China Economic Review – Corporate structure of some major firms in China at risk under proposed law

The corporate structure used by major foreign firms in China and multiple Chinese Internet companies listed in the US could become illegal under a proposed law, The Wall Street Journal reported, citing attorneys specializing in Chinese law. The firms, including the Chinese operations of (AMZN.NASDAQ), Pearson (PSO.NYSE) and CBS (CBS.NYSE) as well as Sina (SINA.NASDAQ), Autohome (ATHM.NYSE) and Weibo (WB.NASDAQ), use a structure called a variable interest entity, or VIE, to do business in sectors of the economy where the government restricts foreign investment. Most Chinese companies listed abroad use this structure, including Alibaba (BABA.NYSE) and Baidu (BIDU.NASDAQ), but don’t seem to be at risk because they are ultimately controlled by Chinese nationals.