Investing capital in China is both risky and is wildly unpredictable given the country’s lack of transparency, weak accounting standards, absence of the rule of law, and poor regulatory oversight.
Worse, the fate of the Chinese economy and business environment is almost entirely dependent on the domestic and global aspirations of a single man, Chinese authoritarian President Xi Jinping.
China is not a democracy and does not abide by the rule of law. Chinese Communist government’s sweeping control over the economy puts businesses, especially American-based firms, in a delicate position in trying to avoid the ire of President Xi and the Chinese government.
Hedge fund manager Kyle Bass, founder of Hayman Capital Management and long time critic of Communist China, has long proclaimed, “You have to say, each country run by maybe a despotic authoritarian should be re-reviewed and maybe not invested in.”
Bass cautioned against investing in Chinese stocks. He highlighted the risk of accounting fraud due to a lack of financial audits in China, and the prospect of further regulatory crackdowns on Chinese companies in the U.S. and crackdowns on American companies in China.
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