A Chinese pharmaceutical company that overstated its cash balance by Rmb30bn ($4.4bn) said on Wednesday that it did so by using false documents — an admission that sent it shares down 5 per cent.
Guangzhou-based Kangmei Pharmaceutical became embroiled in one of China’s biggest accounting scandals in recent memory when it in April disclosed several huge errors in its 2017 annual report, which resulted in it revising down its operating revenue for that year by Rmb8.9bn.
The incident attracted global attention because the company is included in MSCI’s Emerging Markets index, which is tracked by about $1.9tn in funds. The scandal has underscored concerns that global investors could face greater-than-anticipated risk when allocating investment to China via the MSCI index.