs of the Company and/or its subsidiaries.

2.2 Term of Employment . The Executive’s employment under this Agreement will commence as of the date hereof and will terminate on the first year of the Effective Date; provided, however, that the term of the Executive’s employment will be automatically extended without further action of either party for additional one (1) year periods unless written notice of either party’s intention not to extend has been given to the other party hereto at least thirty (30) days prior to the expiration of the then effective term (the initial term and any extensions thereof, the “ Term of Employment ”). Notwithstanding the foregoing, the Executive’s employment may be terminated during the Term of Employment as provided in Section 5 below.

2.3 Reimbursement of Expenses . Unless otherwise agreed to by the Executive and the Company, the Company will reimburse the Executive for reasonable travel and other business expenses incurred by him to fulfill his duties hereunder upon presentation by the Executive of an itemized account of such expenditures, in accordance with Company practices consistently applied.

3.	COMPENSATION

3.1 Base Salary . From the Effective Date, the Executive will be entitled to receive a base salary (“ Base Salary” ) at a rate of US$550,000 per annum, payable in accordance with the Company’s payroll practices and applicable law. If the rate of Base Salary per annum paid to Executive is increased during the Term of Employment, such increased rate will thereafter constitute the Base Salary for all purposes of this Agreement. Base Salary will not be decreased during the Term of Employment without the mutual consent of Executive and the Company.

3.2 Annual Review . The Executive’s Base Salary will be reviewed by the Board, based upon the Executive’s performance not less than annually.

3.3 Bonus Compensation . In addition to his Base Salary, the Executive would be eligible to receive additional bonus compensation as may be awarded to the Executive from time to time by the Board in the sole and absolute discretion of the Board.

3.4 Additional Compensation .

3.4.2 The Company may, in its sole discretion, award the Executive additional equity-based compensation. The Executive further will be eligible to participate in any employment compensation plan established by the Company under the same terms as other Company executives and approved by the Board.

4.	EMPLOYEE BENEFITS

4.1 Leave . The Executive will be entitled to accrue 15 working days paid annual leave each calendar year (which will not be carried over in the event that they are not used by the Executive). All annual leave days will be taken at times mutually agreed by the Executive and the Company and will be subject to the business needs of the Company. If, however, in any calendar year during the Term of Employment, the Executive is unable to take any annual leave due to the business needs of the Company, the Company, in its discretion, shall either pay the Executive the equivalent of 15 working days, or permit the Executive to carry such leave over into the following calendar year.

4.2 Other Programs . The Executive will, during his employment under this Agreement, be included to the extent eligible thereunder in all employee benefit plans, programs or arrangements (including, without limitation, any plans, programs or arrangements providing for retirement benefits, incentive compensation, profit sharing, bonuses, disability benefits, health and life insurance, or vacation and paid holiday) which may be established by the Company for, or made available to, its executives generally.

5.	TERMINATION OF EMPLOYMENT

5.1 Termination Events .

5.1.1 By the Company . The Company may terminate the Executive’s employment

immediately with Cause, without Cause upon ninety (90) days notice to the Executive, or upon the Executive’s death or Permanent Disability (as hereinafter defined).

5.1.2 By the Executive . The Executive may terminate his employment at any time for any reason upon ninety (90) days written notice to the Company.

5.2 Termination by Company With Cause . If the Executive’s employment is terminated by the Company with Cause, the Company shall pay to the Executive all compensation to which the Executive is entitled through the date of termination, and thereafter, all of the Company’s obligations under this Agreement shall cease.

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5.3 Termination by Company Without Cause . Except in situations where the Executive’s employment is terminated under Section 5.2 or Section 5.4, by death or by Permanent Disability, in the event that the Company terminates Executive’s employment at any time without Cause, the Executive shall be entitled to receive an amount equal to twelve (12) months of the Executive’s then current Base Salary paid in twelve (12) equal monthly installments, subject to Sections 5.7 and 5.8 .

5.4 Change of Control. In the event of a Change of Control, the Company shall (i) assign this Agreement and all rights and obligations under it to any business entity that succeeds to all or substantially all of the Company’s business through that merger or combination or sale of assets, or (ii) on at least thirty (30) days’ prior written notice to the Executive, terminate this Agreement upon the effective date of such Change of Control. In the event that the Company terminates Executive’s employment pursuant to this Section 5.4, the Executive shall be entitled to receive, upon termination an amount equal to eighteen (18) months of the Executive’s then current Base Salary paid in eighteen (18) equal monthly installments, subject to Sections 5.7 and 5.8 .

