In January 2015, China's Ministry of Commerce published a
draft of what should have become a new legal cornerstone for
foreign investment in China: the PRC Foreign Investment Law.
Arguably the most controversial provision in that draft – and
perhaps the reason why the draft never became law – was a
provision that defined a Chinese entity under the
"control" of a foreign company as foreign investment.
The common interpretation was that this would doom the VIE
(Variable Interest Entity) structures commonly used for Chinese
companies such as Alibaba, which operate in sensitive industries
(including in technology, media and telecommunications) restricted
or closed to foreign investment but are listed on foreign stock
exchanges and therefore have foreign ownership.
