I. Introduction

The telecommunications, media, and technology (“TMT”) sector operates at the forefront of global innovation and connectivity, shaping industries across the world. While China represents one of the largest and most rapidly growing TMT markets, it has historically remained less accessible to international players due to foreign investment restrictions and stricter government oversight.

At the core of these access restrictions is the licensing for Value-Added Telecommunications Services (“VATS”), which is becoming increasingly relevant across industries in today's digital business world – not only IT-related sectors but also traditional ones.

The latest development in this regard is the Pilot Program for Expanding Foreign Investment in VATS (“Pilot Program Policy”), which was officially launched in October 2024 by the Chinese government in Beijing, Shanghai, Hainan, and Shenzhen, suggesting a significant step toward an opening up of the TMT sector. It provides international companies with new opportunities to obtain a VATS license, thereby creating new prospects for entering markets that were previously inaccessible.

Further reinforcing this trend, on February 17, 2025, China issued the Action Plan for Stabilizing Foreign Investment in 2025, which explicitly prioritizes the VATS sector as a key area for foreign investment liberalization.
This article provides an overview of the evolving regulatory landscape and compliance challenges within China’s TMT sector, and offers practical insights for international companies seeking to navigate this dynamic yet complex market.

II. Legal Framework for Foreign Investors' Access to the TMT Market

While China has progressively opened up its TMT sector to foreign investment in recent years, certain sensitive areas, such as internet news information, publishing, and cultural operations, remain off-limits for foreign investors. 

The market access for foreign investors in China’s TMT sector is primarily governed by a comprehensive set of telecommunications regulations and foreign investment regulations, including: 

• The Special Administrative Measures for Cross-Border Trade in Services, generally prohibiting foreign companies from engaging in telecommunications business in China (e.g., remotely via the internet) without establishing a local presence.
• The PRC Foreign Investment Law and the Special Administrative Measures for Foreign Investment Access (“Negative Lists”), specifying which sub-sectors of TMT remain prohibited or restricted for foreign investors. The Negative Lists are regularly updated and consist of two main standard versions: one applies to the designated Free Trade Zones in various cities across the country (“FTZs”) (“FTZ Negative List”), while the other applies nationwide, excluding the FTZs (“General Negative List”).
• The PRC Telecommunications Regulations, the Regulations on Foreign Investment in Telecommunications Enterprises and relevant implementation measures, outlining the requirements for telecommunication licensing.
• The Pilot Program Policy, issued on April 8, 2024 and the pilot program introduced under this document was officially launched on October 23, 2024 by the PRC Ministry of Industry and Information Technology (“MIIT”), initiating a pilot program in four regions, including Beijing, Pudong New Area and Lingang New Area in Shanghai, Hainan and Shenzhen (“Pilot Regions”), to expand foreign access to VATS, such as Internet Data Centers (IDC), Content Delivery Networks (CDN), and Internet of Things (IoT) platforms. Further details can be found below.

Under these laws, in principle, any foreign company seeking to provide telecommunications services in China must first establish a presence in China (e.g., through a subsidiary or joint venture), and within the scope of TMT sub-sectors open to foreign investment, must then apply for the relevant operating licenses and meet the same requirements as domestic entities, before commencing such operation.

The table below summarizes the five most common types of telecommunications business for private enterprises (all within the scope of VATS) and outlines the corresponding foreign investment restriction policies across mainland China (under the General Negative List), the FTZs (under the FTZ Negative List), and the Pilot Regions (under the Pilot Program Policy).
 

Notes: 
*    There is a separate FTZ Negative List for Hainan, allowing conditional opening: businesses registered and with service facilities within the Hainan Free Trade Port are permitted to operate IDC and CDN services both within the free trade port and internationally.
**  Since the Pilot Regions are also FTZs, they are currently subject to two sets of regulatory regimes : the FTZ Negative List and the Pilot Program Policy. The application for the traditional "Telecommunications Business Operation License" is subject to the FTZ Negative List, while the application for the new “Telecommunications Business Operation Pilot Approval” is governed by the Pilot Program Policy. In practice, the choice of which application to pursue will largely depend on the type of business the applicant operates and the specific requirements of local MIIT.
 

III. Pilot Program Policy – Special License and Requirements

Unlike domestic enterprises, foreign-invested companies in the Pilot Regions should apply for a “Telecommunications Business Operation Pilot Approval” instead of the traditional "Telecommunications Business Operation License" to enjoy the Pilot Program Policy. According to the Pilot Program Policy, relevant governmental official press Q&A and relevant regulations, requirements for the pilot approval generally include:

• General requirements under the PRC Telecommunications License Measures (same as domestic investors): 
  1. Capital and Personnel: Sufficient capital and professional personnel to operate the respective telecommunications services.
  
  2. Registered Capital: For businesses operating within a province, autonomous region, or directly administered municipality, the minimum registered capital is RMB 1 million; for businesses operating nationwide or across provinces, the minimum registered capital must be RMB 10 million.
  
  3. Security and Network Infrastructure: Adequate facilities, premises, and technical solutions to ensure the provision of long-term and stable services.
  
  4. Compliance: Enterprises themselves and their key investors and managers are not listed on the "Discredited List for Telecommunications Business Operations”.
   
