“Vis à VIE” – An Overview of the Variable Interest Entity Investment Vehicle

Abstract

Over the past two decades, Variable Interest Entities (VIEs) have become commonplace among foreign investors as a means for investing in China alongside the established investment vehicles. They have been implemented by many of China's most well-known companies, including Alibaba, Sina or Weibo, and oftentimes serve as the core of a business model. Aside from the obvious advantages, such as the facilitation of an offshore listing, VIE structures also bring along several uncertainties. The Draft Foreign Investment Law published at the beginning of 2015 holds the prospect of existing VIEs being formally recognized while, at the same time, restricting the establishment of new VIEs. With this perspective as a backdrop, the article aims to provide an overview of this increasingly popular investment model.