Changing China

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Is China Inc still credible?

By George Chen
The opinions expressed are the author’s own.

Chinese Premier Wen Jiabao once said there's something even more important and precious than gold -- people's confidence.

In recent weeks, I'm afraid global investors have been losing confidence in Chinese stocks from the New York to Shanghai markets. Sino-Forest Corp became the latest victim of a slump in overseas-listed Chinese companies. The company earlier this week accused short-seller and research firm Muddy Waters of defamation for alleging in a report that it had fraudulently exaggerated its Chinese forestry assets.

Unfortunately, this is just the beginning of the hit to confidence over Chinese stocks, especially small caps listed at home or abroad, for example in Hong Kong, Singapore, New York and even on the second-tier board of the London Stock Exchange.

If you look at yesterday's trading carefully, you may find investors suddenly became more cautious on small-cap Chinese stocks after the Sino-Forest case. There were already signs with the growing dotcom bubble exported by some Chinese Internet companies to Wall Street.

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