Telecoms and Value-Added Telecom Services in China

What value-added telecom services in China are and when you need a licence

Value-added telecom services in China (VATS) are communication and information services provided over public networks, as opposed to the basic telecom services of operating the networks themselves. The Telecommunications Regulations, first issued in 2000 and last revised in 2016, require anyone operating telecom business to obtain a licence from the Ministry of Industry and Information Technology (MIIT) or its provincial communications administrations. Which services count as VATS is defined by the Telecommunications Business Classification Catalogue, issued in 2015 and amended in 2019, which divides VATS into two classes and ten categories.

In practice, VATS licensing reaches far beyond traditional telecom companies. Running an e-commerce marketplace, a commercial website or app, a SaaS platform, a cloud hosting service, a content delivery network or a call centre for third parties can each require a VATS licence. For foreign investors the licence matters for two reasons: operating without one is unlawful, and the licence is where China's foreign ownership limits in the digital economy actually bite.

Basic telecom services, such as fixed and mobile network operation, international gateways and satellite services, are a separate category. They remain dominated by state-owned carriers and require Chinese control, as explained later on this page.

The legal framework is older than the services it now governs. A comprehensive Telecommunications Law has been discussed for many years and appears as a preparatory item in the NPC Standing Committee's 2026 legislative plan, but it has not been enacted, so value-added telecom services in China are still regulated through the 2000 regulations, MIIT departmental rules, the catalogue and the foreign investment negative list, supplemented by cybersecurity, data and content legislation. Regulators fill gaps through notices, pilots and campaigns, which means practice can move faster than the formal rules.

The ten VATS categories

The catalogue is the starting point for any licensing analysis. Each licence lists the specific categories and geographic scope the holder may operate, and providing a service outside those categories is treated as unlicensed operation.

Classification is not always obvious. A SaaS product may be treated as B21 online data processing, B25 information services or B11 if it provides compute resources. A marketplace that hosts third-party sellers is B21 e-commerce, while a brand's own online shop selling its own goods is usually not VATS at all. Getting the classification right determines both the licence needed and the permitted foreign ownership.

Foreign ownership rules for value-added telecom services in China

The current foreign investment negative list, the 2024 edition in force from 1 November 2024 (NDRC explanation), caps foreign ownership of value-added telecom services in China at 50%, except for e-commerce, domestic multi-party communications, store-and-forward and call centre services, which are open to full foreign ownership. Basic telecom services must be controlled by Chinese investors. Internet news, online publishing, online audiovisual programmes, internet culture operations (other than music) and internet public information dissemination are prohibited to foreign investment, regardless of the telecom licence.

Foreign-invested telecom enterprises (FITEs) are also governed by the Administrative Provisions on Foreign-Invested Telecommunications Enterprises. Revisions in force from 1 May 2022 removed the long-standing requirement that the main foreign investor have a good track record in operating telecom business, simplifying approvals for foreign investors in VATS. Hong Kong and Macau service providers benefit from preferential treatment in some categories under CEPA.

The 2024 opening pilot

On 10 April 2024 MIIT announced a pilot that lifts foreign ownership caps for IDC, CDN, ISP, online data processing and transaction processing, and information services (limited to information publishing platforms and delivery services and information protection and processing services) in four areas: the Beijing comprehensive demonstration zone for opening up the services industry, the Lingang New Area of the Shanghai pilot free trade zone and the Pudong leading area, the Hainan Free Trade Port and the Shenzhen pilot demonstration zone. Internet news, online publishing, online audiovisual programmes and internet culture operations remain excluded. The pilot also removed the cap on certain data processing services relevant to IoT platforms.

The first 13 foreign-invested companies received pilot approvals in February 2025. According to Xinhua, by June 2026 a total of 166 foreign-invested companies had been approved, and more than 3,100 foreign-invested telecom enterprises were operating nationwide. The 2026 government work report called for further VATS opening pilots, so investors should check the current scope of the pilot before structuring.

Worked example: a foreign SaaS provider

Consider a European provider of a collaboration platform that wants to host its service in China for Chinese enterprise customers. Hosting the platform on its own servers would involve IDC and, depending on functionality, online data processing (B21) or information services (B25). Outside a pilot zone, a wholly foreign-owned subsidiary could not hold those licences. The provider could form a joint venture at no more than 50%, establish a company in a pilot zone and apply for pilot approval, or deploy through a licensed Chinese cloud operator that hosts and operates the instance.

Each option has different implications for control, data access by the overseas parent, revenue flows, tax and exit. A joint venture gives a local partner rights that can be hard to unwind; a pilot company offers control but ties the business to the pilot conditions; and a cloud partnership is quick to launch but leaves service continuity dependent on the partner. For value-added telecom services in China, the right answer depends as much on data governance and customer expectations as on ownership.

Licensing process and conditions

VATS licences are issued under the Telecommunications Business Licensing Administrative Measures, last comprehensively revised in 2017. A licence covering a single province is issued by the provincial communications administration; a licence covering multiple provinces or the whole country is issued by MIIT. Applications are made through MIIT's online licensing system.

