China Repeats Ban On Foreign Internet Investment

Foreigners are not permitted to invest in Chinese Internet businesses, Minister of Information Industry Wu Jichuan reiterated at the Fortune China Forum.

Wu yesterday categorically stated that Chinese law prohibited foreign companies from investing in ISPs or ICPs but he added that the law could be changed by the end of the year. The ban statement was similar to one made by Wu earlier in the month that horrified the Internet community in Beijing and sent’s stock price on NASDAQ hurdling downward.

More alarming, Wu also said that current foreign investments in Chinese companies would have be “put in order” putting in doubt the future of such sites as Sina, Zhaodaola, Sohu, and Later, Wu backed off on this statement by saying that the status of these companies was yet to be determined but the damage was already done.

The statements came after Internet investors were beginning to feel a better about China after the launch of the Yahoo! China version last week. The fact that one of Wu’s deputies attended the press launch reinforced this confidence.

Nevertheless, Wu shattered this confidence on Monday when he told reporters that it was unclear why U.S. Internet giant Yahoo! was permitted to set up a portal in China.

Wu statements come amidst stalling U.S.-China talks on China’s bid to enter the World Trade Organization (WTO). The WTO discussions appeared to have stalled over China’s reversal on previous assurances that it would open up its economy to foreign investment including its telecommunications and Internet industries.

Despite all this, the Ministry of Information Industry is upbeat about Internet growth in China. MII projects that the number of Internet users in China will reach about 4.5 million by the end of 1999, 9.4 million by 2002, and surpass 20 million by the end of 2003.

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