Laws of the People's Republic of China

Notice of the Ministry of Information Industry on Strengthening the Administration of Foreign Investment in Value-added Telecommunications Services

July 13, 2006

Since the Provisions on the Administration of Telecommunications Enterprises with Foreign Investment (Order No. 333 of the State Council, hereinafter referred to as the Provisions) were promulgated and adopted, most of the foreign investors have gone through the formalities for examination and approval of establishment of foreign-funded telecommunications enterprises, and of licenses for telecommunications services as well as other relevant formalities for examination and approval in strict accordance with the Provisions. They have entered into the Chinese telecommunications service market to develop the value-added telecommunications services in accordance with relevant laws. Yet recently, it has been found that some foreign investors combining with the value-added telecommunications companies within China scheme to evade the requirements of the Provisions and engage in illegal value-added telecommunications services within the territory of China by means of authorization of domain names and authorization of registered trademarks, etc. For the purpose of further strengthening relevant administration of foreign investment in the value-added telecommunications services and safeguarding an impartial market environment, the relevant issues are hereby notified as follows:

1.

A foreign investor that invests in the telecommunications services within the territory of China shall, in strict accordance with the Provisions, apply for establishing a foreign-funded telecommunications enterprise and a corresponding license for telecommunications operation. A foreign investor that fails to go through the said procedures subject to relevant laws may not make any investment in the telecommunications business within the territory of China.

A telecommunications enterprise within the territory of China may not lease, shift or sell any license for telecommunications business in any form, or provide resources, places and facilities or any other condition for any foreign investor to engage in any illegal telecommunications operation by any means within the territory of China.

A telecommunications enterprise within the territory of China that lists out of the territory of China shall be subject to the inspection and approval of the information industry competent authorities of the State Council and obtain the approval in accordance with relevant provisions of the State.

2.

The administrative bureau of telecommunications of a province, autonomous region or municipality directly under the State Council shall strengthen the administration of foreign investment in value-added telecommunications services and regulate the cooperation between foreign investors and value-added telecommunications companies within the territory of China in their administration of market access and regulation subject to the requirements as follows:

(1)

The domain name of the Internet: In accordance with the provisions of Subparagraph (3) of Article 13 in the Regulation of the People's Republic of China on Telecommunications, a business operator of telecommunications services shall have the capability or reputation of providing its clients with long-term services. In view that the domain name of the Internet is an significant resource in carrying out relevant business of value-added telecommunications services, as well as a persuasive indicator of the capability or reputation of providing its clients for long-term services, the domain name of the Internet shall be legally held by a business operator of value-add telecommunications services (including any shareholder thereof).

(2)

The registered trademark: In accordance with the provisions of Subparagraph (3) of Article 13 in the Regulation of the People's Republic of China on Telecommunications, a business operator of value-added telecommunications services shall have the capability or reputation of providing its clients with long-term services. In view that the registered trade-mark is an important intangible asset to develop the business of telecommunications services, as well as a performance indicator of providing its clients with long-term services, as a result, the trademark as employed by the business operator of value-added telecommunications services shall be legally held by the business operator itself (any shareholder thereof).

(3)

The setting of sites, servers or other facilities: An entity applying for the business of value-added telecommunications services shall have the necessary sites and facilities, as described in Subparagraph (3) of Article 6 in the Measures for the Administration of the Business License for Telecommunications Services. The sites and facilities referred to in the aforesaid Measures shall be established within the scope as prescribed by the Business License and be consistent with the value-added telecommunications business that the operator has obtained the approval for running.

(4)

The measures for safeguarding the network information: A business operator of value-added telecommunications services shall perfect relevant measures for safeguarding the network and information, establish relevant administrative system for information safety, set up the procedures for handling emergencies of network and information safety and implement the liabilities of information safety in accordance with the Basic Requirements for Safeguarding the Network Information of Value-added Telecommunications Business (YDN126-2005).

3.

The administrative bureau of telecommunications of a province, autonomous region or municipality directly under the Central Government shall further strengthen the examination on the setting of domain names, registered trademarks and servers or other facilities as well as the materials concerning commitment on safeguarding of information in the routine work of inspection and approval of the business license for value-added telecommunications business, and may not give any approval to any entity that fails to observe the said requirements.

4.

The administrative bureau of communications of a province, autonomous region or municipality directly under the Central Government shall organize the company that has obtained a business license for value-added telecommunications services to conduct self-examination and self-correction under the said requirements and carry out the surveillance and examination on the results of self-examination and self-correction as reported by the business operators of value-added telecommunications services. A key inspection shall be performed on the spotlighted companies to which the consumers' attention is attached. In case of any business operator failing to comply with the relevant requirements, it shall be ordered to correct within a time limit. Any entity that fails to correct beyond the time limit may be cancelled of its business license for telecommunications services subject to relevant laws.

If there is any problem in the relevant work, please timely contact this Ministry , and the result of surveillance and examination shall be submitted to this Ministry prior to November 1, 2006.

Contact department: the Administrative Bureau of Telecommunications under the Ministry of Information Industry

Contact Telephone (Fax): 66012301

Email: shcc@mii.gov.cn