Dialing In or Head in the Clouds? China’s Prospective Opening of its ICT Sector

Dr. Jean-Marc F. Blanchard's picture

There are many sectors in China that are closed or highly-restricted as far as foreign direct investment (FDI) is concerned. Drivers of this include political nationalism, a desire to protect domestic firms, and concerns about economic independence. The Information and Communication Technology (ICT) sector, or parts of it, has long been an area unwelcome to inward FDI (IFDI), not just because of the aforementioned reasons, but also because of national and regime security concerns. Regarding this, IFDI in the sector raises anxieties because it potentially allows foreign access to today’s “gold” (i.e., data) and potentially boosts the volume of external information entering China. When China promised to open its telecommunication sector pursuant to its World Trade Organization (WTO) accession agreements and many years later when the Shanghai Pilot Free Trade Zone was created, there were hopes for ICT sector liberalization, most which never materialized. Recently, though, there have been developments which are spurring some to query if China might truly open its ICT sector. Specifically, in January 2019, China’s Ministry of Industry and Information Technology granted licenses to the United Kingdom’s BT Group that would allow it to compete with Chinese domestic telecoms firms nationwide, market directly to Chinese customers, and offer internet and VPN services. On top of this, in late March, Chinese Premier Li Keqiang told the leaders of foreign multinational corporations (MNCs) that “China will eventually open up its rapidly growing domestic market for cloud computing services.” While these are positive signs, they are but a few. Moreover, it remains to be seen if promises will be fulfilled or foreign MNCs will have the chance to fully enjoy whatever rights/licenses they obtain. Like the past, the future will be shaped by China’s need for competition, technological upgrading, and the goodwill of foreign investors and their home governments.