Core conditions

• The applicant must be a company lawfully established in China, with shareholding that complies with foreign ownership rules.
• Minimum registered capital is generally RMB 1 million for a provincial licence and RMB 10 million for a cross-regional or nationwide licence.
• The applicant needs suitable premises, staff and technical capability, and must commit to network and information security measures.
• For FITEs, MIIT reviews the foreign investors and, for pilot applications, the pilot conditions.
• Some categories require additional technical and security assessments, for example IDC and CDN, which involve infrastructure and resource checks.

Typical sequence

1. Classify each service against the catalogue and confirm the ownership position.
2. Establish or restructure the operating company, including capital and shareholding.
3. Prepare the application, security and technical plans, and service terms.
4. Submit and respond to questions; timing depends on category and regulator workload.
5. After grant, complete domain, ICP filing, app filing and network security grading steps, and submit annual reports and maintain compliance through the licence term.

Separately, non-commercial websites need an ICP filing rather than a licence, and since 2023 apps and mini-programmes that provide internet information services must be filed with MIIT through their hosting or distribution providers.

Changes of control and transactions

Licences are not freely transferable. A change in shareholders of a licence holder, a merger, a change in registered capital or a move of the operating entity generally requires approval or a record update with the licensing authority, and for foreign-invested telecom enterprises the foreign ownership rules are re-tested at that point. Acquirers should check whether the target's licence categories match its actual business, whether pilot approvals depend on the target staying in a pilot zone, and whether the buyer's own ownership chain will keep the target within the caps. Closing conditions and long-stop dates should reflect the time needed for these steps, and merger control may also apply where turnover thresholds are met.

Data, security and content obligations for VATS operators

Holding a licence brings continuing obligations. VATS operators must verify users' real identities for relevant services, keep logs, cooperate with lawful investigations, and maintain content moderation where users can publish information. They must implement the multi-level protection scheme for network security and, where designated as critical information infrastructure operators, store personal information and important data within China and pass security assessments before exporting it.

The amended Cybersecurity Law, in force from 1 January 2026, raises penalties, and the Network Data Security Management Regulations, in force from 1 January 2025, add duties for platforms and data handlers. Cross-border connectivity is restricted: international private lines and cross-border VPN services may only be provided through licensed basic telecom operators, and unapproved VPNs are prohibited. Multinationals usually obtain cross-border connectivity through licensed carriers for internal business use. See our cross-border data transfer page for the data export routes.

Content rules apply through the licence and the CAC's internet information rules. A VATS licence does not authorise news, publishing, audiovisual or internet culture activities, which need separate permits and are closed to foreign investment.

Hardware used in networks has its own regime. Telecom terminal equipment, radio transmission equipment and equipment connected to public networks generally require network access licensing or type approval from MIIT before sale or use, and critical network equipment requires security certification or testing. Operators building infrastructure for value-added telecom services in China should allow for these approvals when sourcing equipment, particularly where suppliers are subject to foreign export controls that could affect spare parts and support.

Structuring options and basic telecom limits

Foreign businesses usually choose among four approaches to value-added telecom services in China:

• Wholly foreign-owned company in an open category, such as an e-commerce platform under B21 or a call centre under B24.
• Pilot zone company holding IDC, CDN, ISP or other opened services without the 50% cap.
• Joint venture with a Chinese partner holding at least 50%, which suits categories still capped outside pilots.
• Commercial partnership with a licensed Chinese operator, common for cloud and SaaS, where the partner holds the licence and operates the service under contract.

Offshore-listed Chinese internet groups have often used VIE structures to hold licences in domestic companies controlled by contract. That remains possible but requires disclosure under CSRC overseas listing filing rules, and it carries regulatory and enforcement risks; see red-chip and VIE structures.

Basic telecom services require Chinese control, with foreign ownership limited accordingly, and licences are granted sparingly. Mobile virtual network operation was opened to private Chinese companies and has been formalised as a commercial service, but foreign participation remains limited. Satellite communications, including emerging direct-to-device services, are tightly controlled; see our space page.

Common mistakes and a pre-launch checklist

• Launching a marketplace or app under a filing when the business needs a commercial ICP or e-commerce licence.
• Assuming a licence held by a related company covers the operating entity.
• Adding a feature, such as user-generated video or live streaming, that moves the service into a restricted category.
• Using a partner's licence without contractual control over data, content and service continuity.
• Overlooking licence changes on M&A, which may need MIIT approval or a licence update when shareholders change.

Before launch, confirm the catalogue classification for each feature, the ownership position, the licensing authority and geography, the ICP and app filing route, the network security grading level, data export arrangements and content permits. A one-page licence map maintained by legal and product teams is the simplest control. Groups planning data centres and new infrastructure investments should also review energy, land and computing policy.

How TRW & Co helps with value-added telecom services in China

We help foreign telecom, cloud, software and platform businesses plan their China operations around the VATS framework. We map services against the licensing catalogue at a general information level, design cross-border holding and partnership structures, negotiate joint venture, cloud partnership and international service agreements, advise on non-PRC law aspects of acquisitions and financing, and coordinate data transfer programmes across jurisdictions. Where PRC legal opinions, licence applications to MIIT, regulatory filings or representation in Chinese courts or arbitration are required, we work with licensed PRC law firms and manage the overall project. See our TMT in China and technology pages, or contact us.