China Firms Can Follow Rules Says Muddy Waters Target

The chief executive of China's largest private educational services provider New Oriental, a former target of U.S. short-seller Muddy Waters, says China has good companies that can abide by global market regulations.

Michael Yu, founder and CEO of New Oriental Education & Technology Group told CNBC that he's sure more Chinese firms will meet the standards of global business.

"China has good companies. So even though we go through lots of ups and downs, and also a lot of attacks actually from companies like Muddy Waters, I'm pretty sure that we still are a good company," Yu said on the sidelines of the China Entrepreneur Club's Annual Summit of Green Companies in Kunming, located in the country's southwestern Yunnan province.

New York listed shares of New Oriental plunged 33 percent in July last year after Muddy Waters alleged that its accounts were fraudulent, wiping out more than a third ($2 billion) of the company's market value.

A Muddy Waters report alleged that New Oriental had lied about its entire store network being company owned and that it actually had numerous franchises, Reuters reported. A day after the allegations, the U.S. Securities and Exchange Commission initiated a probe.

An investigation by New Oriental concluded in October that there wasn't any "significant" evidence to support the Muddy Waters allegations and they also said they were co-operating with the SEC in its probe.

In November, the CEO of Muddy Waters Carson Block said he had lost interest in short-selling Chinese company stocks, leading to a jump in New Oriental's share price - which is up almost 105 percent since the sell-off last July.

Frederic J Brown | AFP | Getty Images

Yu said he's trying to do his best to make his company a good company for the world, and not just in China.

"In China, you can do something in the China way, which sometimes means that has nothing to do with this world," Yu said. "We [Chinese companies] have to prove to the world that we abide by all the rules, all the regulations set up by the world... and also we have to let our investors have total confidence in us."

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Addressing talk about the "lost decade" for private businesses in China as state-owned firms took over the resources space, Yu added that he's confident China's new leaders understand a shift needs to take place for private companies to thrive.

"I have full confidence that for the next decade, most of the resources will come back to private businesses," Yu said. "I'm pretty sure that for the next 10 years, Chinese private businesses will develop even faster than the last 10 years."

- By's Rajeshni Naidu-Ghelani; Follow her on Twitter @RajeshniNaidu