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Internet rules leave China dotcoms in dark

A looming deadline for tough, new rules on Internet companies in the mainland has left foreign dotcoms in the dark about the status of their investments.

The rules, initially targeting content providers, are aimed at keeping out 'objectionable' foreign news that differed with the official version of events. But they also call for the re-registration of all Internet service companies and that is the cause of the present confusion.

The deadline was originally set at 60 days from the October 1 publication of a first batch of tightened rules but has since been postponed and now falls on January 31.

'We prepared the requested documents,' said an official at a foreign-invested company that provides employment information but does not supply news on its Web site. 'But when we tried to register we were told to wait.'

Officials at other Internet companies said they too were waiting for approval to allow them to comply with the new regulations.

Internet portal Sohu said it had not yet been registered but was not expecting a long delay. Sohu, like its other rivals in the sensitive information content segment of the market, has its information supplied by a domestic company. Its Nasdaq listing was made through a foreign arm that does not control the local content.

Part of the problem for foreign-invested dotcoms is that the status of such investments is unclear in spite of pledges by China that it will allow foreigners to own 49 per cent of Internet firms on mainland entry to the World Trade Organisation and 50 per cent the following year.

Officials at the Shanghai Communications Administration confirmed that the deadline for registration under the new regulations had been pushed back to the end of January. They also acknowledged that the problem was with foreign-invested firms.

'So far, only domestic Web sites have been approved,' said an official of the Shanghai Communications Administration, the local agency set up to monitor Internet companies. 'We don't have formal notification from the Ministry of Information Industry [the central government regulator] on how the foreign-invested Web sites are to be handled.'

The Beijing Communications Administration, the local regulatory agency in the capital, had a slightly different answer from its Shanghai counterpart.

'If [Internet companies] are not for profit they can be registered,' said a Beijing official. 'But as for the profit-seeking ones, we don't have details from the State Council.'

Officials at the Shanghai and Beijing regulatory bodies said companies that failed to register before the deadline could face closure. The initial announcement was made in the name of the State Council, or cabinet, in October. It included special approval provisions for Internet companies that were related to information, publishing, education, pharmaceuticals and health care.

Those regulations were later expanded to include provisions on Internet chat rooms and to insist that all news on local Web sites be from domestic sources. That expanded statement was issued jointly in November by the State Council and the Ministry of Information Industry. For content providers, the intent of the rules clearly has been censorship on the fast-growing Internet.

The rules state that content providers must not publish or reproduce anything that conflicts with the basic principles of the constitution - which sets the legal framework for the leadership of the Communist Party.

The rules also bar content providers from revealing state secrets - a term that is applied in an extremely broad sense on the mainland. They also forbid the publishing of anything that harms national security, national interest or national dignity.

They bar publication of anything that conflicts with state policy on religion, including religious cults. This provision appears aimed specifically at rooting out anything that reports favourably on the Falun Gong spiritual group, designated a cult.

Foreign executives said the rulings may be last-minute posturing before China's WTO entry, expected within six months.

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