For the purpose of this Agreement, “ Change of Control ” means the occurrence of any of the following events:

(a) The consummation of the sale or disposition by the Company of all or substantially all of the Company's assets;

(b) The consummation of a merger or consolidation of the Company with any other entity, unless the voting securities of the Company immediately prior to the merger or consolidation remain outstanding or are converted into voting securities of the surviving entity or parent so that they continue to represent at least fifty percent (50%) of the total voting power represented by the voting securities of the surviving entity (or parent) outstanding immediately after such merger or consolidation; or

(c) A change in the composition of the Board, which results in fewer than a majority of the directors being “Incumbent Directors.” For purpose of this provision, “ Incumbent Directors ” shall mean directors who either (i) are directors as of the Effective Date, or (ii) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of those directors whose election or nomination was not in connection with any transactions described above or in connection with an actual or threatened proxy contest relating to election.

5.5 Voluntary Resignation . If the Executive terminates his employment voluntarily, then the Executive shall not be entitled to receive payment of any severance benefits. The Company further shall have the option, in its sole discretion, to make the Executive’s termination effective at any time prior to the end of notice period required under Section 5.1.2 as long as the Company provides Executive with all compensation to which he would be entitled for continuing employment through the last day of the notice period. Thereafter, all obligations of the Company under this Agreement shall cease.

5.6 Cause . Termination for “ Cause ” means termination of the Executive’s employment by the Company because of:

(i) any act or omission that constitutes a breach by the Executive of any of his obligations under this Agreement or any Company policy or procedure and failure to cure such breach after notice of, and a reasonable opportunity to cure, such breach;

(ii) the continued willful failure or refusal of the Executive to substantially perform the duties reasonably required of him as an employee of the Company;

(iii) an alleged act (with credible substantiated evidence) of moral turpitude, dishonesty, fraud or violation of law (whether or not connected to the Company or its Affiliates (as defined in Section 8.1 )) by, or criminal conviction of, the Executive which in the determination of the Board (in its sole discretion) would render his continued employment by the Company damaging or detrimental to the Company or its Affiliates in any way; or

(iv) any misappropriation of Company property by the Executive.

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5.7 Release of Claims . The receipt of any severance payments pursuant to Sections 5.3 or 5.4 of this Agreement is subject to the Executive signing and not revoking a separation agreement and release of claims in a form reasonably acceptable to the Company (the “ Release ”), which must become effective and irrevocable no later than the 60 ^th day following the date of Executive’s termination of employment (the “ Release Deadline ”), and if not, the Executive will forfeit any right to severance payments or benefits under this Agreement. In addition, no severance payments or benefits will be paid or provided until the Release actually becomes effective. To the extent that any severance payments or benefits constitute Deferred Payments (as defined below), severance payments shall commence on the 61 ^st day following Executive’s termination of employment, subject to Section 5.8.

5.8 Section 409A . The Company intends that all severance payments made under this Agreement comply with, or be exempt from, the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and any guidance promulgated thereunder (“ Section 409A ”) so that none of the payments or benefits will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to so comply or be exempt. Specifically, the severance benefits are intended to be exempt from the requirements of Section 409A under the separation pay plan exception set forth under Section 409A. If, at the time of the Executive’s separation from service, the Executive is a “specified employee” within the meaning of Section 409A and the severance benefits payable under this Agreement, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A (together, the “ Deferred Payments ”), payment of such Deferred Payments will be delayed to the extent necessary to avoid the imposition of the additional tax imposed under Section 409A, which generally means that Executive will begin to receive payments on the date 6 months and 1 day following the Executive’s separation from service. The Company and the Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to you under Section 409A. In no event will the Company reimburse the Executive for any taxes that may be imposed on Executive as a result of Section 409A.