• Special requirements under the Pilot Program Policy:
  1. Business establishment: Enterprises must be lawfully established within the Pilot Regions, i.e., the registration address and the location of service facilities must be within the same pilot region. They cannot purchase or rent CDN and other facilities outside the pilot region to carry out accelerated services. 
  
  2. Business operation: Operators providing the above services, except for ISPs, are allowed to offer their services nationwide. However, the geographical service scope for ISP is limited to the respective pilot region, and internet access must be provided to users through the equipment of the basic telecommunications service providers.

Notably, MIIT has recently approved the first batch of 13 foreign-invested enterprises under the Pilot Program Policy, granting them special approvals for operating various VATS. Among the newly approved companies are subsidiaries of Siemens and Deutsche Telekom in China, marking a milestone for European & German firms entering China’s rapidly evolving TMT landscape.

IV. Licensing Guidance for International Companies

Whether a specific business model requires a VATS license depends on the nature of the services provided. In today’s global business and technology environment, this can be relevant to most industries and various business models:

• Tech Companies
  VATS licensing is particularly relevant to tech companies as Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS) providers. For example: depending on specific business model and service functionality, IaaS providers typically require an IDC license, PaaS providers often need an EDI license, SaaS providers often face more ambiguous regulatory requirements. 
   
• Traditional Industries Upgrading Through IoT, AI and Other Technologies
  Numerous traditional international businesses are undergoing technological transformation by integrating IoT, AI and other software-driven solutions into their products and operations, such as smart vehicles, smart homes, and smart factories, and some are transitioning from traditional industries to the tech sector by commercializing their industry-specific software products. If the software provides online data processing with external interactions that fall under regulated categories, a VATS license may be necessary.
   
• B2B and B2C E-Platforms
  In China, it has become standard practice for companies across all industries to create customized apps and websites to market and sell their products or services. Platforms that facilitate third-party participation—such as multi-merchant e-commerce, user-generated content or marketplace platforms—typically fall under the scope of VATS and their operators must obtain the relevant licenses. In contrast, self-operated e-platforms that exclusively offer their own products or services are generally not regarded as VATS in Chinese regulatory practice.

V. General Compliance Recommendations 

To ensure compliance with VATS-related regulations, companies generally needs to adopt one of the following approaches:

(a) Collaborating with Local Entities: Partner with domestic entities that already hold the necessary licenses for long-term cooperation, or engage professional Chinese IaaS (Infrastructure as a Service) or PaaS (Platform as a Service) providers for underlying service support. In each case, it is crucial to verify the compliance status of these entities and ensure the validity of their licenses to avoid potential liabilities or disruptions.

(b) Securing Independent Licensing: Take advantage of recent regulatory relaxations to obtain their own VATS license (or the pilot approval), potentially unlocking additional business opportunities and increasing operational independence.

In addition to VATS licensing, attention should also be given to other mandatory IT related regulations governing the use of IoT technologies, AI, software service, networked products, as well as relevant filing and approval requirements for specialized sub-sectors, like automotive software and generative artificial intelligence (GAI). 

It is also important to note that, regardless of licensing obligations, companies operating self-operated websites and apps may need to fulfill additional filing requirements (including so-called “ICP Filing” and Cybersecurity Filing) with various Chinese authorities. 

Companies must also ensure they meet further cybersecurity and data protection regulations, including the PRC Data Security Law, the PRC Personal Information Protection Law, the PRC Cybersecurity Law, and the newly introduced Regulations on Network Data Security Management, which came into effect earlier this year. Furthermore, industry-specific qualifications and licenses may be required, such as the Internet Pharmaceutical Information Service Qualification Certificate.

In cases where the products or services offered may fall under any regulated category, seeking professional advice is strongly recommended to ensure full compliance and avoid potential disruptions. Failure to address these filing and approval obligations could result in business interruptions and legal complications.

VI. Business Model Strategic Shifts and M&A Opportunities

As mentioned above, in certain recently opened TMT sub-sectors, spanning various types of VATS, international investors and companies no longer have to solely rely on partnerships with local Chinese enterprises. The existing joint venture or business partnership models in these fields can gradually be replaced by wholly-owned subsidiaries. This shift allows international companies the opportunity to independently operate services such as IDC, CDN, and IoT platforms, thus directly benefiting from the expanding Chinese market. 

In terms of mergers and acquisitions (M&A), with the ongoing relaxation of foreign investment policies, legal barriers faced by foreign investors during the acquisition process—such as national security reviews—are also being gradually eased, international investors may consider acquiring Chinese TMT companies as a strategic move. This offers opportunities for market expansion, as well as technology integration and development. 

VII. Conclusion

As China’s TMT sector continues to open up, international investors and companies from both traditional and emerging industries are presented with more opportunities to enter the market. Close attention should be given to the implementation of VATS licensing under the Pilot Program Policy the constantly evolving regulatory requirements related to cybersecurity, data security, and industry-specific technologies. Crafting a comprehensive compliance strategy in this sector, tailored to your industry and business model, is essential for ensuring long-term success and sustainable growth in the dynamic Chinese market.

^{Zhenting Lyu, an intern at GvW Shanghai, also contributed research assistance to this article.}