Even Stocks are Tainted in China.

By now we should all be convinced that anyone doing business in China better be very involved with their suppliers. But the latest news suggests that some people still haven’t learned that lesson yet. Tainted BSA badges aside, the juicier story is now stock in worthless companies.The stock for the tech firm China Expert Technology is now, it seems completely worthless. The US investors that bought up to a 20% stake in the company and saw the value rise to $7 are now sitting on worthless paper. What happened?It looks like they just didn’t do the due diligence necessary and/or didn’t have anyone on the ground to confirm that what the company was claiming was real—after the initial dog and pony show, things fell apart. Once the first visit was over the veneer of “US accounting” practices, a home office in Hong Kong and announcements of big provincial level contracts convinced foreign investors that this was a safe bet.Of course, only insiders know the full story, but you can bet that none of the foreign investors stayed in China confirming orders even though they bought 20%. More specifics are available here.What’s the take away? You’d better either be on the ground yourself or have someone who you trust be on the ground to represent you. You, as the buyer/distributor in the West will ultimately take the biggest hit in both PR and $$ for a shipment of below standard product. What’s avoiding that hit worth to you?So whom can you trust? You need to hire a company or employee who is rewarded for accuracy and quality rather than fast turn around and cheap prices. It’s still true—you get what you pay for. Whether its stock, toys, tires, or BSA badges.What does one trip to China do for you? Nothing. Absolutely nothing. If you are the buyer or an investor don’t forget that a tradeshow is just a show and Shanghai and Shenzhen are showcase cities—designed specifically to impress foreigners and attract FDI. That’s whey they were built and they do a damn good job in fulfilling their purpose. Further, a one-week “fact finding” tour of a facility will get you more dinners and photos than facts. The Chinese have been “entertaining” foreign gests for centuries and they know exactly what they are doing—especially if you’ve got cash to spend.A 10-day trip to China will do nothing but overwhelm you. So don’t get all excited that China “is totally different than I thought it would be. I can’t believe it!” as we hear so many people say. Keep your wits about you, keep your camera and your wallet in your pocket, ask every question to more than one person and compare answers, come to China more than once and don’t invest anything until your harshest critic has been answered.