In our investment practice, I avoid buying stock and mutual funds of Communist Chinese companies. There are several reasons for my decision and I will discuss these today.
First, despite quite broad agreement on accounting standards in the US, Europe, Asia, and the rest of the developed economies, China continues to insist on using its own convoluted corporate accounting standards. These apparently make it easier for companies to commit fraud in their reporting.
Instead of addressing this issue, the China Securities Regulatory Commission points to its sharing of audit papers of 14 Chinese companies listed on American stock exchanges since 2012 as a sufficient step forward to protect US investors. According to Hong Kong News of March 10, 2026, the Commission (or a regulator on its behalf) stated “China has proactively sought to build a mutually acceptable mechanism for inspection.” This is clearly not the same as ensuring Chinese companies adhere to the world standards.
Even this proactive defense of its policies came one day after Luckin Coffee was reported to have posted a fraudulent revenue number of US$309M. This has been the largest dollar amount of fraud on Wall Street by a Chinese listed company thus far.
In response to the problem, last May 21 US Senator John Kennedy of Louisiana introduced a bill that would expel such miscreant companies from the NE Stock Exchange and the NASDAQ. The legislation is still pending.
On a national level, the Chinese Communist Party recently released that it hit its 2025 goal of Gross Domestic Product (GDP) growth of exactly 5 percent. Imagine that—right on the nose! That reminds me of the gullibility of the wealthy clients of Bernie Madoff for years as he churned out the reports that he earned 12 percent per year for them, year after year.
My second primary reason for my personal investing boycott stems from the alleged, blatant stealing of American technology. Doug Kelly, CEO of the American Edge Project made several important points about this in his letter of March 6, 2023.
He maintains China has a three-pronged strategy of building its capabilities by massive government investment in technology, especially semiconductor chips and Artificial Intelligence (AI), its stealing over $500B of technology each year from our research labs and companies, and make the world totally dependent upon China for its own improvements.
To that end, the Chinese Cyber Corps has over 100,000 hackers, language specialists, and analysts dedicated to cyber espionage in the US. In October, 2023, FBI Director Christopher Wray told CBS 60 Minutes Overtime that it had over 2,000 separate investigations under way just involving this type of Chinese theft.
Third, although there is at least one Exchange Traded Fund that claims to invest in only non-government related Chinese companies, even the Chinese government has been transparent about its policy of requiring all domestic business firms to cooperate fully in achieving the goals of the Chinese Communist Party. This is fully discussed in a September 30, 2020, report in The Diplomat by Stephen Olson.
Competition between companies and countries is a positive. But true world progress depends upon the researchers, their companies, investors, and supporting countries being rewarded for their ingenuity and investment of time and resources to develop new solutions. Communist China does not meet this test. Therefore, I do not intend to help them.
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)