China has announced new guidelines that allow foreign ownership of up to 50% for each VPN (Virtual Private Network) provider in the country, as part of efforts to boost foreign direct investment (FDI) rates. The move is part of a larger set of measures that include fiscal and tax support for foreign firms, establishment of research and development centers, and enhanced intellectual property protections.
The decision to increase foreign ownership in VPN services has raised suspicions within the industry, considering China’s strict control over businesses and the government’s history of tech company governance. VPNs, while not illegal, require government authorization to operate, and unauthorized VPN software is banned by the Chinese Communist Party (CCP).
The guidelines are seen as a response to the economic downturn and the decline in FDI rates. Geopolitical tensions and high government control have contributed to foreign investors’ hesitation to invest in China. FDI into China fell by 2.7% year on year from January to June.
These measures could also be a reaction to the US investment ban, which restricts US investments in critical technology sectors in China. The move may help counterbalance the effects of the ban.
Despite the announcement, China’s strict regulations on VPN services remain. VPN companies are required to be based in China, keep their servers within the country, log users’ activities, and provide those records to the CCP when requested. This level of government control contradicts the principles of data privacy, security, and anonymity that VPN services are intended to provide.
The Chinese government’s history of tech governance and data control raises concerns among VPN providers and consumers. State-owned companies in China are known to share data with the government, leading to censorship and surveillance.
The move to increase foreign ownership in VPN services could be seen as an attempt to attract foreign investment and boost the economy while navigating increasing international pressures and economic challenges. However, the government’s tight grip on technology and data governance remains a significant concern for both businesses and individuals seeking data privacy and security.
