A prominent Chinese artificial intelligence company is restructuring its international business operations to meet new government requirements as it prepares for a public stock offering in Hong Kong, according to three industry sources.
StepFun, based in Shanghai, is dismantling what’s known as an offshore incorporation structure following recent guidance from China’s securities regulator targeting so-called “red-chip” companies. These are businesses registered in foreign countries, typically tax havens, while maintaining their primary assets and operations in China through equity arrangements.
Last month, China’s financial oversight body directed several red-chip companies to eliminate these structures, a move that industry analysts warn could postpone some stock market debuts as firms rush to relocate their legal headquarters back to China. Some companies may abandon their public offering plans entirely due to the potentially prohibitive costs of restructuring.
Sources familiar with StepFun’s decision said the company, which creates general-purpose foundation models for artificial intelligence applications, determined that a domestic corporate structure would be more suitable given its substantial backing from state investment funds. Company records show StepFun’s previous structure included entities in the Cayman Islands.
The sources requested anonymity because details about StepFun’s corporate restructuring have not been made public. StepFun representatives did not respond to requests for comment from Reuters.
StepFun’s financial backers include investment funds from Shanghai’s municipal and district governments, along with Qiming Venture Partners and Chinese technology conglomerate Tencent Holdings, according to public filings and media coverage.
Former Microsoft Vice President Jiang Daxin established StepFun in April 2023, and the company has emerged as one of China’s premier AI startups successfully developing large-language foundation models.
StepFun’s restructuring demonstrates how Chinese companies are scrambling to align with new regulatory requirements while maintaining their prospects for overseas stock listings and capitalizing on strong investor interest in shares from Chinese AI and semiconductor companies.
Following a record-breaking year for Hong Kong’s stock market in 2025, when fundraising jumped 231% to $37 billion, more than 530 companies had submitted listing applications as of last month, with most being Chinese firms, according to stock exchange records.
The exact number of red-chip companies among these applicants remains unclear. However, data from Chinese law firm Hankun shows that last year, one-fifth of the 131 Hong Kong listings China approved involved offshore holdings, with most using the red-chip structure.
Chinese business publication Caijing reported in February that StepFun intended to raise between 2 billion yuan ($293 million) and 3 billion yuan in pre-IPO funding at a valuation reaching $6 billion. The report indicated the company planned to submit its Hong Kong IPO application by the end of June, targeting a $10 billion valuation for anchor investors.
Since launching in February, StepFun’s Step 3.5 Flash has maintained a position among the three most popular models on OpenClaw, the widely-used AI agent platform, competing alongside MiniMax M2.5 and Kimi K2.5.
The company has integrated its models into mobile phone and automotive operating systems through partnerships with OPPO and Geely, based on public announcements.
In February, StepFun brought on Yin Qi, who founded facial recognition firm Megvii Technology, as president to strengthen its executive leadership.
The increased scrutiny of red-chip structures has prompted numerous Chinese companies, particularly in the technology sector, to consider whether they should follow regulatory guidance and relocate their legal domicile to China, according to investors and legal professionals.
AI startup Moonshot, for instance, is evaluating whether to dismantle its offshore incorporation structure but has not reached a final decision, according to three people with knowledge of the deliberations. Corporate records show Moonshot’s structure also involved the Cayman Islands.
Moonshot, which created the popular large language model Kimi, is currently pursuing $1 billion in new funding at an $18 billion valuation and may begin a Hong Kong IPO process later this year, sources said, speaking on condition of anonymity due to the confidential nature of the information.
The company’s most recent fundraising round, completed in February, valued Moonshot at $10 billion, more than doubling its December valuation of $4.3 billion, according to Chinese corporate database Qichacha.
Moonshot declined to provide comment.
