A Chinese Drug Company has revealed that it overstated its cash balance by $4.4 billion (~KSh444 billion) in the latest financial reports. Kangmei Pharmaceutical, a leading drug manufacturer in China, is the firm behind the fraud.
Chinese financial regulators are lax in exercising their oversight role which often results in staggering cases of accounting fraud by listed companies. According to the financial news website Zero Hedge, international investors need to be cautious when investing in Chinese securities due to the lenient financial regulations in China.
Kangmei is just one of the many companies that have engaged in financial cheating in the Asian country. An analyst at Schroder Investment Management Ltd told Zero Hedge, “We have seen a number of Chinese companies with high cash balances still seek funding from investors, and later on the cash just disappears.”
Kangmei could be de-listed from the Chinese Stock Exchange following the crime. The pharmaceutical still hopes to raise money to repay its debt obligations which fall due in September 2019. The company’s shares and debt notes lost substantial value immediately the news about accounts cheating broke out. Foreign investors are keen to see how the Chinese Capital markets regulator will handle the matter.