$2 Trillion Invested in Chinese Companies, but US Investors Have No Visibility or Control
12.13.22
The Variable Interest Entity structure enables Chinese companies to sell US investors shares in Cayman Island shell companies. Investors have no visibility or control over the real companies located in China.
US investors have no control over the Chinese companies they invested $2 trillion into, because these companies are structured as Variable Interest Entities (VIEs). With VIE, the Chinese companies are registered in Cayman Islands but they are only the shell companies of the real entities in China. Therefore, by owning stocks of the Cayman Island shell companies, US investors have no control over the real companies located in China. DIDI, Alibaba and others all fall into this scenario.
Watch Part 1 of this interview: https://www.youtube.com/watch?v=7bJ1JFZ3xOEh
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Technology is the new frontier of international relations. The interaction is bi-directional: technology is defining diplomatic matters while diplomacy is also influencing the development and deployment of technology. Take semiconductors as an example. This is a technology that forms the foundation of digital economy, national security, and productivity in almost all industries. Global supply chain in the semiconductor industry is shaping U.S. foreign policy. Conversely, America’s diplomatic effort has been redefining the supply chain. Tech diplomacy is different from science diplomacy, which became a key pillar for the U.S. and other countries since World War II. Scientists participated in treaty negotiations, engaged in bilateral summits and served as attachés at embassies. Primary topics included nuclear proliferation, super-collider construction, human space exploration and environmental science.