On 30 June 2019, the National Development and Reform Commission and the Ministry of Commerce jointly issued the Special Administrative Measures (Negative List) for Foreign Investment Market Access (2019 Version) ("Negative List") and the Special Administrative Measures (Negative List) for Foreign Investment Market Access in Pilot Free Trade Zones (2019 Version) ("FTZ Negative List"), which will take effect on 30 July 2019 and supersede the Special Administrative Measures (Negative List) for Foreign Investment Market Access (2018 Version) and the Special Administrative Measures (Negative List) for Foreign Investment Market Access in Pilot Free Trade Zones (2018 Version) (together referred to as the "2018 Version") respectively. Compared with the 2018 Version, the number of restricted sectors in the Negative List has been shortened from 48 to 40 (down by 16.7%), while that of the restricted sectors in the FTZ Negative List have been reduced from 45 to 37 (down by 17.8%). In the telecommunications sector, the restrictions on foreign investment in the following three types of value-added telecoms services (“VATS”) has been lifted:
(i) domestic multi-party communication services;
(ii) store-and-forward services; and
(iii) call centre services, with no restriction on shareholding percentage of foreign investors.
There is improvement as compared with the 2018 Version Negative List, which only opened VATS subject to China’s WTO commitments, with the exception for e-commerce (in any event). In the Negative List, the exception has been expanded to the aforementioned three types of services, but these are relatively marginal VATS services compared to say those underpinning cloud services, such as Internet Data Centres or Internet Resources Collaboration services. In addition, these three sub-sectors were already liberalized in the 2018 Version FTZ Negative List, which applies to all FTZ areas in China, but not the entire country. So there is still some benefit that investors are now allowed to invest in and operate domestic multi-party communication, store-and-forward, and call centre services. Under the current Foreign-invested Telecommunications Enterprises Administrative Regulations ("FITE Regulations"), the proportion of foreign investment in companies that provide VATS is capped at 50%. With the changes of the Negative List, the restrictions set out in the FITE Regulations on foreign investment in domestic multi-party communication services, store-and-forward services and call centre services are expected to be revised.
Consistent with the Negative List, the FTZ Negative List also lifts the restriction on the aforementioned three types of VATS. Under MIIT’s Opinion to further open VATS in Shanghai FTZ, in conjunction with the 2018 Version FTZ Negative list, the restriction on foreign investment in the aforementioned three types of VATS had already been lifted in all FTZ areas subject to the condition that the registration of the entity and the service facilities must be located within the FTZ areas. Such condition may no longer be applicable with the changes to the Negative List.
