Foreign Internet investors face tougher rules in China

China is trying to tighten control over foreign investors in Internet ventures in a crackdown that may see some companies stripped of operating licenses, an Associated Press report said.

The report, quoting the China Daily, said it was not clear how the crackdown might affect industry giants such as Yahoo, eBay, and Google, which had launched portals, search engines and e-commerce sites with local partners in China, the world's second-biggest online market.

Regulators said some foreign investors were using licenses, domain names or trademarks that were improperly shared by Chinese partners, the China Daily said.

The report said a notice on the Web site of the Ministry of Information Industry, which regulated Internet businesses, ordered companies to comply with rules on domain names and other regulations.

The crackdown added possible legal complications for companies that had faced criticism from human rights activists for cooperating with the communist government's efforts to censor the Internet, the report said.

Regulators are eager to see benefits flow to Chinese companies, and require foreign investors to take on local partners and operate under rules that limit their ownership of ventures, according to the report.

China capped foreign ownership stakes in Internet ventures at 50% under its World Trade Organization commitments to open markets to outside competitors, the report said.

Regulators said some had bought into Chinese companies without obtaining required government approval, while others failed to follow operating rules, the China Daily reported.

It said companies that failed to comply with the latest order could lose their operating licenses, the report further said.