Vol.3, No.02

CHINA INFORMATION TECHNOLOGY LAW NEWSLETTER

Vol. 3, No. 2- January 31, 2002

TOPICS THIS ISSUE:

• Part Two of the New Regulations for Telecom Business with Foreign Investment
• Increased Internet Controls in China
• Crackdown on Internet Bars

Part Two of the New Regulations for Telecom Business with Foreign Investment

Article 13: A telecommunications business with foreign investment that applies to provide value-added telecommunications services in a province, autonomous region, or municipality under the Central Government's direct jurisdiction shall have its application submitted to the telecommunications administrative authorities in the province, autonomous region, and municipality through the principal Chinese investor; and it shall also furnish the following documents:

(1) Report on feasibility studies;

(2) Proofs of credentials or relevant documents of confirmation prescribed in Article 10 of these regulations; and

(3) Other proofs of documents of confirmation a telecommunications business that provides value-added services should possess as required by telecommunications regulations.

The telecommunications administrative organ of the province, autonomous region, or municipality under the Central Government's direct jurisdiction shall indicate its views within 60 days after receiving the application. For the case it approves, it shall refer the case to the State Council department in charge of information industry; and for the case if does not approve, it shall notify the applicant in writing and explain the reasons.

The State Council department in charge of information industry shall finish examining the application, endorsed by provincial, autonomous regional or municipal telecommunications administrative authorities, within 30 days after receiving the application. If it approves the application, it shall issue the "Opinion on Examining the Telecommunications Business with Foreign Investment;" and if it disapproves the application, it shall notify the applicant in writing and state the reasons.

Article 14: The project proposal of the Telecommunications business with foreign investment shall include: The names of business capital partners and their basic situations, the total amount of money to be invested in the business, the registered capital, the percentage of money to be contributed by different partners, the kind of services it will provide, and how long the joint venture will operate.

The report of feasibility studies of the telecommunications business with foreign investment shall include the followings:

The basic situation of the business planned to be established, and its kinds of services, business forecast, development plan, analysis of investment returns, and projected time of operations.

Article 15: When the investment plan of the telecommunications business with foreign investment planned to be established requires the examination of the State Council department in charge of information industry or the examination of the State Council economic administrative department according to relevant regulations of the state, the State Council department in charge of information industry shall, prior to issuing the "Opinion on Examining the Telecommunications Business with Foreign Investment," refer the application to the State Council department in charge of planning or to the State Council economic administrative department for examination. For the case referred to these departments, the time for the examination prescribed in Article 11 and Article 13 in these regulations may be extended for 30 days.

Article 16: If the telecommunications business with foreign investment planned to be established is to provide basic telecommunications services or value-added telecommunications services in areas that straddle provinces, autonomous regions, and municipalities under the Central Government's direct jurisdiction, the principal Chinese investor shall submit the contract and operation rules of the business to the State Council department in charge of international economic affairs and trade, basing on the "Opinion on Examining the Telecommunications Business with Foreign Investment." If the telecommunications business is to provide value-added telecommunications services within a province, autonomous regions, or municipality under the Central Government's direct jurisdiction, the principal Chinese investor shall submit the contract and the operation rules of the telecommunications business planned to be established to the authorities in charge of international economic affairs and trade under the people's government of the province, autonomous region, or the municipality, basing on the "Opinion on Examining the Telecommunications Business with Foreign Investment."

The State Council department in charge of international economic affairs and trade; and the authorities in charge of international economic affairs and trade under the provincial, autonomous regional or municipal people's government shall finish reviewing the contract and the operation rules of the telecommunications business with foreign investment planned to be established. If they approve the application, they shall issue the "Certificate of Approval for Business with Foreign Investment;" and if they disapprove the application, they shall notify the applicant and state the reasons.

Article 17: With the "Certificate of Approval for Business with Foreign Investment," the principal Chinese investor of the telecommunications business with foreign investment planned to be established shall proceed to the State Council department in charge of information industry to apply for the "License for Telecommunications Business Operations."

