Companies with larger translation gaps showed wider inquiry-response gaps
Tina Lang, Lorien Stice-Lawrence, Forester Wong and T.J. Wong used machine-learning tools to compare the Chinese- and English-language versions of annual reports filed by Chinese companies for their study in The Accounting Review, a leading academic journal focused on financial disclosure. The versions were supposed to present the same documents, but the researchers found they often did not. English-language reports provided less complete information overall. The study suggests Chinese companies are not necessarily willing to give foreign investors the same information they provide to domestic shareholders, leaving foreign investors with less information even as China seeks foreign capital.
China’s stock market has just entered bear-market territory, with the blue-chip index down more than 20% from its June peak. Morgan Stanley has warned of another 10% to 15% decline before a bottom. State-backed funds have rushed in to buy stocks. The Wall Street Journal characterized the intervention as “more like a Band-Aid than a cure.”
Foreign investors have taken losses through U.S.-listed Chinese stocks, Hong Kong-traded shares and the Stock Connect programs that since 2014 have allowed global investors to buy directly into mainland markets through Hong Kong brokers.
One difference involved operations in Xinjiang. Companies with more foreign investors were less likely to mention those operations in their English reports, and the authors linked the pattern to foreign investors’ greater concern about forced-labor allegations. Companies receiving government subsidies also played down related-party transactions in English reports. The researchers said Western investors tend to view close government ties as a “governance red flag,” while Chinese investors often view them as an advantage.
Chinese-language reports also contained details about Communist Party connections, affiliations with the United Front Work Department and links to companies embroiled in corruption scandals that did not appear in the English versions. The Wall Street Journal described the United Front Work Department as “a far-reaching party influence operation.” When Chinese firms wanted to raise capital from foreign investors by listing in the United States or issuing shares in Hong Kong, they emphasized reassurances about accounting methods in their English reports, the study says, to soothe the concerns foreign investors were most likely to have.
The researchers supplemented their analysis of filings with a field experiment. They emailed Chinese companies while posing as both local and foreign investors and asking for information. Companies were half as likely to respond to the foreign-investor inquiries, and the response gap was significantly worse among firms with the largest translation gaps in their public reports.
The study also found that being a native Chinese speaker did not overcome the disadvantage of working for a foreign firm. The information gap also affected professional analysts. Researchers found that analysts at foreign brokerages received less information and made less accurate forecasts than their Chinese peers, even though most of those analysts spoke fluent Mandarin. The study attributed much of the disparity to companies’ reluctance to speak with those analysts and answer their questions.
Tina Lang, Lorien Stice-Lawrence, Forester Wong and T.J. Wong also found that selective disclosure made companies’ shares less liquid, making it harder and more expensive for those firms to raise capital.
The study identified strategic and cultural forces behind the differences. Strategically, companies tailor information to each audience, emphasizing what that group wants to hear and omitting information the audience does not want. Culturally, in-group favoritism, reinforced by the importance in China of keeping local stakeholders happy, especially government officials, often comes at the expense of shareholders. Previous research cited in the study found that Chinese firms will sometimes take steps to help a connected firm or benefit the government even when those actions could reduce shareholder value. State-owned enterprises represent most of China’s market capitalization and have outsize regulatory influence, the researchers said. The Wall Street Journal called that “a very different proposition for American investors.”
The Wall Street Journal described the contradiction—“wanting foreign capital while reflexively protecting insiders”—as one that “mirrors a tension at the heart of China’s economic model.” The Journal called it “the same tension visible in the current stock-market rout, where Beijing is simultaneously trying to stabilize stock prices and tightening its grip on the information environment.”
Lorien Stice-Lawrence described the translation gaps as a “canary in the coal mine.” The differences in public filings themselves were not the biggest problem, according to the report: in 2026, any investor could run a Chinese annual report through a translation tool. The greater concern was what the gaps indicated about private interactions that were harder to quantify, including phone calls that went unreturned and meetings where less information was shared. The researchers were not arguing that investors should avoid China. Their warning was that American and Chinese investors and firms are “playing different games with different rules.” They said an investment strategy requiring the same information as local investors needs a different strategy or a different market.
China briefs
Separate items in the same newsletter reported that young Chinese burnout survivors were flocking to picturesque Dali to perfect the art of “lying flat,” which the newsletter described as a “soul-cleansing bout of doing absolutely nothing.” According to the report, Beijing’s spy agency suspected the practice was a foreign-backed sabotage plot, while the drifters said they would gladly return to work if only decent jobs existed.
Another brief said China’s navy had eclipsed the U.S. fleet by 35% under Xi Jinping’s maritime push. The brief said the fleet gap compelled the Trump administration to slash red tape and rebuild domestic dockyards in a bid to restore naval dominance.
A third brief reported that Alice Huang, a data-center industry executive with close ties to Nvidia CEO Jensen Huang, had been investigated in the United States, Singapore and Taiwan over allegations that she doubled as a Chinese intelligence source and diverted critical AI chips to Beijing. The report attributed the allegations to people familiar with the matter.
Reader responses
In another item, readers answered a question posed the previous week about what they would watch for if a trilateral summit among President Trump, Vladimir Putin and Xi Jinping were to take place. The responses were condensed and edited.
Tim Tangredi of Florida said, “Summits succeed when staff finish the text beforehand. Summits that try to solve the hard issue in the room fail. This one hasn’t even agreed on its topic.”
Donald P. Brown of Utah said, “Should the three-way meeting of Xi, Putin and Trump occur in Shenzhen, I can’t foresee any outcome favorable to Ukraine. Trump and Xi’s interests in reaching some kind of deal, and Putin’s designs for an agreement forcing Ukraine to give up territory, seem to portend some sort of agreement favorable to Russia at Ukraine’s expense.”
Gerard M. Housey of Michigan said, “I’m no politician, but I would bet that Xi will agree to have the summit. Regardless of what is actually discussed internally, the public perception will be that he will be at the center of mediating the issue and it will reflect positively on him and China. Thus, I think that China will propose a more nuanced justification of why the summit will take place.”
Eugene P. Grace of Pennsylvania said, “Among the three world leaders, the only one who may gain something out of the upcoming gathering is President Xi. Trump has little to gain and little to give so the underlying premise for Trump, post midterms, is to maintain the strategic stability between the two countries. Putin’s goal is much the same; keep Xi, the next Chinese leader may not be as accommodating to Russia. The optics are the key. Xi’s message: China is on the world stage, but only with me at the helm.”