This paper presents how a capacitive voltage source is connected in series to the rotor of induction motor to improve power factor, reduce stator current, and improve efficiency and ability of overloading. The principle of the reactive power compensating device for windings rotor induction motor is described and mathematical model in dq0 reference frame is set up. A single phase to three phases AC-AC cycloconverter is adopted in order to produce capacitive voltage, which make the circuit simple and capacity of transformer much decremented. Using an 89S52 sing-chip microcomputer as the control kernel and MAX197 as A/D, the system is capable of automatic adjusting the function of power factor compensation as the change of the motor load. The system was tested on a JR138-8 motor. The result shows that the power factor is over 0.96 and the current of the stator reduces over 15%.