In case you don’t know what the article’s title means, it’s from a Chinese saying that loosely translates like this: a thief who calls for the capturing of other thieves. And that’s what the U.S. government and congress are reportedly doing to the allegedly fraudulent Chinese companies.
After producing history’s biggest financial scoundrel who embezzled billions of dollars from its own people, after rearing the company that cooked history’s biggest fraudulent accounting book, and after busting history’s biggest financial bubble, the U.S. is now investigating Chinese companies that are legally listed in the country through a procedure called “reverse mergers.” This at least is according to an article by a newspaper that used to have some credibility under its former editors and owner.
The investigation, reportedly by the SEC and congress, is aimed at those Chinese companies that are listed in the U.S. through buying domestic “shell” companies, a procedure that’s totally legal and used by other overseas companies. But the Chinese companies were called by the newspaper as having “minimal revenues” (sounds like a silicon valley startup?) and “questionable accounting” (sounds like Enron and Lehman and AIG?). One of the companies named by the newspaper is said to be ordered the disgorgement of $129,500, or about 1 percent of the bonus of a senior Wall Street banker who just participated in creating a historic financial bubble.
At a time of stubbornly high unemployment rate and skyrocketing debt, it’s understandable that the U.S. people feel a bit jittery toward its biggest creditor, and it’s also understandable that some media, desperately trying to regain its credibility, will utilize this feeling. And to be sure, there are thieves in China, although they are not as unscrupulous as the ones that produced by the U.S., and some Chinese companies do have accounting problems, although they are not as big as the U.S. companies’.
But before finger-pointing innocent Chinese companies and switching congress and the U.S. government’s attention away from their own messes, consider this: How much more investment alternatives have Chinese companies created for U.S. investors? How much more returns have Chinese stocks provided to U.S. investors? How much has China boosted global stock markets by buying up products that otherwise will have nowhere to sell?
And since we are in a capitalist country that boasts the power of market and law and orders, let’s remember that every one is innocent until he is proved guilty, and that investors make their judgment with their own money at stakes. People buy into Chinese stocks for a reason and companies go to China for a reason. There will be more and more Chinese companies coming to the U.S., either to buy up bankrupt companies or to list on the stock exchanges. And the Chinese companies that are coming here will follow the U.S. laws and have the same sound accounting books like most U.S. companies.
China and the U.S. are standing on the opposite sides of a world trend. For China, it’s not how big of a problem it has, it’s how fast and how strong it’s growing. For the U.S., it’s not how powerful it is, it’s how big and messy its problem is.
So, borrowing the opening sentence from the newspaper’s report, “one of China’s least-noticed exports” is actually not the “back-door mergers,” it’s this ongoing historical trend. And of course, China also exports its wisdom, such as: the thief should stop stealing first before turning its gun to other imagined thieves. And one more piece of wisdom: instead of reading the newspapers that don’t actually know China, why don’t you just go to the country and take a look by yourself?
An Outside Look 