Horror investment stories in China - Shaun Rein

Shaun Rein by Fantake via Flickr

Shaun Rein recalls in CNBC a proposed investment of US§ 50 million in a Chinese internet venture that did not exist, and was only cancelled after some solid due dilligence was done. The investor "had only been to China once, when the CEO of the target firm had wined and dined him, introduced him to some supposedly high-ranking government officials, and showed him a packed outlet.
Rein summarizes:

Despite the many horror stories investors run into in China, it still amazes me how little due diligence is actually done by people investing there.

If it can almost happen to professional private equity firms, it can happen to you. Even though I have been, and continue to be, one of the biggest China bulls for over a decade and a half, I recommend a healthy dose of caution for most everyday investors before buying Chinese stocks. In fact, they might be better off investing in companies like Apple or Yum! Brands that make money in China but whose numbers you can trust.

Unfortunately, fraud is commonplace there and the investment banks, law firms, and accounting firms that should be protecting you and doing due diligence aren't doing their jobs. Why not? Often they just want to get deals done to get their commissions and, frankly, often they are simply not up to the job. I've seen many non-Chinese speaking executives fly into China for for a few days to conduct due diligence and get hoodwinked.

The whole story in CNBC.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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More education not always better - Bill Fischer

Bill Fischer by Fantake via Flickr

Getting more patents and PhD's are not the ways to improve education, writes IMD professor Bill Fischer in Business Week. Getting faculty in with business experience is more important to improve the now lagging education in China.

IMD's 2010 World Competitiveness Yearbook reports that China's education system has been in decline since 2007 in terms of how well it meets the needs of a competitive economy, presently ranking 44th out of 58 countries—below countries such as Greece (43), Kazakhstan (35), and Qatar (14). Finland, on the other hand, which ranks 1st in this category, is a notable reference point that people speak about with respect to how its educational offerings in engineering, technology, and innovation are having a direct impact on the economic vitality of the country. Do you ever hear the same about China?

If pushing out more graduates, patents and PhD's does not help, what is the problem, according to Bill Fischer?

During my sojourn in China as an academic and as president and dean of the China Europe International Business School, I was frequently struck by the thought that China's scarcest resource might just be "practically experienced" university faculty. Far too many of the Chinese professors I observed in other schools (CEIBS insisted that any faculty had the ability to interact competently with executives) had never actually worked for a living; they were lifelong academics, and everything was "theoretical" for them. This simply does not work if the goal is to transform new ideas into practical solutions. And it is particularly devastating if we are speaking about business schools and their role in preparing a "managerial class" for competing on the world stage.

More in Business Week, where Bill Fischer explains this is not only a problem in China.

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