China plans to ban loophole used by tech firms for foreign IPOs

Companies using the so-called VIE structure would still be allowed to pursue initial public offerings (IPOs) in Hong Kong, subject to regulatory approval, the people said.

HONG KONG: China is planning to ban companies from going public on foreign stock markets through variable interest entities (VIEs), according to people familiar with the matter, closing a loophole long used by the country’s technology industry to raise capital from overseas investors.

The ban, intended in part to address concerns over data security, is among changes included in a new draft of China’s overseas listing rules that may be finalised as soon as this month, said the people, asking not to be identified discussing private information.