Internet Bars in Shenzhen

The following is a translation of a Q&A with the Shenzhen department of culture about the principles behind the regulations of Internet bars in Shenzhen.  This is insightful because this is a regulated market, and the assumptions behind those regulations are listed here.  The current standard is 1 Internet bar per 10,000 persons.  This is obviously contrary to free market ideas of letting the supply meet the demand automatically.

[Nanfang Daily]  December 30, 2005.

Q: How come no new Internets bars have been approved to operate for some years now?

A: In early morning of June 16, 2002, the illegal "Blue Extreme Speed" Internet bar in the Haiding district of Beijing caught fire, leading to the deaths of 25 persons and injuries to 13 persons.  For this reason, the National Ministry of Public Security, Ministry of Culture and Ministry of Industry and Commerce began a cleaning up of all Internet bars in the country.  Basically, the process of approving new ones was stopped.  On November 15, 2002, the Regulations for Management of Internet Service Businesses was put into action and the Ministry of Culture was designated to be responsible for handling Internet bar approval.  Following the unified national plan, the cleaning up of Internet bars in Shenzhen was completed in the first half of this year.  There are only 314 Internet bars that are legal here.

Q: According to my understanding, there are currently only 32 legal Internet bars in the Po An district.  As a result, the market demand has enabled several thousand underground Internet bars to exist there.  According to the announcement from the Shenzhen Department of Culture, there will be 746 new Internet bars.  How was this figure determined?  Will it satisfy market demand?  If it cannot satisfy market demand, then how will the problem of underground Internet bars be solved?

A: Internet bars are cultural properties, and the standards are set by the Guangdong province department of culture and followed rigorously by the Shenzhen department of culture.  The principle is that there shall be one Internet bar per 10,000 persons and that was the standard by which the planning was made.  Accordingly, the Guangdong province department of culture determined that the total number of Internet bars should be 1,060.  Subtracting the 314 that are legal right now, the number of new Internet bars is 746 (not including the number of Internet bars belonging to national and provincial chains).  Underground Internet bars are a different problem.  No matter what, we will resolutely eliminate underground Internet bars.

Q: How are the Internet bar targets for the various districts determined?  How come some district gets several hundred more while another district gets only ten more?  Is this unfair to those people from that district?

A: The targets for each district is based upon the standard of 1 Internet bar per 10,000 residents in the plan.  We also had to make adjustments due to rounding.  It is fair and reasonable.

Q: According to the public notice from the Shenzhen City Internet Bar Management Leadership Group, it is necessary to gather 1 million yuan in capital in order to apply to operate an Internet bar.  This is difficult to accomplish for the ordinary individual entrepreneur.  What was the threshold set so high?

A: The Shenzhen department of culture is following the administrative requirements about the Internet access businesses in a rigorous manner.  The regulations require that the Internet bar operator must have an area of no less than 300 square meters and no less than 100 computers at the site.  Based upon this standard plus the costs of furnishing and labor, it would cost at least 1 million yuan.  Therefore, we require the applicants to furnish proof of 1 million yuan in capital.  The purpose of the capital requirement is to remind the applicants about the reality of operating an Internet bar so that they don't just blindly apply.

Q: The public notice for Internet examination was announced on December 5, and the applications were accepted between December 13 and 15.  Between December 5 when the notice was published and December 15 when applications were accepted last, excluding two legal rest days, there were only eight days for the applicants to obtain all the required materials.  I calculated it.  It takes one day to go to the Ministry of Industry and Commerce to apply for "approval of name."  It takes one day to go to the bank to obtain proof of capital.  It takes two to three days with the accountant.  It takes one work day or more to find a suitable place and obtain a lease agreement ... an ordinary citizen will not have the time to be prepared.  Yet, what kind of applicant can get everything ready within such a short time?  The citizens believe that some of them have advantages in information sources.

A: The timing should be enough.  Before setting the policy, we actually analyed everything.  For example, it only takes half a hour to get on line at the Ministry of Industry and Commerce to apply for "approval of name."  At the same time, you can go can go to the bank to register your capital.  After approval, you can immediately apply for certification ... unless you need to borrow money for the capital, the time is enough.  The Internet bar examination procedure and polices were not finalized until one or two days before the notice was published on December 5.  The publication of the information was fair to all applicants.  This time, quite a few of the applicants already operate underground Internet bars, and so they have all the basic requirements.  Therefore, they were relatively quick in assembling the materials.

Q: How do you guarantee that the evaluation process will be "open, fair and just"?

A: The evaluation will be conducted by the Shenzhen Department of Culture with the Shenzhen City Audit Department.  Before the application process was initiated, we gave two training classes to the city auditors.  The first thing that we spoke about was anti-corruption.  The auditing department was auditing everything from day one.  When the applicants turned in their material, everything was sealed under the supervision of the auditors and deposited in the safe room.  At the Po An district application office, we invited people from the People's Congress, People's Political Consultative Conference as well as citizens to supervise.

This time, the evaluation of the Internet bars will go through four stages: including the name approval, verification of the material, on-site inspection and public notice.  If the number of applicants who satisfy the requirements exceed the number allotted to a district, the District Cultural Department will have a lottery draw with the auditing and public notary departments present to supervise.  During the public notice phase, all citizens can participate and those who fail to qualify will have their qualifications cancelled.