Analysis of Foreign Investment in Value-added Telecommunications Services – How to access

2022-08-25

According to China's existing policies, when a foreign-invested company apply for a value-added telecommunications license, it has to comply with different measures for access of foreign investments (or Negative Lists) and the Administrative Provisions on Foreign-Invested Telecommunications Enterprises (Revised in 2022), etc.

Meanwhile, it has to comply with requirements for registered capital and foreign equity ratios in accordance with relative regulations and laws.

Categories of value-added telecommunication services and restrictions on foreign investments

According to China’s Classification Catalog of Telecommunications Services (2015 Edition), telecommunications business is divided into basic telecommunications services and value-added telecommunications services (hereinafter referred to as VATS). The value-added telecommunications services are divided into B1 category and B2 category, with a total of 10 subcategories as shown in the following table.

Categories of VAT
Category	Subcategory	License	Type of business	Representative companies
B1 (Facilities and infrastructural resources)	B11 (Internet Data Centre services)	IDC license	Server cabinets, virtual hosting and broadband for rent	VNET, GDS, Chindata, Sinnet, Ali Cloud, Huwei Cloud, etc.
B12 (Content distribution network services)	CDN license	Web, game, audio and video acceleration	Wangsu, ChinaCache, VNET, Tencent Cloud, KSYUN
B13 (Virtual private network services)	VPN license	Virtual private network services for enterprises and institutions	Army, government, financial companies, etc.
B14 (Internet service provider)	ISP license	Provide Internet access and domain name filing services for users	Great Wall Broadband, Dr. Peng, Sinnet, Ali Cloud, Tencent Cloud, China Telecom Cloud, etc.
B2 (Public application platform)	B21 (Electronic data interchange)	EDI license	E-commerce	Tmall, JD, Pinduoduo, Dangdang, 58.com, Meituan, Didi Chuxing, Ctrip, Mi.com, etc.
B22 (multi-party communication services)	Multi-party communication service license	Multi-party voice calls or video chat services	Tencent Meeting, WeChat, DingTalk, Lark, etc.
B23 (store and forward services)	Store and forward license	Email, voicemail	QQ Mail, 163 Mail, etc.
B24 (call center provider)	Call center provider license	Call enter systems for rent	iFLY TEK, Zinglabs, Instant Messaging, etc.
B25 (Internet content/service provider)	ICP/SP license	ICP：registered user top-up, paid downloads, placement of third party ads, etc. SP：text message, multimedia message, ringtone downloads, positioning service, etc.	ICP：163.com, sohu.com, Tencent Game, Youku, Zhihu, Baidu, Sougou, etc. SP：WeChat, QQ, Weibo, JD, amap, etc.
B26 (Domain name server)	DNS license	Domain name resolution	Net.cn, Xinnet, west.cn, CNDNS, etc.

Some of the VATS are not opened to foreign investors in some areas of China. Some of the VATS have been opened to foreign investors with restrictions on foreign equity ratio.

Based on the existing regulations and policies, we have outlined below the restrictions on foreign equity in VATS. But it is possible that authorities who manage the industries may have different interpretations of the policies when a foreign-invested company applies for a VATS license.

Restrictions on Foreign Equity in VATS
Service category	WTO policy	CEPA policy	National Free Trade Zone policy	Shanghai Free Trade Zone policy	Hainan Free Trade Port policy
Opened or not	Foreign equity ratio	Opened or not	Foreign equity ratio	Opened or not	Foreign equity ratio	Opened or not	Foreign equity ratio	Opened or not	Foreign equity ratio
B11 (IDC license)	×	——	√	≤50%	×	——	×	——	√	≤100% (with a precondition)
B12 (CDN license)	×	——	√	≤50%	×	——	×	——	√	≤100% (with a precondition)
B13 (VPN license)	×	——	√	≤50%	×	——	√	≤50%	√	≤50%
B14 (ISP license)	×	——	√	≤100% (only for Internet access services for Internet users)，≤50% for other services	√	≤50%	√	≤50% (only for Internet access services for Internet users)	√	≤100% (only for Internet access services for Internet users)
B21 (EDI license)	√	≤100% for e-commerce, ≤50% for other services	√	≤100% for e-commerce, ≤50% for other services	√	≤100% for e-commerce, ≤50% for other services	√	≤100% for e-commerce, ≤50% for other services	√	≤100%
B22 (Multi-party communication service license)	√	≤50%	√	≤100%	√	≥50%	√	≥50%	√	≧50%
B23 (Store and forward license）	√	≤50%	√	≤100%	√	≥50%	√	≧50%	√	≥50%
B24 (Call center provider license)	√	≤50%	√	≤100%	√	≥50%	√	≥50%	√	≧50%
B25 (ICP/SP license)	√	≤50%	√	≤100% for app stores, ≤50% for other services	√	≤100% for app stores, ≤50% for other services	√	≤100% for app stores, ≤50% for other services	√	≤100% for app stores, ≤50% for other services
B26 (DNS license)	√	≤50%	√	≤50%	√	≤50%	√	≤50%	√	≤50%

Requirements for registered capital of a foreign-invested telecom enterprise

According to the Administrative Provisions on Foreign-Invested Telecommunications Enterprises (Revised in 2022), the registered capital of a foreign-invested telecom enterprise shall comply with the following requirements.

1.For operating business nationwide or across provinces, autonomous regions, or municipalities directly under the central government, the minimum registered capital shall be CNY1 billion for those that operate basic telecommunications services and CNY10 million for those that operate value-added telecommunications services.

2. For operating business within a province, autonomous region, or municipality directly under the central government, the minimum registered capital shall be CNY100 million for those that operate basic telecommunications services and CNY1 million for those that operate value-added telecommunications services.