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China has confirmed that it is not planning to close the loophole used by companies in the nation to go public in foreign markets. Earlier reports had suggested that Beijing might rule against Chinese companies using offshore structures for foreign IPOs.
Chinese firms use offshore structures known as variable interest entities (VIE) to list their shares on a foreign stock exchange. A Bloomberg report had suggested that Beijing might close this loophole, which has been used by Alibaba and Tencent in recent decades to avoid restrictions on foreign investment and listings abroad.
The report suggested that such a move could be part of the draft foreign listing rules that are expected to be finalised as quickly as this month. It said, however, that companies might be allowed to float IPOs in Hong Kong through VIEs as long as they satisfy regulators. Bloomberg added that the rules were still in the draft stage and could be changed.
The China Securities Regulatory Commission refuted the report as untrue, in a statement on its website.
Such a ban would have been a major step towards China’s crackdown against foreign listings by its companies.
In the past year, China has launched a wide-ranging regulatory crackdown that has hit IPOs and big businesses as the government seeks to rein in their influence. Beijing has been keeping a close eye on major foreign listings following a IPO on the New York Stock Exchange by cab-hailing giant Didi Chuxing that was executed earlier this year despite regulatory concerns.
Following the listing, Chinese authorities have launched investigations into Didi over cybersecurity concerns, ordered its app to be removed from stores, and extended probes into other US-listed Chinese companies.
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