Friday, July 29, 2011

China Should Buy U.S. Equities Instead of Treasuries, Economist Xie Says

Article Bloomberg

China should buy US-listed China Stocks!!!!!!!!!!!!!!!!!!!!!

Wednesday, July 27, 2011

Carson Block Highlights China’s ‘Risky Business’

Article Wall Street Pit

China Nutrifruit Begins Fiscal Year 2012 Production Season

-- Concentrate juice production capacity increases by 50%

Press Release

Saturday, July 23, 2011

New Energy Systems: Powerful Possibilities

Article Seeking Alpha

The GM Story: How Business Really Gets Done in China

China is the world's largest auto market, yet it is unknown territory for many Western auto executives. Michael Dunne's lively account of General Motors' difficult adjustment to China's brand of capitalism is a fun and informative read for anyone who wants to know how business really gets done in China.

Wiley & Sons this month is publishing "American Wheels, Chinese Roads: The Story of General Motors in China." The author, Detroit native Michael Dunne, is president of Dunne & Co., a Hong Kong-based investment advisory firm that specializes in Asia's automotive markets. Dunne has spent the past two decades working in Beijing and Shanghai. He currently divides his time between China and Jakarta, where he lives with his wife, Merlien, and their three children.

Chapter 9, "Signing the Deal," details GM Chairman Jack Smith's awkward encounter with Chinese protocol as he tries to arrange a signing ceremony for GM's joint venture with Shanghai Automotive Industry Corp. The J-V, Shanghai General Motros Co. Ltd., has become one of China's leading automakers.

U.S. Retailers Take a Licking in China

Article The Motley Fool

One of the only US retailers that is veryyyyyyyyyyyyyy succesful in China is KFC (Yum Brands)

Solar Mirages Bring Muddy Waters Concerns to Panel Makers

Article Bloomberg

Fake Apple Store in China: Update with Video

Story on BirdAbroad

Thursday, July 21, 2011

How Chinese Investors Invest in China

Article The Motley Fool


It's bad everywhereIn fact, fraud is likely also a problem on Chinese exchanges. Chinese money managers we talked with during our recent research trip to the country estimated that somewhere between 20% to 40% of Chinese listed companies are misrepresenting themselves to investors in some fashion. To corroborate this point, a local audit professional revealed that it can take days for a bank in China to confirm corporate cash balances for Chinese companies, with the auditor suspicious that the bank is calling the company to ask what the balance should be.

If you read the article completely you could conclude that China listed stocks in the US have higher corporate governance than stocks listed on exchanges in China. So in China there are more frauds than in the U.S.!

So in the end it could be that many institutional investors are going to buy US-listed China stocks instead.

Maybe I am just dreaming and hoping that US-listed China stocks go higher day after's time to go to bed!

Moody's China Red Flag Report under Scrutiny by HK Regulator

Article Reuters

Wednesday, July 20, 2011

Interview Short Seller Carson Block from Muddy Waters

Interview Muddy Waters’ Carson Block: ‘I’m Proud of the Impact We’ve Had’

TechFaith Wireless Technology Limited (CNTF) Just A Matter Of Time

With all the media coverage of allegedly fraudulent Chinese companies, Chinese share prices overall have suffered, including that of many companies that clearly do really exist and make money every day. In other words, babies are being thrown out with bath water and that usually spells opportunity.

One of these companies that will blossom is TechFaith Wireless. Check out their latest presentation!

Company Presentation July 2011

Why China Looks Like a Buy

Article Weekend Edition WSJ

Tuesday, July 19, 2011

Longwei Petroleum (LPH) The Next Rebound Winner

I really like the website Star Analyst Online of Kevin Chen. He made a complete study of Longwei (LPH). READ his latest piece: Longwei Petroleum (LPH) Power of Vertical Expansion and Alternative Growth Strategy

Personally I think we have seen the bottom in the US-listed China (RTO) Stock Space. So pay close attention to a rebound in a lot of China stocks that are trading below cash or have a P/E below 5.

We will see normalized stock prices again, it's just a matter of time!

Fraud Prevalent in Reverse Merger Companies with Operations in China


Monday, July 18, 2011

Chinese Steel Stocks: Bargains Under $4 (CHOP, GSI, OSSN, SUTR)

Article SmallCap Network

Artificial Life Announces New Business Strategy

I am not a visionary but after my article about Artificial Life (ALIF), the company came with a Press Release.

Company transforms into global mobile investment holding with BRICS focus.

However, our stock price and market cap have not followed this success story and our stock price has now reached such low levels that are in no way satisfying. Therefore, we made the strategic decision to change our business model and goals. We believe this is necessary and appropriate now and in the best interest of all our shareholders.

Bullshit of course if Accounts Receivable (AR) was acceptable and accounting firms were not questioning the financials of the company, management was right with their statement.  

Fitch expects more China corporate fraud probes

Article Forbes

Looking into "Reverse Mergers" On Wall Street

Stratfor Logo

China Security Memo: Looking into 'Reverse Mergers' on Wall Street

July 13, 2011

What is a Trade Secret Now?

