Biz China: How foreign capital accessing to China data center and cloud computing industries

By Ajeen Liu, VP of IDCNOVA, senior veteran for China data center and cloud computing industries, from Institute for China Business, HKU SPACE.


Among all the policies,laws and related regulations referring to China Mainland,those covering data center and cloud computing are the so-called valued-added telecommunications service:


According to the Classified Telecommunications Service Catalogue of China,the value-added telecom service is mainly divided into two major categories:


Category I: internet data center(IDC),content distribution network(CDN),IP-VPN,ISP.


Category II: online data processing and transaction processing,domestic multiple communications,storage and retransmission,call center,which consists of domestic call center and offshore call center,information service,coding and specification switch,including domain name resolution(DNS).In practice,what we contact frequently is internet data center(IDC).


IDC belongs to category I of valued-added telecom service,Class B11.IDC service refers to providing services of placing,agents maintenance,system configuration and management on servers and other internet-related equipment via outsourcing lease by utilizing machine room facilities accordingly,and leasing database or servers and storage space,as well as agents lease of communications wire and way out bandwidth and other application services.


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According to the official explanation of Chinese Ministry of Industry and Information Technology on the Classified Telecommunications Service Catalogue,2015 Version,the major contents are as below:


provide services of placing,agents maintenance,system configuration and management on servers and other internet-related equipment via outsourcing lease by utilizing machine room facilities accordingly,and leasing database or servers and storage space,as well as agents lease of communications wire and way out bandwidth and other application services,like data center,server collocation,host collocation,cabinet lease,network hard disk,storage space,cloud computing,cloud mainframe,cloud platform,virtual mainframe,server lease,etc.


Application requirements:


(1)The operator should be independent legal entity registered upon relevant laws and regulations;


(2)For trans-regional operators,the minimum registered capital is 10 million yuan,for operators within provincial area,the minimum registered capital is 1 million yuan.


(3)Professionals fitting for the operations;


(4)The company and major shareholders and managerial force have not any violations against telecom regulations within 3 years.


Materials:


(1)Duplicate of the business license,identity card of legal representative(scanning copy);


(2)Business Archive Inquiry Instructions;


(3)Evidence materials for Class I shareholder certificates(business license duplicate of corporate shareholder,business archive inquiry instructions,identity card of individual shareholder)


(4)3 Identity cards from the company contact,the person responsible for information security principal and the person responsible for customer service and their social security evidence for 1 month(3 persons’social security evidence for 3 months needed for provincial application)


Foreign capital proportion


According to the Provisions on the Administration of Foreign-funded Telecommunications Enterprises,The ultimate proportion of contribution of the foreign investors of a foreign-funded telecom enterprise that is engaged in the value-added services shall not be more than 50%.

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Operational category


According to Catalogue for the Guidance of Industries for Foreign Investors,the valued-added telecom service belongs to restricted category that the foreign capital proportion shall be no more than 50%,excluding the e-commerce.On June 15,2015,the Notice on Releasing Foreign Capital Proportion Restriction in Online Data Processing and Transaction Processing(operational e-commerce)by the Chinese Ministry of Industry and Information Technology stipulated that,the foreign capital proportion can be 100%in online data processing and transaction processing services.However,it’s banned for categories of internet news and information,network publishing,network video and audio programme,internet access venue,internet cultural business(music excluded)and internet information publication.Which can be seen that news and publishing websites are not open to foreign capital.


Provisions on the Administration of Foreign-funded Telecommunications Enterprises points out that,the major foreign investor of a foreign-funded telecom enterprise that is engaged in the value-added services shall be possessed of good performance and operational experiences in the value-added services.The major foreign investor of a foreign-funded telecom enterprise means the investor contributes most capital among all the investors and accounts for over 30%of the total amount of all the foreign investment.This clause rejects the simple financial investor entry into the value-added telecom services,but whether the investment performance in this field could be regarded as the audit basis,the licensing authority may adjust considering the actual conditions of the individual cases.


Time period


If the enterprises is engaged in the basic telecom business nationwide or beyond a single province,autonomous region or municipality directly under the Central Government,the major investor of Chinese capital should apply for and deliver the documents with the Chinese Ministry of Industry and Information Technology(MIIT)directly under the State Council.MIIT should complete the audit and check within 90 days and make decisions on approval or not.If the application is to be approved,an Examination Decision of Foreign Investment in the Telecommunications will be issued.


If the enterprise is engaged in the basic telecom business within a province,autonomous region or municipality directly under the Central Government,the telecommunications regulatory agency should gave preliminary judgement within 60 days upon receipt of the application.If this application is to be agreed,it will be reported to MIIT,which will complete the audit and check within 30 days upon receipt of the signed documents from local telecom regulatory agencies and made decisions on approval or not.If the application is to be approved,an Examination Decision of Foreign Investment in the Telecommunications will be issued.


Original from China IDCNOVA, its open and available for repost, reproduce, quote or retransmission if clearly stating the source with web link combined.

For more information, please contact justin@idcnova.com



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