Ten Ways to Detect Chinese Stock Frauds

  In the summer of 2011 Muddy Waters Research brought to light some suspect accounting practices from some U.S. listed Chinese companies, such as Puda Motor, Chinacast Education Corporation (PINK:CAST), Sino-Forest Corporation (TSE:TRE) (PINK:SNOFF) (FRA:SFJ) or China Electric Motor, Inc. (PINK:CELM). The general issues of accounting differences highlight China’s concerns to protect national and business secrecy (this appears to be the Chinese government’s main issue) and the U.S. government’s concerns regarding information disclosure and auditing capabilities. The issue is so thorny that many close observers think there’s a real chance that the 200 or so Chinese companies with U.S. ADRs could possibly be delisted. Paul Gillis…