Members of the U.S. Securities and Exchange Commission and the U.S. Public Company Accounting Oversight Board (PCAOB) went to Beijing for meetings July 11-12 with the Chinese Ministry of Finance and the China Securities Regulatory Commission. The meetings were prompted by a series of accounting scandals that involved Chinese companies being listed on U.S. stock exchanges through "reverse mergers." This is a process in which companies enter an American exchange not by an initial public offering but by acquiring a shell company that is already publicly traded on the exchange.
The United States allows foreign companies to gain access to its markets if approved by foreign auditors, and the PCAOB is responsible for accrediting the foreign auditors. But if the auditors fail to perform due diligence they can allow fraudulent accounting to affect American markets — hence the need for the PCAOB to conduct investigations abroad.
For years the Chinese government has rejected American appeals to investigate 110 Chinese auditing companies on the basis of preserving its sovereignty over China's business practices. The latest scandals have resulted in the U.S. suspension of 24 Chinese-listed companies that had already been reviewed by the approved auditing companies. This has had a significant impact on the markets, so there is renewed market pressure for U.S. authorities to gain access to Chinese books. STRATFOR sources say the most recent round of negotiations was preliminary and that it will be a long time before the two countries agree on a solution, such as raising standards for accreditation or allowing joint U.S.-China inspections on Chinese soil.
Chinese auditors have reportedly denied giving American investigators access to their books, claiming that to do so would be to violate China's state-secrets law. STRATFOR sources believe this reference to the state-secrets law is a smokescreen for firms that do not want to provide transparency or cooperate with American authorities. Therefore, entirely aside from the stock scandals and financial regulatory negotiations, this incident has again brought up the issue of China's state-secrets laws.
The question comes down to whether auditors in China can legally be allowed to give information to U.S. regulators or whether such information can be designated as state secrets. The current state-secrets law, which was updated in 2010, theoretically gives the Chinese government less flexibility in prosecuting such cases, but it does not make it impossible. The reality is that taking action under the new law — trying to prosecute a case — is the only way to assess how the new law will be interpreted.
One criterion for information to qualify as a state secret would have to be whether it is related in any way to state-owned enterprises (SOEs). The rules set in April 2010 by China's State-Owned Assets Supervision and Administration Commission (SASAC), which manages SOEs, and the state secrets law that went into effect in October 2010 provided some clarity on this issue. Any commercial information from "central enterprises," which are identified as 120 companies overseen by the SASAC, could be considered a state secret. None of the Chinese companies that have been publically identified so far in the recent accounting scandals is an SOE, so information on these companies is not clearly defined as state secrets. But if any of the companies being audited has major business dealings with SOEs, or if SOEs are stakeholders in these companies, such information could be so defined.
Another criterion would be whether the information is related to any "strategic sectors" defined by Beijing or whether it would be in the interest of national security. This is the part of the law that gives Beijing flexibility, and any information relevant to the U.S. investigation could be considered a state secret. An example of this would be the prosecution of Xue Feng, who collected public information on oil reserves, which relate to an industry classified as a strategic sector. This also ignores the whole concept of commercial secrets, which could more clearly be applied to the companies in question. While not as serious as a state secrets prosecution, commercial secrets are also protected under Chinese law, a charge Stern Hu also faced, but was not convicted of, in the 2009 Rio Tinto scandal.
The redefinition of SASAC rules and the new state-secrets law came after Hu's case, in which he was originally accused but not prosecuted for violating the previous law. The new law broadened the potential classification for information related to state-owned companies but not private ones. If what Chinese authorities consider important auditing information is exposed during the U.S. investigation, they may use the same tactics they used in the Hu case. Chinese authorities have created a culture of fear around the issue, making it difficult to move forward with proper due diligence for fear of prosecution.
The problem faced by Chinese companies, and more broadly the Chinese government, is this: To be listed on U.S. stock exchanges, Chinese companies have to make their financial information public. The companies and their Chinese auditors may be trying to hide behind the threat of state-secrets prosecution in order to hide their own problems. The Ministry of Finance may also be bringing up the importance of "national economic information," as Reuters reported July 6, to deter Chinese companies and auditors from revealing too much.
In the end, Beijing may decide that the release of information by the Chinese companies being investigated could reveal state secrets and threaten national security. However it chooses to handle the situation will be telling. If the Chinese government prosecutes auditors for handing over their books, the message will be clear: China's state-secrets law is incompatible with American expectations regarding foreign access to U.S. equity markets. If no auditors hand over their books, it will reinforce the assumption that they are using their fears to hide fraudulent accounting.
(click here to view interactive map)
July 6