With the "Certificate of Approval for Business with Foreign Investment" and the "License for Telecommunications Business Operations," the principal Chinese investor of the telecommunications business with foreign investment shall proceed to the business administrative authorities to register the telecommunications business with foreign investment.

Article 18: The telecommunications business with foreign investment wishing to operate trans-regional telecommunications business must have the approval of the State Council department in charge of information industry; and it must operate the business through an international telecommunications export-import bureau established with authorization of the State Council department in charge of information industry.

Article 19: If any telecommunications business with foreign investment violates Article 6 of these regulations, the State Council department in charge of information industry will charge it to mend its way within a stated time, and the department shall also impose on it a fine between 100,000 and 500,000 Yuan. If the business fails to mend its way by the stated time, the State Council department in charge of information industry shall revoke its "License for Telecommunications Business Operations" and the department in charge of international economic affairs and trade that issued the "Certificate of Approval for Telecommunications Business with Foreign Investment" shall revoke this certificate.

Article 20: If any telecommunications business with foreign investment violates Article 18 of these regulations, the State Council department in charge of information industry shall charge it to mend its way within a stated time and also impose on it a fine between 200,000 and 1 million yuan; and if the business fails to mend its way by the stated time, the State Council department in charge of information industry shall revoke its "License for Telecommunications Business Operations" and the department in charge of international economic affairs and trade that issued the "Certificate of Approval for Telecommunications Business with Foreign Investment" shall revoke this certificate.

Article 21: If any business that applies for establishing a telecommunications business with foreign investment provides false, counterfeited proofs of credentials or documents of confirmation to defraud approval, the approval shall be nullified, the State Council department in charge of information industry shall impose on the business a fine between 200,000 and 1 million yuan and revoke the "License for Telecommunications Business Operations," and the department in charge of international economic affairs and trade that issued the "Certificate of Approval for Business with Foreign Investment" shall nullify this certificate.

Article 22: According to the law, the relevant authorities shall mete out punitive measures against the telecommunications business with foreign investment if it violates the telecommunications regulations or other relevant laws or administrative regulations while operating its telecommunications business.

Article 23: To become a listed company overseas, a telecommunications business established in China must have prior concurrence and approval of the State Council department in charge of information industry on the basis of relevant state rules.

Article 24: These regulations are applicable to companies and businesses in the Hong Kong Special Administrative Region, the Macao Special Administrative Region, and Taiwan that want to establish their telecommunication business on the Mainland.

Article 25: These regulations become effective on 1 January 2002.

Increased Internet Controls in China

The Ministry of Industry and Commerce has issued new regulations concerning the Internet. Internet use guidelines were first issued in 2000.

The regulations aim at increasing control over the industry to limit the use of the Internet in ways that could have negative consequences for the Communist Party. It is feared that the new rules may have a negative consequence for foreign investments in the IT business since it will affect foreign software producers. With the new rules they will be required to guarantee that their software products do not contain any programs that can be used for spying purposes. In terms of local content requirements, it is required that computers that play an important role in Chinese networks use only domestic software. Also, general portal sites must screen and copy all email messages sent or received by users, and providers must erase all material that is deemed prohibited. This is another way for the party to maintain control, especially since emails that are detected, which contain so called sensitive materials may be turned over to the authorities.

However, at the same time the Party is willing to promote the use of the Internet in areas such as business and education. Classified as prohibited materials are those that reveal State secrets, hurt China's reputation, advocate the overthrow of communism, ethnic separatism, pornography and violence, and so called evil cults.

(Source: Associated Press)

Crackdown on Internet Bars

According to the Beijing Police Bureau, there are far more Internet bars in Beijing than actually have a license. The numbers are as low as 310 validly approved bars with security check certificates, compared to an actual number of bars numbering 1,921. It is estimated that over 800 of the bars have no business license. A few days ago there was a police crackdown in northern Beijing close to the university area and 32 computers were confiscated.

(Source: Xinhua News Agency)

Lehman Lee & Xu

China Lawyers, Notaries, Patent, Copyright and Trademark Agents

http://www.chinalaw.cc/

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