Hight Risks of Investing Chinese Stocks Amid Beijing’s Crackdowns

August 17, 2021

According to Zerohedge (Tuesday, Aug. 17, 2021), SEC Chairman Gary Gensler released a new “Office Hours” clip early Tuesday morning. He confirmed that the SEC had shut down the processing of any new potential Chineselistings. He also explained what American investors exactly are owning when they buy shares in Chinese listings.

Chinese ADRs rely on a structure called VIE, or variable interest entity. It’s a workaround to get around the fact that Chinese law forbids any foreigner from directly owning shares in Chinese firms. If that’s true, it means that US investors who bought Alibaba’s 2014 offering don’t own any of the underlying firms.

Shares of Chinese firms listed in the US have been under pressure practically all summer. On top of that, China’s State Administration for Market Regulation, one of the state entities responsible for regulating China’s economy, issued a new set of draft rules last Friday. It is the latest sign that Beijing’s crackdown on its biggest tech firms is far from over. 

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Edited by:【Himalaya London Club UK】

Disclaimer: This article only represents the author’s view. Gnews is not responsible for any legal risks.

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