On April 8, 2024, the Ministry of Industry and Information Technology (hereinafter referred to as the “MIIT”) issued the Notice on Launching the Pilot Program for Expanding the Opening-up of Value-Added Telecommunications Services (MIIT Communications Letter [2024] No. 107), hereinafter referred to as the “Pilot Notice”. This notice aims, under the framework of the comprehensive pilot for expanding the opening-up of the service sector, to provide institutional arrangements for foreign-invested telecommunications enterprises (“foreign telecom enterprises”) outside the pre-establishment national treatment and the negative list. By introducing international capital, technologies, and operational experience, the notice seeks to improve the infrastructure for cloud computing, computing power, and cross-border data flows, thereby promoting high-quality development of the digital economy.This article focuses on introducing the content and implementation status of the pilot program for expanding the opening-up of value-added telecommunications services. I. Institutional Design of the Pilot Program (1) Geographic Scope The pilot is limited to the Beijing Service Sector Comprehensive Demonstration Zone, the Lingang New Area of the Shanghai Pilot Free Trade Zone, the Hainan Free Trade Port, and the Shenzhen Pilot Demonstration Zone for Socialism with Chinese Characteristics (collectively referred to as the “Four Cities”). These areas have each established relatively mature legal “sandboxes” that enable institutional innovation under controlled risk. (2) Business Scope Article 3 of the Pilot Notice clearly stipulates that the following value-added telecom services may be operated with 100% foreign ownership: 1. Internet Data Center Services (IDC)2. Content Delivery Network Services (CDN)3. Internet Access Services (ISP)4. Online Data Processing and Transaction Processing Services (EDI)5. Information Publishing Platform and Delivery Services6. Information Protection and Processing Services News information services, online publishing services, online audio-visual program services, and internet culture business activities remain subject to restrictions or prohibitions under the Special Administrative Measures (Negative List) for Foreign Investment Access and are not included in this pilot. (3) Application Requirements 1. Entity Qualification:Foreign telecom enterprises must be legally established within the pilot regions. Their registered capital and business scale must meet the minimum capital and staffing requirements for the corresponding business categories as stipulated in the Administrative Measures for the Licensing of Telecommunications Business Operations.2. Document Checklist:In addition to standard corporate documents, applicants must submit ownership structure statements, technical solutions, data security and personal information protection measures, domestic and overseas network topology diagrams, and contingency plans.3. Security Assessment:A cross-departmental expert review must be conducted in accordance with the Data Security Law, Cybersecurity Law, and the Cybersecurity Classified Protection System 2.0. A positive assessment result is a precondition for license approval. (4) Approval Mechanism The pilot adopts a “two-tier review, classified approval” model: 1. Preliminary Review at Local Level – The local Communications Administration in the pilot regions shall complete formal review and preliminary security assessment first;2. Substantive Review at Ministerial Level – The MIIT, in collaboration with the Cyberspace Administration of China and the Ministry of Public Security, conducts a substantive assessment and, if necessary, organizes on-site verification;3. License Issuance – Upon approval, a Value-Added Telecommunications Business Operation License (Pilot) is issued, indicating restrictions on geographic area and business scope. (5) Supervision and Administration 1. Reporting Obligations:Foreign telecom enterprises must submit quarterly operational data, node lists, and security logs to the local Communications Administration.2. Random Inspections:Regulatory authorities may jointly conduct penetration tests, code audits, and random inspections of cross-border data flows.3. Exit Mechanism:In the event of major security risks or legal violations, regulatory authorities may order rectification within a deadline, reduce the scope of business, or, in severe cases, revoke the license and require orderly network exit. II. Implementation Status of the Pilot Since the MIIT officially opened the application channel on October 23, 2024, the pilot has been operational for over fourteen months and exhibits the following characteristics: 1. First Batch Approved – Within Four Months from Acceptance to ApprovalOn February 28, 2025—just four months after the acceptance window opened—the MIIT issued the first batch of approvals to 13 foreign-invested enterprises across Beijing, Shanghai, Hainan, and Shenzhen, covering all six types of open business categories. Concurrent official data disclosed that the total number of foreign-invested telecom enterprises in China exceeded 2,400 for the first time, marking a year-on-year increase of approximately 30%. 