Caixin Explains: Why China’s Regulators Are Gunning for Popular Overseas IPO Structure

A controversial corporate structure used by companies including Alibaba Group Holding Ltd. and Didi Global Inc. that enables them to sell shares overseas has come under the spotlight once again amid reports Chinese regulators are planning to ban the arrangement.

Although the China Securities Regulatory Commission (CSRC) denied media reports about the change Wednesday, the watchdog and other government departments, including the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM), are formulating new policies to regulate how the variable interest entity (VIE) structure can be used, sources with knowledge of the matter told Caixin. Overseas listings through VIE structures will not be completely banned, and companies will be regulated differently based on which sectors they come under, the sources said.