“The China Hustle” is a documentary about a financial scam, but as the scam is still ongoing, the information it provides is not just interesting, but potentially useful. It’s the story of how Chinese companies use weaknesses in American law to defraud U.S. stockholders of billions.

Here’s a fun fact: It is not illegal in China to file fraudulent financial disclosures in the United States. So, let’s say you have a company in China worth a million dollars. You can file papers in the United States claiming to be worth $100 million. And then you could go public by merging with some defunct American company whose name is still on the stock exchange.

With just that, you can bring in perhaps $100 million in investment money. And there’s no downside. If you get caught, you can’t get in trouble in China, and you get to keep all the money. Lawyers and short sellers in America make out, too. The only people who get hurt are individual mom-and-pop investors, who end up losing a quarter or perhaps half of their retirement savings.

But wait. How would average American investors even know about some obscure Chinese company, much less sink half their savings into it? It’s simple. The Americans read regulators’ reports, and those reports are prepared on the basis of ... you’re not going to believe this ... those bogus financial disclosures! American regulators don’t send teams of investigators to China to count how many trucks go in and out of a factory. Besides, investigating a business as a private citizen or company is illegal in China.

Written and directed by Jed Rothstein, “The China Hustle” is a brisk, entertaining documentary that shows how the world of investment works. Say you have an investment company and you want to get rich people to sink millions into a Chinese business no one has ever heard of. You don’t send out a press release. You send invitations! You throw a party and hire Snoop Dogg or Billy Idol or Diana Ross to perform. You pay Henry Kissinger to make a speech. And you get some major, trusted name to be your chairman.

Retired Army Gen. Wesley Clark appears here in an interview, and it doesn’t go well. Clark was chairman of Rodman & Renshaw, which sold some of these questionable investments. It’s unclear how much Clark knew, but in the documentary he takes umbrage at the line of questioning and walks off the set.

The hero of the movie — even though he starts the film saying there are no good guys in the story, including himself — is Dan David. David made a lot of money selling Chinese investments — some for legitimate companies — but then got an inkling that something was wrong and started researching some of the companies he was representing. Appalled, he started working the other side of the street — as a short seller, a writer of exposés and a crusader for tougher regulation.

Photo: Magnolia Pictures / Magnolia Pictures

“The China Hustle” tells a story with wide implications, the first being that what we see here could be the tip of the iceberg. It’s quite probable that more Chinese companies are committing this kind of fraud. We take it on faith, for example, when we hear that the Chinese economy is growing at a rate of 8 percent. But those numbers could be seriously inflated. Sooner or later, fraud will come out, and there will be a reckoning.

As we’re talking about the second-biggest economy in the world, the reverberations will be felt everywhere.

Mick LaSalle is The San Francisco Chronicle’s movie critic. Email: mlasalle@sfchronicle.com Twitter: @MickLaSalle

The China Hustle

Documentary. With Dan David and Wesley Clark. Directed by Jed Rothstein. (R. 83 minutes.)

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