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Crackdown on US listings: Will China close $1.6tn VIE loophole?

Variable interest entities used by Alibaba and Didi poised as next target

Didi Global and FANG+ Index components Alibaba Group Holding and Baidu all listed in New York using variable interest entities.   © Reuters

SHANGHAI/NEW YORK -- A method used by top Chinese companies to offer shares in the U.S. while skirting restrictions on foreign listings risks coming into regulators' crosshairs as Beijing ramps up oversight.

Variable interest entities are used by businesses in sectors where China limits foreign ownership, including telecommunications and education, to let foreign investors buy in through shell companies based in jurisdictions such as the Cayman Islands. This is also called the "Sina model," after the internet company that used it to list in New York in 2000.

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