Tag:corporate mergers and acquisitions-foreign direct investment fdi, telecommunications media entertainment and technology-telecommunications
On June 26, 2024, Office of the Cyberspace Affairs Committee of the CPC Hainan Provincial Committee (“中共海南省委网络安全和信息化委员会办公室”) publicly solicited comments on the Regulations on the Development of International Data Centers in the Hainan Free Trade Port (Draft)/海南自由贸易港国际数据中心发展条例（公开征求意见稿）(“Draft”). The public comment period is from June 26, 2024, to July 25, 2024.
This Draft is the first local document to mention the removal of foreign ownership restrictions on internet data center (“IDC”) services, following the MIIT Circular on April 10, 2024, regarding the pilot scheme for the further opening of value-added telecom services to foreign investment. For more details of the MIIT Circular, please find our analysis through: China to Remove Foreign Restrictions on IDC Investment https://mp.weixin.qq.com/s/NiUaSsLNGWS0nVB5MZY5sQ
I. How will Hainan open up IDC service?
Per Article 9 of the Draft, the Hainan Free Trade Port (“Hainan FTP”) will open up value-added telecom services and gradually remove foreign investment shareholding restrictions under the centralized deployment of the state. The Draft does not include specific implementation rules but instead leave room for the state level to decide. This practice aligns with our understanding of the regulation of value-added telecom services in China.
II. Notable Changes to IDC development in Hainan FTP
The Draft does not only provide the alleviation of Foreign Restrictions on IDC Investment, but also provide detailed regulations to operating international internet data center business (国际数据中心业务,”International IDC Services”) in Hainan FTP.
(1) What is International IDC Services?
International IDC Services refers to businesses utilizing the fast and efficient cross-border data dedicated channel within the Hainan FTP to exclusively offer international data services such as storage, processing, and trading to overseas entities.
(2) Who can operate International IDC Services in Hainan FTP?
Companies (including foreign-invested enterprises) registered in the Hainan FTP with service facilities (including leased or purchased facilities) located in Hainan FTP may submit an application to the provincial-level basic telecommunications operator in Hainan. Once approved, such entities may utilize the fast and efficient cross-border data dedicated channel to operate International IDC Services.
(3) What are the key application scenarios?
International IDC Services operators may provide International IDC Services such as gaming services, film and television processing, commercial aerospace, Beidou applications, cross-border e-commerce, cross-border live streaming, cross-border tourism, telemedicine remote education, international academic exchange cooperation, and multinational production and manufacturing to overseas entities.
(4) Any incentives to operate International IDC Services in Hainan FTP?
The draft provides guidelines for the incentives in the following aspects:
- Support in financial services, land use, power assurance, and infrastructure construction will be provided for International IDC Services operators
- Support in housing security, children's education, medical security, and professional title evaluation will be provided for International IDC Services operators
- International data trading platform will be established to support International IDC Services operators in conducting data trading activities
- Comprehensive platform for data outbound services to provide International IDC Services operators with services such as data classification and grading guidance, self-assessment of data outbound, and compliance consultation
III. Exemption of data outbound requirements
In conducting International IDC Services in the Hainan FTP, either of the following conditions exempt the need for data outbound security reporting (申报数据出境安全评估), entering into personal information outbound standard contracts (订立个人信息出境标准合同), and obtaining personal information protection certification (通过个人信息保护):
(1) Only storing, processing, trading, and providing data services for data collected and generated overseas, without involving domestic personal information or significant data in the service process; or
(2) Providing data to overseas entities that are not listed on the negative list of Hainan FTP.
Please note that the Draft is still under comment period and not yet enacted. We will diligently oversee market practices and remain vigilant of regulatory agency attitudes.
Scan the QR code to subscribe to "King & Wood Mallesons" for more information
