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Recently I have been intrigued by the lower prices of Chinese companies and decided to invest into China. But I stumbled open the problem that many Chinese companies you can invest into are VIE’s (Variable Interest Entity).

The company in question: China Resources Land Limited

For example see the following article: https://thediplomat.com/2014/09/no-one-who-bought-alibaba-stock-actually-owns-alibaba/

So, of what I understand of this is that nobody actually owns a piece of the company and if China decides that this system is illegal all investors would lose all their money.

So, I have been trying to find out if the company in question is a VIE or not and if by buying their shares I would actually own a piece of the company. But so far, I could find nothing that tells me how to see if a company is a VIE or not.

So, is there a way to find out if a company is a VIE or not?

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  • The article linked suggests that ALL Chinese companies traded outside of China are VIE's or something similar (and subject to the same risk). Jun 6, 2019 at 15:33
  • If I am not mistaken it says ALL in the sense of ALL tech companies. Not all companies in general. Also, up it says, "It is illegal under Chinese law for foreigners to own stock in certain categories of companies." so not all categories it appears. I can gamble that a company is a VIE because it is in a certain category, but I can't confirm this in any way (all I can do now is guess)
    – Morganis
    Jun 6, 2019 at 15:42

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In response to the OP's concrete question:

So, is there a way to find out if a company is a VIE or not?

it doesn't appear easy to do. One investment company, for instance, asserts that funds routinely omit mentioning VIEs at all:

We have recently reviewed the prospectuses of some of the largest emerging market and China funds, both passive and active, and in not one case did we find even a mention of the VIE structure, let alone any reference to the risks posed by it.

https://gci-investors.com/https-gci-investors-com-chinese-vie-structure-recent-developments/ (HTML sourcecode shows publication timestamp of 2021-07-08T19:58:50+00:00.)


In the past nine months, it remains widely said that most or all Chinese companies listed outside of China are VIEs. For instance:

Now, all US-listed constituents of the MSCI China Index operate under VIE structures. A large number of Hong Kong-listed constituents are also VIE stocks, accounting for about half of the weightings of all MSCI China stocks traded in Hong Kong. … These positions have been vastly understated in the past because US official statistics did not treat those Cayman Islands-incorporated firms as Chinese…

https://www.scmp.com/business/markets/article/3114557/legally-ambiguous-vie-structure-means-foreign-investors-dont (Dated 2020-12-21.)

Almost every listed Chinese company we can buy outside of China is listed through a VIE structure. Through this structure investors (usually unwittingly) don’t actually own any part of the actual underlying Chinese company. While that might sound ridiculous, sadly its true. Investors who buy shares in Chinese stocks such as JD.com, Alibaba, Tencent, etc., do not technically have any ownership of the underlying business whatsoever.

https://gci-investors.com/chinese-vie-structure-wall-street-continues-to-ignore-the-risks/ (HTML sourcecode shows publication timestamp of 2020-11-10T19:21:51+00:00.)

Of the about 250 Chinese companies listed in the US, most are incorporated in the Cayman Islands. This includes Chinese internet giant Alibaba, which raised $25 billion with its initial public offering in 2014.

https://www.caymancompass.com/2021/07/09/china-new-regulations-threaten-use-of-cayman-structures/ (Date 2021-07-09.)

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  • I did heard that China is slowly trying to open up it's markets so that they can better control capital. But I also heard that this still might take a while to accomplish. So for now I guess there is nothing else to do other then waiting.
    – Morganis
    Aug 22, 2021 at 12:33
  • @Morganis You could buy Chinese shares through the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect.
    – Flux
    Aug 22, 2021 at 14:36

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