Fabian,
First off, in China, one hires a 'guide' to accompany one wherever one wishes for next to nothing in pay, so the language is not a barrier. Choad (of these threads) recently spent time visiting companies in China with a Chinese/American friend of his with an eye to investing. Ask him his thoughts from a personal and reliable perspective.
How good could your DD possibly be in determining whether they are fraudulent?
Did you even read the article? Didn't you see where he toured a factory that appeared to be operational that day only to find it was shut down all other days? Yes, he could be short and posting his personal expose to drive prices lower. . .or not. How can one know for sure?
We are discussing fraud in China, not fraud in America. American fraud in no way justifies Chinese fraud. In addition, we understand American fraud somewhat, know what to be wary of in publicly-traded companies (many, including the Motley Fool as I recall, would not invest in Enron because they could not understand the business model, a big red flag!). We do not understand the type of fraud the canny Chinese businessmen perpetrate, from stealing IP to temporarily manning closed factories to impress official visitors.
Certainly there is always risk involved whether one is investing in China small caps or American ones. You pays your money and takes your chance! Just choose your poison!
Newly
