Chinese Financial Invasion

According to The Reformed Broker, the real threat from China is not from its expanding military, but from its expanding 'reverse mergers,' which occurs when a publicly traded American-based shell company, often designed for this very purpose, issues a larger number of shares to purchase a Chinese company. The Chinese company then becomes the majority shareholder and essentially assumes the public listing of its American parent. Companies exaggerate earnings, take the money, restate their earnings, fire their auditors, and the money disappears into China, leaving US investors holding the bag. Forbes' Walter Pavlo put together a list of 24 such deals in the last two months, including China Electric Motor, China Natural Gas, Duoyuan Printing, China MediaExpress Holdings, China Agitech, China Sky One Medical, and Orient Paper.