THE $46.8 million blow dealt to investment firm China Assets by a shaky electrical company in the mainland is a timely reminder that not all things Chinese are gilt-edged. In the euphoria about its cheap land and labour and market of 1.2 billion consumers, many modern China investors - from the punters borrowing funds to buy their slug of Denway, through to the fund managers playing with bigger stakes - have forgotten thatfor every jackpot there are many more lost bets. Firms that spring up overnight can also collapse overnight. Fund managers engaged in filling up these vogueish China funds have the task of separating the winners from the losers. Inevitably there will be more casualties. But when a shareholder buys into a fund that then makes provisions for its entire investment in an unnamed company in the electrical and electronic components business, question marks must appear over the fundmanagers' selection process. China Assets, which announced a further tranche of provisions on Monday, clearly feels it has done its bit. Yesterday it went into purdah. Shareholders on internationally reputed exchanges - such as Hongkong is seeking to be, with the introduction of new products and sweeping changes of the rule book - would expect more. One thing they would expect is the name of the company, which, before provisions, made up some 7.7 per cent of the firm's net assets. Mysteries are suspicious: to withhold the name of the firm that cost you and your owners so dearly is not in line with international concepts of transparency. The number of reputable international fund managers who would buy into a listed vehicle that refuses to identify its loss-makers and then declines to elaborate on the original appeal of the company must be limited. It is only for charity that people bid for mystery parcels. Silence from major listed vehicles only serves to set back all the good achieved by the exchange and its members since the October 1987 fiasco. China Assets, from its point of view, is in a rather nice position to keep secrets. Barely a year old, it has yet to reveal the detail of its existence in an annual report. Shareholders are privy to details on a handful of listed and unlisted investments, courtesy of the listing prospectus and a subsequent press announcement, and now to news of the big provisions. When further China investment firms start revealing similar slip-ups, the whole red-chip concept could go the way of the South Sea bubble and all the other great investment opportunities that have evolved since merchants met in coffee shops. This early tale will do no favours to the legion of China funds that sprang up in the earlier part of last year. If shareholders perceive they are buying little more than a concept, and that they are kept in the dark over the background machinations, they will stop buying. China offers massive potential, but it also brings failed companies; risks of inadvertently being caught in corruption; myriad rules and regulations that muddy the whole investment pool; and outdated accountancy practices which hamper the assessment process. Without greater disclosure on the part of fund managers, and a more realistic approach from buyers, the China investment firm industry will struggle to reach its potential.