August 2017
Specific Restrictions on Foreign Investment under the New Version of the Administrative Provisions on Online Publishing Services(Mainland China)
Li-kang Weng
The State Administration of Press, Publication, Radio, Film and Television (hereinafter, the "SAPPRFT") and the Ministry of Industry and Information Technology jointly promulgated the Administrative Provisions on Online Publishing Services (hereinafter, the "Provisions"). The Provisions went into effect on March 10, 2016, which superseded the 2002 Interim Administrative Provisions on Online Publishing (hereinafter, the "Interim Provisions").
The online publishing services regulated by the Provisions refer to publications intended for distribution to the public through the Internet. Such publications are digital works that have been edited, produced and processed. On the basis of the Interim Provisions, the Provisions also include original digital works such as images, maps, games, animations, and audiovisual reading materials as well as online literature databases. There is also an additional general provision for "other types of digital works recognized by the SAPPRFT." A person seeking to engage in online publishing services is required to obtain the SAPPRFT's approval and obtain a License for Online Publishing Services (hereinafter, the "License").
The Provisions prohibit foreign investors from engaging in online publishing services, and supervision on this matter is enhanced. Article 10, Paragraph 1 of the Provisions provides: "A Sino-foreign joint venture, Sino-foreign cooperative entity and foreign operated entity may not engage in online publishing services." In fact, as the Catalogue for Guidance on Foreign Investment in Industries that was amended in 2015 has already classified online publishing services as a type of business off-limits to foreign investment, the Provisions could therefore be deemed to be an implementation of that rule. In addition, Article 10, Paragraph 2 of the Provisions provides: "An online publishing service entity seeking cooperate with an onshore Sino-foreign joint venture, Sino-foreign cooperation, foreign-operated enterprise or offshore organization and individuals over an online publishing service project shall apply to the State Administration of Press, Publication, Radio, Film and Television for approval in advance." This means that the Provisions has included under its scope of super vision an online publishing service entity's business cooperation involving foreign parties in the scope of supervision. Whether this will affect the VIE framework commonly seen in practice remains to be seen.
The Provisions also specifically provide that an online publishing service entity shall neither lend, lease or sell its License, nor allow another online information service provider to provide online publishing services under its name. Therefore, the past cooperation and partnership model in which an onshore licensed enterprise provided platform or technical support to foreign investors and provided online publishing service in the name of foreign investors is now specifically prohibited by the Provisions.
Finally, the Provisions contain an additional restriction that requires "all necessary technologies and equipment, relevant servers and storage equipment required for engaging in online publishing services to reside within the territories of the People's Republic of China" (in reference to Article 8, Paragraph 3).
The State Administration of Press, Publication, Radio, Film and Television (hereinafter, the "SAPPRFT") and the Ministry of Industry and Information Technology jointly promulgated the Administrative Provisions on Online Publishing Services (hereinafter, the "Provisions"). The Provisions went into effect on March 10, 2016, which superseded the 2002 Interim Administrative Provisions on Online Publishing (hereinafter, the "Interim Provisions").
The online publishing services regulated by the Provisions refer to publications intended for distribution to the public through the Internet. Such publications are digital works that have been edited, produced and processed. On the basis of the Interim Provisions, the Provisions also include original digital works such as images, maps, games, animations, and audiovisual reading materials as well as online literature databases. There is also an additional general provision for "other types of digital works recognized by the SAPPRFT." A person seeking to engage in online publishing services is required to obtain the SAPPRFT's approval and obtain a License for Online Publishing Services (hereinafter, the "License").
The Provisions prohibit foreign investors from engaging in online publishing services, and supervision on this matter is enhanced. Article 10, Paragraph 1 of the Provisions provides: "A Sino-foreign joint venture, Sino-foreign cooperative entity and foreign operated entity may not engage in online publishing services." In fact, as the Catalogue for Guidance on Foreign Investment in Industries that was amended in 2015 has already classified online publishing services as a type of business off-limits to foreign investment, the Provisions could therefore be deemed to be an implementation of that rule. In addition, Article 10, Paragraph 2 of the Provisions provides: "An online publishing service entity seeking cooperate with an onshore Sino-foreign joint venture, Sino-foreign cooperation, foreign-operated enterprise or offshore organization and individuals over an online publishing service project shall apply to the State Administration of Press, Publication, Radio, Film and Television for approval in advance." This means that the Provisions has included under its scope of super vision an online publishing service entity's business cooperation involving foreign parties in the scope of supervision. Whether this will affect the VIE framework commonly seen in practice remains to be seen.
The Provisions also specifically provide that an online publishing service entity shall neither lend, lease or sell its License, nor allow another online information service provider to provide online publishing services under its name. Therefore, the past cooperation and partnership model in which an onshore licensed enterprise provided platform or technical support to foreign investors and provided online publishing service in the name of foreign investors is now specifically prohibited by the Provisions.
Finally, the Provisions contain an additional restriction that requires "all necessary technologies and equipment, relevant servers and storage equipment required for engaging in online publishing services to reside within the territories of the People's Republic of China" (in reference to Article 8, Paragraph 3).
