Ever noticed that many directors of otherwise domestically-focused Chinese companies have Anglo-Saxon names? In many cases, these directors may be legitimate executives appointed to improve a business' operations. But a recent exposé by CNN suggests that the presence of white people in Chinese businesses in many cases is purely for show, sometimes bordering on fraud.
Chinese companies will go so far as to hire actors from overseas in order to bolster their reputations. If there are foreigners around Chinese companies, these companies appear to have prestige, money and connections, which encourages companies to fake it.
Often times, these actors are just brought along to impress government officials or clients. But CNN interviewed a few actors who had been hired to claim they were Vice Presidents or senior executives! One company allegedly swindled investors, and the actor who was claimed to be "in charge" of the company was investigated for fraud!
Emerging markets present a ton of opportunities, due to their potential to grow the labour force and the productivity of that labour force at tremendous rates. Unfortunately, they also present a whole slew of new risks that developed market investors are not used to. As such, investors must be particularly diligent in assessing potential investments in emerging economies.