In a drive to stamp out irregularities in the telecoms services market, the government is to prohibit unauthorized foreign investment.

In a notice posed on its website, the Ministry of Information Industry (MII) has ordered all foreign investors to follow strict application procedures when seeking to offer telecoms value-added services in China.

The procedures are aimed at cracking down on unauthorized foreign investors who are providing services with shared or borrowed licences, domain names or trade marks from domestic companies.

China, in line with its commitments to the World Trade Organization (WTO), has been gradually opening up the country's telecoms value-added services market.

Currently foreign investors are allowed to own a 50 per cent stake in a telecoms value-added service joint venture, if granted MII approval.

But a number of foreign companies have bought into licensed domestic firms, without filling out their applications.

Chen Jinqiao, a research fellow with China Academy of Telecommunication Research under the MII, said the new order will not damp foreign investment in the telecoms value-added service sector.

"Regulators are strengthening supervision and bringing order back to the market to cope with consumers' complaints over irregularities," he said.

The MII carries out an annual review of the licenses granted to telecoms value-added service providers. But there is a loophole  when the ministry reviews the licences, some have been already leased to unauthorized companies for months. This makes it difficult for the MII to regulate the market and cope with consumers' complaints.

In the notice, the ministry asked local regulators to investigate and report such illegal activities by November 1. Companies found breaking rules or failing to comply with the new order within a given time will have their licences revoked.

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