China: Internet News Information Service Industry Reshuffle?

Last Updated: 26 May 2017
Article by Han Kun Law Offices

On May 2, 2017, the Cyberspace Administration of Chinapromulgated the Administrative Provisions for Internet News Information Services("Provisions"), which will come into effect on June 1, 2017 and replace the existing Regulations for the Administration of Internet News Information Services("Regulations") which was promulgated in 2005.

The Provisions preserve a part of the Regulations, while making significant changes with respect to both structure and content.  This article will provide a brief analysis of the Provisions, primarily with respect to businesses subject to licensing requirements, entry requirements and the relevant responsibilities of license subjects. 

Businesses required to obtain an Internet News Information Service License

The core requirements of the Provisions are identical to those of the Regulations, which are that operators engaging in Internet news information services must obtain an Internet News Information Service License, and be subject to the supervision and management of the Cyberspace Administration of China.

Compared to with the Regulations, the Provisions more clearly define Internet news information services, mainly from the following three aspects:

  1. Content: The Provisions clearly explain that "news information" refers to reports and commentary related to political, economic, military, diplomatic and other social and public affairs and reports on social emergencies (which means that general sports, culture, science and technology news and news of a commercial nature would not be regarded as "news information" under the Provisions);
  2. Communication channels: The Provisions clearly provide that news information services are provided to the public through channels based on the technology and developments of the times, including Internet sites, apps, forums, blogs, micro-blogs, public accounts, instant messaging tools and network-based broadcasts; and
  3. Form of services: Depending on the service provider's specific work, the Provisions further classify Internet news information services into three categories: Internet news information editing and publishing services, Internet news information reposting services and Internet news information dissemination platform services.

Based on the definitions and understandings above, operators who engages in Internet news information editing and publishing services, reposting services or dissemination platform services such as Weibo, WeChat and network-based broadcasting platforms are required to obtain an Internet NewsInformation Service License in accordance with the Provisions, although the existing Regulations would not currently require obtaining a license.  Based upon our past experience, it would be quite difficult for some small service providers to obtain an Internet News Information Service License, if they have not yet done so.  Failure to obtain a license could result in an order to cease operating.    

Qualifications for Obtaining an Internet News Information Service License

With respect to the entry of foreign capital, the Provisions preserve the rules found in the Regulations which provide that an Internet news information service entity cannot be established in the form of a Sino-foreign joint venture, a Sino-foreign cooperative venture or a wholly foreign-invested enterprise. Where an Internet news information service entity intends to cooperate with a Sino-foreign joint venture, Sino-foreign cooperative venture or wholly foreign-invested enterprise, the entity should report to the competent authorities for a security assessment. In addition, the Provisions also require the person in charge and the editor-in-chief of Internet news information service entities to be PRC citizens. It is worth noting that the Provisions for the first time require Internet news information service providers to separate editing services from other business operations and clearly provide that non-public capital cannot be used to operate Internet news information editing services. Besides this, the Provisions also set forth that only news entities (including its controlled entities) or entities controlled by the news and publicity department are eligible to apply for an Internet News Information Editing and Publishing Service License. To some extent, these provisions reflect the government's strengthened management of the Internet news editing business and of the content of news information.

The Regulations have clear requirements regarding registered capital and the number of employees for applicants of the Internet News Information Service License. For example, Internet news information service units established by non-news entities must have registered capital of no less than RMB 10 million and more than 10 full-time news editors. The Provisions delete such requirements and only generally require that applicants should have the premises, facilities and funds, full-time news editors, content reviewers and technical security personnel appropriate for the services, and should establish sound Internet news information service management systems, information security management systems and technical support measures. Based upon our experience, these general requirements are not easy to apply, and the authorities are very likely to put forward specific requirements in practice. In the short term, it is quite likely that the authorities will review applications according to requirements provided in the Regulations in the absence of enforcement rules for the Provisions that may be promulgated.

In addition, similar to the Administrative Provisions on Internet Publishing Services, the Provisions also further require qualified Internet news information service providers to implement a special management share system, and specific implementing rules will be separately developed by the Cyberspace Administration of China.  The following issues require special attention with respect to the special management share system:

  1. Will the special management share system only apply to news editing and publishing service providers or will it apply to all three categories of service providers (i.e., news editing and publishing service providers, news reposting service providers and dissemination platform service providers)?
  2. Is there a minimum limit for the shareholding ratio for state-owned special management entities (for example, at least 1%)? How will control rights of the state-owned special management entities be ensured (whether the state-owned investor will have a seat on the board of directors or whether the investor will have veto rights with respect to news content)?

There is no doubt that the special management share system, if implemented, will have a significant impact on the financing and listing of Chinese companies that use a VIE structure or on Chinese companies that intend to be listed overseas.

Responsibilities of Internet news information service providers

The Provisions classify Internet news information services into Internet news information editing and publishing services, reposting services and dissemination platform services. In addition to the general requirements applicable to all Internet news information service providers regarding editor and practitioner management, information security management, content dissemination management and the treatment of illegal information, the Provisions also provide certain special requirements related to the three categories of service providers mentioned above:

  1. The Provisions provide that entities engaging Internet news information editing and publishing services should be a news entity (including its controlled units) or a unit
  1. controlled by the news and publicity department, which refers to news organizations in the conventional sense.
  2. The Provisions require that providers of news reposting services should repost news published by central news entities or their direct local subordinates and should indicate the news source, the original author, the original title and the editor's real name. Providers must not distort or tamper with the meaning of the original title or the news content, and should ensure that the news information can be traced to its source.
  3. The Provisions requires Internet news information platform service providers to require users to provide real identity information and cannot seek improper benefits by editing, publishing, reposting or deleting news information, or through interfering in the presentation of news information or search results. Providers should also sign agreements with registered users and audit the users' public accounts with respect to account information, service qualifications and service scope and file the same with the competent authorities based upon the category of the user.

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