China’s media and publishing regulator, the State Administration of Press, Publication, Radio, Film and Television (“SAPPRFT“), and its telecoms and Internet regulator, the Ministry of Industry and Information Technology (“MIIT“), have jointly issued new rules governing online publications in the People’s Republic of China (“China” or the “PRC“): the Online Publication Services Administrative Provisions (网络出版服务管理规定) (the “Online Publication Provisions“). The Online Publication Provisions were issued on 4 February 2016 and came into effect from 10 March 2016.
Foreign Investor Concerns
The Online Publication Provisions have raised a number of concerns among foreign investors in China, largely due to the expansive scope of what SAPPRFT and MIIT have defined as constituting “online publishing services”, coupled with a complete ban on foreign invested enterprises such as Sino-foreign joint ventures (“JVs“) and wholly foreign-owned enterprises (“WFOEs“) (collectively “FIEs“) from engaging in such activities. Not only are FIEs not allowed to directly participate in online publishing activities, but also all “cooperation projects in relation to online publishing business” (not further defined) between overseas entities, individuals and/or FIEs on the one hand and (domestic capital licensed) online publishers on the other are subject to prior approval by SAPPRFT. This may be an issue for cross-border content licensing transactions, particularly as the approval requirement is somewhat counter-intuitive to foreign investors even if you are familiar with the current direction in which China is heading in this area.
If foreign providers of content or FIEs which provide significant online content were in any doubt that they were not exactly being shown the red carpet by China’s regulators, the Online Publication Provisions make things abundantly clear that China is seeking to tighten up the rules on who can publish online. The text hints at the issue that China sees new forms of online publication platforms as a target for stricter regulation, whereas existing conventional publishing platforms get a slightly lighter touch from the regulators. It is important, however, to see the Online Publication Provisions in their historical content: as will be analysed below, restricting foreign investment in this area is by no means a new phenomenon.
The Online Publication Provisions also remind foreign and domestic investors alike that the license required for online publishing, the “Online Publishing Permit”, is consistent with the rules on other Chinese permits, non-assignable and may not be loaned, leased out, sold or transferred. Similarly, it is prohibited for a licensed online publishing entity to allow any other entity, even another online information service provider, to publish in its name.
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