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Chinese entrepreneurs unite against short-sellers


13:15, September 07, 2012

A group of over 60 Chinese business leaders have united to criticize short-seller Citron Research for issuing erroneous reports on U.S.-listed Chinese stocks.

It is a positive sign that after limited experience in the global market, Chinese enterprises are becoming mature enough to respond loudly to groundless charges.

Headed by former Microsoft and Google executive Kai-Fu Lee, these CEOs, investors and regional heads of global tech giants have abundant experience in international companies and are well-versed in the tech industry as well as practices in the capital market, so they are clear about how short-sellers can succeed in shorting Chinese stocks and the importance of public opinion.

Regardless of the result of the debate, the incident marks an important step for Chinese companies heading toward the global market.

Since March 2011, overseas short-sellers, especially Citron Research and Muddy Waters Research, have issued negative reports on U.S.-listed Chinese stocks, which led to slumps and even the suspension of these stocks.

Earlier in August, Citron targeted China's Internet search engine sector, arousing the fury of Lee and other business leaders who have great experience in the sector.

They signed an open letter condemning Citron for practicing fraud rather exposing it, and "some of these 'China short-sellers' started targeting legitimate companies with either no problems or minimal problems." The letter was posted on the newly-established website

Mei Xinyu, a researcher at the International Trade and Economic Cooperation Institution under China's Ministry of Commerce, said one of the reasons why overseas-listed Chinese stocks often become targets for short-sellers lies in the information asymmetry in the capital market. It is also the biggest risk overseas-listed Chinese firms are facing on the micro-level.

U.S. investors lack understanding about Chinese companies as well as the country's full situation, so they cannot verify or disprove negative reports about Chinese firms that some short-sellers maliciously publish. Therefore, investors can easily believe this information and Chinese companies suffer great losses.

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