In May 2014, Alibaba, China’s leading e-commerce website, filed for a U.S.-based initial public offering (IPO) in what is expected to be one of the largest in U.S. history. The highly anticipated IPO will be just one in a recent wave of Chinese Internet companies launching IPOs in the United States. The trend has raised some misgivings among U.S. regulators about the corporate structures of these companies. To bypass Chinese government restrictions on foreign investment in the Internet sector, Chinese Internet companies use a complex and highly risky mechanism known as a Variable Interest Entity (VIE).
An addendum was added to this paper on September 12, 2014.
The U.S.-China Economic and Security Review Commission was created by the United States Congress in October 2000 with the legislative mandate to monitor, investigate, and submit to Congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China, and to provide recommendations, where appropriate, to Congress for legislative and administrative action.