China looks to close loophole tech firms use for IPOs abroad: report

China is now planning to ban companies from going public abroad

BEIJING (AFP) - Beijing is looking to stop companies from going public on stock markets abroad through a loophole long-used by Chinese tech companies amid heightened concerns over data security, a report said Wednesday.

Such a ban would mark a major step by China to clamp down on listings overseas, after a New York IPO by ride-hailing giant Didi Chuxing went ahead this year despite regulatory concerns.

Authorities have since launched investigations into Didi over cybersecurity, ordered it to be removed from app stores, and extended probes into other US-listed Chinese companies.

China is now planning to ban companies from going public abroad using an offshore structure known as variable interest entities (VIE), closing a gap used by tech giants like Alibaba and Tencent in recent decades to avoid restrictions on foreign investment and list offshore, Bloomberg News reported.

The change is expected to be included in a draft of overseas listing rules that could be finalised as quickly as this month, the report added, citing people familiar with the matter who were not named.

Companies using the VIE structure, however, will still be able to pursue initial public offerings in Hong Kong with regulatory approval, Bloomberg said.

Existing companies listed in the US and Hong Kong will need to make changes for their ownership structures to be more transparent in regulatory reviews -- particularly in areas where foreign investment is not allowed.

Such restrictions could also impact companies like ByteDance, which has been reportedly considering going public.

In the past year, Beijing has embarked on a wide-ranging regulatory crackdown that has scuppered IPOs and hit business as the government seeks to rein in their influence.