Why Are Alibaba And Other Chinese Stocks Trading Lower Premarket?

China looks to impose new restrictions on offshore listings by firms in sectors that are off-limits to foreign investment, Bloomberg reports.

• Curbing VIEs from foreign listings would close a gap abused for two decades by technology giants from Alibaba Group Holding Ltd BABA to Tencent Holdings Ltd TCEHY to sidestep restrictions on foreign investment and list offshore. 
• The structure allows a Chinese firm to transfer profits to an offshore entity registered in places like the Cayman Islands or the British Virgin Islands with shares that foreign investors can own.
• Related Content: More Trouble For Alibaba And Its Tech Peers? China Reportedly Plans to Block Overseas IPOs, Seek Changes From Listed Companies
• Chinese firms in industries banned from the foreign investment will have to seek a waiver from a negative list before proceeding for share sales, the National Development and Reform Commission and the Ministry of Commerce said in a statement. 
• China will forbid overseas investors in such companies from participating in management. 
• According to the updated list, China capped their total ownership at 30%, with a single investor holding a maximum of 10%, according to the updated list effective January 1.
• The regulations will also be a significant deciding factor for Alibaba-backed Ant Group's impending IPO or the growingly popular ByteDance Ltd-owned TikTok IPO. 
• Price Action: BABA shares traded lower by 1.03% at $117.44 in the premarket session on the last check Monday. Baidu Inc BIDU shares traded lower by 0.74% at $143.06, JD.com Inc JD shares traded lower by 1.25% at $67.79.