NDRC Circulates Draft Negative List for Internet Market Access

On 21 October 2016, the National Development and Reform Commission (“NDRC”) circulated for public comment the Negative List for Internet Market Access (“First Batch, Pilot Version”).

The draft marks a partial next step in China’s evolving regulatory system for market access. Under the new system, businesses only need to obtain pre-establishment regulatory clearance if they seek to operate in certain industrial sectors subject to special management measures, which will be set forth in two lists commonly referred to as negative lists:

  • A negative list for market access.  This will apply equally to market access for both domestic and foreign investors.
  • A negative list for foreign investment.  This will set out additional limitations that apply only to foreign investors.

Chinese regulators are still in the process of compiling these lists. The final version of the draft negative list for internet market access will comprise the internet-related sections of the negative list for market access.

The draft is essentially a compilation of those internet-related market access restrictions scattered under a variety of existing legislation, for example:

  • A telecoms licence is required for providing telecoms services (Measures for the Administration of Telecommunication Business Operation Licence 2009).
  • A network taxi reservations operating licence is required for operating an online tax reservations platform (Interim Administrative Measures for the Business of Online Taxi Booking Services 2016).

Market Reaction

Ren Qing, Partner, Global Law Offices

"By compiling the prohibitions and restrictions that are already in effect in China, this list enhances the transparency of internet market access. Another message that the list conveys is that restrictions in certain sectors such as online taxi reservations, internet-based audio-video program services and internet information search services, which are now contained in department rules, will be codified into laws or administrative regulations. This means these restrictions will not be liberalised in the near future."

Action Items

As the current draft represents a compilation of internet-related market access restrictions found in existing rules, it does not offer new opportunities to investors or require urgent action on the part of counsel for telecoms or internet-related businesses. However, General Counsels for companies in these businesses should monitor this sector negative list to see if the government will impose any additional requirements in the final version.