CHINA’S securities regulator is setting up a team to review plans by Chinese companies for initial public offerings (IPOs) abroad, sources with knowledge of the matter said, including those using a corporate structure which the government says has led to abuse.

Chinese companies looking to list offshore will also need approval from the relevant ministry, the sources said, in a break from a decades-old arrangement that did not require them to seek a formal go-ahead from any authorities in China.

The details are the first to emerge after the government said earlier last week that it plans to strengthen supervision of all Chinese firms listed offshore.

That announcement came after Chinese regulators launched a cybersecurity investigation into ride-hailing giant Didi Global Inc. just days after its U.S. stock market listing.

The China Securities Regulatory Commission (CSRC) is establishing a team that will mainly sharpen its focus of companies seeking to list overseas using the so-called VIE structure, said three people with knowledge of the matter.

The VIE structure was created two decades ago to circumvent rules restricting foreign investment in sensitive industries such as media and telecommunications, enabling Chinese companies to raise funds overseas via offshore listings.

It has been widely adopted by China’s new economy companies, mainly Internet firms, that are generally incorporated in the Cayman Islands and British Virgin Islands and therefore fall outside China’s legal jurisdiction.

It gives firms more flexibility to raise capital offshore, while bypassing the scrutiny and lengthy IPO vetting process that locally-incorporated companies have to go through.

The CSRC, which had taken a softer attitude towards Chinese firms using the VIE structure, is now looking to run thorough checks, two of the people said.

The regulator has already kicked off a consultation process with leading domestic banks to work out how the review would be done, one said, adding that it will also seek feedback from global investment banks in the next few weeks.

Under the new process, a company looking to list offshore would need to get the approval from ministries supervising its business, one of the sources said. A fintech firm, for example, would need the go-ahead from the banking regulator.

(SD-Agencies)