With the recent news that China wants to boost VPN services within its borders by allowing foreign ownership of up to 50% per provider, are we looking for a change of heart from Beijing’s infamous anti-VPN regime, or is there other factors? in the game?
In my opinion, as the founder of a VPN service provider, this is nothing more than a desperate plea from the Beijing authorities to attract foreign investment against the backdrop of an economic slump and a troubled recovery. We are completely opposed to such measures, not least given China’s blatantly dishonest record when it comes to governing technology companies.
Foreign investments stagnated
The news about VPN services is just one aspect of a broader set of guidelines that China hopes will boost foreign direct investment (FDI), which is currently declining. There are a total of 24 measures covering issues such as enhanced intellectual property protection and enhanced tax and fiscal support for those foreign companies currently willing to invest in China. The extent to which the government has control over companies has always been a major turnoff for foreign investors, and the prevailing geopolitical winds are also keeping foreign companies at bay.
Reuters data shows dollar-denominated foreign direct investment (FDI) fell 5.6% in January-May compared to the same period last year. And all this despite the end of strict COVID restrictions. US President Joe Biden has also taken steps to limit US investment in Chinese technology by signing an executive order targeting sensitive hi-tech sectors including semiconductors, quantum computing and artificial intelligence (AI).
Safety is at risk
Whatever charm offensive the Chinese authorities offer, the law in China still requires VPN companies to be based within their borders and keep all their servers in China. In addition, VPN service providers are required to log users’ activities and hand over this data to regulatory authorities upon request. If you know anything about VPN services, you know that no logging is one of the most important features demanded by VPN users.
This zero-log approach offers users anonymity, something that China does not like at all. Both businesses and consumers are turning to virtual private networks for superior data privacy, enhanced security and anonymity. The level of government control in China effectively makes all these features redundant, and the proposed measures do not change this environment.
VPNs and censorship don’t work
The Chinese government is the largest data processor of them all. The country’s internet regulatory agency, the Cyberspace Administration of China, has a long history of implementing controls and measures that the Western world has openly disapproved of. We have learned from other examples that state-owned enterprises in China have to hand data back to the government, which then leads to censorship of users. As a VPN service, we are absolutely against censorship of any kind.
China and big technology
It’s no secret that when it comes to regulating Big Tech, China pretty much does whatever it wants, which doesn’t sit well with the big tech giants. For example, if they don’t like how social media influencers are doing their business, they will crack down. They have also introduced laws to limit the amount of time under 18s can play. And with the imposition of new algorithmic regulations in 2022, many companies faced difficult audits regarding the way they handled data. Another example of how China is imposing enormous burdens on big tech companies and the people who use them.
China is clearly feeling the pressure after the COVID-19 crisis. The economic recovery has stalled and foreign investors, led by the US, are staying away. There is plenty of evidence showing that authorities in China are trying to lure in foreign investors and this latest trick with VPN services is just a wolf in sheep’s clothing. The proposed measures do not change the fact that these VPN services are a shadow of what would be expected given the lack of security, the level of censorship and the lack of anonymity.
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