VIE: An Otherwise Unnecessary Legal Innovation to Connect Chinese Companies to the World

Alexandra Stevenson’s “VIE: an acronym every investor in Chinese companies should know about” on offers a simple but clear introduction about the variable interest entity (VIE) structure which has been adopted by a number of China’s tech giants, including Alibaba, whose IPO in 2015 “shows foreign investors able to skirt risks“.

“Created to circumvent ownership restrictions of companies in sectors considered sensitive by the Chinese government, VIEs are contracts that give a foreign-listed company control of a local company without direct share ownership.”

The VIE structure does however present real legal risks, as, in case of insolvence, foreign investors would find no real assets in the company. See the case of Dongfang Shipbuilding.

Other discussions on the VIE:

  • China law blog:
  • China accounting blog: