Hony's CEO defends Chinese company image

In Davos, John Zhao pointed out that fraud is not endemic at Chinese companies. His comments came just after federal officials searched an advisory firm that helps Chinese companies list in the US through reverse mergers.

John Zhao defended the image of Chinese companies at the World Economic Forum in Davos, asking not to judge the many by the actions of a few, according to reports.

“[Chinese companies] haven't had 100 years of corporate governance. The ones that intentionally commit fraud are few… but it'll take some time for the rules to be established,” Zhao was quoted as saying in a report from the Telegraph.

His comments came a day after the Manhattan office of New York Global Group, a reverse merger advisory firm that has advised Chinese companies, was searched by federal agents in relation to an ongoing investigation, according to a Bloomberg report citing a spokesman at the Federal Bureau of Investigation

Chinese companies CleanTech Innovations and Harbin Electric listed in the US through reverse mergers and were New York Global Group clients, according to the report. 

The US Securities and Exchange Commission has been taking steps to address fraud at foreign companies listing in the US, an issue highlighted by the ordeal of Chinese firm Sino Forest, which was accused of overestimating assets by a short seller. 

Most recently, the SEC modified listing rules that broadened disclosure obligations for foreign firms seeking US listings.