MIIT Lifts Foreign Investment Cap for E-Commerce Platforms

On 19 June 2015, the Ministry of Industry and Information Technology (“MIIT”) (工业和信息化部) issued the Notice of the Ministry of Industry and Information Technology on Liberalising Foreign Equity Ratio Limitation on Online Data Processing and Transaction Processing Services (Operating E-commerce) 2015 (工业和信息化部关于在放开在线数据处理与交易处理业务(经营类电子商务)外资股权比例限制的通告) (“MIIT Notice 196”). In Notice 196, the MIIT announced that it was extending the liberalised e-commerce policy in force within the China (Shanghai) Pilot Free Trade Zone (Shanghai FTZ) (中国(上海)自由贸易试验区) (that is, removing the foreign shareholding cap for e-commerce platform services) nationwide.

Under the Circular of the Ministry of Information Industry on the Readjustment of the Classification Catalogue of Telecommunication Services, which was issued by the MIIT and made effective 1 April 2003, online data processing and transaction processing services are defined as "online data processing and transaction/affair processing services provided to users through communication networks, using various kinds of data and affair/transaction processing application platforms". These include:

  • Banking services;
  • Stock trading platforms;
  • Ticket purchasing platforms (for example for cinema tickets);
  • Online auction sites; and
  • Electronic payment processing sites.

The services provided by various well-known e-commerce operators, such as Taobao.com, yhd.com, and JD.com, would all fall within this definition. Other types of e-commerce, for example taxi hailing apps such as Uber, would not fall within the scope of Notice 196.

Action items

The immediate impact of Notice 196 is that any foreign investor interested in engaging in the liberalised business may now do so without a Chinese partner, without needing to incorporate in the Shanghai FTZ. GC in companies already operating with a Chinese partner may wish to alert colleagues to the fact of the change, and consider whether to continue the partnership on the same terms in the light of the removal of the foreign investment cap.