Caixin
Sep 12, 2020 04:13 AM
BUSINESS & TECH

China Clears Foreign Companies to Own 50% of VPN Joint Ventures

VPNs are widely used in China to visit restricted websites such as Google, Facebook and YouTube.
VPNs are widely used in China to visit restricted websites such as Google, Facebook and YouTube.

China’s cabinet approved a plan allowing foreign telecom companies to own as much as 50% in joint ventures providing virtual private network (VPN) services to foreign businesses in Beijing, fulfilling a commitment to further open the services sector.

The grant of access is part of a work plan approved by the cabinet late last month on expanding tests of opening the service sector and building comprehensive demonstration zones for further restructuring of the national service sector.

VPNs enable users to gain access to private networks remotely. As China’s Great Firewall controls what citizens can access on the web, VPNs are widely used in China to visit restricted websites such as Google, Facebook and YouTube. Global businesses operating in China also use VPNs to enable employees to log in to their internal networks.

Since January 2017, telecom and internet service providers offering VPN services needed to obtain licenses from the Ministry of Industry and Information Technology. The authority has since launched a crackdown on unlicensed VPNs.

Currently China has about 20 licensed VPN operators, including Shenzhen-listed Beijing Sinnet Technology and Shanghai-listed cable TV operator Beijing Gehua CATV Network Co. Ltd., according to the Beijing Municipal Communications Administration.

In January 2019, Britain’s telecom giant BT Group PLC became the first international company to gain nationwide internet service provider licenses and a license to provide VPN services in China. The licenses allow the China joint venture BT China Communications Ltd. to contract directly with customers and bill them in local currency, the company said. BT Group owns a 50% stake in the joint venture through its Hong Kong subsidiary.

In addition to opening up the VPN sector to foreign players, the cabinet’s work plan also includes allowing multinational companies in Beijing to set up wholly foreign-owned financial service companies, supporting acquisitions of third-party payment businesses, removing foreign ownership limits on information service businesses, and encouraging foreign companies to participate in providing software as a service.

The work plan aims to improve policies and systems for further opening up the service sector by 2025 with the focus on facilitating trade and investment.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

Download our app to receive breaking news alerts and read the news on the go.

You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code