China Points Out Accounting Fraud Issues Targeting Luixing at Financial Stability Meeting
[Asia Economy Beijing=Special Correspondent Park Sun-mi] Luckin Coffee, known as the "Chinese Starbucks," has been involved in an accounting fraud case in the United States, raising concerns about the "China discount." Amid this, the Chinese government has emphasized the responsibility of listed companies for transparent accounting.
According to the Chinese government website on the 16th, the Financial Stability Committee of the State Council held a meeting chaired by Vice Premier Liu He the day before to discuss strengthening investor protection in the capital market.
At the meeting, the Financial Stability Committee pointed out, "For the development of the capital market, it is fundamental to adhere to the principles of marketization and rule of law and to operate honestly according to the law," adding, "Recently, some listed companies have violated laws and regulations and engaged in malicious acts such as accounting manipulation, infringing on investors' interests."
They further urged, "Regulatory authorities must strengthen investor protection according to the law and raise the standards of listed companies. A favorable market environment must be created, and the capital market's services should be better utilized. Acts such as false information disclosure and fraud must be strictly dealt with."
The Financial Stability Committee did not specifically mention Luckin by name during the meeting. However, as the recent accounting fraud case of Luckin has spread concerns about the "China discount" for Chinese companies listed on the U.S. stock market, the prevailing view is that the government convened the meeting to prevent recurrence.
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Luckin disclosed on the 2nd, ahead of the New York Stock Exchange opening, that its sales figures for the second to fourth quarters of last year were estimated to have been inflated by 2.2 billion yuan (approximately 380 billion won), revealing the accounting fraud. Subsequently, Luckin's stock price plummeted by about 80%.
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