CHINA Trends and Developments Contributed by: Joanna Jiang, Richard Qiang, Greg Guo and Dimitri Phillips, DaHui Lawyers
(the “Notice”), which eliminates foreign invest- ment restrictions on cloud services and certain other value-added telecommunication services (“VATS”) in designated pilot areas. Subject to implementation by the pilot areas, for- eign parties will be permitted to invest or engage 100% in these VATS businesses based in the pilot areas. The pilot areas include parts of Beijing, Shang- hai, Shenzhen and Hainan. There will not be any restrictions on foreign ownership in these areas in the following VATS categories. • Internet data centres (IDCs). • Content delivery networks (CDNs). • Internet service providers (ISPs). • Online data processing and transaction pro- cessing. • Information services (including information release platforms and delivery services but excluding internet news information, online publishing, internet audio and video, and internet cultural operations), and information protection and processing services. In line with the Notice, businesses seeking to engage in the newly permitted categories must satisfy the following requirements. • The business must apply to the Central MIIT for approval. • The business’s registered address and service facilities must be physically located within the pilot area. For example, for a foreign-invested business to obtain and use a B12 licence (in a pilot area), all the space, servers, and other facilities (whether rented, purchased, etc) must be located within the pilot area. • If the business is an ISP services business, not only the registered address and facili-
ties, but also the service offering, must be physically located in the pilot area and the internet access services must be provided through devices of basic telecommunica- tion enterprises. In essence, while a wholly foreign-owned enterprise will be able to offer ISP services, at this stage, its clientele will be limited to the denizens of the pilot area in which the business is registered (and obtains MIIT approval). The Notice is indicative of China’s ongoing com- mitment to creating a more accessible and liber- alised TMT market. According to a report from China Daily, the number of foreign-invested tel- ecommunication enterprises increased by more than 35% from 2023 to 2024. With the Notice in place, foreign investors seeking to invest in businesses providing VATs are expected to have a more convenient and straightforward experi- ence. Company Law Revisions The latest amendments to the Company Law of the People’s Republic of China (the “Amended Company Law”), first published in December 2023, became legally binding on 1 July 2024. These amendments will likely have a profound effect on the operations and strategies of com- panies within China. Some of the key amendments to highlight are as follows. • Capital injection timelines: the Amended Company Law stipulates that shareholders must inject their initial registered capital sub- scriptions within five years from the compa- ny’s establishment. Furthermore, companies established before the amendments came into effect must “gradually adjust the pay-
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