  • The Nanjing Public Security Bureau announced it was looking for two suspects in a local robbery in Jiangsu province. The two suspects followed a woman after she withdrew 500,000 yuan (about $77,000) from a China Merchants Bank branch in Gulou district and stole her bag. They dropped the bag as they were being chased by the woman and bystanders.
  • A man was arrested in Taixing, Jiangsu province, after falsely claiming there was an explosive device on a subway car in Shanghai. The man was arguing with a real estate broker when he shouted, "There is a bomb on the train," indicated the broker was carrying it and escaped in the rush of passengers getting off the train. He was tracked down and arrested that day.
  • An accountant and her husband were sentenced to death and life imprisonment, respectively, for embezzling 70 million yuan (about $10.8 million) of public funds from Jiangxi Guixi Electric Co. in Yingtan, Jiangxi province.
  • Three gunmen in Cangshan, Shandong province, attacked 200 villagers staging a protest over a demolition dispute. The police issued a warrant for the gunmen's arrest.
  • A spokesman for the Higher People's Court of Yunnan province in Kunming city announced that a convicted murderer and rapist could be retried after a public outcry over his sentencing. He was originally sentenced to death, but after an appeal he received a two-year reprieve.
July 7
  • The Beijing Public Security Bureau announced it had detained a man for sending phishing messages through the microblogging service Sina Weibo that automatically made any receiver of the messages a follower of his microblog when they clicked on a link and forwarded the messages to other users.
  • Hong-Kong based media outlet Mingpao reported that thousands of people protested water shortages July 5 in Chongqing during a heat wave in the area. Three protestors said they had drinking water only from 2 a.m. to 6 a.m. each day.
  • The Beijing Transport Commission said that all 1,331 escalators and elevators used in the city's subway system had been checked for faults. The announcement followed an accident when an escalator reversed direction and the resulting crush of people killed a 13-year-old boy.
July 8
  • China's Ministry of Land and Resources announced that 73 officials from city- and county-level posts were recently punished for illegal use of agricultural land for development purposes. The officials received warnings and demotions.
  • Beijing authorities halted the sale of 31 brands of filtered water after it failed safety tests. The water, commonly used in water coolers, was found to have high levels of bacteria, including E. coli.
  • Su Jinsheng, the former chief engineer of the Ministry of Industry and Information Technology, was fired from his job and expelled from the Communist Party for corruption, the Ministry announced.
  • A former Hunan Provincial People's Congress deputy was sentenced to 20 years in prison in Xiangtan, Hunan province, for involvement in organized crime. The man, also the general manager of real estate development company Hunan Zhongyi Group, was convicted of organizing rape, assault, racketeering, illegal imprisonment and gun smuggling.
July 10
  • AsiaNews reported that three Catholic bishops in China loyal to the Vatican were recently detained in the cities of Jiangmen, Meizhou and Zhanjiang, all in Guangdong province. Another bishop from Guangzhou, in Guangdong province, is missing. The four bishops may have refused to participate in the ordination of Haung Binzhang, which they were scheduled to attend July 14 in Shantou. Tensions have been high between the Catholic Church and the Chinese government following the ordination of a Chinese bishop in November 2010 without the permission of the Vatican, which excommunicated him in May 2011.
July 11
  • Journalist Qi Chonghuai was convicted of extortion and blackmail and sentenced to eight years in prison after completing a four-year sentence in Tengzhou, Shandong province, on the same charges. Qi reported various instances of corruption, unemployment, labor violations and illegal demolitions. Authorities say he took hush money not to report certain illegal acts, but his wife claims that he was forced to accept the money. She attempted to commit suicide by jumping off of a bridge after the second sentence was announced.
July 12
  • Zhang Chunjiang, the former deputy manager of China Mobile, went on trial in Cangzhou, Hebei province. Zhang has been under investigation for bribery since before January 2010, when he was removed from his post.
  • A court in Zengcheng, Guangdong province, sentenced six people to prison terms for their involvement in protests over three days in June. The longest sentence, three and a half years, was given to Li Zhonghuang for leading a group that threw rocks at police and set their vehicles on fire. Others were sentenced to prison terms ranging from nine months to two years for engaging in violence during the protests.
  • Radio Free Asia reported that Urumqi police intercepted 13 to 15 Uighurs who were bringing leaflets to the city from Aksu July 1 calling for the independence of Xinjiang. The leaflets have reportedly already been circulating in Aksu, where police are said to be at a higher level of alert.
Copyright 2011 John Mauldin. All Rights Reserved.
Share Your Thoughts on This Article
Post a Comment
Outside the Box is a free weekly economic e-letter by best-selling author and renowned financial expert, John Mauldin. You can learn more and get your free subscription by visiting
Please write to to inform us of any reproductions, including when and where copy will be reproduced. You must keep the letter intact, from introduction to disclaimers. If you would like to quote brief portions only, please reference
To subscribe to John Mauldin's e-letter, please click here:
To change your email address, please click here:
If you would ALSO like changes applied to the Mauldin Circle e-letter, please include your old and new email address along with a note requesting the change for both e-letters and send your request to
Thoughts From The Frontline | 3204 Beverly Drive | Dallas, Texas 75205

