ONE of China’s largest listed drugmakers said last week it had overstated cash holdings by US$4.4 billion, sending its shares and bonds tumbling.

Kangmei Pharmaceutical Co., a Shanghai-listed producer of traditional Chinese medicines, disclosed what it called an accounting “error” in an exchange filing Tuesday, about four months after telling investors that it was being investigated by regulators.

The stock, a constituent of MSCI Inc.’s global indexes, plunged by the 10 percent daily limit Tuesday, the last trading session before the May Day holiday. Kangmei’s 2.4 billion yuan (US$356 million) notes due 2022 fell as much as 14 yuan to 60 yuan.

The immense size of Kangmei’s restatement, described by one securities lawyer as unprecedented in China, puts a spotlight on disclosure practices in a country where several instances of questionable accounting have emerged in recent months.

“Investors have to be more careful about Chinese firms’ reporting,” said Andrew Lam, a director at BDO, an international accounting firm. “They will have to do real homework, examining closely firms’ financial reporting for any potential irregularities.”

Kangmei said it faces forced delisting if the regulator classifies its behavior as a major legal violation. (SD-Agencies)