June 7th, 2012
08:54 AM GMT
Hong Kong (CNN) - Beijing has clamped down on information once publicly available on listed and state-owned companies, hurting the effort of Western investors and companies to gauge whether to invest in - or short-sell - Chinese firms.
First reported by the International Financial Law Review, the State Administration of Industry and Commerce now requires company permission before accessing records such as financial reports and shareholder information.
Companies that sell credit reports - which give companies a quick read on the background of the firm they are considering doing business with - have been hindered, said Peter Humphrey, managing director of ChinaWhys, an international business risk advisory firm in Beijing.
Many believe the move may be in part a backlash against hedge funds like Muddy Waters Research, which prominently took down Chinese timber company Sino-Forest. The hedge fund has led similar short-selling crusade against other North American-listed Chinese firms such as including Focus Media, Rino International, China MediaExpress and Duoyuan Global Water, as CNNMoney reported. All were delisted after Muddy Waters' withering reports, with the exception of Focus Media.
But the information clampdown also comes at a sensitive time for Chinese leadership as it readies for its once-a-decade transfer of leadership at the top as President Hu Jintao and Premier Wen Jiabao, who are both in their final year of office.
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