2. Beijing – Accelerated Approval and Scale LeadershipAs of June 26, 2025, Beijing had approved a cumulative total of 10 enterprises, accounting for 40% of all pilot approvals nationwide. According to a press conference held in the “Two Zones,” the municipal Communications Administration has compressed the approval process to “a little over two months after complete documentation submission,” and adopted a “parallel review + dynamic service package” model. 3. Shanghai – “Lingang Model” Emphasizes Industrial ClusteringShanghai’s first four approved foreign enterprises span new business formats such as digital healthcare, fintech, and human resources services. Relying on the International Data Economy Industrial Park in Lingang, the pilot program provides dedicated communication lines, data ports, and computing power centers, and has launched an online visualized application platform enabling full-process tracking from application to approval and supervision. 4. Shenzhen – Qianhai “Green Channel” and Dedicated Cross-Border Data LinksShenzhen’s initial three enterprises (Siemens Digital Industries, UCloudlink, Eden Software) focus on “AI + Data” and global mobile connectivity. The Qianhai Authority issued the Service Guide for Pilot Items, offering “one-stop” support for company registration, license application, and scenario matching, supplemented by an international data link and a Shenzhen–Hong Kong computing power center. 5. Hainan – “Offshore Data” Feature and International Gateway EstablishmentUpon approval of two enterprises (Dun & Bradstreet Data, Eno Offshore Data), Hainan was also authorized to establish an international communications gateway, pioneering practices such as “offshore read-only cache nodes” and a cross-border data sandbox. 6. Business Composition and Investment TrendsInitial and subsequent approval lists show that IDC, CDN, and ISP licenses account for over 60% of new approvals, indicating that foreign investors are initially targeting computing power and network infrastructure. Several enterprises publicly announced plans to invest tens of billions of RMB over three years to build data centers and node networks. Digital infrastructure has been listed as a “priority industry” in both Lingang and Qianhai. 7. Shift Toward Pre-Approval Regulatory PracticesLocal Communications Administrations have generally embedded penetration testing and cross-border data assessments into the pre-approval stage to avoid duplicate evaluations. Pilot enterprises must submit quarterly operation reports and accept unscheduled inspections, with critical vulnerability remediation timelines typically not exceeding fifteen days. This approach aligns with the Pilot Notice’s advocated principle of “full lifecycle security compliance.” 8. “4 + 9” Expansion UnderwayOn April 11, 2025, the Ministry of Commerce issued the Work Plan to Accelerate the Comprehensive Pilot for Opening Up the Service Sector, incorporating Dalian, Ningbo, Xiamen, Qingdao, Hefei, Fuzhou, Xi’an, Suzhou, and Shenzhen (already part of the first batch) into the pilot. The plan also lifts foreign equity caps for app stores and internet access services and, for the first time, proposes a nationwide pilot path allowing up to 50% foreign ownership in IP-VPN services. These cities have begun conducting security assessments based on the “Four Cities” model, with the first batch of approvals expected in Q4 2025.
Comments and Outlook The pilot program for expanding the opening-up of value-added telecom services provides a clear legal pathway for foreign entities to enter China’s telecom infrastructure sector through a model of “limited geography, specific services, and differentiated regulation.” However, several issues may remain: 1. Regulatory Alignment Requires Improvement – The 50% ownership cap in the Administrative Provisions on Foreign-Invested Telecom Enterprises has yet to be amended. For now, conflicts are addressed through “special authorizations + case-by-case exemptions.”2. Rising Compliance Costs – Cross-border data transfers, node filings, and classified protection assessments have become mandatory expenditures for foreign enterprises entering the market.3. Content-related Services Will Remain Restricted – If the “Four Cities” pilots operate smoothly, and drawing on the “4 + 9” expansion experience, a nationwide removal of equity restrictions in value-added telecom services may be achievable before 2026. However, content-related services (such as news and audio-visual) are expected to remain long-term restricted. Going forward, legislative bodies must accelerate the coordinated revision of upper-level laws and departmental regulations to consolidate pilot achievements and ensure consistency and integrity in the legal system. Meanwhile, market participants should, while enjoying eased market access, remain highly attentive to data security and compliance costs, achieving a dynamic balance between commercial interests and legal obligations.