Asian Tech Press (Oct 20) -- Beijing is allowed to open up its Virtual Private Network (VPN) business to foreign investors, expanding its opening-up efforts.
The State Council, China's highest administrative body, issued on Monday a document specifying that it will allow up to 50% of foreign ownership in VPN services in Beijing.
The specific adjustments are as follows:
1. The restriction on foreign shareholding in information service business (application stores only) will be lifted in Haidian Park of Zhongguancun National Independent Innovation Demonstration Zone.
2. To expand and open up pilot demonstration zones and demonstration parks for comprehensive reform of the service sector in Beijing, and abolish restrictions on foreign ownership of value-added telecommunications services, such as Internet access services (only to provide Internet access services for users).
3. To open up the domestic Internet virtual private network business to foreign investors (with no more than 50% foreign shareholding) and attract overseas telecom operators to provide domestic Internet virtual private network services to foreign-invested enterprises in Beijing through the establishment of joint ventures.
The value-added telecom business, which is generally regarded as a sensitive area by outsiders, has seen greater opening measures in China. And the area where the opening is being piloted is in Beijing, China's capital, which seems to be a signal of the country's continued deepening openness to the outside world.
Under the current regulatory framework, China has a strict regulatory regime for VPNs. First of all, to operate a VPN business, approval from the telecoms authority is required. Only after approval is granted can the business in question be launched. And it is strictly forbidden to establish and rent VPN private lines without approval.
In addition, international private lines leased by VPNs approved for operation can only be used for internal offices and are prohibited for connecting to data centers inside and outside the country.
Two telecom industry professionals revealed that the compliant users of VPN private lines are mainly foreign companies, multinational corporations, etc., who use VPN private lines to connect to the internal office system of their companies and complete their daily work. Before the approval, such service had long been provided by China's basic telecom operators.
