Investment Company Asks: Can We Legally Short Sell?

(Beijing) – Is it legal in China to short a company's shares and then publicly question its financials with prepared research reports? This is the question a domestic investment company formally asked China Securities Regulatory Commission (CSRC) in a letter in March.

The matter drew attention because of the significant weight it carries in the country's nascent short-selling industry. The method in question is practically the same as that used by American short seller Muddy Waters Research, which has made a name for itself by attacking U.S.-listed Chinese companies in recent years and making big money out of the ensuing share collapses.