6.	DEATH OR DISABILITY

In the event of termination of employment by reason of non-work-related death or Permanent Disability, the Executive (or his estate, as applicable) will be entitled to the Base Salary and benefits determined under Sections 3 and 4 through the date of termination. In the event of termination of employment by reason of work related death or Permanent Disability, the Executive (or his estate, as applicable) will be entitled to the greater of (i) Base Salary and benefits determined under Sections 3 and 4 through the date of termination, or (ii) the minimum compensation permitted by applicable law. Other benefits will be determined in accordance with the benefit plans maintained by the Company, and the Company will have no further obligation hereunder. For purposes of this Agreement, “ Permanent Disability ” means a physical or mental disability or infirmity of the Executive that prevents the normal performance of substantially all his duties as an employee of the Company, which disability or infirmity exists for any continuous period of 180 days.

7.	CONFIDENTIALITY

7.1 Confidentiality . The Executive covenants and agrees with the Company that he will not at any time during the Term of Employment and thereafter, except in performance of his obligations to the Company hereunder or with the prior written consent of the Company, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company or any of its subsidiaries and Affiliates. The term “confidential information” includes information not previously made generally available to the public or to the trade by the Company’s management, with respect to the Company’s or any of its subsidiaries’ or Affiliates’ products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical information, financial information (including the revenues, costs or profits associated with any of the Company’s products), business plans, prospects or opportunities, but will exclude any information which is or becomes generally available to the public or is generally known in the industry or industries in which the Company operates other than as a result of disclosure by the Executive in violation of his agreements under Section 7.1 . The Executive will be released of his obligations under this Section 7.1 to the extent the Executive is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law provided that the Executive provides the Company with prompt written notice of such requirement. For the purposes of this Agreement, “ Affiliate ” means, with respect to any person or entity, any other person or entity that is directly or indirectly through one or more intermediaries, controlled by, controlling or under common control with such person or entity.

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7.2 Acknowledgment of Company Assets . The Executive acknowledges that the Company, at the Company’s expense, has acquired, created and maintains, and will continue to acquire, create and maintain, significant goodwill with its current and prospective customers, vendors and employees, and that such goodwill is valuable property of the Company. The Executive further acknowledges that to the extent such goodwill will be generated through the Executive’s efforts, such efforts will be funded by the Company and the Executive will be fairly compensated for such efforts. The Executive acknowledges that all goodwill developed by the Executive relative to the Company’s customers, vendors and employees will be the sole and exclusive property of the Company and will not be personal to the Executive.

7.3 Exclusive Property . The Executive confirms that all confidential information is and will remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company will be and remain the property of the Company, except for such papers customarily deemed to be the personal copies of the Executive. Upon termination of the Executive’s employment with the Company for any reason, the Executive will promptly deliver to the Company all of the following that are in the Executive’s possession or under his control: (i) all computers, telecommunication devices and other tangible property of the Company and its Affiliates, and (ii) all documents and other materials, in whatever form, which include confidential information or which otherwise relate in whole or in part to the present or prospective business of the Company or its Affiliates, including but not limited to, drawings, graphs, charts, specifications, notes, reports, memoranda, and computer disks and tapes, and all copies thereof.

7.4 Communication to Third Parties . The Executive agrees that Company will have the right to communicate the terms of this Section 7 to any third parties, including but not limited to, any prospective employer of the Executive. The Company waives any right to assert any claim for damages against Company or any officer, employee or agent of Company arising from such disclosure of the terms of this Section 7 .

7.5 Independent Obligations . The provisions of this Section 7 will be independent of any other provision of this Agreement. The existence of any claim or cause of action by the Executive against the Company, whether predicated on this Agreement or otherwise, will not constitute a defense of the enforcement of this Section 7 by the Company.

7.6 Non-Exclusivity . The Company’s rights and the Executive’s obligations set forth in this Section 7 are in addition to, and not in lieu of, all rights and obligations provided by applicable statutory or common law.

8.	INDEMNIFICATION

8.1 Indemnification of the Executive . The Company agrees to indemnify Executive (and his heirs, executors, and administrators), and to advance expenses related to this indemnification, to the fullest extent permitted under applicable law and regulations, against any and all expenses and liabilities that Executive reasonably incurs in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his service as an Executive of the Company or any of its subsidiaries or Affiliates (whether or not he continues to be an Executive at the time of incurring any such expenses or liabilities). Covered expenses and liabilities include, but are not limited to, judgments, court costs, and attorneys’ fees and the costs of reasonable settlements, subject to Board approval, if the action is brought against Executive in his capacity as an Executive of the Company or any of its subsidiaries or Affiliates. Indemnification for expenses will not extend to matters related to Executive’s termination for Cause. Notwithstanding anything in this Section 8.1 to the contrary, the Company will not be required to provide indemnification prohibited by applicable law or regulation. The obligations of this Section 8.1 will survive the term of this Agreement by a period of six (6) years.

