A China syndrome

As growth in Europe and the US slows, the world is looking to China for signals for the future. Will it shore up global growth? What challenges does it face? A director in McKinsey’s Shanghai office offers a unique perspective. Among his 10 forecasts for the country in 2012, he predicts that accounting scandals will continue. “China’s reputation among regulators and investors was tarnished in 2011,” writes Gordon Orr in the February edition of the McKinsey Quarterly. He goes on to explain that according to the Financial Times, the total value of Chinese companies delisted from US exchanges “exceeded what Chinese companies raised through IPOs in the United States last year”. The trend was likely to continue through 2010 “since more than 400 ‘reverse merger’ companies are still listed in the United States; the fact that they were not subjected to the rigors of the typical IPO process suggests that markets are in for more surprises.” As a result, Orr says, international investors will become increasingly selective about buying shares of Chinese companies. Good news for India? Or are there other Satyams lurking here?