Editor's note: This is the second part of Rick Pearson's look on investing in Chinese small-cap stocks. Here is Part 1.Supposedly "objective" third-party research should be viewed with a healthy degree of skepticism. Wall Street investment banks have an irreparable conflict of interest when it comes to providing research, due to the connection with generating sales and trading volumes as well as investment banking revenue. For a good example, look at A123 Systems ( AONE). The company did a roughly $1 billion IPO in 2009 despite the fact that it has never made a profit and in fact has negative gross margins. Not since the blazing days of the Internet boom have I seen a more deserving candidate for a "strong sell" recommendation. And yet how many Wall Street banks initiated coverage with a sell rating? None that I could see.