Quid pro quo

The Chinese Internet sphere is once again the target of a tightening of rules in an attempt to clarify national security reviews of foreign investments in Chinese companies

Variable interest entities (VIE) – a scheme in which a Chinese company holds an operating license but control rests in foreign hands – is bound to come under increased scrutiny from the legislator. The hic? Some of the major players (including Google, Baidu, Sina, Youku or Renren) and thousands of smaller Internet players are using VIEs.

While giving more leeway to the regulator, this new rule is, in essence, not very different from the role played by the Committee on Foreign Investment in the United States (CFIUS) which has in recent years blocked Huawei’s acquisition of two US technology companies (2Wire and 3Com).