China IT investors undeterred by accounting scandals

CHINESE COMPANIES listing in the US have been hit by a spate of accounting scandals, but private equity and venture capital companies remain eager to invest.

Social, mobile and location-based services – otherwise known as So-Lo-Mo – are enjoying a rush of capital as investors eye the impending tablet and smartphone boom in the world’s fastest-growing major economy.

Cyril Ebersweiler, partner at Ireland-based SOSventures, told Reuters he is not too concerned about the accounting scandals: “We invest into the early side, around pre-revenue. We already know there are risks but this just puts an extra layer of having to be extra careful with due-diligence.”

Scandal-plagued companies have seen their stock plunge, as US listings have revealed major inconsistencies in accounts and auditors have refused to sign off or resigned.

Despite this, venture capitalists invest at an early stage, hoping to cash in when the companies take off. At the end of last year there were around 300 million mobile internet users in China, meaning more then 60% of internet use was through a smartphone.

Accounting scandals may have made investors more cautious, but is seems the attraction of a booming economy and a huge population are too strong to keep capital away.