China is tightening restrictions on foreign investment in its tech firm, reports Ryan McMorrow in the Financial Times. McMorrow writes:
China is preparing a blacklist that is expected to tightly restrict the main channel used by start-ups to attract international capital and list overseas, in a bid to limit the role of foreign shareholders in the country’s next generation of tech companies.
The blacklist will target new companies in sensitive sectors that use so-called variable interest entities to run their China businesses, according to four people familiar with the matter. They did not expect the changes to apply to existing companies.
VIEs are a legal structure that has been used for decades by Chinese tech groups — including industry leaders Alibaba and Tencent — to circumvent foreign investment restrictions and raise billions of dollars from international investors.
The list, which is being formulated by Chinese authorities including the state planner, commerce ministry, securities regulator and central bank, follows a tech sector crackdown over the past year that culminated in an announcement last week by ride-hailing group Didi Chuxing that it would delist from the New York Stock Exchange.
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