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US panel warns of investment risks in Alibaba, other Chinese firms

Published on Jun 20, 2014 11:39 PM

WASHINGTON (AFP) - Buying stock in online giant Alibaba or other Chinese Internet companies that bypass Beijing's restrictions on foreign ownership could be a big risk for investors, a US government panel warns.

An agency that advises Congress on national security implications of the US-China trade and economic relationship raised the red flag this week, as Alibaba, the world's largest online retailer, prepares for its US stock listing.

Alibaba, social networking giant Weibo and several other Chinese Internet firms use a complex legal mechanism in which "ownership is deliberately obscured by a series of shell companies," the US-China Economic and Security Review Commission (USCC) said in a report on Wednesday.

In the case of Weibo, for example, the report noted that a Cayman Islands corporation owns 100 per cent of a Hong Kong company that in turn controls the group through three layers of Chinese entities.

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