Authors: Richard Ma, Joanna Jiang, and Dimitri Phillips
On 10 April 2024, China's Ministry of Industry and Information Technology (“MIIT”) issued the Notice on Carrying Out the Pilot Work of Expanding Opening-Up to Foreign Investment in Value-Added Telecom Services (“Notice”), which heralds the elimination of foreign investment restrictions on cloud services and other value-added telecom services (“VATS”) in pilot areas. Subject to implementation by the pilot areas, foreign parties will be allowed to invest or engage 100% in businesses based in the pilot areas and offering the specified VATS. This Notice is a significant positive development for China’s telecom markets, especially for foreign cloud service providers. The key points of the Notice are summarized below.
Which VATS restrictions will be eliminated?
The Notice states that the pilot areas will be free from restrictions on foreign ownership in the following categories of VATS: Internet data centers (IDC),[1] content delivery networks (CDN), Internet service providers (ISP), online data processing and transaction processing, information services[2] (including information release platform and delivery services but excluding Internet news information, online publishing, Internet audio and video, and Internet cultural operations), and information protection and processing services.
As can be seen in the below table, the pre-existing restrictions on foreign investment for these VATS are several and varied, including based on whether the services are offered from Free Trade Zones (“FTZs”), on whether they are offered by providers qualified under the Mainland and Hong Kong Closer Economic Partnership Arrangement (“CEPA”), and on which subcategories of services are offered. The Notice heralds not only the further opening-up of several categories or subcategories, but also to some extent the simplification of the overall framework of restrictions, although foreign investors will still have to consider factors such as the location and subcategory of services in which they wish to invest.
