Recent developments in the China telecommunications regulatory landscape mean it is a good time to look into or reconsider investing in the burgeoning China communications market.
In terms of changes for businesses thinking about investing in China telecommunications, the specific commitments around foreign direct investment in value-added telecommunications services (VATS) went further than the existing WTO commitments. However, while that is the case and the inclusion of telecommunications commitments in ChAFTA provides the potential for greater certainty and clarity for Australian investors through the trade relationship, these additional commitments have largely been superseded by further deregulation of VATS in China. For example, under the ChAFTA foreign direct investment in e-commerce businesses is permitted up to 55% whereas 100% foreign investment participation in e-commerce businesses is now permitted nationwide
For all businesses interested in investing in VATS in China – on 29 May 2015, the Ministry of Industry and Information Technology (MIIT) issued a circular which saw MIIT relaxing some of the geographic restrictions imposed on certain VATS taking advantage of the Shanghai Free Trade Zone (SHFTZ) benefits.
This development now means that:
the facilities used for providing call centre services and edge routers for domestic internet protocol VPN services may now also be installed within the Shanghai municipality area
website acceleration server nodes are now permitted to be set up nationwide where the relevant website constitutes an essential part of the service provider’s operation of the licensed VATS (but only for the purpose of providing acceleration for the relevant service provider’s own website for content delivery).
Previously, in order to take advantage of the SHFTZ regulatory advantages, these facilities were required to be located only within the Shanghai Free Trade Zone.
Investors still need to be aware of the other SHFTZ requirements for VATS that will no doubt impact on any business decision to pilot arrangements in China (eg the requirement for facilities to still be located in Shanghai and the term of available licences). However, this development and the efforts to date to streamline the application and approval process are examples of a desire in China to continue to look at necessary improvements to the existing regulatory regime for telecommunications
For e-commerce businesses interested in investing in China – on 19 June 2015 MIIT issued a circular confirming there is no restriction on the level of foreign investment in e-commerce VATS businesses in China on a nationwide basis. Although this confirmation is consistent with the 2015 Foreign Investment Catalogue released in April (which removed the previous 50% foreign investment restriction), the publication of the circular is generating a bit of discussion in China.
Download our Dial into China – Insights for investing in China Telecommunicationspublication for more detail on the investment process and regulatory requirements, or watch the video above to hear from key sector Partners on investment developments in the regulatory framework.
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