Database

Browse Database
Establishment restrictions

CHINA

Since 2008

Chapter Investment  |  Sub-chapter Other restrictive practices related to foreign investment
Provisions on the Administration of Foreign Invested Telecommunications Enterprises, Art. 11
Licenses are required for the provision of all telecom services. The notification process is reported as especially burdensome for foreign investors providing basic and value-added services (VAS). For instance, in the case of VAS, the foreign investor must notify the relevant State Council of its activities in order to be approved.

For each VAS, an individual lincese is required. Additionally, foreign companies must obtain VAS licenses only through a joint-venture company. In this regard, the European Chamber of Commerce in China has complained about the multiple value added services licenses required, suggesting the approval of one single value added service license that allows for the provision of multiple VAS.

Regarding computer services, AMCHAM China complained that the multitude of licensing and accreditation government agencies to be engaged is problematic and excessively time consuming for foreign investors.
Coverage Computer services and telecommunication services, including value added services (VAS)
Establishment restrictions

CHINA

Since 2006

Chapter Investment  |  Sub-chapter Screening of investment and acquisitions
Measures on Security Review Mechanism for Merger & Acquisition of Domestic Enterprises by Foreign Investors
In additional to a general merger control regime, there is a notification and clearance regime for transactions involving sensitive/strategic sectors, which are reviewable by inter-ministerial bodies with the power to block proposed transactions on national security grounds.

To date, there is no record of transactions on the telecom or ICT marked being blocked by Ministry of Commerce of the People's Republic of China (MOFCOM). However, the agency has imposed a number on behavioral remedies as a condition to clearing the acquisition of Nokia's smarthphones business by Microsoft in 2014. According to MOFCOM, the transaction, already cleared without conditions in the US and EU, could have restricted the competition in the downstream smarthphone market in China and endager the ability of Chinese smarthphone manufactures to compete.

Furthermore, despite the MOFCOM review period can last up to a maximum of 180 days, it is reported that there have been cases where the review lasted significatly longer forcing the parties to withdraw their applications.
Coverage Sectors related to key industries or national economic security
Establishment restrictions

CHINA

Since 2011

Chapter Investment  |  Sub-chapter Screening of investment and acquisitions
Provisions on Merger and Acquisition of a Domestic Enterprise by Foreign Investors. Art. 12
According to Art. 12 of the Provisions on Merger and Acquisitions, where a foreign investor intends to obtain the actual controlling rights of a domestic enterprise and if any key industry is concerned, or if it has an impact on or may have an impact on the national economic security, the parties concerned shall file an application to the Ministry of Commerce of the People's Republic of China (MOFCOM). If the parties concerned fail to apply, but the acquisition has had or may have a serious impact on the national economic security, the MOFCOM may, together with the relevant authorities, demand the parties concerned to terminate the transaction or transfer the relevant equities, assets or take other effective measures to eliminate the acquisition impact on the national economic security.
Coverage Sectors related to key industries or national economic security
Establishment restrictions

CHINA

Since 2001

Chapter Investment  |  Sub-chapter Screening of investment and acquisitions
Rules for The Implementation of The Law of The People's Republic of China on Foreign-capital Enterprises, Art. 5
According to Article 5 of the "Rules for the Implementation of the Law of the People's Republic of China on Foreign-Capital Enterprises", foreign-capital enterprise shall not be approved if the proposed enterprise is under any of the following circumstances:
- injuring China's sovereignty or social and public interests;
- endangering China's national security;
- in violation of Chinese laws and regulations;
- not in keeping with the requirements of China's national economic development.
However, to date there are no cases of investments in the telecom/ICT sector being blocked on national security grounds.
Coverage Sectors related to key industries or national economic security
Establishment restrictions

CHINA

Since 2008

Chapter Investment  |  Sub-chapter Screening of investment and acquisitions
Provisions on the Administration of Foreign Invested Telecommunications Enterprises, Art. 14
The Provisions on the Administration of Foreign Invested Telecommunication Enterprises provides that the joint venture's project proposal and feasibility study report shall include a business forecast and development planning, and an analysis on the return of investment.

Additionally, the "Rules for The Implementation of The Law of The People's Republic of China on Foreign-Capital Enterprises", Art. 3, provide that the foreign-capital enterprises to be established must benefit the development of China's national economy and be capable of gaining remarkable economic results.
Coverage Telecommunication services and other foreign capital enterprises
Sources
Establishment restrictions

CHINA

Since 2008

Chapter Investment  |  Sub-chapter Restrictions on ownership
Provisions on the Administration of Foreign Invested Telecommunications Enterprises (FITE Provisions), Art. 5.
The minimum registered capital shall be RMB 2 billion (USD 305 million) for providing basic telecommunications services throughout the country or across different provinces, autonomous regions and municipalities directly under the Central Government.

The minimum registered capital shall be RMB 200 million (USD 30 million) for providing basic telecommunications services within a province, an autonomous region or a municipality directly under the Central Government.

The minimum registered capital shall be RMB 10 million (USD 1.5 million) for providing value-added telecommunications services throughout the country or across different provinces, autonomous regions and municipalities directly under the Central Government.

