CHINA INFORMATION TECHNOLOGY LAW NEWSLETTER
Vol. 4, No. 14 - November 28, 2003
TOPICS THIS ISSUE:
- Heilongjiang's Preferential Policies For Foreign Investors
- Shanghai Telecom Gets Internet Cafe Chain Management License
- Jiangsu Province Blacklists 17 Internet Content Providers
- Chinese Government Backs Development Of Online Gaming
- China 2003 Telecom Investment May Reach Rmb250 Billion, Revenues Rmb480 Billion
- Project Appraisal Standardised, Macau Granted Cepa
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Heilongjiang's Preferential Policies For Foreign Investors
Foreign-funded manufacturers which have operated for more than 10 years in Heilongjiang Province in China will enjoy income tax exemptions for the first two years and will only have to pay half of their income tax for the following three years from the year they begin to make a profit. Manufacturers in the economic and technological development zone and high-tech enterprises in the high-tech development zone in Heilongjiang will have an income tax rate of 15%. Foreign-funded manufacturers in the border region of Heilongjiang, namely the region along the Heihe and Suifen rivers, in the province's riverside cities and Harbin, and those bordering economic cooperation zone will enjoy an income tax rate of 24%.
Foreign-funded enterprises which have operated for more than 10 years and satisfy either of the following criteria can be refunded five years of income tax:
1. Those which have bought or merged with Heilongjiang's bankrupt companies with foreign investment accounting for more than 50% of the total and recruited their laid-offs with the number accounting for more than 60% of all employees;
2. Those with more than US$5 million of foreign funding which have launched high-tech reforms on some of Heilongjiang's large and medium-sized key companies. Joint ventures engaged in the construction of ports and docks can enjoy an income tax rate of 15%. Financial institutes approved by the State Council with foreign investment or an operational capital exceeding US$10 million which have operated in Heilongjiang for more than 10 years can enjoy an income tax exemption during the first year and pay half of their income tax in the second and third years.
(Source: Financial Times)
Shanghai Telecom Gets Internet Cafe Chain Management License
Shanghai Telecom recently received approval to manage Internet cafes chains in the municipality, becoming the first subsidiary of China Telecom to receive such a local online service license.
It was reported that Shanghai Telecom marketing official Zhang Jiehua as saying that the company formally launched a campaign called "Green Power" recently, which has attracted the participation of 30 Internet cafes with free membership and preferential network access fees.
Shanghai Telecom expects the number of member Internet cafes to reach 100 by the end of this year, and it is also planning to set up its own flagship Internet cafe in Shanghai.
It said Shanghai authorities would issue only three Internet cafe management licenses in Shanghai, with the application of Shanghai EastdayBar Chain Administration Co Ltd being in process.
Shanghai currently has more than 1,200 Internet cafes, around 40% of which use Shanghai Telecom's networks.
China reported 7 million new broadband users in the second quarter, up 54.43% quarter-on-quarter, or 185.25% year-on-year.
China Telecom had more than 6 million broadband subscribers as of September 15 this year.
China Telecom's counterpart, China Network Communications Group Corp (China Netcom), has formed alliances with 32 companies, such as Legend Group Ltd and France's Alcatel to grab a larger share of the broadband service market.
China Netcom now has 2 million broadband users, and aims to attract another 1.8 users within this year, and expand its broadband subscriber base to 15 million in its 10 northern provinces or municipalities territory within two years.
China United Telecommunications Corp (China Unicom) said in late May this year that it had obtained approval from the Ministry of Culture to start an Internet cafe chain nationwide. The company said in a statement it will directly manage Internet cafe chain stores and franchises.
The Beijing Times earlier quoted a source with China Unicom as saying the company plans to set up 700 Internet cafes nationwide, except in Tibet, this year.
The newspaper said it is the first time that a telecom operator will manage Internet cafes in China, adding that the cafes are expected to offer cheaper rates to clients, as China Unicom does not need to lease broadband facilities.
