China said that if domestic companies operate in areas deemed to be prohibited for foreign investors, they must obtain approval before listing overseas, thus filling the loopholes for Chinese technology groups to raise funds in the United States without undergoing domestic regulatory review.

The National Development and Reform Commission, the national economic planning agency, said on Monday that local companies in industries that restrict foreign investment must obtain approval from “relevant” government agencies before conducting overseas IPOs.

The regulator also stated that foreign investors will face a 30% shareholding limit after these Chinese companies are listed, and will be prohibited from operating and managing these companies.

“Gone are the days when you want to go public overseas,” said Li Chengdong, founder of the Beijing-based consulting firm Dolphin, adding that “the Chinese government’s nod is essential for local companies to sell shares overseas.”

The National Development and Reform Commission stated that Chinese companies in affected industries can still raise funds overseas. [these firms] Overseas listing”.

Foreign investors are restricted from investing in certain industries in China, such as Internet companies, but long-term use of complex legal structures Variable interest entity Get around these restrictions and raise funds from abroad.

The introduction of this policy comes at a time of turmoil for Chinese start-ups, after Didi Chuxing, the country’s leading ride-hailing app, announced this month that it would Delist From the New York Stock Exchange June U.S. IPO Although Beijing opposes data security issues.

That legend not only caused The sudden end of prosperity While China Science and Technology Group went public in the United States, it also cast a shadow over the future of VIE-structured companies.

Investors and analysts say the new policy has eased Worried that VIE may be banned, Reserves an important source of financing for Chinese technology start-ups.

Li said the policy emphasized Beijing’s strengthening of control over industries deemed strategically important while attracting foreign investment.

“The authorities are eager to prevent the Didi incident from happening again, but it hopes to provide a lifeline for dollar-denominated investment funds that rely on the New York listing and exit, because they are important financiers of local innovation in China.”

Some people are cautious about the significance of major repairs in practice. A Beijing-based private equity fund partner welcomed the rule because it made things “clearer,” but added that it was not yet certain how the IPO of companies that were initially denied listing would proceed.

“The review standard lacks transparency,” the fund partner said. “This is what we worry about the most.”

Additional reporting by Ryan McMorrow in Beijing