Tesla will soon be able to independently operate data center businesses in Shanghai
On October 23, the Ministry of Industry and Information Technology (MIIT) organized a meeting to launch the pilot program for expanding the opening-up of value-added telecommunications services in four regions: Beijing, Shanghai, Hainan, and Shenzhen.
Regarding the pilot programs, I wrote a detailed analysis this April, which you can findĀ here.
Zhang Hongtao, Deputy Director of the Shanghai Municipal Commission of Economy and Informatization, mentioned in an interview with China Daily that Tesla and nine other foreign companies (Trafigura, HSBC Fintech, Siemens Digital Health, Liepin, TDR, E-Link, Unity, and Prologis) have already filed applications to operate VATS in pilot areas.
1. Trafigura
Trafigura is one of the worldās leading independent commodity trading companies, founded in 1993 and headquartered in Singapore.
Main Business: Trafigura focuses on trading and logistics of commodities such as oil, metals, and minerals. Its business spans the purchasing, transportation, storage, and sale of commodities including oil and petroleum products, natural gas, coal, non-ferrous and precious metals. Trafigura is also involved in infrastructure investment, resource extraction, and logistics related to energy and metals.
2. HSBC Fintech
HSBC Fintech is the financial technology arm of HSBC, dedicated to developing and applying innovative fintech solutions.
HSBC Fintech's core business involves using technologies like artificial intelligence, big data, and blockchain to provide innovative digital solutions for banking, financial services, and wealth management. The goal is to enhance the efficiency, security, and inclusiveness of financial services through fintech innovations.
3. Siemens Healthineers Digital Health Technologies
Siemens Healthineers Digital Health Technologies is the digital healthcare arm of Siemens Healthineers.
This division focuses on providing digital health solutions for hospitals and healthcare providers, leveraging technologies such as artificial intelligence, cloud computing, and big data analytics to help healthcare institutions achieve digital transformation. Its key areas include medical imaging, diagnostics, clinical information systems, telemedicine, and patient management platforms. Siemens Healthineers also promotes personalized healthcare and optimizes patient care processes.
4. Liepin
Liepin is a leading online recruitment platform in China, founded in 2011 and headquartered in Beijing.
Liepinās main business is offering online recruitment services, including full-time, part-time, and executive headhunting services. The platform connects employers, headhunters, and job seekers, providing tailored recruitment solutions. Liepin focuses especially on the mid-to-high-end talent market and uses AI technology to improve recruitment matching efficiency. In addition, it offers talent management and career development services for companies.
5. TDR Capital
TDR Capital is a private equity firm headquartered in the UK, founded in 2002.
TDR Capital specializes in mergers and acquisitions and growth investments in medium and large enterprises, with a focus on industries with long-term growth potential such as consumer goods, industrials, services, and financial services. TDR works closely with management teams to drive operational improvements, enhance value, and participate actively in strategic development and operational management.
6. E-Link
E-Link is a Chinese technology company focused on providing internet services and data solutions.
E-Linkās core business includes offering internet access, data processing, cloud computing, IoT solutions, and smart city technologies. The company is dedicated to providing efficient digital solutions for enterprises and governments, helping with digital transformation and smart development. Their services encompass internet data centers (IDC), content distribution networks (CDN), and network and data security management.
7. Unity Technologies
Unity is a leading global real-time 3D development platform company, headquartered in San Francisco, USA, and founded in 2004.
Unity is best known for its 3D engine platform, widely used in video game development, animation, virtual reality (VR), augmented reality (AR), and industries like automotive, architecture, and film. Developers use Unityās engine to create cross-platform interactive 3D and 2D content. Its core business includes providing development tools, engine technology, and services to help companies innovate and commercialize in gaming, film, architecture, and more.
8. GLP (Global Logistic Properties)
GLP is a leading global logistics and industrial infrastructure company, founded in 2009 and headquartered in Singapore.
GLP focuses on providing logistics facilities, warehousing management, and supply chain solutions. Its core business includes developing, investing in, and managing modern logistics real estate and industrial parks. GLP has an extensive logistics network covering North America, Europe, and Asia, serving industries such as e-commerce, retail, manufacturing, and third-party logistics. GLP is also involved in data centers and renewable energy projects.
On April 10, 2024, MIIT issued the "Notice on Conducting Pilot Work for Further Opening Up the Value-Added Telecommunications Services". According to the notice, restrictions on foreign ownership in value-added telecommunications services such as cloud services, internet access, data processing, and app stores will be lifted in pilot areas of Beijing, Shanghai, Hainan, and Shenzhen. As long as the registration location (not necessarily office locations) and service facilities (typically referring to data centres or servers) of foreign businesses are within the pilot areas, they will henceforth be able to offer IDC, IRCS, CDN, EDI, ICP services throughout China.