(Source: AFX News Limited)
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Jiangsu Province Blacklists 17 Internet Content Providers
The Jiangsu Communications Administration (JSCA) has blacklisted 17 Internet content providers (ICP) in eastern China's Jiangsu Province, according to a JSCA statement.
The ICPs were found providing Internet content services without certification or registration from JSCA. Under China's Internet Information Service Regulations, commercial ICPs must apply for a license from provincial communications administration before beginning operations. Additionally, non-commercial ICPS are also required to register with provincial communications administrations.
The 17 ICPs were required to submit formal application or registration material within 30 days. The blacklisted ICPs are Changzhou Lingbo Information Industry Co. Ltd, Changzhou Ziyi Network Technology Co. Ltd., Nanjing Xinwanxin Science and Trade Information Co. Ltd., Yixing Taodu E-Commerce Co. Ltd., Nanjing Zhufeng Information Technology Co. Ltd., Xuzhou Tongwei Computer Co. Ltd., Kunshan Human Resource Development Co. Ltd., Kunshan Development Zone Human Resource Development Co. Ltd., Nantong Etong Network Information Technology Co. Ltd., Nanjing Tianji Technology Trade Development Co., Changzhou Zhonghuan Computer Internet Technology Serivces Co., Wuxi Boxin Information Technology Co. Ltd., Wuxi Housu Information Technology Co. Ltd., Nanjing News, Lanho.com and Yangzhou 36g.net.
(Source: Interfax News Agency)
Chinese Government Backs Development Of Online Gaming
After online gaming technology was included in the 863 Plan, the state-level high technology development plan of China, the Ministry of Culture of China issued the License for Running Online Cultural Services to 12 online gaming companies. These moves show that Chinese government is accepting online gaming as an industry.
IDC statistics show that the production of online gaming of China had reached RMB910 million in 2002. However, lacking of core technologies, Chinese online gaming companies are mainly the agents of foreign games, and 80% of the core technologies are controlled by foreign companies. Experts hopes to set up a core technology platform to protect the independent property rights of Chinese game software.
It was reported that two projects were included in 863 Plan, including research of universal online gaming engine and development of demonstrative products. It is the first time that the cultural industry projects were included in state-level science and technology plan, industry insiders said.
863 Plan will invest RMB5 million into the two projects. On the basis of existing online gaming engines and the results of Chinese characteristics processing, interactive of human and computer and digital media of 863 Plan, the projects will develop a universal two or three dimension online gaming engine with independent property rights that can be used by the third party, and a demonstrative online game will be developed based on the engine.
However, only Kingsoft and NetEase.com have developed independent online gaming engine. Industry insiders said its happy to see that the country started to pay attention to online gaming industry, but considering the development power of Chinese game developers, it is hard to say if the RMB5 million is enough for developing a high quality gaming engine.
Whether the company shall operate online games with licenses is also a concern within the industry. According to the rules, the 12 companies that obtained licenses from the Ministry of Culture can operate gaming services using the Internet.
Official with the Ministry of Information Industry said, "to operate gaming industry services using the Internet" is a gloomy definition for the convenience of management. The specific definition should be that the enterprises with the license can be involved in five scopes of business including Internet gaming, Internet music, Internet animation and cartoon, Internet video, and Internet intellectual property rights protection and content management.
According to the official with the Ministry of Culture, the ministry has not decided when to stop the business of the companies without licenses, instead suggested that the companies should apply for the license as soon as possible.
Some Internet game operators question the regulation. The specifications for a qualified Internet gaming operator are not defined, and there are some problems in the qualification conditions and procedure drawn by the Ministry of Culture. According to the operators, it is suspected of excluding the small companies.
