One of the central players in uncovering Chinese investment fraud research is the firm Muddy Waters who recently published a white paper entitled Frauducation Part I: in this paper the author outlines how Chinese businessmen are taught and sponsored by experts, who sponsor and coach fraudsters in subjects like falsifying records, accounting, assets and the various methods needed to pull off grand frauds. When a character like John Paulson gets taken for nearly half a billion there is a lot of motivation on the criminal side to get things right
The fraud school’s assistance went well beyond providing document and accounting templates. The fraud school provided a network of “friendly” auditors that would help the companies get through the initial due diligence processes. The fraud school also helped companies game the due diligence process by providing the companies with contact information of suppliers and customers to give to potential investors. The suppliers and customers were frauds – the school hired them merely to play a role and answer questions according to the script. (Source: Muddy Waters)
Fraud is central to the Chinese system, it has emerged via virulent mutation of the ancient tribute system. In the past, these tribute systems reflected an ancient form of private regulatory order. In the past there was often a limited basis for the rule of law to govern transactions. Throughout Chinese history, trade relied on systems of tribute to ensure secure business and political outcomes.
These old systems were still essential throughout Asia up until only a few decades ago because, transacting parties could not rely on the rule of law to ensure the security of terms governing a transaction. In China this has evolved into government sponsored systemic corruption with Western motivations of greed and criminality. It infects every level of the private and public sector....
Originally posted by silent thunder
Where are these pictures from? The national palace in some European country? No, they are images of the Harbin Pharmaceuticals Group’s Sixth Pharmaceuticals Plant. Harbin is a state-owned Chinese company.
Now, some people in China are arguing that the gold-and-marble encrusted building with its expensive granite exterior is a sign of a healthy company with money to spend. On the contrary...these photos are evidence of a sick, sick economy in deep trouble. Let me break it down for you.
In China, with its one-child policy, saving for one's old age is essential. Because in the future, each child will have four grandparents to support, which means the grandparents aren't likely to get much support at all from their grandkid. And there is no real, viable pension system for most people in China. Knowing this, Chinese have become some of the world's greatest savers, mostly stashing their humble nest-eggs in banks or insurance plans, because their opportunities for investment are limited. Some put money into real estate, which has accounted for the boom of empty buildings across the country, now looking unstable. But the majority of savings go into big Chinese banks and insurance companies.
What do these banks and insurance companies do with their glut of savings? They, too, have limited investment opportunites, so large amounts of the savings flows it to state-owned enterpries -- companies like Harbin Pharmaceuticals.
Most of these state-owned enterprises are nests of corruption. What isn't skimmed off or used in bribes is often wasted in a spectacular manner. Like the photos above attest. Statistics are just made up; its impossible to know whether these companies are making any sort of profit at all, or even have an income flow. But they generally have access to money from banks. Money that non-wealthy Chinese people are counting on to be there in their old age.
Some day, probably before too much longer, this is all going to blow up in everyone's faces.
It won't be pretty. Just sayin'.
edit on 12/20/2012 by silent thunder because: (no reason given)
Originally posted by silent thunder
reply to post by spangledbanner
This thread isn't about America, it's about China. Of course America has huge problems. What does that have to do with corruption in China?
It'w funny...I've got one response insinuating that because I dare to criticize this waste of borrowed money, I'm somehow anti-business. Then we have your response, insinuating that because I criticize China I'm somehow ignoring problems in the US. Both of you at wrong, both irrelevant to this thread.
America has 16 trillion in debt. China has a trillion dollar surplus.
Sixteen trillion debt. 16 trillion.
China rules the world already.