Hong Kong - Ming Pao News - SVA Interview on Dangers to VIE Structured Companies

Risk Assessment Company: Fear that VIE companies will become the eye of the Sino-US storm


The continuation of the coronavirus pandemic, coupled with economic weakness and geopolitical tensions, risk consultancy Steve Vickers and Associates (hereinafter referred to as SVA) pointed out that this has significantly worsened the risks faced by companies operating in Asia, and in particular the VIE (Variable Equity Entity) structure company may become key in the Sino-US struggle. The consultancy estimates that US investors alone account for up to USD800 billion in the market value of VIE investments. As rifts in Sino-US relations appear, investors may have to consider whether China's official acquiescence in the VIE structure can continue as it has done in the past, and what possible consequences should be assessed when Sino-US relations deteriorate further.

More and more cases of high bulk cargo fraud in Asia

Affected by the coronavirus pandemic and economic adjustments, SVA pointed out that many companies have “treated” their accounts receivable, exaggerated asset values, or swindled funds. In Hong Kong, several individuals have been accused of using fake premises to develop letters of credit and even fabricating salary lists. SVA also sees more and more cases of share speculation fraud in the region that are vocal about high bulk cargo. Luckin Coffee, which is listed in the United States, uses complex structures or financial tools to conceal huge losses, which may become more and more common. The bank also noticed that some sponsors and investment banks handled the due diligence of IPOs in a rough way, and the participating teams only reported their own interests and fully reported all fees and charges. The bank recommended that investment banks must implement rigorous due diligence standards and supervise their work. Handed over to legal personnel or relatively neutral institutions. In addition, cyber-crimes are rising at an alarming level, and criminals with less technical knowledge are involved in more ransomware-as-a-service activities, increasing risks.

Original texts


【明報專訊】新冠疫情持續,加上經濟疲弱及地緣政治緊張,風險評估機構Steve Vickers and Associates(下稱SVA)指出,這令在亞洲地區內營運的企業面對風險明顯惡化,尤其是原先行之有效VIE(可變權益實體)結構公司,在中美角力下或成風眼。該行估計,單是美國投資者佔VIE公司投資市值高達8000億美元。隨着中美關係出現裂痕,投資者或要考慮,中國官方過往默許VIE結構能否繼續下去,以及在中美關係進一步轉差時,評估有哪些可能後果。