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Nana Li, Senior Research Analyst, was invited by the Wall Street Journal to comment on the case of the investigation of Luckin Coffee Inc. by China’s top commerce regulator after the company was revealed that much of its 2019 sales were fabricated and caused massive losses for many investors. Nana's comments are quoted below.

The probe by China’s business regulator was likely in response to the SEC’s criticism, as well as an attempt by Beijing to tackle the thorny situation, according to Nana Li, senior research analyst at the Asian Corporate Governance Association in Hong Kong.

“Chinese regulators are trying to make an example out of Luckin, because it has hurt the image of China and the reputation of the Chinese business community,” Ms. Li said.

Ms. Li said the commerce regulator could hand over the evidence and materials gathered in the probe to the SEC, as it is in the Chinese government’s interest to cooperate with U.S. regulators in this particular case. That would deter other overseas-listed Chinese firms from committing accounting fraud, she added.

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