In todayās meeting, Jin Zhuanglong, Party Secretary and Minister of MIIT, attended the meeting and delivered a speech, while Zhang Yunming, Party member and Vice Minister, presided over the meeting. Ling Ji, Party member and Vice Minister of Commerce and Deputy International Trade Representative, Jin Wei, Standing Committee member of the Beijing Municipal Committee and Vice Mayor, Chen Jie, Party member of the Shanghai Municipal Government and Vice Mayor, Gu Gang, Party member of the Hainan Provincial Government and Vice Governor, and Qin Weizhong, Deputy Secretary of the Shenzhen Municipal Committee and Mayor, also attended the meeting and delivered remarks. Zhao Zhiguo, Chief Engineer of MIIT, was also in attendance.
Jin Zhuanglong emphasized that the Central Committee of the CCP attaches great importance to the opening up of the telecommunications industry. General Secretary Xi Jinping has issued several important directives on the matter, and the Third Plenary Session of the 20th CCP Central Committee has clearly outlined the need to orderly expand the opening of sectors such as telecommunications and the internet. This provides guidance for the high-quality development of the information and communications industry and accelerates the building of China as a strong cyber power.
Since the 18th CCP National Congress, China's telecommunications industry has been actively implementing the decisions of the CCP Central Committee and the State Council. This has resulted in the gradual expansion of the scope and geographical reach of foreign investment in the sector, a lowering of the entry barriers for foreign capital, and the formation of a high-level open economy. These efforts have deepened reciprocal relationships with countries around the world and showcased China as a responsible major power.
As of September 2024, the number of foreign enterprises approved to operate telecommunications services in China has increased to 2,220, with several well-known global companies investing and operating in the country. These efforts have contributed to the prosperity of China's telecom market and supported the global development of the digital economy.
Jin Zhuanglong stressed that the official launch of the pilot programs in Beijing, Shanghai, Hainan, and Shenzhen marks a new phase of opening up for China's telecommunications industry. He called for a deeper understanding and implementation of General Secretary Xi Jinping's directives, the reforms outlined in the Third Plenary Session of the 20th CCP Central Committee, and a continued focus on optimizing the foreign investment environment. It is essential to create a multi-layered security regulatory system, develop replicable and scalable experiences, and inject new momentum into promoting new industrialization, fostering new productive forces, and building a new development pattern.
Jin urged the adoption of a systematic approach, emphasizing sound institutional design, scientific planning, coordination, and precise policy measures to ensure the successful implementation of the opening-up initiatives. He also called for strong risk management, ensuring that businesses assume primary responsibility while promoting high-quality development alongside robust security.
Jin further emphasized the need for demonstration models, attentive listening to the needs of foreign enterprises, enhanced policy guidance, improved service management, and the legal protection of foreign investment rights.
Lastly, he stressed the importance of summarizing the pilot outcomes, exploring new business models, and creating a high-level platform for openness and international cooperation.
At the meeting, MIIT issued formal approval for the pilot programs in Beijing, Shanghai, Hainan, and Shenzhen. Under the pilot scheme, foreign companies will be able to wholly own and operate telecommunications services such as data centers and online data processing and transaction processing in these regions. This will allow foreign enterprises to participate more deeply in Chinaās computing power and cloud services markets, contributing to the growth of China's digital industries.
Officials from 11 departments, including the Ministry of Publicity, the Cyberspace Administration of China, the National Development and Reform Commission, and the Ministry of Commerce, along with officials from the governments of Beijing, Shanghai, Hainan, and Shenzhen, as well as local communications authorities and MIIT's industrial management departments, attended the meeting.
According to the follow-up Q&A released by MIIT, opening internet data centres and their subsidiary "Internet Resource Collaboration Services" in this pilot program is a key component of developing computing power infrastructure. This is the first time such services have been opened to foreign capital beyond Hong Kong and Macau, marking a significant step in opening China's information and communications industry since its accession to the WTO. Expanding the openness of IDCs and other value-added telecommunications services will accelerate the integration and innovation of new technologies such as AI, big data, and computing power across various industries. This will lead to the emergence of more diverse internet information services and new models of the digital economy, further promoting the deep integration of the digital and real economies and injecting strong momentum into the development of new productive forces.
