Countering Chinese Accounting Control Fraud and Predation Against U.S. Investors


New Economic Perspectives has the article Countering Chinese Accounting Control Fraud and Predation Against U.S. Investors.

What the China Hustle accounting control fraud schemes and the predation schemes described have in common is that neither would be possible if the SEC and either the Bush, Obama, or Trump administration were not so utterly spineless for at least 15 years as to allow the fraud and predation schemes to persist. The Chinese context should have been the easiest context for the U.S. to deny the ability of Chinese corporations to list on the U.S. markets unless the SEC had the power to prevent fraud and contract provisions in the U.S. that China agreed in a binding fashion were enforceable in China. The SEC has not required such a grant of power as a condition of approving Chinese stock listings in the U.S. and has not insisted on enforceable contract terms to prevent predation. The SEC is not even asking for such powers, warning Americans not to invest in Chinese stocks, or seeking to ban such listings.

I commented on the post as follows:

Thanks for the warning. I might have finally decided to invest in Chinese stocks if I hadn’t read this article. What frightens me though, is that I have no assurance that these shenanigans aren’t going on in the highly rated USA companies where I do most of my investing. I try to look at measures to assure myself that I am not investing in companies that are going deep into debt to buy back their own shares to boost the per share earnings and dividends. I’ll only know if I have succeeded when I don’t go broke in the coming market decline.

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