The price tag of anti-Chinese rhetoric in the US - Shaun Rein

The US could lose 1 to 2 trillion US dollar in revenue if they successfully scare away Chinese investors, writes Shaun Rein in CNBC, quoting a recent Asia Society report. "Fear mongering about China by American politicians and businessmen like Donald Trump has made Chinese think twice about investing in the U.S."

A few months ago I was interviewing salespeople in luxury boutiques like Louis Vuitton and Gucci along 5th Avenue in New York. “60 percent of our customers are Chinese,” a salesman at one store told me. “20 percent are Brazilians, and the rest are Europeans and Americans. A few years ago, it was mostly Americans, but not anymore.”...
There are some retail outlets in the U.S. that have been wise enough to adapt their strategy to accommodate high-spending Chinese tourists, including hiring more Mandarin-speaking salespeople. But not all American retailers are that foresighted.

Also Chinese investors have shifted their preference from the US to Europe, Rein says:

In recent interviews, most executives told us they plan to focus on Europe rather than the U.S. because they fear increasing anti-Chinese sentiment here. Cases like telecom giant Huawei’s rejected attempt to acquire 3Leaf Systems have made them nervous, while in Europe the welcome mat is being rolled out for investors.

More in CNBC.

Shaun Rein

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting of conference? Do get in touch.

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Horror investment stories in China - Shaun Rein

Shaun Rein by Fantake via Flickr

Shaun Rein recalls in CNBC a proposed investment of US§ 50 million in a Chinese internet venture that did not exist, and was only cancelled after some solid due dilligence was done. The investor "had only been to China once, when the CEO of the target firm had wined and dined him, introduced him to some supposedly high-ranking government officials, and showed him a packed outlet.
Rein summarizes:

Despite the many horror stories investors run into in China, it still amazes me how little due diligence is actually done by people investing there.

If it can almost happen to professional private equity firms, it can happen to you. Even though I have been, and continue to be, one of the biggest China bulls for over a decade and a half, I recommend a healthy dose of caution for most everyday investors before buying Chinese stocks. In fact, they might be better off investing in companies like Apple or Yum! Brands that make money in China but whose numbers you can trust.

Unfortunately, fraud is commonplace there and the investment banks, law firms, and accounting firms that should be protecting you and doing due diligence aren't doing their jobs. Why not? Often they just want to get deals done to get their commissions and, frankly, often they are simply not up to the job. I've seen many non-Chinese speaking executives fly into China for for a few days to conduct due diligence and get hoodwinked.

The whole story in CNBC.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Pin the nail on the donkey investment decisons - Amy Sommers

Amy Sommers by Fantake via Flickr

China stocks are hot at the US markets, whether they go IPO or through merging a shell, while class action law suits against Chinese companies go up. Shanghai-based lawyer Amy Sommers looks in Forbes at the risks for investors.

Are US investors in China companies intrigued by the China brand and playing ‘pin the tail on the donkey’ in their investment decisions? From where I sit in Shanghai, that’s my general impression. 

For those interested in investing in China companies, I would recommend viewing a company’s reverse-merger history as a potential red flag deserving of further scrutiny of business fundamentals before proceeding. An IPO led by a reputable investment bank may be somewhat less risky. 

Also, bear in mind that the listing standards for the Shanghai exchange are very high – China’s capital markets are still relatively undeveloped and so the CSRC limits listings to companies they deem mature. Consequently, the Chinese companies that are pursuing listings on exchanges outside of China generally are doing so because they can’t qualify to list in China, perhaps in part because they are more volatile/immature. As a result, generally speaking such companies have a higher risk profile. If investors recognize this and allocate their capital accordingly, then they are consciously assuming risk and can plan accordingly.

More in Forbes.

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Amy Sommers is a speaker at the China Speakers Bureau. When you need her at your meeting or conference, do get in touch.
The China Speakers Bureau will be live on air at the American Entrepreneur Radio tonight. Check here for more details. 

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Take care when investing in China - Shaun Rein

Shaun Rein    by Fantake via Flickr

While mostly optimistic about China's economic future, Shaun Rein warns in Forbes against too lighthearted investments in China's companies, even when they are listed in the US.

Why? First, Chinese company stock prices remain very volatile, because of hedge funds. There are only several dozen good Chinese companies traded on the New York Stock Exchange and NASDAQ, so hedge funds control an inordinate amount of Chinese equity. If they grow bearish or need liquidity, they might sell stakes quickly. Second, despite some improvement, the transparency of Chinese firms remains questionable...  Many Chinese companies keep three sets of books, one for the tax bureau, one for investors and one for senior executives.

More warnings in Forbes.

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Do you need more advice on where to invest in China? Shaun Rein is a speaker at the China Speakers Bureau and happy to speak at your meeting or conference. Interested? Do get in touch.

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