In 2000, the internet portal Sina listed its shares in the United States. Its control over the business in China rested on contracts, not on ownership. Chinese lawyers call such a structure xieyi kongzhi, “control by agreement,” or the “Sina model.” The other name, VIE, for variable interest entity, comes from American accounting rules.
The law firm Zhonglun explains why it spread. China restricted or banned foreign investment in fields such as the internet, the news media and education. The American SEC and the Hong Kong exchange accepted the structure, so it became an important route for Chinese companies to list abroad.