![handle is hein.journals/asiaplwre29 and id is 1 raw text is: ASIA PACIFIC LAW REVIEW
2021, VOL. 29, NO. 1, 1-24
https://doi.org/10.1080/10192557.2021.1995229
Routledge
Taylor & Francis Group
8 OPEN ACCESS
Variable interest entity structures in China: are legal
uncertainties and risks to foreign investors part of China's
regulatory policy?
Fa Chen
Teaching Associate, Faculty of Law, University of Cambridge, Cambridgeshire, UK
ABSTRACT ARTICLE HISTORY
Over the past two decades, variable interest entity (VIE) Received 10 June 2021
structures have been used widely for foreign investors to Accepted 1 September 2021
access Chinese industries that are closed or restricted to
foreign investment. However, the legality of the VIE structure KEYWORDS
has been neither recognized nor denied by Chinese authorities structure;ambiguous
in the general sense and has thus been a focus of legal legality; Chinese regulatory
scholarship. Nevertheless, existing literature has rarely covered policy; legal risks; foreign
China's regulation on VIE usage from 2015 onwards. This investors
article endeavours to narrow the research gap. It argues that
the ambiguous legality of the VIE structure is a Chinese
regulatory policy for economic development but with legal
risks to foreign investors. China's recent regulation has
reflected a policy continuation and not clarified the legal
uncertainties of the VIE structure, notwithstanding the
occurrence of some positive changes, such as the achievement
of the first domestic VIE listing. Instead, against Didi's US VIE
flotation as a trigger, China has been tightening the national
control over domestic companies' overseas listings, which may
change the landscape of future VIE listings and help Chinese
capital markets become a beneficiary.
1. Introduction
China has achieved striking economic success since the implementation of the
national economic reform and opening-up policy in 1978. During this process,
foreign investment has played a significant role in terms of a huge volume of actu-
ally-utilized foreign capital (over USD two trillion) through the nearly one million
foreign-invested enterprises.' Part of the foreign capital could not have been raised
without a special corporate device named the variable interest entity (VIE) structure
which has been conceived for Chinese companies to raise overseas capital on the
CONTACT Fa Chen fc463@cam.ac.uk
'Standing Committee of the National People's Congress of China, Explanatory Note on the Foreign Investment Law of
China (Draft) (A CA-d , 9 T (($KA t l]X F J x ( *| ) )) MiA5).
© 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group
This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License
(http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any
medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way.](ViewImageLocal?handle=hein.journals/asiaplwre29&div=1&collection=&method=preview&ext=.png&size=3)
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