Artificial Life (ALIF) in Denial

My first article on Seeking Alpha was an article called Artificial Life Attractive Trade For The Booming iPhone Pad Market.

A lot has happened with the company since my first publication. Auditors come and go and accounting problems remain unresolved. KPMG resigned on March 30 and BDO resigned on June 27 this year.
The problem seems to be the substance of certain material transactions, accounting for recognition of revenues (including timing and actual receipt of cash) and valuation of intangible assets. In April I already mentioned that securitizing their receivables is a red flag. Acquiring equity stakes with non-cash assets (accounts receivables) raises questions. Selling receivables enables the company to collect cash sooner, but the firm collects less cash because they are sold at a discount.

Despite these issues Artificial Life is still alive and engaged new auditors, Parker Randall from Hong Kong The 10-K (FY 2010) and the 10-Q for the quarters ended March 31, 2011 and June 30, 2011 will be completed on or before August 15 according to the document. Let's hope Parker Randall doesn't resign before.

In my opinion one of the problems of this company is the CEO and Chairman Eberhard Schoneburg. Mr. Schoneburg is a well-known IT and mobile industry veteran. He is a prominent speaker at industry conferences worldwide and has written five lecture books and more than sixty research papers pertaining to computer viruses, neural networks, evolution strategies and genetic programming. Mr. Schoneburg holds a Master of Science degree in Mathematics from Freie Universität Berlin, Germany.

The CEO and Chairman is a Technician and a major shareholder without the knowledge or skills necessary to run a successful business. But as an owner of a business, he has to deal with hiring and managing employees, budgeting, taxes, payroll, administrative tasks .
An entrepreneur like Schoneburg has to do the work of envisioning the business.

Central to this approach is repeating: you are not your business. Even if you are the one who actually drills the teeth or performs the exam, you must view your business as your end product. You can be a Technician and not be the business. If you don't figure that out, you'll never be able to get free of the business, to retire or — and this is where it gets good — only work when you want to.

When you realize that your business is your product, you can step outside of it and reinvent it. And this holds true for any Technician, It all starts with a change in the way you think about your business; it starts with entrepreneurial thinking.
The Technician thinks: Time = Work = Money. I spend the time, I work hard and I earn money. To get more money, I work harder.
The Entrepreneur thinks: Time = Equity = Freedom. I spend the time, I build the equity of my business and I get free of the business. To get more freedom, I build more equity.
The Technician thinks: I do the work.
The Entrepreneur thinks: Someone else does the work.
The lesson here is that you don't have to give up the technical work if you have the knowledge to build a business that supports that technical work. You have to develop your business so that the systems run the business, and let people run the systems.

The CEO's job is to lead and a big part of leadership is deciding who does what job.

Despite all the issues and red flags Artificial Life has encountered it has to explain to investors why certain issues where not resolved, that's the only way to regain trust and faith in a promising business.

In my opinion the company has still value but how much it's hard to calculate right  now. Games are still being downloaded (sold) and people are still being hired. Maybe you can apply for a job as a CEO in the future.

Friday, July 15, 2011

Huifeng Bio-Pharmaceutical JUST BANDITS?


Changes in Registrant's Certifying Accountant

Item 4.01 Changes in Registrant's Certifying Accountant.
(a) Previous independent registered public accounting firm
On April 11, 2011, the Board of Directors of Huifeng Bio-Pharmaceutical Technology, Inc. (the "Registrant" or the "Company") entered the decision to dismiss Baker Tilly Hong Kong Limited ("BTHK") as the Company's independent registered public accounting firm. The dismissal of BTHK was primarily due to Company's dissatisfaction with BTHK's services (the "Dismissal").

On April 15, 2011, BTHK directed its resignation letter as the Company's auditors and ceased its services as the Company's accountants to the Company's Board of Directors. In such letter, BTHK stated a number of accounting matters, which principally related to: accounting for revenue, goodwill and financial instruments, completeness and consistency of accounting documentation, effectiveness of internal control system, possibility of materials errors or fraud, which would have prevented BTHK from rendering an unqualified opinion if these issues were not resolved. In addition, BTHK stated that they were no longer able to place reliance on management representations in relation to prior period financial reports. BTHK's audit report on the Company's 2009 financial statements did not contain any adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.

On April 28, 2011, BTHK submitted a letter to the Company and stated in such letter that:
"in the course of conducting our audit of the Company's financial statements, we have become aware of information indicating that an inappropriate act may have occurred. We therefore concluded:
* the inappropriate act has a material effect on the financial statements of the issuer;
* senior management of the Company has not taken, and the Board of Directors of the Company has not caused senior management of the Company to take, timely and appropriate remedial actions with respect to this act; and
* the failure to take remedial action warranted our resignation from the audit engagement."

The Company has started an investigation into the matters raised by BTHK's letter. The Company is unable to determine the full effect of these matters, including whether any restatement of its historical financial statements will be required, until the investigation is completed.

The Company provided BTHK with a copy of this Current Report on Form 8-K prior to its filing with the Securities and Exchange Commission and requested that BTHK furnish a letter addressed to the Commission stating whether or not BTHK agrees with the statements noted above.

A copy of such letter responding to that request, dated July 15, 2011, are attached as Exhibit 16.1 to this Current Report on Form 8-K.
(b) Engagement of independent registered public accounting firm
As of the date of this current report on Form 8-K, the Company is still in the search for a new independent registered public accounting firm.

NIVS IntelliMedia Technology Group Big Trouble Underneath

8-K summary

Resignation of Directors
On June 12, 2011, the special committee of the Board of Directors of NIVS IntelliMedia Technology Group, Inc. (the "Company"), established on March 28, 2011 to investigate certain allegations of the Company's former independent auditors (the "Special Committee"), made certain interim remedial recommendations to the Company, including: the suspension of two employees; the engagement of an outside accounting firm to perform the Company's accounting functions; and the consolidation of the Company's cash in fewer bank accounts, and on June 15, 2011, the Board of Directors formally approved the Special Committee's recommendations.

