Chinese central government approved Beijing's plan to allow foreign shareholding of no more than 50% in domestic virtual private network (VPN) services.

Details:

The opening-up move intends to attract foreign telecom operators to provide VPN services for foreign-invested firms in Beijing via the set-up of joint ventures, according to the announcement posted on the State Council's website on Monday.

Share of foreign investment in value-added telecommunications services shouldn't exceed 50%, except for e-commerce and domestic multi-party communication services, among others, and basic telecom services must be majority-owned by China, the announcement added.

The move is effective immediately in designated areas in Beijing only. Foreign shareholding limits would be lifted in the Haidian park of the Zhongguancun national innovation demonstration zone in Beijing exclusively for app stores, among other revisions.

Context:

Last September, Beijing has unveiled an all-encompassing plan for opening up the services sector, which included allowing foreign companies to invest in VPN. "Overseas telecommunications providers can set up joint ventures to provide such services for foreign enterprises in Beijing," Wang Shouwen, vice minister of commerce, explained the plan.

The Chinese capital now attributes over 80% of its economic activities to the service industry, and since 2019 more than half of the city's GDP has come from the digital economy. 

Currently, only VPN offerings from authorized basic telecommunications operators are legal in China, while those provided by other businesses or overseas companies are not, Global Times reported, citing an article by AllBright Law Offices.