China Planning to Allow Foreign Investment in VPN Services

In a rare and unexpected move by the Chinese government, the City of Beijing is planning to give foreign investors to put money in VPN (Virtual Private Network) services. The country’s Great Firewall has very strict controls over the internet service providers that are operating in China, which has resulted in internet censorship on a wide scale. Now, Beijing is planning to make room for a trial zone for VPN services by the end of this year.

The change in stance regarding VPN services in China is only an attempt of the government to attract foreign investment. The foreign ownership in these provides will be capped at 50 percent by the Beijing Municipal Bureau of Commerce. The measure was approved in January by the State Council to enable companies with foreign investment in Beijing to be able to gain access to websites that have been blocked by the Great Firewall of China. There has been a slowdown in the service sector in Beijing and this prompted the city to take some action. In the first six months of this year, the city’s economy slowed down by almost 6.3 percent due to the service sector.

VPN services are regarded by the municipal government as a way of attracting greater investment in the city as they can enable foreign firms, which already use VPN services, to access around 135 of the top one thousand websites in the world. Apart from that, the municipal government is also expected to welcome foreign investment in video and audio programs and also online games. Audio and video is still considered a gray area in the country because there are strict laws that prohibit any foreign investment in video, audio, online and publishing news in China. As a matter of fact, the country has been known to send citizens to jail for sharing VPN information. All services and games that will be open for foreign investment in Beijing will have to meet the country’s data security standards.

In January of this year, the Chinese government had begun to clamp down on people using VPNs for evading the Great Firewall of China. They had issued the first fines for getting around the ban, which was imposed in 1997. Businesses operating in China were also affected due to this VPN ban. A Chinese citizen was fined Rmb1,000 or $145 as he used a popular VPN service.

 A public security law that was introduced in 1997 was used for prosecuting the citizen. As per this law, citizens are not allowed to access ‘foreign internet’ without appropriate permission. The fine is not very substantial and it is just a disciplinary warning to the user as well as an example to other internet users in China to think twice before overriding any barriers via VPNs. This cleaning up of the internet ecosystem in China has been going on for more than a year, but this was the first time that a single person was targeted and punished for using VPN services.

Even though the law was introduced more than 20 years ago, it was rarely enforced until President Xi Jinping, who has been named the country’s president for life, begun clamping down. The country had beefed up the public security law of 1997 in 2017. They added new regulations for shutting down VPNs that were not approved by the government. This certainly created a problem for multinationals operating in the country because their internet access was cut off entirely, as they didn’t use an approved VPN service.

Even Apple Inc., the maker of the iPhone, had to bow down to the Chinese government as the company removed 674 apps from its App Store in the country. Later on, Google also banned ads of VPN services in China in order to comply with the government’s requirements. Nevertheless, it is suggested that almost 30 million people from a population of 1.4 billion get round the Great Wall of China through VPN usage.

The change in stance and the willingness to give access to VPN shows that China is softening its stance where foreign investment is concerned. In the past, as mentioned above, action has been taken by authorities against companies and individuals that were providing VPN services in China. This relaxation of VPN policies has been viewed as a welcome measure by economists. They also consider this change as the country’s commitment to encouraging globalization. Other than that, a three year plan has also been unveiled by Beijing that will open up the services sector of the municipal government. The city unveiled this plan after there was a decline of 2.5 percent in fiscal revenue in the first half of 2019. This decline amounted to 317 billion yuan.

Once these relaxation policies are put into effect, it will allow Chinese internet users to be able to gain access to Facebook, Twitter, YouTube and Google. It should be noted that even with the relaxation of the current policies of government, they will still be able to maintain content oversight and will continue to ensure that all the data is in accordance with their security standards. However, there are also critics that suggest that the country’s attempt to reduce and cut down VPN restrictions is only a farce. According to them, the only purpose of this relaxation is to normalize the state-controlled and approved VPN service providers as they will be able to use them for monitoring all user activities online.

But, there is also a conflict as foreign businesses can only use VPNs that are government approved, which will be monitored heavily by state officials. This would make them quite inappropriate and insecure for the kind of sensitive corporate information that most businesses will have to receive and send. Unless the business wants the Chinese government to have complete access to their company information, they would never want to use any of the approved VPNs. Not a single business is going to opt for any such VPN services due to security risks to their company information.

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