The real problem isn't the pervasive fraud in Chinese stocks, its the lack of recourse by U.S. investors when fraud is discovered.
The Chinese government refuses to act - they refuse to investigate and/or prosecute known frauds.
Fraud or no fraud - given the lack of legal recourse in China, U.S. listed stocks of Chinese companies are effectively worthless.
You don't own something you have zero control over.
Take a look at the host of Chinese companies that have been proven fraudulent - have any of the CEO's been arrested by the Chinese government? Have any of the CEO's been fired by the shareholders? Has there been any recovery of defrauded funds?
It is a shame Chinese stocks were ever allowed to be listed in the U.S. Many, many government officials (Chinese AND American) and private parties (auditors, investment banks, underwriters, stock exchanges, SEC, PCAOB) are flat out guilty of negligence (and, in some cases, fraud).