Occasionally you run into a story that freaks you out about China's banking and accounting system suggesting that the place is one big Ponzi scheme.
Take for instance the story in Forbes about how about $1 billion was pinched by an ethnic Mongolian woman named Tuya who managed to convince bank employees to redirect money from savings accounts to fund her speculative investments in property and mines. The scheme unraveled when the bank noticed money missing from over 40 savings accounts and promptly fired the three clerks. She kept shifting money around to different accounts to cover up what was happening but was pinged when she kidnapped the wife of the Bank of China's division chief for the Inner Mongolia division and demanded a $30 million ransom for her.
The obvious question to ask is how could this happen? What does that say about the Chinese banking system?
All this coincides with the Financial Times reporting that the US Department of Justice is looking into accounting practices at Chinese companies, following a series of high-profile scandals this year.
Forbes explains the problem with the Chinese system. "There are dozens of mini-Enrons and WorldComs run by Chinese managers. But there are also the major large cap name brands, who may not be entirely cooking the books, but survive by off-balance sheet, unaccounted for loans and cash. In short, no one knows what Chinese companies are really worth."
The problem is that the world is heavily dependent on a strong Chinese economy. But that is undermined by these large scale Ponzi schemes.
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