How do you feel comfortable investing in Chinese stocks when they mostly use messy, illegal VIE structures?

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by withabackpack

I have been doing some research into Chinese stocks recently as lots of people have been saying they are presenting buying opportunities at these prices.

However I discovered that it is illegal (seemingly?) for us foreigners to actually invest in the companies. Or we can invest in a holding company and not own any of the assets.

Some of the sources I have read indicate that this can mean that we are at huge risk of Chinese government withdrawing them completely from the market, or managing directors moving the assets in or out without needing to let us shareholders know about it.

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All the sources I have read seem to have a negative view, yet people are still keen to invest in stocks like BABA, IQ, JD etc. so my question is why do you feel comfortable buying these kinds of stocks? Can you counter the arguments raised here?

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Some Sources:

The Chinese corporate structure that terrifies american investors

A legal vulnerability at the heart of China’s big internet firms

Chinese stocks and their Dark Secret [Video]

No One Who Bought Alibaba Stock Actually Owns Alibaba

Love to hear your thoughts, especially if you are a keen China company investor


Disclaimer: Consult your financial professional before making any investment decision.


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