China’s protectionist Minister for Information Industry, Wu Jichuan, has thrown cold water on the hopes of foreign investors in the country’s internet industry, which were raised by the WTO deal struck between China and the US last month.
Prior to the trade pact, Wu had said internet services fell under regulations governing telecommunications, which meant foreign investment in internet service and content provision was illegal. After the WTO agreement was signed, US Trade Representative Charlene Barshefsky raised expectations China’s restrictions on internet investment would go. No longer an issue. We have rights to invest, she told reporters.
Now he says China will impose strict regulations on foreign investment in internet companies, including a cap on ownership. Wu also stressed that existing foreign investments in internet companies will be dealt with so they match the terms of the China-US agreement. Under last month’s agreement, foreign companies are allowed to hold a 49% stake in telecommunications companies from the start of China’s WTO accession, rising to 50% after two years.
Clearly these businesses are in violation of current Chinese policies and we shall find an appropriate way to address it, Wu said in an interview with the Wall Street Journal. This was a direct contradiction of what had earlier been said by US officials who said the limits would not be applied to existing internet companies. Leading Chinese portal sites, including Sohu.com and Sina.com, rely almost exclusively on foreign capital and are seeking foreign listings.
Wu also said China would impose a licensing regime on ICPs. Whether your business be high-tech communications or selling fruit, you need a license, he said. A licensing regime could give authorities broad powers to reject foreign
investment in certain areas and it could also entangle the investment approval process in red tape.
He also promised government censorship of all internet sites. We will not allow the introduction of trash that is harmful to the people, he said. In China trash is whatever the government says it is, with the worst trash being anything critical of the government. However the government’s firewalls are far from perfect and many Chinese users are able to go where they want to go on the web.
Wu also dashed hopes that the WTO agreement offered a resolution for foreign telecommunications companies who have been ordered to disinvest $1.4bn they put into about 40 mobile phones ventures with China United Telecommunications.
Since these projects are in violation of existing policies, we need to correct them immediately, the Wall Street Journal quoted one of his aides, Dai Shuang, as saying. WTO does not change this at all Hong Kong-based analysts interpreted Wu’s stance as an effort to save face after his reformist opponents in the government, led by Premier Zhu Rongji, managed to get the WTO deal through despite his ministry’s best efforts to derail it.
