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.
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