China New Pilot Program Removes Foreign Ownership Caps on Telecom and Data Centers

China officially launched a new pilot program that allows 100 percent foreign ownership of data centers and value-added telecom services in Beijing, Shanghai, Hainan, and Shenzhen. This marks a significant shift in tech-sector investment opportunities for multinational companies. Over 10 foreign companies, including Tesla and Apple, have shown interest in joining the pilot.

In a strategic move to attract foreign investment and strengthen its tech infrastructure, China’s Ministry of Industry and Information Technology (MIIT) has officially launched a pilot program to remove the longstanding 50 percent foreign ownership cap on data centers and other value-added telecom services (VATS), allowing for full foreign ownership in the sector.

First announced in April 2024, this program will be rolled out in four major hubs: Beijing, Shanghai, Hainan, and Shenzhen. The relaxation of the foreign ownership cap marks a significant shift in China’s approach to tech-sector investment, providing international companies with unprecedented opportunities to own and operate data centers in one of the world’s largest digital markets.

This policy update is a response to mounting global demand for data center services fueled by advancements in generative AI and cloud computing. By opening its borders to full foreign ownership, China is aiming to attract multinational tech giants eager to tap into its market potential.

For foreign investors, the opportunity to establish a stronger presence in China’s digital economy could unlock substantial growth, making this pilot program a potential turning point for both China’s competitive position in the global tech arena and the scale of foreign direct investment (FDI) in the country.

Pilot Program FAQs

Why is China launching this pilot program to allow 100 percent foreign ownership in data centers and other value-added telecom services?

This pilot program is part of China’s broader initiative to open its economy further, align with global trade standards, and promote high-quality growth in its telecom and digital infrastructure.

By allowing 100 percent foreign ownership beyond Hong Kong and Macao for the first time in these sectors, China aims to strengthen global cooperation, attract innovative solutions, and foster an ecosystem where both local and international players contribute to the advancement of its digital economy.

Which cities are included in the pilot, and what makes them suitable for this program?

The program will roll out in Beijing, Shanghai, Hainan, and Shenzhen—four cities recognized for their strong digital infrastructure, strategic location, and focus on innovation.

Each city will pursue its approach to implementing the pilot, reflecting its unique strengths. For example, Beijing’s role as a tech hub and Shanghai’s position as a financial and trade center will offer varied opportunities for investors to explore different facets of telecom and data services.

How has China’s approach to opening its telecom sector evolved, and what has been achieved so far?

China has taken a gradual approach to telecom sector openness. After joining the WTO, it initially allowed foreign ownership in four out of ten designated telecom services, but over time, China expanded this to eight services and lifted foreign ownership limits on half of them.

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Beginning in 2013 with pilot programs in Shanghai’s Free Trade Zone, these policies have progressively broadened nationwide, attracting 2,220 foreign-invested companies as of September 2024. This stepwise expansion has ensured sustainable growth while adapting regulatory frameworks to international standards.

What potential impact will this program have on China’s telecom and data center sectors?

The program is expected to enhance service options and competition, providing users with more diverse, high-quality, and specialized services.

For the telecom sector, this openness will drive innovation and elevate China’s capacity for integrating advanced digital technologies.

The data center expansion, in particular, will boost support for fields like artificial intelligence, big data, and cloud computing, reinforcing China’s digital infrastructure and strengthening its role in global tech development.

What new opportunities does this pilot program open for foreign investors?

Foreign investors now have direct access to China’s data center infrastructure and the Internet resource coordination sector—key components of the nation’s digital backbone.

This access allows investors to enter high-demand areas such as cloud computing, AI, and big data, tapping into a thriving market and contributing to a rapidly expanding digital economy. By removing ownership caps in these areas, China offers an environment conducive to innovation, providing foreign investors with meaningful opportunities in one of the world’s most dynamic digital landscapes.

Background and context of the pilot program

China’s recent pilot program to ease foreign ownership restrictions in VATS is the latest in a series of strategic policy shifts aimed at boosting foreign participation and enhancing market efficiency in the telecom sector. This move aligns with China’s overarching development strategy of greater openness and dual circulation, integrating both domestic and international markets.

The program was first outlined in an April 2024 Circular by the MIIT, aiming to further liberalize specific VATS sectors—including Internet Data Centers (IDC), Content Delivery Networks (CDN), and Internet Service Providers (ISP)—in the four pilot regions.

