Betting on China

Chinese companies deserve a premium, a multiple over Western companies.

The problem, though, is that ... U.S. investors are pouring billions of dollars into [Chinese] companies whose standards of financial disclosure and corporate governance are dramatically different from our own and which are, in some cases, nonexistent.

Betting on China differs from other treatments of China by suggesting a new prism through which to view key aspects of the nation’s rise, present-day workings, and future prospects in the global economy: stocks. More specifically, the stocks of China-operating companies that are listed on the major U.S. stock markets of NASDAQ and the New York Stock Exchange (NYSE).

The world’s ongoing bet on China’s reemergence—following a relatively brief period of comparative decline in that colossal nation’s material development during the nineteenth and twentieth centuries after China economically flourished for millennia—as a major world economy finds a unique and influential transaction point in the American equity marketplace.

The World Beyond China has been betting on China, and betting big. Because of the sheer size of these wagers—the money, resources, talent, planning, and ambitions at stake—getting China in a way that is both meaningful and practically useful has become more important than ever before.

As more and more private Chinese enterprises have gone to US stock markets for capital-raising, weaknesses in some of the methods for listing and auditing the firms have come to light. This has brought forward another set of challenges for foreign investors, Chinese issuers, and U.S. and Chinese regulators. The situation has also exposed how getting things straight amid all the betting taking place still remains a work in progress. Despite these limitations, U.S. stock market–driven information on Chinese companies remains an unrivaled source for publicly available, transparent, rapid, and insightful data about the workings of China Inc. The wagers riding on this new dynamic in global capitalism are not just about money, even if money remains the major motivating factor for placing the bets. The dynamism that propels all the betting is about a new way of looking at China and providing a new way for China to look at the world.