On July 11, 2011, each of Messrs. Charles Mo and Robert Wasielewski resigned as a Director of the Company, effective immediately. In his resignation letter, Mr. Wasielewski's cited as a reason for his resignation, the Company's delay in implementing the Special Committee's recommendations. Mr. Wasielewski's resignation also noted that concurrent with his resignation, the Special Committee's legal counsel, Sidley Austin LLP, and its accounting advisors, Deloitte Financial Advisory Services LLP, have terminated their engagements with the Special Committee.

The Company is in the process of engaging an outside consulting firm and consolidating the Company's bank accounts.


Artificial Life (ALIF) Appoints Parker Randall as New Auditors


Artificial Life, Inc. (OTCPK:ALIF), a leading provider of award-winning mobile technology and applications, announced today the appointment of Parker Randall CF (H.K.) CPA Limited (“Parker Randall”), a member of the Parker Randall International, as its independent auditors.

As previously announced in our 8-K filing on July 1, 2011, the Company terminated the engagement of its former auditors, BDO AG, effective June 27, 2011. Parker Randall has been engaged by the Company and its independent audit committee to audit the financial statements of the Company for the year ended December 31, 2010. The Company and Parker Randall presently anticipate that such audit will be completed on or before August 15, 2011 and that the Company’s Form 10-K for FY 2010 and the Company’s 10-Q for the quarters ended March 31, 2011 and June 30, 2011 will be filed at such time.

Asia Pacific And China Tigers Of Luxury

Article Seeking Alpha

Tuesday, July 12, 2011

Listing & Delisting Through The Eyes of A Homegrown Chinese Enterpreneur

Article Business Insider

I think most Chinese entrepreneurs got suprised by short sellers and the US capital markets, that's why a lot of them want to go private again.

Moody's Report Sparks Selloff in Chinese Firms

Article CNBC

Friday, July 8, 2011

Man Shing Agricultural Engages Moore Stephens, Hong Kong as Independent Registered Accountants

Man Shing Agricultural Holdings, Inc. (OTCBB: MSAH) ("Man Shing" the "Company," "we," "us," or "our"), located in the Shandong Province and one of the largest Chinese exporters of high quality, fresh ginger to Japan, the United Kingdom, and the Netherlands, today announced that it has engaged Moore Stephens, Hong Kong ("Moore Stephens") as the Company's independent registered accounting firm. The decision to change accountants was approved by Man Shing's board of directors.

Moore Stephens will review the financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2011. There were no disagreements between Man Shing and its former independent accountant from October 29, 2010, the date such accountant was engaged, through June 30, 2011, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

Mr. Shili Liu, Chairman and Chief Executive Officer of Man Shing, stated, "The Company is pleased to announce the appointment of Moore Stephens, one of the largest accounting firms with extensive experience in working with China-based U.S. publicly listed companies, as the Company's new accounting firm."

American Lorain (ALN) Going Strong But Trading Low

Article World Market Media

ChinaCast Education: The Real Thing

Article Seeking Alpha

Longwei Petroleum increases deposit for the acquisition of Huajie Petroleum Assets (LPH)

Longwei has increased its deposit to $85.1 mln through cash on hand for the purchase of the assets of Huajie Petroleum. The company intends to acquire the assets of Huajie Petroleum for a total of $108.3 mln. Longwei and Huajie Petroleum had previously been in discussions to close on the asset purchase by June 30, 2011, at which time Longwei had agreed to pay at least 50% of the total purchase price through cash on hand as a deposit and the Seller would accept a promissory note for the balance of the purchase price. The Parties could not reach a final agreement relating to the terms of the promissory note and have agreed that the Company shall pay the balance of the purchase price, $23.2 mln, by December 31, 2011, at which time the assets will be transferred. As of June 30, 2011, Longwei had paid a $85.1 mln deposit, or 78.6% of the total purchase price, using cash on hand.

SkyPeople Fruit Juice (SPU) Rocks The News

Civil Action Against Short Seller Absaroka Capital Management

SPU Skypeople Fruit Juice: Morgan Stanley discloses 5.0% stake in 13G filing

Guys, not every US-listed China (RTO) company is a fraud and I expect we will see a huge run in Chinese quality stocks the coming months.

Tuesday, July 5, 2011

China Security & Surveillance Technology Announces Expiration of "Go-Shop" Period

SHENZHEN, China, July 5, 2011 /PRNewswire-Asia/ -- China Security & Surveillance Technology, Inc. ("CSST" or the "Company") (NYSE: CSR; Nasdaq Dubai: CSR), a leading integrated surveillance and safety solutions provider in the PRC, today announced the expiration of the 60-day "go-shop" period pursuant to the terms of the previously announced Amended and Restated Agreement and Plan of Merger (the "Merger Agreement"), entered into on May 3, 2011, among the Company, Rightmark Holdings Limited, Rightmark Merger Sub Limited and Mr. Guoshen Tu (solely for the purpose of Section 6.15).

