The delisting of U.S.-listed Chinese stocks may come in the next two to three years, according to Jamie Allen of the Asian Corporate Governance Association.

“There doesn’t seem to be a huge incentive … for China to compromise, nor does the U.S. seem to want to compromise,” the secretary general at the non-profit organization told CNBC’s “Squawk Box Asia” on Tuesday.

With both sides appearing to dig in their heels, Allen said delisting for U.S.-listed Chinese firms is set to start in a few years.

“There are some discussions ongoing at the moment between the two sides, but these discussions have been going around in circles for quite a long time,” he said. “Unless there is some change in the geopolitical relationship between these two countries, it does seem to us that in two or three years you will start to see delisting.”

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Beijing’s tolerance of VIE structure

Many Chinese firms have used the variable interest entity (VIE) structure to list stateside. That’s done by creating a listing through a shell company, often based in the Cayman Islands, in effect preventing investors in the U.S.-listed shares from having majority voting rights over the Chinese company.

For now, the Chinese government appears “willing to live” with the VIE structure despite it existing in a “very gray area” that does not technically comply with China’s national policy on foreign ownership of sensitive sectors, Allen said.

In December, Chinese regulators released new rules for overseas listings, with no ban being placed on the popular VIE structure.

“It’s a sort of convenient way for the Chinese state to allow private companies to list overseas without affecting, strictly speaking, the sort of ownership restrictions in China on tech firms and value-added telecom services,” he said.


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