Minister in the Prime Minister's Office Chan Chun Sing and Chongqing Party Secretary Chen Min'er. (Photo: Ministry of Trade and Industry)

Minister Chan encourages SMEs to “fully exploit” opportunities in South-Western China even as world becomes aware of Chinese Accounting Fraud

by Kwok Fangjie

While in Chongqing last Thursday (12 Apr), Minster Chan Chun Sing spoke at a seminar organised by the Singapore Business Federation. There, he said that the two countries have made good progress on the Chongqing Connectivity Initiative (CCI), the third project bilateral project after the Suzhou Industrial Park and the Tianjin Eco-city.

The former army general said that freight time between the two cities could be cut to as little as 5 days, and that companies could the new transport route to achieve greater economies of scale, which will further lower costs and increase efficiency. He also said that there were opportunities for developing an “information network to facilitate such trade flows”.

The minister then urged Singapore businessmen to work with the local firms to “fully exploit” the “vast opportunities” and potential of South-western China, which covers two-thirds of the country’s vast land area and is home to one-third of the nearly 1.4 billion population

Accounting fraud in China a hidden phenomenon that could have a serious impact on World Economy 

Influential magazine Forbes calls the China Hustle the ‘most important film of 2018’ while acknowledging that this film is something that we might not even have heard of. The China Hustle makes a bold assertion that Chinese firms listed in the US could cause an economic disaster because of shady accounting records.

Written by award-winning director Jed Rothstein, the documentary touches on how some 400 Chinese companies have listed themselves on the American Stock Exchange, 80% of which are through reverse mergers. A reverse merger involves merging the operations of a Chinese company with that of a shell company already on the stock exchange, skipping the requisite regulatory inspections upon listing.

The film alleges that such Chinese US-listed firms are exaggerating their financial statements. This was possible through a loophole in Chinese law which “ does not punish its citizens for lying to foreign investors” while getting the endorsement of a “Big 4” accounting firm which is less regulated in the local Chinese office.

Such a setup provides unscrupulous businessmen with an opportunity to defraud the public by pumping up the share price of their companies through falsified records before dumping their shares when they are no longer able to keep up with the deception. One such example was the reverse-merged China MediaExpress, which attempted to claim it had $57 million in cash balances when there was only $141,000.

This does not appear to be a new phenomenon. Some 4 years ago in a 2014 interview, portfolio manager Bing Lin said that the exposed cases of accounting might just be the “tip of the iceberg”. He added that there was “still widespread accounting abuse among listed [Chinese] companies, even some large ones”

ST: Minister Chan tipped to be the new Minister for Trade and Industry

According to anonymous sources given to the Straits Times, Minister Chan could possibly be the next Minister of Trade and Industry while the current Minister Lim Hng Kiang steps down as the incumbent.

It is unclear how Minster Chan would perform in his new role given his past experience as a Chief of Army before being given Ministerial positions across various ministries – including the Ministry of Social and Family Development and Minister in the Prime Minister’s Office – both of which are largely unrelated to trade or economics.

Facebook user Usha Thuyaga commented that: “Only in Singapore are people with no prior job experience allowed to flourish in top level economic positions. We are truly a special economy”

What do you think?