The variable interest entity ("VIE")
has long been a popular structure for foreign parties to invest in
sectors which are restricted by China's industrial policy to
foreign investment. In addition the VIE structure has also been
used as a means by which Chinese domestic entities could list
offshore on international capital markets.
The first well known VIE structure was that of Sina.com in its
2000 listing on NASDAQ. Indeed the VIE structure is also commonly
known as a "Sina Structure". Sina used the VIE as a
workaround structure to avoid restrictions on foreign direct
investment (FDI) in the value-added telecom services sector. Since
then, both foreign and Chinese investors alike have replicated the
VIE structure in many other sectors of China's economy where
FDI is either restricted or prohibited to foreign investors.
