China to make it harder for tech start-ups to raise foreign funding, FT reports

Red flags fly in front of the Great Hall of the People as the third session of the 13th National People’s Congress (NPC) opens on May 22, 2020 in Beijing, China.

Du Yang | China News Service | Getty Images

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.

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