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According to all the native Chinese I've spoken to, investing in the Chinese stock market is generally a bad idea. They say it is filled with scams, probably du

According to all the native Chinese I've spoken to, investing in the Chinese stock market is generally a bad idea. They say it is filled with scams, probably due to lack of regulation or corruption. The government's brazen ability to delete whole industries may be another deterrence though.

fma 5y ago
There's a difference between investing in the Chinese stock market vs investing in a Chinese company listed in the US stock market as an ADR. An ADR usually goes through more vetting - but that doesn't mean there are not scams. Luckin Coffee comes to mind...but in the US we also have Enron.
- shoo 5y ago
  For a different (no doubt biased) perspective, see how Chinese companies listed on US stock exchanges are perceived by many US short sellers. One sentiment I have heard from US short sellers is that if Chinese companies defraud US investors, Chinese market regulators don't care and US market regulators can't enforce anything even if they are forced to care. But if Chinese companies defraud domestic Chinese investors, then Chinese regulators may react strongly to take action against the offending companies or executives [1]. There are also complications with how Chinese firms listed on US stock exchanges are audited. Francine McKenna writes a lot about complications with audit (not specifically about ADRs) at her newsletter https://thedig.substack.com/ https://thedig.substack.com/ There are some interesting perspectives in the wolfpack research podcast -- esp e.g. episode 3 & episode 8: https://wolfpackresearch.com/podcast/ https://wolfpackresearch.com/podcast/ [1] there is an anecdote about one company that was selling shares to both US investors and their elderly Chinese employees without telling each group that shares in the company were also being sold to the other group, i.e. so both groups of investors were being lied to about the total amount of shares outstanding -- apparently one of the directors responsible for the fraud was taken out and shot.
wise_young_man 5y ago
TAL, mentioned in the article, is listed in the US stock market, NYSE specifically.
- yellow_lead 5y ago
  Yes
nomay 5y ago
Anything requiring advanced cooperation, especially from the gov, is doomed to fail in China, the system has no check and balance, anyone is looking to monetize their authority, the stock market literally was set up coz SOEs needed to offload their junk assets, it was not meant to be seriously policed from the very start.
seanmcdirmid 5y ago
You can invest in the Chinese stock market and make money, but it is generally by “following in the wake of whales”, who have the real inside information and connections to make the real money. Also, China doesn’t tax capital gains, so the dynamics for making money are really different than in the states.

fma 5y ago

There's a difference between investing in the Chinese stock market vs investing in a Chinese company listed in the US stock market as an ADR. An ADR usually goes through more vetting - but that doesn't mean there are not scams. Luckin Coffee comes to mind...but in the US we also have Enron.

shoo 5y ago
For a different (no doubt biased) perspective, see how Chinese companies listed on US stock exchanges are perceived by many US short sellers. One sentiment I have heard from US short sellers is that if Chinese companies defraud US investors, Chinese market regulators don't care and US market regulators can't enforce anything even if they are forced to care. But if Chinese companies defraud domestic Chinese investors, then Chinese regulators may react strongly to take action against the offending companies or executives [1]. There are also complications with how Chinese firms listed on US stock exchanges are audited. Francine McKenna writes a lot about complications with audit (not specifically about ADRs) at her newsletter https://thedig.substack.com/ https://thedig.substack.com/ There are some interesting perspectives in the wolfpack research podcast -- esp e.g. episode 3 & episode 8: https://wolfpackresearch.com/podcast/ https://wolfpackresearch.com/podcast/ [1] there is an anecdote about one company that was selling shares to both US investors and their elderly Chinese employees without telling each group that shares in the company were also being sold to the other group, i.e. so both groups of investors were being lied to about the total amount of shares outstanding -- apparently one of the directors responsible for the fraud was taken out and shot.

wise_young_man 5y ago

TAL, mentioned in the article, is listed in the US stock market, NYSE specifically.

yellow_lead 5y ago
Yes

nomay 5y ago

Anything requiring advanced cooperation, especially from the gov, is doomed to fail in China, the system has no check and balance, anyone is looking to monetize their authority, the stock market literally was set up coz SOEs needed to offload their junk assets, it was not meant to be seriously policed from the very start.

seanmcdirmid 5y ago

You can invest in the Chinese stock market and make money, but it is generally by “following in the wake of whales”, who have the real inside information and connections to make the real money. Also, China doesn’t tax capital gains, so the dynamics for making money are really different than in the states.