The dark side of investing in China

Tom Bulford examines the pitfalls of investing in China by highlighting the experiences of three small-cap companies.

I have written many times about some of the potential dangers of doing business with the Chinese, and some readers don't seem to agree with me. Lately I have come across a little more supportive evidence - a juicy murder that may put you off China for good...

Pacific Ores Metals and Chemicals is a Hong Kong-based trading company specialising in rare earth metals. A few years ago the company got into a dispute with a mainland Chinese refinery. These refineries are sometimes run by businessmen whose methods are, to say the least, unscrupulous. Mines are often opened up quite illegally, toxic chemicals are dumped in the local water supplies and estimates suggest one-third of China's rare earth production is smuggled out of the country.

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Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund. Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.