{"id":128141,"date":"2011-12-03T04:19:40","date_gmt":"2011-12-03T11:19:40","guid":{"rendered":"http:\/\/chinadigitaltimes.net\/?p=127753"},"modified":"2011-12-03T04:19:40","modified_gmt":"2011-12-03T11:19:40","slug":"sometimes-a-cave-is-just-a-cave","status":"publish","type":"post","link":"https:\/\/chinadigitaltimes.net\/2011\/12\/sometimes-a-cave-is-just-a-cave\/","title":{"rendered":"Sometimes a Cave is Just a Cave"},"content":{"rendered":"

Reuters profiles\u00a0China’s “Underground Grand Canyon,” a cave and tourist attraction in a remote part of Shandong Province which exemplifies the controversial measures Chinese companies sometimes take to achieve\u00a0the\u00a0recognition that accompanies an overseas\u00a0listing:<\/a><\/strong><\/p>\n

The owners of the Underground Grand Canyon attraction eventually used a dizzying array of holding companies to ultimately list in the United States through a reverse merger that accomplished the feat in 2010.<\/p>\n

That practice has come under scrutiny over the past year, as short-sellers including Muddy Waters have targeted some firms listed in the United States and Canada, publishing research reports accusing them of fraud that caused their stock prices to plummet, from which the short-sellers profited.<\/p>\n

Some companies that listed through reverse mergers, including Chinese clean-tech firm Rino International, were eventually delisted following investigations prompted by short-sellers’ accusations of accounting flaws.<\/p><\/blockquote>\n

The New Yorker’s Evan Osnos writes that even though\u00a0the company\u00a0hasn’t been accused of any accounting irregularities or fraud, the story of the\u00a0Underground Grand Canyon and others which have similarly sought reverse-mergers has fueled recent\u00a0concern over investing in China<\/a><\/strong>:<\/p>\n

\n
\n

The prospect of wrongdoing isn\u2019t really the point, anyway. This is probably not the Madoff of caves, and the listed entity, BTHC XV Inc.<\/a>, isn\u2019t even trading yet, as far as I can tell. This is far more interesting as a milestone of a rarer kind, as I\u2019ve mentioned before, as in the moment that a Chinese entrepreneur sought to purchase a significant chunk of Iceland<\/a> not long ago. It is the kind of moment when those of us keeping an eye on China\u2019s rise pause with a hand against the wall to recover our bearings.<\/p>\n

Reverse mergers\u2014by which a Chinese company gets listed through the back door, using the carcass of another firm\u2014have proved to be one of the occasionally toxic byproducts of overzealous ambitions to bring China into global markets faster than its companies should have. This is one of the realizations behind the surge of concern lately about Chinese investments, in which various analysts have been offering versions of what Sean Williams, at the Motley Fool, titled, \u201cI Was Wrong About China.\u201d (Among other lessons, he writes<\/a>, \u201cThe second mistake I made was assuming that corporate governance in China was comparable to what we\u2019re used to in the United States.\u201d)<\/p>\n<\/div>\n<\/blockquote>\n

\n

Sino-Forest, the name most associated with and responsible for the recent cloud of suspicions that has engulfed foreign-listed Chinese companies, began to fight back<\/a> last month against accusations of fraud in an\u00a0August research report published by Muddy Waters<\/a> which caused the Toronto-listed stock to plummet and\u00a0prompted regulatory and criminal investigations into the company<\/a>.\u00a0See also coverage, via CDT Money, of new allegations by Muddy Waters<\/a> against advertising company Focus Media.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Reuters profiles\u00a0China’s “Underground Grand Canyon,” a cave and tourist attraction in a remote part of Shandong Province which exemplifies the controversial measures Chinese companies sometimes take to achieve\u00a0the\u00a0recognition that accompanies an overseas\u00a0listing: The owners of the Underground Grand Canyon attraction eventually used a dizzying array of holding companies to ultimately list in the United States […]<\/p>\n","protected":false},"author":983,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[116,2,10,14744],"tags":[7642,3218,14806],"class_list":["post-128141","post","type-post","status-publish","format-standard","hentry","category-world","category-economy","category-law","category-level-2-article","tag-foreign-investment-in-china","tag-shandong","tag-sino-forest","et-doesnt-have-format-content","et_post_format-et-post-format-standard"],"yoast_head":"\nSometimes a Cave is Just a Cave<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"http:\/\/chinadigitaltimes.net\/2011\/12\/sometimes-a-cave-is-just-a-cave\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" 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