Are VIEs still VIE-able?

Are variable interest entity (VIE) structures still viable as an investment structure in China?

VIE structures became an investment structure for the PRC in the late 1990s with the US listing of Sina. But since the fall of 2011, with the Ministry of Commerce (MOFCOM) issuing regulations on national security review procedures and unsubstantiated talk of a China Securities Regulatory Commission (CSRC) internal report calling for a crackdown on VIE structures, there has been uncertainty in the China legal and investment market as to their continued viability.

Many US technology companies – particularly online and Internet companies – are already familiar with VIE structures, which channel investment into Chinese businesses that are restricted or even prohibited from receiving foreign investment. Chinese entrepreneurs have often used them to raise offshore financing from foreign investors, because they offer foreign investors a tried and true way to exit their investments through trade sales or initial public offerings on exchanges outside China (without Chinese regulatory approvals in most instances). VIE structures are also popular with PRC founders, as start-up companies in China have traditionally been unable to raise substantial financing from onshore investors and exit through A-share listings, because companies listing domestically must meet requirements (such as prior profits) that start-ups probably cannot meet.