Meaning
Telecom operating permits issued by the Ministry of Industry and Information Technology (MIIT) are required to provide value-added telecommunications services in China. The acquisition of a VATS license is mandatory for any enterprise operating cloud services, e-commerce platforms or information service portals. This license is divided into different categories based on the specific service provided, such as hosting, data processing or content delivery.
The requirement applies to both domestic companies and foreign-invested joint ventures, which are subject to foreign equity caps.
Application Requirement
Demonstrating technical capability and data security infrastructure is necessary to secure the regulatory approval. To apply for a VATS license, the company must submit a detailed business plan along with information security assessments. This procedure involves a thorough review by the MIIT, which can take several months to complete.
Foreign Equity
Capital restrictions limit the level of foreign ownership allowed in joint ventures that apply for value-added telecom permits. In most categories of a VATS license, foreign investment is restricted to fifty percent or less. However, exceptions exist within pilot free trade zones where foreign investors can own up to one hundred percent of certain service providers.
Compliance Obligation
Maintaining the permit requires continuous compliance with national data localization and cybersecurity standards. Once a company holds a VATS license, it must submit annual compliance reports and undergo regular technical audits by the regulator. Failing to meet these standards can result in the suspension of the license and the blocking of the company’s online services.
