Why Beijing’s latest crackdown should worry foreign investors
China is going after holding companies, usually based in tax havens such as the Cayman Islands, that are designed to get around strict rules on foreign investors in key sectors, including education.
Tabby Kinder, Hudson Lockett, Ryan McMorrow, Michael Mackenzie and Harriet Agnew
Hong Kong/Beijing/New York/London | The value of Chinese shares on Wall Street has soared from just a few billion dollars to $US2 trillion ($2.7 trillion) over the past two decades as investors turned a blind eye to the precarious legal structure underpinning many of the country’s biggest US listings.
However, a crackdown by Beijing on China’s $US100 billion tutoring industry over the past week has included a ban on companies using this structure, known as the variable interest entity, raising the spectre of a broader disaster for some of the world’s biggest investors.
