NEW YORK (TheStreet) -- The iShares China Large-Cap ETF (FXI) is down 10% in 2013, largely underperforming the S&P 500 and TheStreet's Gregg Greenberg gets some perspective on the country's investment landscape from Junheng Li, author of Tiger Woman on Wall Street.
Many Americans are leery of investing in China, due to the accounting irregularities that plague individual companies.
Li said the only real way for U.S. investors to combat the issue is by doing extensive and exhaustive research.
But even the pros get it wrong, most notably, hedge fund manager John Paulson's huge losses that came in Sino-Forest.
She also pointed out the large disconnect between Chinese GDP and its stock market performance.
However, Li quickly reminded investors that the GDP was a measurement of economic activity, whereas the stock market largely reflects company profits. This is what attributes to the divergence between the two.
China needs to overhaul its corporate governance, because too many large investors are getting burned from these accounting issues, most recently, NQ Mobile (NQ), she said.
Li added that the Chinese middle-class will soon start investing in the stock market, and they too will be burned if these changes are not made. She concluded that China is not the only country guilty of accounting irregularities, an issue that plagues many emerging markets.
-- Written by Bret Kenwell in Petoskey, Mich.