China opens telecom pilot programmes to foreign firms amid US curbs

China’s decision to greenlight over 100 foreign-invested entities to pilot value-added telecommunications services (VAS) in the country could be a major boon for some multinationals, though its impact on the domestic market is likely to be limited, according to industry analysts.

The Ministry of Industry and Information Technology (MIIT) said on Wednesday that it had approved licences for 166 foreign companies since February last year, covering VAS sectors including internet data centres, internet access and information services.

While the move signalled a step forward in market accessibility, industry experts noted it was unlikely to fundamentally disrupt China’s domestic telecoms landscape.

China has gradually eased restrictions on non-Chinese telecoms VAS providers, having lifted the previous 50 per cent foreign ownership cap to allow wholly foreign-owned enterprises to operate within pilot zones, including Beijing, Shanghai, Hainan and Shenzhen.

However, the sectors being opened were already fiercely contested, according to Yang Guang, a senior principal analyst covering communications at consultancy Omdia. Furthermore, the easing of restrictions remains limited to pilot zones.

“I don’t think there will be a significant impact on the domestic market,” Yang said.

Despite the tough domestic competition, the policy shift might be meaningful for certain global corporations operating in China, such as German engineering giant Siemens and European aerospace leader Airbus, according to Yang.

Yang noted that a VAS licence would allow these conglomerates to deploy their own data centres and private network access services to directly support their core business in China.

“The policy is indeed a positive move for foreign companies seeking to accelerate their digital transformations in the Chinese market,” he said.

The liberalisation aligns with China’s long-term pledges to open its telecommunications market – a commitment dating back to its accession to the World Trade Organization in 2001.

According to MIIT, the licensing initiative was part of a broader push by the State Council, China’s cabinet, to drive “high-standard opening-up” in the telecoms sector. The ministry said that expanded foreign access would diversify the products available to Chinese consumers and foster a more dynamic, open market ecosystem.

The ministry pledged to “continue to open its telecommunications sector to foreign participation and foster a market-oriented, law-based, and international business environment” to welcome more qualified foreign players.

Beijing’s widening of telecoms access stands in contrast to recent actions by Washington. In April, the US Federal Communications Commission said it was considering barring Chinese telecoms carriers from operating data centres in the country and would further restrict their access to American networks and infrastructure. South China Morning Post