Chinese Government supports enhanced foreign investment in telecoms industry

08 January 2014

Grace Chen, Marcus Vass

Background

The State Council has decided to establish a new pilot free trade zone in the Shanghai region (the "Pilot FTZ"), in order to implement a more proactive and open strategy to promote innovation and reform. The Ministry of Industry and Information Technology ("MIIT") and the Shanghai Municipal People's Government have jointly issued the <<Opinions Concerning Further Opening up Value-Added Telecommunications Businesses to Foreign Investment in the China (Shanghai) Free Trade Pilot Zone>> (the "Opinions") on 6 January 2014. 

New Initiatives

The Opinions set out a number of initiatives to permit greater involvement by foreign investors in the value-added telecommunications industry. First of all, the Opinions call for elimination of the 50% cap on foreign investment in two types of value-added telecommunications businesses that have already been opened up to foreign investment pursuant to China's WTO commitments, i.e., information services (limited to application stores for this purpose) and storage & forwarding services (voice mails, emails, facsimiles, etc.). 

The Opinions also propose to open up certain other types of value-added telecommunications businesses, i.e., call centres, domestic multi-party telecommunications services, internet access services (providing internet access services to online users), domestic internet virtual private network services. Of the four types of value-added telecommunications businesses proposed to be opened up to foreign investors, only domestic internet virtual private network services will be subject to a 50% cap on foreign investment. 

Online data processing and transaction processing services (business e-commerce) will also be opened up to foreign investors, subject to a 55% cap on foreign investment. 

Significance of the Opinions

Foreign companies seeking to establish new or expand their existing value-added telecommunications operations in China may consider exploring the possibility of investing in the Pilot FTZ in order to take advantage of these new initiatives.