China is reportedly tightening its grip on tech start-ups trying to tap foreign funding

• China is said to be drawing up a blacklist that will make it harder for new technology companies to raise foreign funding and list overseas, according to the Financial Times.  
• The blacklist could be published as early as this month, according to the report, which cited unnamed people familiar with the matter.
• It will include start-ups in sensitive sectors that use the so-called variable interest entity structure, the FT reported.

China is said to be drawing up a blacklist that will make it harder for new technology companies to raise foreign funding and list overseas, according to the Financial Times.  

The blacklist could be published as early as this month, according to the Wednesday report, which cited unnamed people familiar with the matter.

It will include start-ups in sensitive sectors — such as those involving the use of data, or those that could pose national security concerns — that use the so-called variable interest entity structure, the FT reported.

VIE is a legal structure controlled by a company by means other than a majority of voting rights. It is used by many Chinese companies to circumvent domestic restrictions on foreign investments and raise funds internationally. not able Prominent companies with VIE structures include tech giants Alibaba and Tencent.

The blacklist would likely not affect companies with existing VIE structures, the report said.

CNBC was unable to confirm the report, but reached out to China's state planner, commerce ministry, securities regulator and central bank for comment. None of them responded before the time of publication.

The FT report followed months of regulatory crackdown on China's technology sector. Authorities aimed to rein in monopolistic behavior among large companies, as well as regulate the use of data and algorithms.

China imposed fines on its large internet firms including Alibaba and food-delivery giant Meituan. Meanwhile, ride-hailing company Didi announced last week that it will delist from the New York Stock Exchange — less than six months after its debut.

Earlier this year, China banned foreign investments in education firms via VIEs and other routes.

— CNBC's Iris Wang contributed to this report.

For more on China's planned blacklist, read the Financial Times.

Source: Read Full Article