China issues new Online Publication Rule

China government issues a new Online Publication Rule, which potentially leaves a room for foreign companies to participate into online publication business.
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China General Administration for Press, Publication, Radio and Television (GAPPRT) and the Ministry for Industry and Information Technology (MIIT) jointly issued the Regulation on Online Publication Service Administration (the Online Publication Regulation) which will come into effect on 10 March 2016.  The Online Publication Regulation, which reflects the fast development of online publication business, will replace the older Provisional Regulation on Online Publication Administration (the Provisional Regulation) which was published in 2002.

Scope of application

The scope of application of the Online Publication Regulation is defined as “online publication services,” which slightly differs from the definition under the Provisional Regulation, that is “Internet publication activities.”  Although neither the term “online publication services” nor the term “Internet publication activities” is clearly defined, the change of the wording suggests:

  1. from the aspect of communicating media, the scope of application is expanded from “internet” only to include other public networks, such as mobile networks, which are increasingly popular in China, and
  2. from the aspect of “business activities,” the definition under the Online Publication Regulation suggests that it regulates the services relating to publishing third party contents rather than the business of providing self-generated content.  The latter will be considered an internet content provision business and not an online publication business.

Strict approval system

According to the Online Publication Regulation, the establishment of online publisher is subject to an approval system.  The government encourages traditional media companies to expand their business online and set out lower requirements on them.  The requirements on the establishment of online publishers by other investors are relatively onerous.

The Online Publication Regulation requires that online publishers establish internal censorship system to examine the content published via their services. In particular, online publishers are required to have designated person responsible for censoring and editing content to be published.

Moreover, “sensitive contents” (undefined) need to be filed with the government and the online games need to be approved by the government before they are allowed to be published online.

Foreign investment restrictions

In line with the restrictions under the Foreign Investment Catalogue, foreign investors are prohibited from directly investing in online publication business in China.  In other words, foreign-invested companies, either WFOEs or joint ventures, are not allowed to directly enter into online publication business.

However, the Online Publication Regulation, for the first time, explicitly permits foreign companies and foreign-invested companies to participate in online publication business, on a project basis, in collaboration with Chinese companies, which is also subject to an approval system.  The Online Publication Regulation does not elaborate how foreign companies and foreign-invested companies may collaborate with Chinese companies.  Likely, foreign participants may provide content, technical support, marketing services but the Chinese companies will have the ultimate power to censor the content to be published.

Publication by using offshore servers

The Online Publication Regulation requires that the servers used for providing online publication services be located within China.  It is reported that some online publishers have already been moving their servers into China.

However, strictly speaking, said requirements apply only to online publishers duly established in China.  The operation of an offshore online publishing business which potentially faces customers from China remains still a grey area.

This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document. Simmons & Simmons is registered in China as a foreign law firm. We are permitted by Chinese regulations to provide information on the impact of the Chinese legal environment and also to provide a range of other services. We are not admitted to practise in China and cannot, and do not purport to, provide Chinese legal services. We are, however, able to co-ordinate with local counsel to issue a formal legal opinion should this be required.