TAIPEI - The Chinese government on Sunday made public new regulations imposing strict controls on the operation and financing of Internet content and service providers, unveiling the long-awaited set of rules on China's National Day.
Chinese Internet companies and foreign investors who own stakes in the industry have been operating in an uncertain regulatory environment, with different regulations being proposed and imposed by various government agencies. If the broad new rules are the final word on Internet regulation, Chinese and foreign companies may face a hard road in developing the country's Internet industry.
All Internet service and content providers will need a license from the relevant authorities, which in many cases will be the Ministry of Information Industry (MII). Companies must get approval to seek a listing on domestic or foreign stock exchanges or to form joint ventures with foreign companies, according to a Chinese-language version of the regulations published on the Web site of Xinhua, China's official news agency.
The proportion of foreign ownership in such companies must comply with relevant laws and regulations. The regulations governing Internet companies are basically a subset of new regulations covering China's telecommunications industry that were passed by the State Council, China's cabinet, on Sept. 20, and made public late last week.
According to the new regulations, foreign ownership in ventures offering basic telecommunications services is limited to 49 percent, though that may change once China enters the World Trade Organization.
All companies offering commercial Internet content services will have to provide extensive records to the MII in the next 60 days to obtain licenses for their operations. Unlicensed operators will face fines up to 1 million renminbi ($121,000), or in more serious cases, a shutdown of their services.
The regulations include a sweeping ban on presenting or disseminating information that could harm the state or threaten reunification efforts with Taiwan. This could include state-classified information, pornography, gambling and advocacy of cults such as Falun Gong, a group that was banned last year and which has come under a government crackdown.
Moreover, the Internet companies must be able to hand over to the government records of all users who have used their sites and all information posted there for a 60-day period.
Content providers in areas defined as strategic, including news, education and health care, will also need approval from relevant agencies in these areas.
Terho Uimonen and Stephen Lawson write for the IDG News Service.
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