Words of wisdom to help you deal with this ethical dilemma from those who endured and prospered for 15 years behind the Great Wall...
August 15, 2011
Welcome to the land of never-ending bribes. A survival guide for frustrated
foreign business owners who simply cannot resist the lure of Chinese markets
ReRc ently a week cannot pass without another revelation of another Chinese stock fraud that is exposed later rather
than sooner. Investors blinded by greed and the lure of a quick market bonanza have been casting common sense
and due diligence to the roadside just as soon as they see a familiar name peddling the stock, Goldman Sachs,
Morgan Stanley, etc. Their faith and confidence in these Wall Street giants mentally mitigates the nagging questions
they eventually ignore. After all, everyone is throwing money at Chinese companies and they don?t want to be the
last one in buying at higher share prices. But is the lowest hanging fruit always the sweetest, or just the easiest?
Since short-selling s banned in China, it is not difficult to understand how easy it is to manipulate stock prices
especially when Chinese regulators themselves have their family fortune invested in the stock markets ? either the
Hangseng or the the Shanghai Index two of the most active markets in the world in terms of volume. Over 150 million
Chinese families have more the equivalent of $100,000USD invested in the PE markets. The stock market is their
quickest route to easy wealth, and in a land where bribery has become a 5,000 year tradition, buying a new release
or a creative accountant is not difficult. In Beijing only $10,000 will buy either, and the resulting outcome can make
millions for someone who quickly dumps before the fraud is
discovered and revealed.
Virtually all the news and Internet media is controlled and censored
in China, ostensibly for ?quality control purposes? but some suggest
that bad news about a stock is always delayed until the elite have
safely bailed and are safely on the ground rolling up their tell-tale
parachutes before the proverbial *hit hits the fan. Due diligence
specialists at the China Trade Commission in Beijing now estimate
that a full 30% of all publicly traded companies in China rely on stock
fraud to prosper. They were the first to wave the red flags on Alipay
and China Media Express and recently issued a fraud alert on two
dozen similar situations. They have sounded the alarm on 39
companies in just the last 90 days, and over 300 companies since
2008 (See listing below). But is anyone listening? In fact the China
hype has become deafening. Stories of instant millionaires and
b illionaires fill the pages of local newspapers and magazines. One
cannot walk down a Beijing street anymore without seeing a dozen Beemers, Porsches, or Lamborghinis parked in
front of lavish restaurants and private clubs that carry a $1,000 cover charge. Even the 20 year old girl pictured above
owns two Lamborghinis. Her name is Guo Mei Mei and she works for the China Red Cross. She claims her boyfriend
got ?lucky? in the stock markets. Many government officials admit that ?luck? has nothing to do with it.
Then there is Jack Ma, perhaps China?s second or third wealthiest man, and
Yahoo?s joint venture partner in China. Mr. Ma owns the infamous Alibaba on-
line etrade site which according to Ma himself ?makes a million dollars a minute?.
With over 10 million subscribers, it is no great mystery why. But Billionaire Ma
was not content with his huge earnings and many Yahoo shareholders now claim
in a class action suit that he swindled Yahoo out of over $100,000,000 a year in
gross revenues. Their allegations of a sophisticated fraud can be found at
Bloomberg dot com, Yahoo News, and in this detailed Forbes expose article:
Chinese reporters or bloggers who write about this controversial Alipay scandal either get threatened or censored
online. At least 500 government officials are know to have substantial holdings in Ma?s many ventures. Carting him
off to prison fraud would be disastrous for their portfolios. Thus is the reality of the China stock market scene and
only the locals seem to be paying attention. As more and more foreigners are drawn into the Chinese markets like
moths to a flame, the local investors are quietly cashing out as they anticipate a market implosion growing near. All
the time Chinese government officials ply the world trumpeting the success and growth of China, like many pied
pipers leading us all to financial fates with an irresistable tune.
When and where will it all end? Bloomberg and Hong Kong insiders say not any time soon, but they all agree on the
dismal destination. What goes up must come down and in a stock world with no short selling, massive sell-offs could
be sparked any day that the truth of the widespread corruption meets the sunshine. From traders on the floor to
retail and institutional brokers ? they all have their own agendas and game plans. The only news and foecasts they
believe are those they buy themselves.
?Our advice ? look twice before you leap, and sort fact from fiction
before removing your wallet from the safety of your pocket.?
- Anthony DeMarco, CTC Director
The sad news is that foreign business owners who originally came to China to grow a viable and profitable business
with a methodical business plan, soon see hundreds of others making stock market fortunes, and quickly abandon
their stable business to claim their slice of the PE pie. For a lucky few with the right ?guanxi? (chinese for contacts)
the sudden switch is indeed lucrative. But for most, foreign investors are the ones easily spotted ? holding the bag at
the end of the day. For a foreigner who is not a corporate officer of a multi-national corporation like Siemens,
Motorola, or Microsoft, legal recourse and remedy in China is almst non-existenet.
?Every investor will live and die by their own choices, and that is precisely why due diligence is the buzz word in
Beijng as well as Wall Street.? says Ian Greene, chief market analyst for a Tier 1 investment bank in Shanghai, who
then went on to predict? ?The last to profit from the China gold rush will be those who first invested in professional
due diligence. Those who remain shall all be victims.? To read the conclusion of ths article and obtain a listing of
China?s biggest red flags stocks, merely send an email to ChinaMarketNews at ChinaTradeCommission dot org and
the full article will be sent to you free of charge withn 24 hours.