Why China really wants to boost VPN services

A digital representation of a lock
(Image credit: Altalex)

With the recent news that China is looking to boost VPN services within its borders by allowing foreign ownership of up to 50% for per provider, are we looking at a change of heart from the notoriously anti-VPN regime in Beijing, or are other factors at play?

In my opinion as a founder of a VPN service provider, this is nothing more than a desperate plea by the authorities in Beijing to attract foreign investment against the backdrop of an economic slump and a fitful recovery. We are completely against such measures not least of all given China’s openly dishonest track record when it comes to governing tech companies.

Foreign investment stalled

The news regarding VPN services is only one aspect of a broader set of guidelines that China hopes will boost foreign direct investment (FDI) rates which are currently on the slide. There are, in fact, 24 measures in total that cover things such as upgraded intellectual property protections and enhanced fiscal and tax support to those foreign enterprises willing to invest in China currently. The level of governmental control over businesses has always been a big turn-off for foreign investors and the prevailing geopolitical winds are also keeping overseas businesses at bay.

Data from Reuters shows that dollar-denominated foreign direct investment (FDI) fell 5.6% in January-May compared to the same period last year. And all of this in spite of the end of strict COVID curbs. Also, US president Joe Biden has moved to restrict US investment in Chinese technology by signing an executive order which focuses on sensitive hi-tech sectors including semiconductors, quantum computing and artificial intelligence (AI).

Sebastian Schaub

CEO, hide.me

Security is compromised

Whatever charm offensive the Chinese authorities offer-up, the law in China still requires VPN companies to be based within its borders and to keep all their servers in China. Also, VPN service providers are required to log users' activities and hand these records over to the regulatory authorities whenever requested. If you know anything about VPN services, then you’ll be aware that no logging is one of the primary features demanded by VPN users. 

This zero-log approach provides users with anonymity which is something China doesn’t like at all. Businesses and consumers alike use virtual private networks for superior data privacy, enhanced security, and anonymity - the level of government control in China effectively does away with all of these features, the proposed measures do nothing to alter this environment.

VPNs and censorship don’t work

The Chinese government is the greatest data processor of all. The country’s internet regulatory body, the Cyberspace Administration of China, has a long history of implementing controls and measures that the Western world has openly decried. We have learned from other examples that state-owned companies in China must pass data back to the government, which then leads to the censorship of users. As a VPN service, we are totally against censorship of any kind.

China and big tech

It’s no secret that when it comes to regulating Big Tech, China pretty much does what it wants which doesn’t sit well with the big tech giants. If they don’t like how social media influencers go about their business, for example they will enforce a crackdown. They have also introduced laws to limit the amount of time those under the age of 18 can play online games. And with the imposition of new algorithmic regulation back in 2022, many firms were faced with onerous audits with respect to how they handled data. Yet another example of how China imposes huge burdens on big tech firms and the people who use them.

China is clearly feeling the pinch post-COVID. Economic recovery has stalled and foreign investors, led by the US, are staying away. There is plenty of evidence that shows the authorities in China trying to woo overseas investors and this latest ploy involving VPN services is merely a wolf in sheep's clothing. The proposed measures do nothing to change the fact that these VPN services are a shadow of what should be expected given the lack of security, the level of censorship and the dearth of anonymity.

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Sebastian Schaub

Sebastian is the founder of hide.me VPN and he has been working in the internet security industry for over a decade. He started hide.me VPN to make internet security and privacy accessible to everybody.