GELYF - Alibaba Common Prosperity And The VIE

• In the midst of the Chinese crackdown on firms like Alibaba, there are two important factors in play.
• The Chinese government has been pressuring companies to invest in 'common prosperity', an initiative to reduce inequality in the country.
• But in my opinion, the main risk of Alibaba and other Chinese tech companies remains the Variable Interest Entity (VIE) structure.
• Though I do not believe that Beijing will flat out ban the VIE on short term, long term risks will remain.
• There are striking and frightening parallels between the situation in Hong Kong and the VIE structure.

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