Will Hutton writes:

Only 1% of private Chinese companies subject themselves to independent audit, he claims, and then because they want a stock listing. The vast majority focus on staying below the radar, underreporting their sales and overinvoicing abroad to keep money overseas — or simply, as he describes it, running even large companies from the “cash box in the back of the Mercedes.”

Most Chinese companies have three sets of accounts — one for the banks, one for the tax authorities and one for the management. Outsiders can never believe what they are told, so banks lend only on the basis of hard collateral.

Most private firms do not last long, with the average duration being three years. The law of the jungle prevails: you do what you can get away with.

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http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=5843