More than two years ago, I alerted you to the fraud that is the Chinese ADRs traded on U.S. exchanges. Shockingly, little has been done by regulators to crack down on Chinese defrauding U.S. investors.
There’s too much money to be made by allowing fraudulent Chinese firms to list as ADRs on U.S. exchanges.
Folks, Chinese debt defaults will rise as more and more Americans get scammed in Chinese ADRs and simply stop investing their hard earned money in these fraudulent companies.
Remember, the purpose that China has for allowing its companies to list as ADRs on U.S. exchanges is to raise money for China, not U.S. investors! China is a hostile communist country that’s the antithesis of a free democracy. Why would rich Chinese communist party heads pass a law that helps make Americans rich whom they despise? They wouldn’t. The Chinese government refuses to crack down on companies that are lying about their revenue to U.S. investors. These Chinese companies often have two sets of books. The real set of books for local Chinese authorities, and a fake set of books for ADRs listed on U.S. exchanges.
I had a gut feeling for decades that something was seriously wrong with a hostile communist country listing on American exchanges. The whole thing didn’t feel right because I know how much the Chinese communist party hates Americans. I found an incredible man named Dan David who was once a China bull. Dan David played a role in the movie called The China Hustle and you can rent it on YouTube for $2.99 or watch a free version of the movie below with foreign language subtitles. All traders should watch this movie. If you don’t have time to watch the movie now, bookmark this page and come back later. You won’t regret watching the movie below:
Remember, it’s still not illegal in China to steal from American capital markets and so the scam goes on.
Fewer and fewer Americans are being scammed in China ADRs that trade on U.S. markets. This means that China’s game of scamming U.S. investors in order to raise money is failing.
Chinese bond rating are scams too.
More than 55 billion yuan ($8 billion) of local note defaults took place in the first half of 2019, including 20 first-time defaulters. The tally last year was a record about 122 billion yuan, more than quadruple the 2017 amount.
Chinese authorities are still not prosecuting China scams or Chinese borrowers who renege on payments both in the domestic market and offshore. This has caused many U.S. investors to reassess the risk of investing in China. U.S. investors have also grown more skeptical about the quality of Chinese issuers’ financial reporting.
China defaults are soaring not just because fewer Americans are being fooled into buying China’s stocks and bonds. The corporate debt to GDP ratio surged to a record 160 percent at the end of 2017 largely because the Chinese government went on a borrowing spree to keep the economy growing faster than any other country during the global financial crisis. In order to keep China’s debt holders buying more Chinese debt, Dictator Xi and his lieutenants vowed in 2016 to rein in excessive corporate borrowing and financial market leverage in an effort to reduce the risk to the economy. The government issued directives on how money is to be loaned and managed, with a particular goal of curbing China’s $10 trillion ecosystem of shadow banking.
China’s defaults are also soaring because U.S. corporations are moving production plants out of the country after President Trump exposed what happened to the manufacturing sector in the U.S. as a result of corporate America outsourcing and offshoring factories and jobs to China. President Trump’s economic adviser Dr. Peter Navarro produced the incredible movie Death By China that you can watch for free below. Again, if you’ve never watching this movie, bookmark this page and come back later when you have more time. You will not be disappointed. It should be mandatory education for all U.S. investors to watch The China Hustle and Death By China before investing overseas.
It’s really bad PR for a U.S. corporation to continue to have most of its manufacturing in China. Furthermore, these U.S. corporations that outsourced their supply chains to China are having to pay 25% tariffs and this will likely escalate over time.
China’s debt defaults look likely to pick up over the next year as the global economy slows. Worse, foreign investors have limited enforcement rights on China’s state-owned assets.