Under the terms of the Merger Agreement, the Company and its subsidiaries and their respective representatives had the right to directly or indirectly initiate, solicit and encourage any alternative transaction proposals from third parties and enter into and maintain discussions or negotiations with respect to any alternative transaction proposals until 11:59 pm, New York City time, on July 2, 2011. During the "go-shop" period, at the direction of the special committee of the Company's board of directors, the financial advisor to the special committee contacted 68 parties, including 29 strategic parties and 39 financial sponsors, to solicit interest in a possible alternative transaction. Despite these solicitation efforts, the Company did not receive any alternative transaction proposals during the "go-shop" period.

Pursuant to the Merger Agreement, unaffiliated stockholders of the Company will have the right to receive $6.50 per share in cash without interest at the effective time of the merger. The completion of the transaction is subject to customary closing conditions, including receipt of stockholder approval. The closing of the transaction is expected to occur in the third calendar quarter of 2011.

Shareholders have almost no other choice then to approve the $6.50. There are no other parties interested!

John Paulson Needs To Go Austrian

John Paulson, the hedge-funder who made a personal fortune of $5 billion in 2010, is now seen as a goat rather than as the “top kid” on the hedge fund block because of recent big losses.

Paulson suffered a huge loss on his firm’s investment in Sino-Forest Corp, a Chinese tree plantation grower. Reports of balance sheet fraud caused the stock to tank. It is difficult to assess the loss, but estimates from the press range from $750 million to $150 million.

Article Minyanville

Red Flag Soap in Artificial Life (ALIF) Continues

8-K filing
Item 4.01

Changes in Registrant’s Certifying Accountant.

Dismissal of Principal Accountant
On June 27, 2011, the audit committee of Artificial Life, Inc. (the "Company") approved the dismissal of BDO AG ("BDO") as the Company’s principal accountant effective immediately.

BDO has not issued a report on the financial statements of the Company in either of the two most recent fiscal years.

BDO was engaged by the Company on April 20, 2011. Since that date, there were no disagreements between the Company and BDO on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of BDO, would have caused BDO to make reference to the subject matter of the disagreement in its report on the Company's consolidated financial statements, and there were no reportable events as that term is described in Item 304(a)(1)(v) of Regulation S-K, except as set out below.

During the course of the audit of the Company's financial statements for the fiscal year ended December 31, 2010, BDO raised a number of accounting matters that would have prevented BDO from rendering an unqualified opinion if the issues were not resolved. There were discussions between the Company, its audit committee and BDO in connection with these matters, which principally related to: the commercial substance of certain material transactions, accounting for recognition of revenues (including timing and actual receipt of cash), valuation of intangible assets, the impact of these matters on the Company’s financial statements as of December 31, 2010 and whether prior years’ financial statements were affected by these matters, and accounting for a joint venture agreement.

These issues remained unresolved at the end of BDO’s engagement, which occurred before BDO could complete its work on these and other issues. In addition, as of the date of the Company’s termination of BDO’s engagement, BDO was unable to determine whether the Company had taken timely and appropriate remedial actions with respect to possible illegal acts, within the meaning of Section 10A of the Securities Exchange Act of 1934, identified on June 1, 2011 by BDO to the Company.

In connection with the above, at the recommendation of management, the audit committee of the Company engaged accounting consultants on June 18, 2011 to perform an analysis of the above described issues. Such accounting consultants have met with the Company's audit committee on these matters, have been instructed to continue their work and will continue to report to the audit committee which will determine what, if any, action should be taken. The Company believes that such actions will constitute prompt remedial action. The Company’s audit committee will also be addressing these matters in connection with its appointment of a successor auditor.

The Company has provided BDO with a copy of the foregoing statements and has requested that BDO furnish it with a letter addressed to the Securities and Exchange Commission stating that BDO agrees with the Company's statements in this Item 4.01(a). A copy of BDO's letter stating its agreement with such statements is attached as Exhibit 16.1. The Company has authorized BDO to respond to inquiries of the successor accountant concerning the matters set forth above.

How hard can it be for a company to listen? 
Don't deny your accounting errors!

Sino-Forest Surges After Wellington Reveals Stake

Article Bloomberg

Monday, July 4, 2011

Understanding China's Economic Indicators: Translating the Data into Investment Opportunities


Understanding China's Economic Indicators is the only guide to what China's statistics say about the state of the economy and how to use them to make more profitable investment decisions. Leading China market analyst Tom Orlik introduces China's 35 most important indicators, explaining why they matter and what they mean, identifying the distortions in the data, and spelling out the impact on equity, commodity, and currency markets.

Short-Sellers' Hunt for Fraud Shifts to Hong Kong

Article Reuters

They are victims of their own success. So now it's time for short sellers of Chinese stocks listed in North America to shift their attention thousands of miles away to Hong Kong.
Short-selling investor-bloggers have made enough noise, and cash, by shorting the shares of New York and Toronto-listed Chinese companies and issuing reports accusing them of fraud that the charges for borrowing shares in these companies has soared. And that can make the strategy's costs prohibitive.

They have also picked off the low-hanging fruit - the companies, most of which came to the U.S. market through reverse takeovers (RTOs), that have committed the most obvious accounting shenanigans.

There is therefore an increasing danger the short sellers will overstep by accusing healthy Chinese entities in the U.S. of misbehaving and face legal action from the companies or the authorities as a result.