The minimum registered capital shall be RMB 1 million (USD 150K) for providing value-added telecommunications services and computer services within a province, an autonomous region or a municipality directly under the Central Government.
Coverage Basic and value-added telecommunication services (VAS)

Computer services
Establishment restrictions

CHINA

Since 2008

Chapter Investment  |  Sub-chapter Restrictions on ownership
Provisions on the Administration of Foreign Invested Telecommunications Enterprises (FITE Provisions). Art. 2.
In order to operate as a foreign invested telecommunications enterprise, the enterprise providing telecommunications services has to be established as joint venture between foreign and Chinese investors within the territory of China. The formation of such a joint venture must be pre-approved by the Ministry of Industry and Information Technology (MIIT) and approved by the Ministry of Commerce.
Coverage Value-added and basic telecommunication services
Establishment restrictions

CHINA

Since April 2015

Chapter Investment  |  Sub-chapter Restrictions on ownership
Foreign Investment Industrial Guidance Catalogue (amended in 2015)
Since 2015, investment in manufacturing of telecommunication facilities and other electronic devices is no longer prohibited as restrictions were relaxed in the 2015 Foreign Investment Industrial Guidance Catalogue. However, caps might still apply.
Coverage Manufacturing of telecommunication facilities and other electronic devices
Establishment restrictions

CHINA

Since April 2015

Chapter Investment  |  Sub-chapter Restrictions on ownership
Foreign Investment Industrial Guidance Catalogue (amended in 2015);
Foreign Invested Telecommunication Enterprises (amended in 2008), Article 6
Foreign investment in basic telecommunication services (fixed, mobile and internet) is capped at 49%. However, in practice, all telecommunication companies are Chinese.
Coverage Basic telecommunication services
Establishment restrictions

CHINA

Since April 2015

Chapter Investment  |  Sub-chapter Restrictions on ownership
Foreign Investment Industrial Guidance Catalogue (amended in 2015)

Foreign Invested Telecommunication Enterprises (amended in 2008), Article 6
Internet publishing, including online games, is a sector where investment is prohibited. This sector has been added in the 2015 Foreign Investment Industrial Guidance Catalogue.
Coverage Internet publishing
Establishment restrictions

CHINA

Since April 2015

Chapter Investment  |  Sub-chapter Restrictions on ownership
Foreign Investment Industrial Guidance Catalogue (amended in 2015)

Foreign Invested Telecommunication Enterprises (amended in 2008), Article 6
Foreign investment in value-added telecommunication services (including: online database storing and searching; electronic data exchange; online data processing and transactions processing; domestic multiparty communication services; IP-VPN; ISP; ICP and video tele-conferencing) is capped at 50%. An exception applies to e-commerce, for which 100% foreign equity and ownership is allowed.
Coverage Value-added telecommunication services
Fiscal Restrictions

CHINA

Reported in 2007

Chapter Public Procurement  |  Sub-chapter Requirement to surrender patents, source codes, trade secrets
Multi-level protection scheme (MLPS)
The Multi-level protection scheme (MLPS) introduced by the Ministry of Public Security prohibits government authorities with IT systems classified as "critical infrastructure" to purchase and incoporate foreign IT products. The MLPS requires all IT systems in China to be classified on different levels of security, from one to five (with the most sensitive systems designated as level 5).

MLPS regulations bar Chinese information systems graded level three and above from incorporating foreign products. Systems labeled as grade level three and above, for instance, must solely contain products developed by Chinese information security companies and their key components must bear Chinese intellectual property. Companies making systems labeled as grade level three and above must disclose product source codes, encryption keys, and other confidential business information.

To date, government agencies, firms in China’s financial sector, Chinese telecommunications companies, Chinese companies operating the domestic power grid, educational institutions, and hospitals in China have issued hundreds of request for proposals (RFPs) incorporating MLPS requirements. By incorporating level three requirements, many RFPs rule out the purchase of foreign products.
Coverage All IT products purchased by government organisation for IT systems classified as "critical infrastructure"
Fiscal Restrictions

CHINA

Since 2002

Chapter Public Procurement  |  Sub-chapter Preferential purchase schemes covering digital products and services
WTO Government Procurement Agreement (GPA)
China is currently an observer to the WTO Agreement on Government Procurement, but is negotiating its accession.
Coverage Horizontal
Fiscal Restrictions

CHINA

Reported in 1996, last update/check in May 2015

Chapter Public Procurement  |  Sub-chapter Preferential purchase schemes covering digital products and services
Buy Chinese policy
In the Chinese public procurement regulatory framework, there is an active Buy Chinese policy. In principle, only Chinese companies are allowed to bid in public tenders and foreign ones are only allowed under exceptions. Government agencies and related entities are required to purchase equipment and technology from Chinese state or privately owned manufacturing companies. There are also reports of insufficient publicity of public tenders. Furthermore, it is reported that central and local entities tend to implement in a very broad manner those provisions, going far beyond discriminations imposed by the law.
Coverage Horizontal
Source
  • EC Market Access Database:

    http://madb.europa.eu/madb/barriers_details.htm?barrier_id=960027&version=22
Fiscal Restrictions

CHINA


Chapter Public Procurement  |  Sub-chapter Preferential purchase schemes covering digital products and services
Local content requirement
It is reported that foreign enterprises might be obliged to commit to the use of locally produced parts or products during the establishment process and to include them in the feasibility study report. Additionally, the tariff rate for importing finished products (e.g. handsets) is higher (12%) than for importing key components (7-10%). At the same time the "essential characteristics rule" is applied for customs valuation according to which imported products with more than 60% of dutiable value will be deemed finished. This encourages local sourcing of parts and components.
Coverage Foreign investment manufacturing enterprises of electrical products