China to allow overseas investment in VPNs but Beijing keeps control of the generally discouraged tech

Foreign ownership capped at 50%


After years of restricting the use and ownership of VPNs, Beijing has agreed to let foreign entities hold up to a 50 per cent stake in domestic VPN companies.

China has simultaneously a huge market and strict rules for VPNs as the country's Great Firewall attempts to keep its residents out of what it deems undesirable content and influence, such as Facebook or international news outlets.

And while VPN technology is not illegal per se (it's just not practical for multinationals and other entities), users need a licence to operate one.

Under the new regulations, VPNs must be at least half owned by Chinese firms. The foreign companies will be expected to maintain internet censorship requirements, store data in local servers that authorities can access, and report those who are using censorship-skirting tech.

The move is part of eight policy amendments announced on Monday by the State Council that touch on foreign investors in other sectors like performing arts groups, adult education, the travel industry, non-profits, and telecoms.

The easing of investment restrictions seems counterintuitive given China's recent habit of increasing regulations on everything from data storage to privacy rules to monopolistic behaviour.

However, the VPN measure doesn't necessarily relinquish any control. With at least half of any VPN company owned by Chinese firms, the policy allows for foreign money while subjecting the tech primarily to local laws, and by proxy controls the content Chinese residents have access to. ®

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