China Denies Report It Is Looking To Close Foreign IPO Loophole

Beijing on Wednesday denied a report that it was looking to plug a loophole used by Chinese tech companies to go public on foreign stock markets.

Bloomberg News reported, citing unnamed people familiar with the matter, that China was planning to ban firms from using offshore structures known as variable interest entities (VIE), closing a gap used by tech giants such as Alibaba and Tencent in recent decades to avoid restrictions on foreign investment and listings abroad.

But the China Securities Regulatory Commission rejected it.

"We have noticed the reports... This news is not true," it said in a statement on its website.

Such a ban would mark a major step by China to clamp down on overseas listings.

Beijing has stepped up scrutiny of major foreign listings 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 removed from app stores, and extended probes into other US-listed Chinese companies.

The Bloomberg report said the change was expected to be included in draft foreign listing rules that could be finalised as quickly as this month.

It said, however, that companies using VIE will still be allowed IPOs in Hong Kong as long as they satisfy regulators. Bloomberg added that the rules were still in the draft stage and could be changed.

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