China: Cloud Computing In China: New Rules Will Increase Regulatory Oversight

Last Updated: 20 January 2017
Article by Barbara Li


On 24 November 2016, China's Ministry of Industry and Information Technology (MIIT) issued a draft "Notice on Regulating Cloud Computing Service Market Business Activities" (Draft Notice). The public consultation period is open for one month and closes on 24 December 2016. Cloud computing is receiving a great deal of attention within China's information technology industry at present, and is a particular focus for businesses engaged in providing IT and telecom products and services in both the public and private sectors. However, at the moment provisions relating to cloud computing services are currently scattered among policy guidelines, technical regulation and industry standards. The purpose of the Draft Notice, therefore, is to enhance regulatory oversight and control over cloud computing services by imposing certain obligations on cloud computing service operators.

Key aspects of the Draft Notice

1. Internet Data Centre Value Added Telecom Services Permit (IDC VATS)

The Draft Notice clarifies that operators of cloud computing services which fall within "Internet-based resources collaboration services" must apply for and obtain an IDC VATS permit. Internet-based resources collaboration services is added as a sub-category of "Internet Data Centre" (IDC) services under the 2015 Telecom Services Catalogue. It covers the cloud computing technology and services that are based on data center facilities, that can be realized through the flexible deployment, sharing and collaboration of resources via the Internet.

It is well-known that cloud computing services are classified into three subcategories: Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS). On a plain reading, it seems that the Draft Notice refers to IaaS and PaaS types of cloud computing services, which - based on the nature of the services - fall within the description of Internet-based resources collaboration service.

It is arguably the case that SaaS may fall within the same category. If the final Notice makes clear that operators of all sub-categories of cloud computing services must apply for an IDC VATS permit, this could be of significant concern to SaaS providers. This may be particularly so because:

  • the application thresholds for IDC VATS permit are quite high; and
  • it could be impractical for SaaS providers to meet the site, facility and experience requirements (given the nature of SaaS is that it provides non-physical delivery of software services).

2. Restrictions in Technical Cooperation

The Draft Notice puts strict restrictions on technical cooperation in cloud computing services where the operator's partners do not have IDC VATS permits, such as the following:

  • a cloud computing service operator:

    • and its partner(s) must report the proposed cooperation in writing to the telecom authorities;
    • is not permitted to lease, lend, or transfer any telecom permits in any way, and nor is it permitted to provide funds, sites, facilities and other assistance to partners who illegally operate cloud computing services in China;
    • shall not provide services under the a partner's trademarks and brands or provide a partner with users' personal data or network data illegally; and
  • partners must not sign a service agreement with users directly.

These restrictions could have a potential impact on foreign investors because China has made no specific commitments to open up the IDC service market when it joined the WTO. As of today, only Hong Kong and Macau investors can apply for an IDC VATS permit (with a cap on foreign shareholding at 50%), and it has proved very difficult for foreign invested entities to obtain an IDC VATS permit.

The Draft Notice signposts the Chinese government's intention to crack down on the practice of licence borrowing and any other behaviors that circumvent prescribed requirements. Foreign investors must therefore carefully consider the new requirements proposed by the Draft Notice in any technical cooperation with their Chinese IDC licence holders.

3. Technical and Industrial Requirements

The Draft Notice requires that cloud computing service platforms must be situated within the territory of China. When connected with an overseas network, the server of a cloud computing service must use MIIT-approved international network gateway channels (rather than a private network, virtual private network or other channels). The Draft Notice further requires that connection service providers of a cloud computing service, including network infrastructure facilities, bandwidth and IP address service providers, must all be licensed telecom services providers. Additionally, telecom service providers must not provide connection services to persons/entities who do not, in providing cloud computing services, have a corresponding VATS permit.

Implication to cloud computing business

The issuance of the Draft Notice is a strong indication of the Chinese government's desire to strengthen the regulation of cloud computing services following the promulgation of the Cyber Security Law. In particular when faced to the upcoming restrictions in technical cooperation, the IDC VATS license holders and their partners, especially the foreign partners, must carefully review of their practice in China to avoid being punished by authorities or being ordered to suspend operations.

Besides that, the foreign investors shall note that IDC VATS permit is not opened up to foreign invested enterprises except for the qualified Hong Kong and Macau invested joint ventures where 1) the Hong Kong and Macau investors shall qualify under the Closer Economic Partnership Arrangements between the Mainland and Hong Kong/Macau, 2) the cap on foreign investment is fixed at 50%, 3) the foreign investors shall obtain the Opinion on the Examination and Approval of Foreign Invested Telecom Enterprise Project from MIIT authorities prior to the application for IDC VATS permit.

Because the Draft Notice is fairly generic, subsequent amendments or interpretations could well be more practical following the further implementing rules of the Cyber Security Law. We will continue to keep close watch over such regulatory developments in China and will provide an update as developments occur.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.