I wrote an Op/Ed in the Wall Street Journal today calling for reforms in China and the US that can achieve three objectives:
1. Allow Chinese people to invest in China’s top companies like Alibaba.
2. Get rid of the seriously flawed VIE structure.
3. Provide a mechanism to solve the regulatory battles between the United States and China.
I call my idea the Singapore Solution, since it is based on an agreement last November between China and Singapore that lets private Chinese companies list directly in Singapore without using an offshore holding company. I think that paves the way for a similar deal with the U.S. that can solve the regulatory problem – assuming regulators are willing to compromise, which is a huge assumption.
The VIE becomes unnecessary if China follows through on promises to liberalize the rules for foreign investment in education and e-commerce.
I hope regulators on both sides find a way to make a deal like this work. We are on a pathway to kicking all Chinese companies off of U.S. exchanges unless both sides start giving a little.