China’s Openness in Progress -

The Ministry of Industry and Information Technology (hereinafter “MIIT”) has released on 10^th April 2024 a new circular on expanding the opening-up of value-added telecommunications services (hereinafter “the Circular”). This circular signalizing the determination of the China’s opening to the foreign investors in the telecommunications industry. Sinovest quotes some highlights of the Pilot Plan for Expanding the Opening-up of Value-added Telecommunications Services and the Ministry’s replies to the Press as below:

1.What are the value-added telecommunications servicesto be opened under this Circular?

• Internet data centers (IDCs)
• Content delivery networks (CDNs)
• Internet access services (ISPs)
• Online data processing and transaction processing
• Information publishing platforms and delivery services (except for Internet news information, online publishing, online audio-visual and Internet cultural operations), information protection and processing services in information services in the approved pilot areas

The “Circular” proposes to remove the restrictions on the foreign ownership rations in the above-mentioned sectors of activities, which means a foreign investor can be 100% shareholding a Chinese company in these opened telecommunications businesses.

2. Where is the Pilot Plan going to be carried out?

Based on the Circular, the MIIT has published the Pilot Plan for Expanding the Opening-up of Value-added Telecommunications Services (hereinafter “the Pilot Plan”). This Pilot Plan will be carried out in 4 designated areas in 4 cities (Beijing, Shanghai, Hainan, Shenzhen)

• Beijing Comprehensive Demonstration Zone for the Expansion and Opening-up of the Service Industry
• Lingang New Area of the Shanghai Pilot Free Trade Zoneand Shanghai’s Pioneer Area for Socialism Modernization 
• Hainan Free Trade Port
• Shenzhen Pilot Demonstration Zone for Socialism with Chinese Characteristics.

These 4 provincial authorities to which the four zones belong shall be responsible for organizing and formulating the pilot implementation plan including the approval procedure and the timeline in accordance with the Pilot Plan. MIIT will organizes assessment and demonstration, investigates and verifies the supervision and guarantee system. After the implementation plan is approved, these 4 zones are able to can officially carry out the pilot project. The scope of the pilot areas will be expanded in the future based on the MIIT’s assessment.

3.What are the operation requirementsbased on the Circular?

The place of registration: 

• The place of registration and the place where service facilities (including rented, purchased, and other facilities) must beplaced in the same pilot area;
• CDN and other facilities outside the pilot area must not be purchased or rented to carry out acceleration services. This is based on the characteristics of telecommunications services, which are also necessary rules that prove in practice to effectively serve the development and management of telecommunications services.

The scope of services:

• The Internet access service (ISP) business is limited to the pilot area and must in accordance with the Administrative Measures forTelecommunications Business Licenses, provide Internet access services to users through the Internet access equipment of basic telecommunications enterprises.
• Theforeign-invested telecommunications enterprises can carry out other business operations nationwide

The regulatory requirements:

Based on the principle of “Equal treatment to domestic and foreign investment”, the foreign-invested enterprises in the value-added telecommunications businesses in the Pilot Plan are required to obtain approval in accordance with the Telecommunications Regulations and other provisions, comply with the relevant provisions of laws and regulations and the pilot approval in telecommunications business activities, and accept and cooperate with the supervision and management of the telecommunications regulatory agency and the relevant competent authorities.

For more insights and updates on China’s ongoing openness, stay tuned for our upcoming series of articles. We’ll delve deeper into the implications and progress of these significant reforms. Follow us for the latest developments, and don’t hesitate to reach out to Sinovest-Consulting for expert consultation on navigating these dynamic changes.