"This is no longer an easy game. We're moving on from the Chinese RTOs. They've been beaten to smithereens by this point. The game is getting harder and no longer in the U.S., but rather is moving to Hong Kong," said John Hempton, a short seller of Chinese companies as the chief investment officer of Sydney, Australia-based Bronte Capital Management.

Through an RTO, a company merges with a shell company that already has a listing on a U.S. exchange as a way of gaining access to stock market investors more quickly and cheaply than through the more arduous process of an initial public offering.

Additional investor interest in the problems in the sector has not only increased the borrowing demand for shares to short and reduced their availability, but the spectacular plunge of some company share prices has brought down values, making it harder to find profitable trades, fund managers say.

There have been over 20 U.S. listed Chinese companies delisted or halted so far this year amid the allegations, while others have been hit by the resignation of their auditors.

Among the most notable to have suffered from such negative hits are Rino International (RINO.PK), China Media Express (CCME.PK), and Longtop Financial Technologies Ltd (LFT.N).

However, there have been occasions where shares have quickly bounced back after initially sinking on reports thy have been targeted by the short sellers.


An investor who hones in on a company believed to have provided fraudulent information and wanted to short the shares used to be able to borrow those shares at less than 1 percent a year.

"Costs are now up to anywhere between 7 to 70 percent," said Andrew Left, a Beverly Hills-based blogger and short seller who runs Citron Research. In some cases it is higher, perhaps even 100 percent.

Short sellers bet on a decline in a stock by borrowing shares in the market and selling them in the hope they can buy them back once prices have dropped. They would then return the shares to the owner and keep the difference as profit.

Carson Block, the director of research at one of the most prominent short selling firms, Muddy Waters, told Reuters in an email that the increasing inability to borrowing shares has made it more difficult to commit capital and resources to research into companies it suspects of fraud.

"It is far more difficult to short these days. It takes 100 percent of your margin buying power to borrow here and quite frankly some of the other exchanges haven't caught up with what we've dealt with the past 8 months," said Dan David, head of sales and daily operations at research and investing firm Geo Investing in Skippack, Pennsylvania.

"We are trading other exchanges, that's very much a recent development," he said.


The Hong Kong authorities have indicated that they think many of the recent problems have been because of loose listing standards in the U.S. In Hong Kong, for example, companies seeking listings have to have a track record of profitability that they aren't required to have in the U.S.

Indeed a source close to Hong Kong regulators dismissed the notion of widespread problems in that market, saying that the U.S. Securities and Exchange Commission "has acknowledged there's a problem with the way some of these companies have been able to list in the U.S., which wouldn't happen in Hong Kong."

Hempton doesn't buy this argument, though.

"It's the simple facts on the ground that make Hong Kong attractive - lots of large market caps and lots of frauds. The first Chinese forestry company that got pinged faking their ownership was in Hong Kong, not Canada," said Hempton.

Hempton was referring to China Forestry Holdings (0930.HK), whose shares were suspended in January of this year after auditor KPMG informed the board of directors of possible irregularities in its accounting books and its former CEO faced investigation by authorities.

More recently shares in another forestry concern, Toronto-listed Sino-Forest (TRE.TO), plunged leading to more than $4 billion of market value being lost on accusations of fraud that are denied by the company.

Singapore is also increasingly a fertile ground for those wanting to dig up accounting problems at Chinese companies.

On Thursday, the Singapore Exchange reprimanded Chinese multimedia firm KXD Digital Entertainment (KXDD.SI) and its former chairman and CEO Liu Fusheng for breaching a string of rules, including failing to disclose it had ceased business operations. [nL3E7HU0FF]

The same day, China Gaoxian (CGXF.SI) said its special auditor had obtained evidence showing its cash and bank balance at the end of last year was around 93 million yuan ($14 million), not 1.1 billion yuan which the fabric maker had originally claimed. [nSNZ1x9f9w]

Certainly, the figures are starting to support the talk of the beginnings of a shift in interest by short sellers.

Short interest, that is shares in a company being sold short as a percentage of the total number of shares outstanding, is rising on the Hong Kong Stock Exchange while it has slipped from a recent peak for U.S. listed Chinese companies, according to New York-based research firm Data Explorers.

Year-to-date, average short-interest among Chinese companies listed in the U.S. has doubled to 5.8 percent in the past six months, though it is off a recent peak of 6.7 percent.

Short interest in Hong Kong listed shares is considerably lower, but has risen to 1.34 percent from 0.81 percent around the end of last year, the firm said.

"The trend is identical, just not as aggressive, and that's probably related to fewer hedge funds based in Hong Kong," said Will Duff Gordon, research director at Data Explorers.

Gordon speculated it was unlikely many retail investors would switch their focus to Hong Kong from U.S. markets.

"There has been an uptick in Hong Kong short interest generally, but that could be related to wider macro issues," he said.

There has been increasing concern in the past year that China's economic boom could turn to a bust, particularly because of the possibility of a real estate bubble. Beijing has made efforts to slow down the pace of economic growth in an effort to short-circuit speculative investing and inflation.

"Rising short interest in Hong Kong could be a macro issue, but I think some of these investors and research firms in the U.S. have now developed an expertise and given the scrutiny here, it would make sense for them to apply their skills to places like Hong Kong," said Sahm Adrangi, principal owner at New York-based Kerrisdale Capital Management.

