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China reveals ways to reduce foreign IPOs in restricted areas | Business and Economy

Chinese companies that are in the foreign trade factories will have to be removed to register overseas.

China imposes new sanctions on overseas businesses and businesses that are not allowed to trade foreign currency, a move that could block the approach used by the country’s technology to raise foreign exchange.

Chinese companies in the export-oriented industry will need to be removed from the list before they can sell shares, the National Development and Reform Commission and the Ministry of Commerce said on Monday.

Foreign investors in such companies are not allowed to participate in management and their total ownership will be 30%, while one Investor does not have 10%, according to the updated list effective January 1.

The redevelopment represents one of the major steps Beijing has taken to intensify international scrutiny, following the rise of the giant Didi Global Inc. continued in New York starting in New York despite concerns about the security of its data. Although regulators have lifted the ban on IPOs by companies that use the so-called Variable Interest Entities (VIE) system, these new rules could make the process more complex and expensive.

“For companies wishing to register under the VIE system, this move could affect their perception of where they are going,” said Xia Hailong, a lawyer for the Shanghai law firm in Shenlun. “Previously he had no obstacle to registering abroad, but now he will face a lot of scrutiny and the path to foreign IPOs will be very difficult.”

VIEWS have been a constant complaint to investors around the world over their legal instability. He pioneered with Sina Corp. with its financial banks during the 2000 IPO, the VIE system was not officially approved by Beijing. However, it has helped Chinese companies disregard foreign exchange laws in difficult areas, including online companies.

This structure allows the Chinese company to transfer profits to offshore companies – registered in places like the Cayman Islands or the British Virgin Islands – and the potential foreign investors.

The requirements also apply to new divisions and do not affect the ownership of companies that are already registered abroad, according to the country’s financial planning agency.

‘Increased Growth’

The move comes just days after the China Securities Regulatory Commission said on Friday that all Chinese companies seeking IPOs and exporting shares must register with security officials. Any company whose list may be at risk of national security will be barred from taking action.

Companies that use so-called reform-minded organizations will be allowed to follow external IPOs once they meet the requirements, the security regulator said, without providing further details.

Both are part of a year-long campaign to curb cybercrime in China and what Beijing called a “careless growth” of business finance. Reducing VIEs on the external list could close the gap that has been used for 20 years by technical giants from Alibaba Group Holding Ltd. to Tencent Holdings Ltd.

The crackdown turned Didi’s IPO July into a frenzy with stock exchanges after China surprised investors by announcing it was investigating the company. Didi announced earlier this month that he would withdraw his American deposits from the New York Stock Exchange and follow up on the list in Hong Kong.

Didi fell 3% in US sales on Monday after the Financial Times reported that the company had banned current and former employees from selling their shares permanently.

Further scrutiny of Chinese regulators has been confirmed by their US counterparts. The Securities and Exchange Commission this month announced its final plan to introduce a new law that allows foreign companies to open their books for inspection by the US or may be removed from the New York Stock Exchange by the Nasdaq within three years. China and Hong Kong are the only two countries that refuse to allow visits even though Washington wants to since 2002.

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