Gang, See the documentary "The China Hustle" ASAP.
It is an excellent explanation of how fraud is being committed in the stock market with an old trick combined with two weak spots in the legal system of the US and China.
The first enables a company to get listed without having to go through the usual steps. The new, to us, Chinese company buys a morbid company that is already listed on a US exchange and just renames it. Bingo, they are in the market. American brokers, aand others involved in our stock market profit from this so they are all too happy to assist with the process
The next problem is that China has no legal apparatus for dealing with financial lies told outside China itself and the US has no way to enforce our laws about fraudulent statements when they originate in China.
The third problem is that it is profitable for American companies like Price Waterhouse Cooper (PWC), KPMG, legal firms, and others who are supposed to audit and/or verify statements to do no real digging into the claims of a company. The result is claims about value and profitability are "verified" by big names.
An example that will help you understand this is when a Chinese company says they've been audited by PWC, technically it is true but they leave out one part, that it is a mostly independent branch of PWC in China which has the name but is almost totally uncontrolled by American PWC and can't be challenged by the SEC or other US regulatory agencies because they are not based here.
It's all a bit complicated and hard to explain in a short post because the film is quite dense and moves along through the many twists and turns of the market process. However, the claims of the people in the film are backed up with good, visual evidence that is quite stunning.
The four key people in the film have different motivations but have one thing in common, they are short sellers making money by exposing the frauds.
Another element, though not the core of the film, is that there is approximately $1,300,000,000 bucks currently involved in these companies on the American stock exchanges and, given that they may well crash big time, there might be a big risk of their demise triggering an even bigger downturn.
"The China Hustle" is worth seeing, even if you don't have any money in any of the positions, because it exposes the lack of reasonable regulation and validation of statements made by CEOs, brokers and others involved, for these companies, in the US stock market.
