Review: ‘The China Hustle’

TIFF 2017

4 mins read

The China Hustle
Dir. Jed Rothstein
Programme: TIFF Docs (World Premiere)


You saw The Big Short, right? Of course you did. And you came away with two thoughts: they ought to do something about this, and they won’t.

Well get ready to think those thoughts all over again when you see Jed Rothstein’s brisk new doc The China Hustle.

In case you’ve forgotten, short-selling is what happens when investors figure out that stocks are overvalued: they borrow shares in the company in question, sell them at the current rate, release a report showing that the company is overvalued, watch as the company’s value plummets, and pay for the shares they’d borrowed at the newly tanked cost, pocketing almost all the money they made in the initial sale as profit.

In 2008, the overvalued stocks were subprime mortgages and most of the investors were Americans. Today, according to the investors and experts in Rothstein’s film, the investors are Chinese firms trading on US stock markets. (Those experts are led by investor-activist Dan David and include a number of other short-sellers as well as, amusingly, former general, presidential candidate and investor Wesley Clark throwing a temper tantrum.) They have managed to do that through “reverse mergers,” processes in which defunct but still technically registered US companies like, say, Nevada silver mining companies “merge” with Chinese companies, which take over their stock market registrations.

These companies look legit—they all appear to be audited by one of the big four accounting firms—but as soon as you dig, you figure out they are anything but. For one, they are all audited not by, say, PricewaterhouseCoopers’ head U.S. office but by the company’s China division, which, the film suggests, may have paid off to overvalue their assets._ The China Hustle_ goes out of its way to explain that things just plain work different in China. In the absence of a strong legal system, it’s basically the Wild West.

But in fact, you don’t need to even go to those lengths to figure out that they’re bogus. What China Hustle’s investors do is just go to China and look at what the companies are actually doing. Unsurprisingly, they find that a paper company listed at over $100 million is actually a two-bit operation with broken machines, just a few employees, and one delivery a day—about a tenth of the business they would have to be doing to be worth that much.

It’s not just China that’s the problem, of course. Take American regulatory bodies. They are not actually entrusted to come up with the numbers themselves—rather, they just look over what companies send them and then sign off. They don’t have the staff or, probably, the mandate to do anything more than that.

The result: regular people lose lots of money and, as we see on a drive through Dan David’s hometown of Flint, Michigan, lives and livelihoods are destroyed, all while bankers and CEOs get off with severance packages running worth tens of millions of dollars. The ending montage, cynically but truthfully, shows that nothing at all has changed.

Basically, we’re all living in an economic nightmare. But we knew that, right? I look forward to seeing The Big Short 3 at TIFF 2019.

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