After a boom in Chinese IPOs on U.S. stock markets, a
rash of apparent wrongdoing at newly-listed China firms
is taking the shine off China stocks.
Huanqiu, People's
Republic of China
U.S.-Listed
Chinese Firms are Ruining China's Reputation
Are dishonest
Chinese firms getting themselves listed on U.S. stock exchanges to reap rewards
from the good reputation developed by their more honest, hard-working counterparts?
According to this surprisingly self-critical article from China's state-run Huanqiu,U.S.-listed
Chinese firms who break the law in the United States are ruining China's good
name, and should be punished not only by U.S. authorities, but by China's.
Looking
for partners for selling books, marketing anti-virus software, setting up
social networks, online gaming sites, or tire manufacturing plants - in recent
months, like a river rushing toward
the sea, there has been a great surge of Chinese companies that have sought to be
listed on the U.S. stock market. Regardless of the industry, its scale or its
profitability, people seem to think they can land successfully on Wall Street.
It's a march that brings to mind a movie of a few years ago, Big
Shot's Funeral. In the film, it seems that a famous American director
wants to have the filming of his Chinese funeral listed on the NASDAQ. The
theme is anything but an outrageous joke. Of course, the premise is that the
funeral is funded by an IPO. [Believe it or not, the Chinese production stars
Donald Sutherland as the American director].
Chinese stocks are surging on the U.S. stock market. According
to SouFun,
since the latest market uptick began in September 2010, a total of 38 Chinese
companies have successfully listed on the U.S. stock market, attracting a total
of $4.5 billion. Shanda
Literature, classified ad site 58
City [58同城], Thunder
[迅雷等],
and other companies are also hot in the heels to be U.S.-listed. However, with
the scandals and rumors swirling, U.S.-listed Chinese companies face an unprecedented
crisis of confidence.
The reversal came faster than anyone imagined it would. Just six months ago, Dangdang [当当] listed on the NASDAQ with a price to earnings ratio of 103, jumped 87
percent on its first day of trading; then when Youku[优酷] went public, its stock soared 161.25 percent on the
first day; and Qihoo
360 [奇虎360] soared 134.48 percent on
its first day. But now people see quite a different picture: from mid-March to
mid-May of this year, of the 170 NASDAQ-listed Chinese companies, share prices
for 130 fell, with 46 dropping more than 30 percent.
The situation
is similar on the NYSE, where many Chinese firms have "nosedived." Even
more embarrassing is that since the year began, 19 Chinese companies have suffered
a suspension in trading on the U.S. market, and four companies face delisting. On
May 31, trading in Jiangbo
Pharmaceuticals [日江波制药] was
temporarily suspended. On May 23, Longtop Financial
Technologies [东南融] announced that it was being
investigated by the U.S. Securities and Exchange Commission. The company decided
to commission auditors, the accounting firm Deloitte Touche Tohmatsu, which turned
their own "clients" into regulatory authorities. It seems a good number of Chinese firms have committed
misdeeds.
Some critics assert that this is a "conspiracy" involving
investors who are making a profit by circulating negative rumors and then
short-selling the stocks. However, anyone familiar with China's business climate
and methods of growth must accept the real possibility that these negative
rumors are facts.
Posted by WORLDMEETS.US
The
biggest reason U.S. investors are optimistic about Chinese companies is China's
huge and booming market of 1.3 billion people. In addition,
experience tells them that investing in China is like money in the bank. In the
early stages, the performance of China's rising U.S.-listed enterprises like
Sina [新浪], Sohu [搜狐], Baidu [百度],
Shanda [盛大] and Ctrip [携程]
demonstrated China's market potential, forming a dream team of
overseas-listed Chinese firms. Afterwards, PetroChina [中石油、],
Sinopec [中石化], ICBC [工商银行],
China Construction Bank [建设银行等垄断]
and other state-owned monopolistic enterprises went public in the U.S., further
extending the myth that one can't miss with Chinese companies.
Many utterly hopeless and domestically-listed
Chinese firms see an opportunity, even if they have to use fraudulent methods. This is
quickly exhausting the confidence that other Chinese companies have accumulated with
American investors.
Some of these Chinese enterprises were already "sick" when they went
public and, during the financial crisis, "notorious" investment banks
and various stakeholders helped them practice the art of deception to reap enormous
rewards.
It now appears that many U.S.-listed Chinese companies
are joining forces to destroy the good reputation of China's emerging and most innovative
enterprises, destroy this hard-won financial platform, destroy the ambitious
entrepreneurs who might have anticipated the future, destroy Chinese
businesses, China's economy, and the overall image of the Chinese people. This is
a loss much greater than those of these U.S.-listed companies and their
investors. They may now be debtors, but it is the many Chinese enterprises and
all Chinese people who will have to pay the price.
Thus, while these companies cook the books for
auditors in the U.S. accounting system, it is in China that they operate. Relevant
tax authorities in China should also conduct determined investigations of the companies
involved, so that these firms, which are fast-diminishing US confidence in China,
have no place to hide and are made to pay the price for their crimes.
