Barriers to Foreign Investment in China's Internet IndustrySummary: Developing an Internet business in China is not easy, even though the country has the largest population of Internet users among all countries in the Asia-Pacific region. China's laws make foreign investment difficult, and the country, unlike the United States, has strict legal controls on information and distribution and poor enforcement of intellectual property laws. This article explains the obstacles facing high-tech companies in China.Introduction| |China has the largest population and one of the fastest growing economies in the world. If just 1% of its population participated in the New Economy, China would provide a market of more than 13 million potential customers for Internet businesses worldwide. Today, China has about 22.5 million Internet users, according to a survey released by the China Internet Network Information Center. Although non-governmental organizations and foreign agencies have questioned the accuracy of these figures, none have disputed the fact that China has the largest population of Internet users among all countries in the Asia-Pacific region. Although the Chinese market is attractive, developing Internet business in China is not easy. and it can be frustrating at times. Due to different political, social, economic and cultural conditions, foreign investors face significant obstacles in establishing Internet businesses in China. Disillusioned with their idealism and tired of the bureaucracy and regulatory hassles of investing in China, many investors have abandoned the Chinese market. Foreign Investment Law Current Chinese laws and regulations are unclear as to whether foreign investment in the Internet industry would be permitted. Experts generally argue that China's telecommunications laws prohibit foreign participation in the Internet sector. Under these regulations, foreign investment in the telecommunications sector is severely limited. Telecommunication services are limited to local providers, such as China Netcom, China Telecom, China Unicom and JiTong Corporation. With its impending accession to the World Trade Organization (“WTO”), China is expected to relax its rules on foreign ownership. In November 1999, China signed a bilateral accession protocol with the United States, establishing the terms for China's accession to the WTO. Under this agreement, China will allow 30% foreign ownership of telecom enterprises upon joining the WTO, 49% after the first year, and 50% after the second year..