The decision to open this sector follows directives from key national events, including the 20th National Congress of the Communist Party of China (CPC), where leaders emphasized deepening market integration with global economic standards and removing access barriers to stimulate competition. This shift was reiterated in President Xi Jinping’s speech in September 2023, which underscored the importance of broadening access in key industries such as telecommunications, tourism, law, and professional services. Additionally, during the 2023 Central Economic Work Conference and in the 2024 Government Work Report, leaders highlighted the importance of loosening restrictions in service sectors, including telecommunications, to attract investment, foster innovation, and drive high-quality growth.

Historically, foreign ownership in China’s telecom industry was capped at 50 percent, with limitations covering most VATS areas. Over the years, these constraints were gradually relaxed, beginning with the establishment of pilot zones like the Shanghai Free Trade Zone in 2013 and subsequent expansions to other free trade zones nationwide. By progressively easing restrictions, China has aimed to align with international standards while carefully managing the sector’s security and stability.

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The current pilot program’s rollout in select regions highlights China’s commitment to moving toward more open and transparent market practices. By allowing 100 percent foreign ownership in selected telecom sectors, the initiative signals a significant regulatory shift and offers substantial new opportunities for foreign investors. This pilot program will also enable local governments in each designated area to develop tailored implementation strategies.

As this pilot progresses, for foreign investors, this is an opportunity to engage with China’s growing telecom market and leverage the resources and support offered within these key pilot regions.

Opportunities for foreign investors in China’s telecom and data centers economy

China’s recent pilot program to lift the 50 percent foreign ownership cap on data centers and other VATS sectors in select regions marks a transformative opportunity for foreign investors looking to establish a deeper foothold in the country’s digital economy. Some critical areas where this policy shift may unlock new potential include the following:

• Direct market access and operational control of data centers: For the first time, foreign investors can now fully own data center operations in China’s most lucrative regions, offering them unprecedented market access and the ability to manage operations with greater flexibility. This removal of the ownership cap enables multinational tech firms to establish and operate data centers independently, eliminating prior restrictions that often led to joint ventures. With control over strategic decisions and technology deployments, foreign companies can now tailor their services to meet China’s high standards for data efficiency and scalability.
• Expansion of cloud and AI Infrastructure: The booming demand for generative AI and cloud computing across China is creating a heightened need for advanced data center capabilities. Multinational companies with cloud expertise, such as Amazon Web Services and Google Cloud, can now expand their services to meet the needs of China’s tech sector, which is looking to leverage foreign innovation in AI, machine learning, and big data analytics. With the ownership cap lifted, foreign firms are well-positioned to capture a substantial share of the growing market for data storage and processing, especially as local businesses seek cutting-edge cloud solutions.
• Innovation in data management and green technology: China’s digital infrastructure goals increasingly prioritize energy-efficient and sustainable data centers, aligning with global trends toward green technology. Foreign companies with expertise in renewable energy integration, liquid cooling, and energy-efficient data center design can play a pivotal role in advancing these goals. Data centers typically demand intensive energy use, and international firms that bring innovations in sustainability can gain a competitive edge, appealing to local governments that prioritize low-carbon footprints in their projects.
• Supply chain and ecosystem development: The pilot program also indirectly creates downstream opportunities for foreign suppliers of data center infrastructure, including hardware, network components, and software. Companies specializing in data center solutions—such as high-performance servers, storage arrays, and networking equipment—will find demand as China scales up its data infrastructure. Beyond physical infrastructure, there is also scope for software developers focused on data center management, cybersecurity, and cloud-native applications to provide support for data centers in China’s digital landscape.
• Increasing demand for digital services and data localization: China’s policy environment increasingly emphasizes data sovereignty and localization. The growing requirements for localized data storage solutions for businesses in regulated industries—such as finance, healthcare, and e-commerce—create a unique niche that foreign data center operators can address with on-the-ground facilities in China. These services, now able to be owned and operated directly by foreign companies, can meet the needs of multinationals and Chinese enterprises alike seeking compliant, localized data solutions.

As this pilot program unfolds, it may serve as a precursor to a broader liberalization of the tech and telecommunications sector, potentially reshaping the competitive landscape and boosting foreign direct investment in China’s data-driven economy. For global players, these changes are not only a chance to participate in one of the largest digital economies in the world but also to contribute actively to China’s aspirations in AI, cloud, and green data technology.

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