
The Big China Short - rsecora
https://www.thewirechina.com/2020/04/26/the-epic-collapse-of-luckin-coffee/
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nmfisher
I worked in China for a number of years. If there's one lesson I took from
that time, it's that companies like Luckin are the rule, not the exception.

Fake accounts, inflated metrics, bribery and graft are the norm. It's not even
considered unethical, it's just the way business is done. If someone cheats
you, then you can only blame yourself for being cheated. What's more, you
should also blame yourself for not cheating them first.

A lot of Westerners fall into the same trap, thinking there's no way that
anybody could be so blatant in lying, cheating and stealing, so they give
their Chinese partners the benefit of the doubt.

Well, China certainly can be so brazen. Luckin literally inflated its
quarterly sales figures by 88%, and it wouldn't surprise me if they did so
just by fiddling with a spreadsheet. The fraud I encountered was rarely
sophisticated.

It's also naive to think that auditors - even Western firms - provide any
assurance at all. It requires a special type of stomach/spine to stand up to a
client pressuring you or flooding you with information that is difficult to
verify.

~~~
sbmthakur
How's the regulatory oversight in China? If companies can get away with lying
then I don't think they have much say in the matter.

~~~
nmfisher
It exists, but it's hardly effective. It's mostly a merry-go-round of bribery
and currying favours. As an example, look at how little consumers trust
inspections carried out by authorities (hence why Australian milk powder
carries such a premium).

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rsecora
The organizers had a hunch that Luckin Coffee, China’s fast-growing challenger
to Starbucks and a company traded in the U.S. stock market, was falsifying
financial statements to exaggerate its sales. The organizer set out to prove
it, deploying 1,510 investigators to count sales and record traffic at more
than 600 of the company’s retail stores, one mobile phone video at a time.

