Economic Watch: China to lift foreign ownership limit
in value-added telecom services in pilot areas

In its latest move to expand opening up, China said Wednesday that it will remove foreign ownership restrictions on some value-added telecom services provided within domestic pilot areas.

The value-added telecom services will include internet data centers, content delivery networks and internet service providers, online data processing and transaction processing, information publishing platforms and information delivery services excluding services related to internet news information, online publishing, internet radio and television, internet culture management, and information protection and processing services, according to a circular released by the Ministry of Industry and Information Technology.

The pilot areas are Beijing's national comprehensive demonstration zone for expanding opening-up in the service sector, Lingang new area of the China (Shanghai) Pilot Free Trade Zone and the pioneer area for socialist modernization in Shanghai, Hainan Free Trade Port, and Shenzhen pilot demonstration area of socialism with Chinese characteristics, according to the circular.

The move is China's latest effort to expand opening-up. By aligning itself with high-standard international economic and trade rules, the country aims at stimulating the vitality of market entities and sharing the development dividends of its digital economy with the world, said Wang Zhiqin, deputy director of the China Academy of Information and Communications Technology.

After the restriction that foreign investors can only hold 50 percent of the share in electronic data interchange and networked electronic devices data processing businesses is scrapped, qualified foreign investors will be able to set up wholly-owned businesses to offer Internet of Things platform services, said Wang.

China has seen rapid market scale expansion of Internet of Things platforms such as smart homes, Industrial Internet, and Internet of Vehicles, said Wang. Further relaxing market access of foreign enterprises can continuously enrich the supply of products and services, stimulate the innovation vitality of domestic enterprises, improve domestic companies' services and international competitiveness, and promote higher quality development of China's Internet of Things industry, she added.

For the first time, the internet data center and its sub-item internet resource collaboration business are open to foreign capital other than those from Hong Kong and Macao, and there is no shareholding limit.

Following the vigorous development of the digital economy and artificial intelligence, computing power has become a strategic resource in short supply around the world and an important form of infrastructure supporting the development of the digital economy, experts have pointed out.

Data shows that since 2018, the compound annual growth rate of the number of data center racks in China has exceeded 30 percent.

This policy welcomes foreign-funded enterprises to participate in the investment and construction of China's computing power infrastructure, and provides domestic enterprises with more cloud computing service options, said Wang.

China's telecoms industry has developed rapidly in recent years. By the end of March this year, 1,926 foreign-funded enterprises had been approved to operate telecommunications businesses in China.

Vice Commerce Minister Guo Tingting said at the China Development Forum 2024 last month that China will further expand its high-level opening up, offering more opportunities for foreign investors.

As China continues to lift market access restrictions in the manufacturing sector, it will also promote the opening up of sectors such as telecommunications and medical care to create more trade and investment opportunities for foreign investors, said Guo.

The country will also launch a campaign to boost investment, continue to optimize services, and fully ensure national treatment for foreign-funded enterprises, Guo said.