What are the potential benefits for U.S. shareholders when investing in Chinese companies with VIE structures?

Expert Solution

Potential benefits for U.S. shareholders when investing in Chinese companies with VIE structures are as follows:

In china, Foreign Direct Investments has been classified into four categories 1. encouraged 2. permitted 3.restricted 4. prohibited. Different ,are subject to different level of governmental review.

Foreign investors must obtain certain approvals from the governmrnt for their investments in china. It can be difficult to obtain approval to enter certain industries, especially restricted industries, such as value added telecommunication services, direct sales, mail order, and online sales. By using a ViE Structure, foreign investors don't have to obtain PRC government approval for a foreign direct investment since they do not own the equity of the target company. However they can still operate the target company and receives revenues from it.

These are the potential benefits for US Shareholders when investing in Chineses companies with VIE structures.

ekkarill92 answered 2 years ago

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