If China does shut itself off from foreign investment in the Internet sector, in an effort to protect the market for domestic players, the country runs the risk of losing the capacity to leapfrog and catch up with the advanced nations by missing out on benefits emerging from the global Internet economy. Whether such growth can materialize will largely depend upon China's regulatory framework and the degree to which China becomes a global Internet player and innovator. Some Chinese policy makers and Internet executives have argued that in the high technology area, capital itself is no longer a controlling power. Instead, knowledge, expertise, human resources, and the prevailing legal and economic systems matter more. Foreign investment not only brings in capital, but also provides Internet players in China with access to these crucial elements.
China can benefit from increased foreign investment in Internet services.
A freeze or ban on foreign investment in this field is extremely complex and difficult to enforce. This commitment seems to override MII's pledged ban just two months earlier. However, there is no clarification yet on what exactly these percentages mean. Undue-optimism should be cooled down as implementation and enforcement of WTO rules are years away. Foreign investors may yet have to conquer many policy constraints and contextual problems before they can really compete in the Chinese market.