Iranian-born Adrangi's firm has a staff of five managing about $20 million in assets. He confirmed published reports that first quarter performance rose 73.2 percent, due mostly to shorting U.S.-listed Chinese companies accused of fraud.

However, rules in Hong Kong could throw up barriers to firms such as short selling research firm Muddy Waters if they don't have a license to offer advice on listed companies.

Block, in his e-mail, said this issue comes down to what extent there are protections for free speech to discuss a stock.

And not every investor is ready to bet against Hong Kong-listed companies.

"There is a witch hunt going on. They're going to find some companies (in Hong Kong) and I think it will be good in the long term for investors," said Himanshu Shah, president and chief investment officer of Shah Capital, a $300 million hedge fund in Raleigh, North Carolina.

Shah, who said his firm is mostly long China, said the country is moving in the right direction.

"It's not going to be accomplished overnight or in a quarter; the cleansing of corporate China has begun for sure." (Additional reporting by Rvan Vlastelica, David Gaffen in New York and Rachel Armstrong in Singapore. Editing by Martin Howell)

American Lorain Successfully Passes Factory Inspection of Two Premium Retailers

American Lorain Corporation (NYSE Amex: ALN), an international processed snack foods, convenience foods, and frozen foods company based in Shandong Province, China, today announced that its Beijing and Dongguan facilities have recently successfully passed the factory inspection by two premium retailers, Ito Yokado ("Yokado") Chengdu subsidiary and Jusco Guangdong subsidiary.

Yokado is owned by Seven & i Holdings Co. Ltd., a fortune 500 holding company from Japan which also owns other world famous brands such as the 7-Eleven chain stores. The Yokado Chengdu subsidiary conducted factory inspection for American Lorain's rice box products with specific focus on the production facilities and each functional department. Result shows that American Lorain implemented distinguishing storage zones and clear tracing mechanism for its raw materials, semi-finished and finished goods; the production was efficient, procedural and hygienic which fully qualified the inspection standards. Next, the Company expects to commence selling its rice products at the Yokado stores in Chengdu subject to further negotiations.

The mid-high end positioned Jusco supermarkets are owned by AEON Co. Ltd., also a fortune 500 holding company from Japan comprised of a group of 180 retailing companies. During May, the Guangdong subsidiary of Jusco conducted a stringent factory inspection for American Lorain's pickle products in its Dongguan subsidiary with respect to procurement, production, storage & transportation, and hygienic standards, which also yielded satisfactory results. American Lorain's Caigenjie branded pickle products have now began retailing through branded counters in Jusco supermarkets in Guangzhou and Shenzhen, with negotiation for chestnut and frozen food products in progress.

American Lorain's Chairman and CEO, Mr. Si Chen, stated, "With the rapid development of the processed food industry, factory inspection has become a prerequisite for entering retail channels for manufacturers. The 7-Eleven's Japan headquarter conducted a successful factory inspection for American Lorain's chestnut products back in November of 2010, and we now export our chestnut products to these 7-Eleven retail outlets in Japan. The successful inspection by two other top retailers has shown that American Lorain possesses strong manufacturing facilities and systematic production management expertise, which we believe serves as a solid foundation for the Company's further development."

Nestlé in Acquisition Talks With China’s Biggest Confectioner

SHANGHAI — Nestlé, the world’s biggest food maker, is one of several companies in talks to acquire or form a partnership with the biggest Chinese confectioner, Hsu Fu Chi International.

A spokeswoman for Hsu Fu Chi said today that the company has been in talks with companies in the United States, Europe and Japan to form a partnership that would help expand its business in China but that no deal has been reached.

“We don’t deny we’re discussing this with Nestlé, because there’s already rumors. But we don’t want to reveal the names of the other companies,” said Christine Sun, the Hsu Fu Chi spokeswoman. “For now, we don’t have a concrete agreement with anyone. It’s too early to discuss the form of cooperation.”

Shares of Hsu Fu Chi, which are listed in Singapore, were suspended in trading early Monday.

He Tong, a spokeswoman for Nestlé, which is based in Switzerland, declined to comment on Monday.

If Nestlé or another big company acquires all of Hsu Fu Chi, it would be one of the largest deals ever by a foreign company in China and would likely need regulatory approval from the Chinese authorities since the company’s operations are almost entirely in China.

Two years ago, regulators blocked Coca Cola’s $2.4 billion bid to acquire the Chinese juice maker Huiyuan, saying the deal would impede competition in the beverage market.

Bloomberg News first reported over the weekend that Nestlé was in talks to buy Hsu Fu Chi, which has a market capitalization of $2.6 billion.

But Ms. Sun suggested Monday that Hsu Fu Chi was looking for a partner rather than seeking to sell the entire company.

“Hsu Fu Chi has been seeking a partnership that can help strengthen the company’s brand for a while,” she said. “Since 2007, we have been negotiating with companies from Japan, the U.S. and Europe about potential partnerships.”

In her comments, though, Ms. Sun did not rule out a sale.

Hsu Fu Chi was founded by four brothers from Taiwan and has been operating from southern China since the early 1990s. The company makes chocolates, candy and pastries.

Xu Yan contributed research.