{"id":13357,"date":"2012-02-02T09:52:51","date_gmt":"2012-02-02T14:52:51","guid":{"rendered":"http:\/\/quotulatiousness.ca\/blog\/?p=13357"},"modified":"2012-02-02T09:52:51","modified_gmt":"2012-02-02T14:52:51","slug":"is-sino-forest-a-typical-chinese-company","status":"publish","type":"post","link":"https:\/\/quotulatiousness.ca\/blog\/2012\/02\/02\/is-sino-forest-a-typical-chinese-company\/","title":{"rendered":"Is Sino-Forest a typical Chinese company?"},"content":{"rendered":"

Colby Cosh posted an initial article on the investigation into Sino-Forest’s business back in June<\/a>:<\/p>\n

\n

Timber company Sino-Forest is locked in a fascinating battle for survival against Carson Block, a stock analyst with a mixed record of publicity attacks on Chinese-based enterprises. With professional analysts reluctant to say what they make of Block\u2019s \u201cstrong sell\u201d report on Sino-Forest, I\u2019m in no position to endorse it as a piece of financial advice or investigative journalism. Considered strictly as entertainment, however, the report is remarkable.<\/p>\n

Block has documented that Sino-Forest operates with extraordinary opacity for a company whose holdings are surely very widely distributed — particularly, one assumes, within Canada. Sino-Forest claims to be doing hundreds of millions of dollars\u2019 worth of sales through mostly unidentified \u201cauthorized intermediaries\u201d in China — traders who are apparently happy to let the company buy title to trees, hold them as they appreciate, take on the bulk of the costs and risks in the meantime, and then snap up revenues when the trees are eventually converted into wood products. Block, having poked around a bit in the literal Chinese backwoods, questions whether much if any of the reported underlying activity is happening.<\/p>\n

[. . .]<\/p>\n

Sino-Forest is refusing, despite intense pressure, to make a full disclosure of the identities of the \u201cauthorized intermediaries\u201d who are making its money. The company claims that to do so would put it at a competitive disadvantage, which makes one wonder why its business model ought to depend so heavily on sheer obscurity. One possible answer is that Sino-Forest\u2019s real, fundamental business is some sort of cryptic regulatory arbitrage; that seems like a game potentially worth playing with paper assets in places that have a strong rule of law, but it is surely a dangerous one in a nominally Communist country, where a nationalization could be arranged in the space of an afternoon. (Or where some regional Party functionary could simply be bribed to \u201close\u201d crucial paperwork.)<\/p>\n<\/blockquote>\n

Today, he posted a follow-up report<\/a>:<\/p>\n

\n

Could a curious investor look at actual maps of timber controlled by Sino-Forest agents, you ask? Well, you see, it\u2019s not exactly kosher for foreigners to carry around maps of remote parts of China. You can borrow them from forestry officials if you really need to. Will the local forestry bureaus confirm Sino-Forest\u2019s claims about plantations operated by its agents? Well, sometimes they\u2019ll give you a certificate of sorts, for all the good it might do. \u201cThe confirmations are not title documents, in the Western sense of that term,\u201d the committee report notes. (As I understand it, the Western meaning of \u201ctitle document\u201d is that it gives one an unquestioned, justiciable claim to ownership of something, whether the Party or the Army or the good Lord in heaven approve or not.)<\/p>\n

[. . .]<\/p>\n

The impression given is that you need influential \u201cbackers\u201d to do business in China. The question for the Western investor, though it\u2019s probably now moot, is whether the real role of these backers is to help exploit Chinese resources for the benefit of the Western shareholders or to help fleece Western shareholders for the benefit of Chinese suppliers and bureaucrats.<\/p>\n<\/blockquote>\n

As Jon, my former virtual landlord puts it, this is a hobby horse I like to ride now and again<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Colby Cosh posted an initial article on the investigation into Sino-Forest’s business back in June: Timber company Sino-Forest is locked in a fascinating battle for survival against Carson Block, a stock analyst with a mixed record of publicity attacks on Chinese-based enterprises. With professional analysts reluctant to say what they make of Block\u2019s \u201cstrong sell\u201d […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[22,25,84,9],"tags":[363,727,571,661],"class_list":["post-13357","post","type-post","status-publish","format-standard","hentry","category-china","category-economics","category-government","category-law","tag-corruption","tag-cronycapitalism","tag-investment","tag-regulation"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p2hpV6-3tr","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/13357","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/comments?post=13357"}],"version-history":[{"count":1,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/13357\/revisions"}],"predecessor-version":[{"id":13358,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/13357\/revisions\/13358"}],"wp:attachment":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media?parent=13357"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/categories?post=13357"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/tags?post=13357"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}