China may soon block local tech firms from listing on stock exchanges overseas via variable interest entities (VIE), a workaround designed to circumvent restrictions on foreign investment, Bloomberg reported, citing people privy to the matter.

Recently, the country’s regulators have intensified a crackdown on firms doing an IPO abroad over concerns related to data security.

The move will likely be part of China’s upcoming revised rules for firms already listed or planning an IPO overseas. The proposed ban, however, could exclude companies using VIE for a Hong Kong listing, although they may need to get regulatory approval, the report added.

If the VIE ban is implemented, companies that have made their market debut via this method will be forced to make key changes to comply with the rules and to be more transparent to regulators.

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