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8.2 Indemnification of the Company .

The Executive will indemnify and keep the Company fully indemnified at all times from and against all claims, suits, proceedings, fines, punishment, loss, damage, costs and liabilities whatsoever incurred or sustained by the Company in connection with or arising out of or as a consequence of any breach by the Executive of the confidentiality obligations set forth above.

9.	FOREIGN CORRUPT PRACTICES ACT

The Company and the Executive each represent and warrant that it is aware of and familiar with the provisions of the Foreign Corrupt Practices Act of 1977, as amended by the Omnibus Trade and Competitiveness Act of 1988 (“ FCPA ”), and the rules and regulations thereunder, and its purpose. Each party agrees that it will take no action and make no payment in violation of, or which might cause the Company or the Executive to be in violation of, the FCPA, including, but not limited to, the making of unlawful payments to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds.

10.

MISCELLANEOUS

10.1 Severability . The parties intend this Agreement to be enforced as written. However, (i) if any portion or provision of this Agreement is to any extent be declared illegal or unenforceable by a duly authorized court having jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, will not be affected thereby, and each portion and provision of this Agreement will be valid and enforceable to the fullest extent permitted by law and (ii) if any provision, or part thereof, is held to be unenforceable because of the duration of such provision, the geographic area covered thereby, or other aspect of the scope of such provision, the court making such determination will have the power to reduce the duration, geographic area of such provision, or other aspect of the scope of such provision, and/or to delete specific words and phrases (“ blue-penciling ”), and in its reduced or blue-penciled form, such provision will then be enforceable and will be enforced.

10.2 Assignment . The rights and obligations of this Agreement will bind and inure to the benefit of any successor of the Company by reorganization, merger or consolidation, or any assignee of all or substantially all of the Company’s business and properties. Neither this Agreement nor any rights hereunder will be assignable or otherwise subject to hypothecation by the Executive.

10.3 Entire Agreement . This Agreement represents the entire agreement of the Company and the Executive and will supersede any and all previous contracts, arrangements or understandings.

10.4 Governing Law . This Agreement will be construed and interpreted in accordance with and governed by the law of the State of Delaware, USA, without regard to the choice-of-law provisions thereof that might direct the application of the law of another jurisdiction.

10.5 Dispute Resolution . Any legal action or proceeding with respect to this Agreement shall be brought in the courts of Delaware, or the United States District Court for the District of Delaware. By execution and delivery of this Agreement, each of the parties hereto accepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Executive and the authorized representative of China Biologic Products, Inc., execute and enter into this Agreement as of the date first written above.

	EXECUTIVE

	/s/ David Gao
	Mr. Xiaoying (David) Gao
	Passport No.

	CHINA BIOLOGIC PRODUCTS, INC.

	By:	/s/ Ming Yang
	Name: Ming Yang
	Title: EVP and CFO
	Date: August 4, 2016

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Exhibit 31.1

CERTIFICATIONS

I, David (Xiaoying) Gao, certify that:

I have reviewed this quarterly report on Form 10-Q of China Biologic Products, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2016

/s/ David (Xiaoying) Gao

David (Xiaoying) Gao

Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

CERTIFICATIONS

I, Ming Yang, certify that:

I have reviewed this quarterly report on Form 10-Q of China Biologic Products, Inc.;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2016

/s/ Ming Yang
Ming Yang
Chief Financial Officer (Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, David (Xiaoying) Gao, the Chief Executive Officer of CHINA BIOLOGIC PRODUCTS, INC. (the “Company”), DOES HEREBY CERTIFY that:

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, each of the undersigned has executed this statement this 4 ^th day of August, 2016.

/s/ David (Xiaoying) Gao

David (Xiaoying) Gao

Chief Executive Officer

(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to China Biologic Products, Inc. and will be retained by China Biologic Products, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Ming Yang, the Chief Financial Officer of CHINA BIOLOGIC PRODUCTS, INC. (the “Company”), DOES HEREBY CERTIFY that:

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, each of the undersigned has executed this statement this 4 ^th day of August, 2016.

/s/ Ming Yang
Ming Yang
Chief Financial Officer (Principal Financial and Accounting Officer)