(Source: Comtex News Network)
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China 2003 Telecom Investment May Reach Rmb250 Billion, Revenues Rmb480 Billion
The total telecom infrastructure investment in China will reach 230-250 billion yuan in 2003, up from 207.4 billion yuan in 2002, while total telecom operating revenue is projected to rise 14% year-on-year to 480 billion yuan in 2003, according to the Ministry of Information Industry.
Chairman Liu of the Consultative Committee for Telecom Law Drafting with the ministry, said in a government-sponsored forum in Beijing today, that the telecom sector investments in China in 2003 will rebound to similar levels seen in 2001, after an 18.1% drop in 2002 mainly due to industry restructuring.
However, the rapid investment growth in telecom infrastructure also introduces overcapacity concerns, possibly leading to further slow revenue growth for telecom operators, and make it riskier for foreign players to offer basic fixed-line and mobile communication services in China.
Chairman Liu, who is also secretary general of the China Institute of Communications, said China's telecom infrastructure sector was too crowded to accommodate any new players, making it extremely risky for foreign companies to build new telecom networks in China to compete with local telecom operators.
"Even in China's remote Xinjiang region, there are often five to six communications cables along expressways, but in fact one cable is enough to accommodate telecom demand there. It is highly risky for foreign players to enter the telecom operating sector," said the official.
Three of China's four leading telecom operators have listed part of their assets in domestic and overseas markets, including China Telecom Corp Ltd, China Unicom Ltd, China United Telecommunications Corp Ltd and China Mobile (Hong Kong) Ltd.
China Netcom Group Corp is also seeking an overseas listing as early as mid-2004.
According to China's WTO commitments, the country will gradually permit Sino-foreign joint ventures in telecom value-added services, fixed-line telecom and mobile communications with foreign stakes restricted to 50%.
Thus far however, few foreign telecom players have worked out detailed plans to vie for the world's largest potential telecom market -- one that still has an annual double-digit growth rate.
According to Chairman Liu, it is the world telecom development that slowed down in recent years, rather than China's policy restrictions being the main reason for the limited enthusiasm by foreign companies towards China's telecom market. He further added, "the question now is not whether we will open the market for foreign players, but whether foreign companies will like China's market potential and offerings".
He said value-added telecom services in China still have vast growth potential and that the value-added telecom services sector should be the first choice for foreign companies in China.
He said the ministry had received about 10 applications to set up small Sino-foreign joint ventures in value-added telecom services sector, which he regarded as "trials" rather than serious investment plans.
The ministry has approved two of the applications, but one of the two approved joint venture plans was cancelled for unknown reasons, the official said.
The total mobile phone subscribers in China stood at 249.98 million at the end of September this year, the world's largest mobile phone market, while the total fixed-line telephone subscribers in China were 250.47 million at the end of September.
In addition to telecom service subscribers, Liu said China had 68 million Internet users by the end of June, second only to the USA and the number is still growing by 20 million annually.
(Source: AFX News Limited)
Project Appraisal Standardised, Macau Granted Cepa
The Chinese Ministry of Science and Technology has issued a regulation on the appraisal of science and technology projects sponsored by the government. The rule is intended to increase the transparency of budget planning for government spending. Appraisal is to be conducted by local teams of experts from universities, research institutions and companies. Foreign scientists are permitted to contribute to the appraisal of frontier scientific projects, where China lacks expertise.
Macau was granted CEPA access recently. The Ministry of Information Industry said that telecommunications service providers from Macau are permitted to establish joint ventures in China as part of a Closer Economic Partnership Arrangement (CEPA) signed between Macau and China. Service providers from Macau are permitted to offer Internet access, Internet data centre, call centre, memory and transmission and information services through joint ventures but not allowed to hold stakes of over 50%. Hong Kong service providers were granted similar access earlier on October 1st.
(Source: The Economist)
The China Information Technology Law Newsletter is intended to be used for news purposes only. It should not be taken as comprehensive legal advice, and Lehman, Lee & Xu will not be held responsible for any such reliance on its contents.
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