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China: Foreign-Funded Telecom Companies Rules Modified

(Sept. 29, 2008) On September 10, 2008, the State Council, China's Cabinet, promulgated amended Provisions on Administration of Foreign-Funded Telecommunication Enterprises, effective immediately. The purpose of amending these Provisions, originally adopted in 2002, was to adapt to the need to open up the industry and provide favorable conditions for its development. The Provisions apply to equity joint venture enterprises established by foreign and Chinese investment partners within China to provide telecommunication services.

The Provisions establish minimum levels of investment needed to fund such joint ventures. The registered capital must be at least RMB1 billion (about US$145.9 million) for companies planning to offer basic services nation-wide or across provinces, unless they offer value-added tele-communication services, in which case the threshold is much lower, at RMB10 million. If, however, the company only operates within a province or equivalent administrative unit within China, those levels are reduced to RMB100 million without value-added service and only RMB1 million with that service. These amounts represent half of the previous requirements for those offering basic services, whether nationally or within a province. (The State Council Amended and Promulgated the New Version of the 'Provisions on Administration of Foreign-Funded Telecommunication Enterprises,' 35 ISINOLAW WEEKLY (Sept. 8-14, 2008), available via email from [email protected]; Restriction Relaxed on Establishing Foreign-Funded Telecom Firms, CHINA.ORG.CN, Sept. 13, 2008, available at

For basic telecommunications joint ventures (excluding wireless pager services), the foreign stake is limited to 49 percent; for those engaging in value-added services, including wireless paging, that stake may be 50 percent. Foreign-funded enterprises must still apply to the administrative department in charge of the information industry under the State Council and receive approval before starting to provide any telecommunications services. The Provisions include specifications of penalties for any violations and for providing false or forged documents in the approval process. (ISINOLAW WEEKLY, supra.)