Tech Companies: A Model for China?

Two Chinese tech companies show that they’re leading the pack, albeit in very different ways. China’s answer to Facebook, Renren.com, is mulling a potential U.S. IPO. If the track record of other Chinese tech stocks listed in both the U.S. and Hong Kong is anything to go by, investors have a lot to get excited about, particularly if Renren.com goes public before its Western peers do, which would make it the first social-networking site to go public.

But not all is well in the fast-growing Chinese tech sector as the problem of fraud rears its head in one of the country’s most well-known and respected companies. Alibaba.com Ltd. said in a filing to the Hong Kong stock exchange on Monday that it has appointed a new chief executive to replace David Wei Zhe after he resigned following an internal investigation into fraud at the company. The company’s chief operating officer, Elvis Lee, also resigned.

The investigation found that 100 sales people, out of a sales force of 5,000, defrauded customers through fradulent storefronts which were “either intentionally or negligently” allowed to evade the company’s authentication measures. “The investigation concluded that the pursuit of short-term financial gain at all cost had tainted parts of our sales organization, risking serious damage to our Company’s core values,” said the statement.

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