DSWLF if different from AEHCF.
Before I came to this country in 1985, I had lived in China for 40 years. I also visited my relatives in China every year recently and call my sisters and brothers there every week. From what I learned over the years, I feel compelled to come to DSWLF defence with regard to its "accused" similarity to AEHCF. DSWLF is different from AEHCF; it is very unlikely that what happened to AEHCF will ever happen to DSWLF.
First, AEHCF has Chinese subsidiaries that are bona fide local Chinese companies (I do not know much about AEHCF itself). The accused Chairman/CEO, Du Qingsong, is itself a communist party member and is subject to the power of the Disciplinary Commission of the Xianyang county Communist Party. As a local, Du must have political connection and, according to reports, this time his political connection backfired and became his trouble. DSWLF if a HongKong-based company; the company CEO or other officials are unlikely to be involved in local politics.
Second, China is a heterogeneous country in terms of economical development and reform, general education level, and local custom/culture. China has a backward, vast countryside, represented by more than 3000 counties and hundreds of small cities. I grew up in Shanghai, a big port city. In the early 70's during the Cultural Revolution, fresh out of university, I was assigned to work in a rural county and was shocked by the local officials' lack of respect to the laws; they behaved like kings. They were basically army solder-turned civilian officials with little education. Unfortunately, the Chinese company of AEHCF in trouble is located in a county where such abuse of power is still seen. In the big cities, such as Shanghai and Beijing, however, you generally do not see this kind of culture. I would be surprised to see a Shanghai local official, without a legal warrant, detaining the CEO of China East Airline, a company also traded on a US exchange. One step further up on the Chinese map of political and economical development, you have Guadong Province and GuaZhou City (my spelling might be wrong), geographically close to HongKong and having close personal and capital ties to the latter. Chinese economical reform started here two decades ago. In this area, you will find little communism's influence and most tolerant political climate. Business is carried out here much like anywhere else in the world. The most developed region in China is the so called "special economical development zone", a small region just across from HongKong, where companies and factories invested by foreign capitals are located and insulated from the rest of China. In this special zone, you can hardly tell a difference from HongKong. DSWLF's factories are located there too.
Similarity issue aside, the AEHCF incidence is an isolated one in China. China is changing for the better. The other day the WSJ had a front page report from China, describing a newspaper editor who now can report relatively freely and objectively. Ten journalists/investigators have been sent to Xianyang county, some by the central Chinese government. Obviously, the Chinese government is paying attention to this. We may see a fair resolution in the end.
IMO, DSWLF's recent price movement is not caused by the AEHCF incidence, but by the fear of "Asian Flu". In a month, we will see the recent Q's result from DSWLF and the company may surprise us with a better than expected number. Its EPS growth may have come down from the annual rate of 40% to 20% during this Flu season, which still makes it undervalued. When the Flu season is over, it will recover. |
