China cracks down on fraud and tries to clean up image with Luckin probe
Evelyn Cheng, 25 February 2021
In a period fraught with tensions with the U.S., China is trying to show it’s being serious about tackling fraud. Nasdaq-listed Luckin Coffee said Monday it was cooperating with regulators, following reports of government investigation into the company over recently disclosed financial fraud.
The rare crackdown comes after an update to China’s securities law took effect in March. A new clause said the Chinese government will take legal action against overseas securities issuance and trading activity that hurts domestic investors.
The China Securities Regulatory Commission (CSRC) and other authorities have not directly confirmed an investigation into Luckin — China’s challenger to Starbucks. But the commission has been more vocal in denouncing the coffee company’s fraud, and talked up efforts to cooperate with the U.S. Securities and Exchange Commission (SEC).
“The particular timing and particular nature of this case (will) probably become a poster child for China’s attempt to step up or improve its implementation … regarding securities law,“ Zhu Ning, a professor of finance at Tsinghua University, said Tuesday. “The update to the securities law is definitely making it clear that China is trying harder to maintain the order and discipline of the market.”
