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Analysing chinese companies


valueorama
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I'm in China right now.  Just finished a fact finding trip in Ordos.  I see zero reasons for investing in any Chinese companies even though there must be some that would make excellent investments.  The due diligence process is horrendous for small caps and how would it be possible to tell what the government might do that would affect any of the SOEs?

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I was burned on Chinese reverse mergers during that infamous period right before and during some of the highest profile blow ups. Until evidence proved otherwise, I found the idea that there were many billions of dollars worth of fraudulent companies spread among many companies listed on major US exchanges to be pretty ridiculous. These days I think it is good business practice to assume that any Chinese company has some degree of corruption and fraudulence and is fleecing the shareholder until proven otherwise.

 

I would largely ignore any Chinese equity unless it has paid out to shareholders the majority of the cash it has raised by equity offerings in the past. If they have met that requirement the potential for them being a fraud is pretty low.

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