Q&A on the Official Launch of the Pilot Program for Expanding the Opening-Up of Value-Added Telecommunications Services
1. What is the background of the pilot program for expanding the opening-up of value-added telecommunications services?
Answer: Openness is a defining feature of Chinese modernization. The Central Committee of the Communist Party of China (CPC) and the State Council place great importance on the opening up of the telecommunications industry. General Secretary Xi Jinping has called for the expansion of the services sector, including telecommunications, to foreign investment. The 2023 Central Economic Work Conference and the 2024 Government Work Report proposed relaxing market access for service sectors like telecommunications. The Third Plenary Session of the 20th CPC Central Committee outlined the orderly expansion of the telecommunications industry, providing clear direction and fundamental guidance for the further opening of the sector.
MIIT has actively implemented the decisions of the CPC Central Committee and the State Council, based on the new stage of development and guided by new development principles. To promote a higher-level open economy, drive high-quality industry development, and deepen practical international cooperation, MIIT initiated this pilot program. In April 2024, in collaboration with relevant departments, MIIT issued the āNotice on Conducting Pilot Work for Expanding the Opening-Up of Value-Added Telecommunications Services.ā Based on this notice, pilot regions proposed implementation plans, and MIIT, with expert evaluations, approved the formal launch of the pilot programs in qualifying areas.
This pilot program is a further exploration of expanding market openness in telecommunications, showcasing Chinaās commitment to integrating with international high-standard economic and trade rules, stimulating market vitality, enhancing foreign investment confidence, and sharing the dividends of Chinaās digital economy with the world.
2. What are the main achievements of Chinaās telecommunications sector in terms of opening up?
Answer: In recent years, MIIT has actively implemented the directives of the CPC Central Committee and the State Council, promoting high-quality development of the telecommunications industry through high-level openness. First, the scope of business opened to foreign investment has steadily expanded. China initially committed to opening 4 out of 10 value-added telecommunications services upon joining the WTO. Today, 8 categories are open, and the foreign shareholding restrictions have been removed for 4 of them, significantly elevating the level of openness. Second, the geographical reach of openness has expanded. The first pilot for opening value-added telecommunications services to foreign investment started in the Shanghai Free Trade Zone in 2013. In 2018, this policy was extended to all Free Trade Zones, and by 2019, foreign shareholding restrictions for several services, such as call centers, were removed nationwide, releasing policy benefits on a broader scale. Third, the business environment for telecommunications has continuously improved. MIIT has streamlined the approval process by merging foreign investment entry procedures with telecommunications business licensing, simplifying the approval process for value-added services in Free Trade Zones, and fostering a top-tier, market-oriented, rule-of-law-based, and internationalized business environment.
After years of exploration, the opening-up of China's telecommunications industry has deepened, and a high-level pattern of openness is taking shape. By the end of September 2024, the number of foreign enterprises approved to operate telecommunications services in China had increased to 2,220. Many well-known international companies have invested and operated in China, contributing to the prosperity of the Chinese telecom market and promoting global digital economic development.
3. What positive impacts will the pilot program have on the pilot regions and Chinaās information and communications industry?
Answer: The pilot program in Beijing, Shanghai, Hainan, and Shenzhen allows these regions to implement differentiated and phased opening-up based on their unique development goals and resource endowments. This will help achieve the goals of promoting development, reform, and innovation through openness, accelerating the construction and application of information infrastructure, attracting foreign investment, and contributing to high-quality local economic development.
Through the independent expansion of openness, Chinaās information and communications industry will enhance market supply capabilities, offering users more choices and differentiated services. It will also enable deeper participation in global industrial collaboration, providing businesses with a favorable environment for international growth. This high-level opening-up will lay a solid economic foundation for Chinese modernization and allow the world to share the opportunities arising from Chinaās digital economic development.
At the same time, the pilot programās opening of internet data centers (IDCs) and related āInternet Resource Collaboration Servicesā is a major step in developing computing power infrastructure. For the first time, this sector is open to foreign capital beyond Hong Kong and Macau, marking a significant milestone since Chinaās accession to the WTO. Expanding the openness of IDCs and other value-added telecommunications services will accelerate the integration of artificial intelligence, big data, computing power, and other new technologies with various industries. This will lead to the emergence of new models and formats in the digital economy, promoting the deep integration of the digital and real economies, and injecting strong momentum into the development of new productive forces.
4. What steps will MIIT take to further promote the expansion of value-added telecommunications services after the formal launch of the pilot program?
Answer: Moving forward, MIIT will continue to implement the directives of the Third Plenary Session of the 20th CPC Central Committee, promoting the orderly expansion of sectors such as telecommunications. First, MIIT will actively support the pilot regions in accelerating their opening-up work, strengthening policy promotion, optimizing service management, and encouraging foreign enterprises to participate in the pilots, exploring new business models and formats to stimulate market vitality. Second, MIIT will emphasize the role of policy guidance, organizing reviews and evaluations of the pilot programs, identifying best practices and successful cases for promotion, and ensuring the ongoing demonstration effect of these policies. Third, MIIT will timely introduce additional policies as needed, continuously improving the opening-up policy framework, aligning with international high-standard economic and trade rules, optimizing the business environment in telecommunications, and expanding the scope of pilot regions as appropriate.
