Excerpt:

“What’s interesting about VIEs is they bring a lot of capital into the country, but they are in direct contrast to Chinese law,” said Drew Bernstein, co-chairman of Marcum BP, an Asian-focused audit and advisory firm with offices in China and throughout Asia.

That should come as no surprise, Bernstein said.

“Having more regulations is a good thing — it promotes standards and lets people know what is going on,” Bernstein said. “Also, with (Chinese) companies being larger and more complex … you have to expect regulators will react.”

Bernstein agrees it is unlikely venture money will stop flowing, as there is just too much venture capital out there in general, and many of these companies have an “aura of being too big to fail.” However, it could be wise for investors to add a level of scrutiny to the companies they are investing in just as the Chinese government is doing.

“I hope it changes how (investors) operate somewhat,” Bernstein said. “They better do their homework.”

Click here to read full article as PDF >>