Whitney Tilson complained about a Chinese website ripping his father off over a $1,000 electronic good. He also discussed the problems with HFT, which Michael Price, Leon Cooperman, Jim Chanos, Mark Cuban and others recently addressed. The HFT industry is a multi-billion one, as we analyzed in a previous article, High Frequency Trading: a Look at How Much the Exchanges Make. Below he discusses both topics in-depth, including his efforts to get the Chinese Government to address problems of fraud.
In response to my recent email about the pervasive fraud in China, a Chinese-American friend on this email list sent me the following (highly politically incorrect) comments:
I read your last email in which you commented about pervasive fraud in China and wanted to add my two cents. As a Chinese individual (of American birth), I have had the last 40 years to watch the actions, thoughts, and behaviors of multiple generations of Chinese individuals. Some are fresh off the boat, some moved here a long time ago (my parents), and some (like me) were born in the US. Many don’t even speak Chinese!
My parents are proud of their Chinese heritage, yet are cautious of newly arrived Chinese friends. Forgive my generalization, but their experience and mine (and the gossip and warnings that circulate in the older established Chinese American crowd) is that many of the Chinese that have left China in the last 10 years suffer from the same problems afflicting China today: rich, greedy, fake, shallow, cheaters, etc. I rarely hear of good adjectives when describing a newly arrived successful Chinese businessman. They had nothing during the cultural revolutions. They were incentivized to turn in their family members and friends, all for bullshit communist ideals. They lied, cheated and jockeyed for position to survive. Now money has taken the place of communist ideals. (If you think about it, China is actually more capitalistic than the US!)
Think about how the successful Chinese businessman has “made it”: he’s likely to be a factory owner who has embezzled, cheated, and paid off local officials. He’s a member of the communist party, yet has polluted the party’s ideals and his own country in his attempt to make it big. I have had successful Chinese businessmen tell me, “It doesn’t matter how I win, it’s that I win. I’m rich, they’re not, I own them.” They take those ill-gotten gains (often paid to them by US companies) and bring the dollars back here to the US to buy multimillion dollar homes (often out of foreclosure – they know a good deal!).
The US has had decades of experience dealing with financial shenanigans and we’ll always have them, but China takes it to a whole new level. It doesn’t have a real set of regulations, laws, and precedents that establish codes of conduct, so it’s the wild west of business in China. Many Chinese view typical white businessmen as “gwai lo’s” (white ghosts) who are out to plunder the riches of China. This belief is rooted in centuries of exploitation of China both by other Asian countries (hence the huge row with Japan), as well as western powers. It’s small wonder then when they take the opportunity to screw a western company/person – nobody should be surprised by this. To be clear: I’m not saying EVERY person in China is out to screw people, but when the system typically requires paying bribes, kissing ass, and lying, of course this behavior becomes ingrained.
Their kids tend to be selfish and greedy as well (the apples tend to fall close to the tree), and are under tremendous pressure to win at all costs. Tiger moms aren’t a myth – Asians push education to a whole new level – but there’s a lot of cheating here as well.
Lastly, the ladies from China are a shocking set of crazies. My wife (Taiwanese) would NEVER let me travel to Asia on my own. Women there regularly go after successful married men just to gain status and get taken care of. Men there frequently cheat on their wives, and men are viewed as being particularly strong if they father many children.
I’m generalizing like crazy here but it’s what I’ve seen and what my ‘network’ of Asians have seen. It’s a pervasive problem in both young and old from China. It’s a culture of greed and rampant capitalism that’s fostering future problems we can’t even fathom…
2) Speaking of fraud in China, you may recall my story in a recent email about my dad getting scammed for $1,000 atwww.topchinatrade.com. After he realized what happened, he wrote the letter below to the Chinese ambassador in Washington DC and (surprise!) never received an acknowledgment, much less a reply. Here are excerpts:
Dear Mr. Ambassador:
I am writing to request your support to close down a fraudulent Chinese commercial business and website www.topchinatrade.com. This is a sophisticated website offering to sell of large number of items at low prices.
…Subsequently, I have heard nothing from them even after sending several emails. Thus, it would appear that this company is a scam.
Of course, I would like to get back my money, but, more importantly, I would like to help close down this website so that thousands of others don’t lose their money as well.
Through my son, who is a significant financial specialist in New York City, we have begun to get the word out to several thousand Americans about this company.
…Letters such as the above and the subsequent related news articles harm China’s reputation. I would love to be able to send out a follow-up letter that states that the Chinese government is taking firm action against this company.
I should add that my wife and I have had a wonderful visit to China with our daughter who studied Mandarin in high school and college for many years. I am an admirer of China and all that it has accomplished in recent decades. Perhaps that is why I succumbed to the Internet site.
3) More on China frauds:
From: Leading the Fight Against Chinese Stock Fraud and Corruption [mailto:comment-reply@
Sent: Monday, September 24, 2012 3:46 PM
To: Whitney Tilson
Subject: [New post] Sino Clean Energy Delisting is a Lesson for China Frauds
|Alfredlittle.com posted: “Beginning in April 2011 I wrote a series of reports exposing the massive fraud Sino Clean Energy (“SCEI”) conducted against its investors. SCEI’s chairman and chief fraud orchestrator Baowen Ren fought back hard, fabricating shipping records and”