Anyone that has ever been to China at least once will be familiar with the internet censorship that one can expect to experience while visiting or living in the country. One common way of circumventing the problem is using what is called a Virtual Private Network (VPN).

The “Great Firewall of China” is a government firewall that blocks access to several foreign websites including Google, Facebook, YouTube, Twitter, New York Times and pretty much any news outlet or social media sites from the “West”. While these restrictions can sometimes be seen as amusing or harmless, this censorship is very problematic for both foreign companies looking to tap into the Chinese markets and Chinese business looking to establish a presence in foreign markets. For foreign companies, standard software and resources may not be accessible forcing reliance on a domestic alternative. This may lead to issues in integration and coordination with the foreign parent company. Given the increased reliance on business software today, monetary cost, in addition to the cost of the Chinese software, would also include those arising from a loss in synergy. Similar issues may arise for Chinese businesses seeking to expand abroad as they may fail to integrate the foreign standard software with their domestic counterpart. Social media advertising in foreign social media platforms would be even more problematic for Chinese companies as, in addition to the cost of developing new strategy and tools, they will find it difficult to access these platforms in the first place.

These are the reasons why many businesses have resorted to using a VPN as it allows its users to bypass the Great Firewall. Unfortunately, VPN use may no longer be feasible in China.

What is the Treatment of VPN by Chinese Authorities?

Laws regulating VPN use in China are not very clear. While there appears to be no direct liability on the individuals or entities for the use of VPN, there has been a general crackdown on unlicensed domestic VPN providers which indirectly affects VPN use. However, some places like Chongqing have passed regulations that directly prohibits VPN use and can also impose fine on users who profit from VPN.

On 29 September 2017, China’s State Council and the State Cryptography Administration (“SCA”) issued two documents that reveal a major change in the regulatory regime governing commercial encryption products in China (including VPN) which removed some approval requirements for the manufacturing, sale, and use of commercial encryption products. The State Council Decision removed approval requirements for manufacturers and distributors of VPN, as well as the use permit requirement for foreign entities and foreign individuals located in China. This is good news and this means that using a VPN is perfectly legal as long as it is one approved by the SCA.

What Should Business Owners Do?

China is definitely cracking down on the use of VPN in China by both individual and business entities. Further, a myriad of laws and regulations are being used that creates a lot of uncertainty about VPN in China. However, the crackdown appears to be focused on VPN service providers rather than users. Even regulations that directly target VPN use like that in Chongqing city only threaten disconnection and small fines (5,000 – 10,000 RMB). It is rather likely that the objective of the crackdown is to prevent unregulated VPN service providers and not prevent the use of VPN in China.

Therefore, business should ideally opt for the state-approved VPN service providers to continue to use VPN in China.

[1] MIIT, Circular No. 32 of 2017, http://www.miit.gov.cn/n1146285/n1146352/n3054355/n3057709/n4704651/c5471876/content.html

[2] “An initiative to “clean up” China’s internet will make it even harder to jump the Great Firewall”, https://qz.com/893238/china-is-cracking-down-on-vpns-making-it-harder-to-jump-the-great-firewall/

[3] “China disrupts global companies’ web access as censorship bites”, https://www.ft.com/content/80e50a6c-fa8a-11e7-9b32-d7d59aace167

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