China Briefing | Ye Fei stocks scandal shows why China must encourage whistle-blowers
- The private equity manager sparked a national storm after claiming at least 18 stocks were being manipulated by listed companies, private equity funds, publicly offered funds, brokers and proxy holders
- Chinese regulators should learn from their US counterparts and offer greater financial rewards to those who, in exposing corruption, risk their jobs – and in some cases much more
By official counts, there are more than 180 million mostly small investors who, driven by rumours, trade in and out of positions very frequently, contributing to wild fluctuations. The trading pattern is known as chao, the Chinese term for a method of stir-frying meat or vegetables rapidly in a wok at high heat.
This method of trading makes suckers out of many, who are compared to chives. Easy to grow and known as a culinary delicacy across China, chives are a hardy perennial plant which return every year after being harvested. The phrase Ge Jiu Cai or “harvesting chives” is a way of saying that as one group of investors falls prey to rampant securities frauds, another group always steps up.
It is an open secret that retail investors are often harvested like chives by unscrupulous brokers and fund managers but securities frauds are harder to prove and nail without the help of whistle-blowers.