MIIT's Promotional Article:
1. How Does Further Opening Up the Value-Added Telecommunications Sector to Foreign Investment Benefit Chinese Consumers?
Expanding the opening of the value-added telecommunications sector is conducive to enriching the variety of products and services in China's value-added telecom services market. For consumers, this means gaining more choices and access to higher-quality services. Take the two types of value-added telecom services that are being opened up this time as an example, which are of particular interest to foreign investors: Internet Data Centers (cloud services) and Internet Information Services.
With the development of artificial intelligence, computing power has become a globally scarce strategic resource and a core infrastructure supporting the growth of the digital economy. Opening Internet Data Center services to foreign investment can attract foreign capital to increase investment in Chinaās computing power infrastructure, promoting higher-quality and higher-level development of computing power in China. Consumers can benefit from this development process.
Internet Information Services are an essential part of the digital economy, with their main form being the integration of digital technologies with various industries, such as online finance and online healthcare. With the implementation of innovative applications like 5G, artificial intelligence, and big data, the digital transformation of various sectors of the economy and society will unfold on a broader scale, at deeper levels, and with higher standards, giving rise to many new business models and forms. Expanding the opening of Internet Information Services will help diversify the domestic supply of these services, giving consumers more choices and allowing them to enjoy higher-quality services.
Reaction of Foreign Enterprises:
At present, China's cloud computing market is still in a rapid development phase. In 2023, the market size reached 602 billion yuan, an increase of 32.3% year-on-year, which is 12% higher than the global growth rate, making it highly attractive to foreign investors.
A foreign enterprise engaged in the aviation business operates a big data platform that can analyze operational data from more than 10,000 aircraft belonging to over 100 airlines worldwide. Currently, more than half of the aircraft operated by Chinese airlines come from this company. A relevant business leader told reporters that they are now establishing a data storage, analysis, and application platform for domestic fleets. The expanded foreign investment access policy will provide safer and more efficient solutions for fleet maintenance and operations.
Xu Gang, CEO of Airbus China, stated: "China has now initiated pilot programs for value-added telecom services. This is a significant and tangible benefit for us. We are preparing to apply for a value-added telecom services license in Beijing, which will bring considerable value to our customers in line with the needs of the Chinese market."
A major European telecommunications operator is currently building a data center service system in China. A business leader from the company told reporters that the expanded foreign investment access policy will create new business opportunities for them and broaden their market presence in China.
Li Wenfang, Vice President of Deutsche Telekom (China) Communications Technology Co., Ltd., commented: "This will promote the iteration and upgrade of various products in China's data center industry, building a more comprehensive data center service system. On the other hand, it will also help bring technologically advanced and innovative data center solutions to the international market. Moreover, this provides foreign enterprises with a broader commercial platform and opportunities to further expand their value-added telecom business in China."
Foreign Enterprises Must Comply with China's Data Security Laws and Regulations
In today's surging wave of digitalization, data is not only an important foundation for developing new productive forces but also a key pillar for enhancing national governance capacity and an important reliance for ensuring and improving people's livelihoods. The importance of data security is self-evident. Value-added telecom services involve a large amount of user data, so how can data security and privacy protection be ensured during the open pilot process?
Li Xiaodong, Vice Chairman of the China Internet Society and Director of the Fuxi Think Tank, stated:
"The expansion of value-added telecom services as a pilot for further opening is an important move for China to deepen reform and opening-up, integrate into global economic development, and fulfill its external policy commitments. It will also introduce sufficient competition and bring in advanced technologies and experience. Undoubtedly, value-added telecom services will involve a large amount of user data, and the protection of this data must be prioritized. However, data security for users is not directly related to whether the enterprise is foreign or domestic. Both domestic and foreign enterprises operating in China must comply with Chinese laws and regulations."In 2021, China introduced a series of laws and regulations, including the Data Security Law, the Personal Information Protection Law, and the Regulation on the Protection of Critical Information Infrastructure. Government departments have also accumulated years of experience in managing and governing data security.
Furthermore, it is not just China; major countries and regions worldwide, including the United States and the European Union, also place great importance on data security. The industry has also amassed extensive experience in data governance and security protection. Foreign enterprises entering the value-added telecom sector need to fully understand Chinaās legal requirements and local user needs, and should leverage local knowledge, experience, and talent in the Chinese market to expand their business while ensuring compliance."