WTO Entry Urges to Reform Telecom Sector

Sweeping staff cuts will be made to China's telecommunications industry in a bid to sharpen competition in the sector, a China Economic Times article said.

The step will be taken to meet the severe challenges China has to face after its accession to the World Trade Organization (WTO), the article said.

With a vast territory and 1.2 billion potential consumers, China has the chance to become the world's largest telecom market.

In the past 20 years China has become the world's most rapidly developing nation, making foreign companies anxious to enter its telecoms market.

China now faces big challenges from three overseas companies -- Motorola, Nokia and Ericsson, who make up 82 per cent of the country's mobile phone market.

Due to foreign companies' monopoly of core technology, domestic producers are in a disadvantageous position, the newspaper said.

Duplicated construction, backward management and marketing as well as small-scale production are preventing the effective use of funds.

Meanwhile, China faces the pressing task of improving its telecom service.

The newspaper said the top priority was introducing real competition to the sector.

Although the Ministry of Information Industry announced a break-up of China Telecom's monopoly by splitting the mammoth company into four competing service units (conventional telephones, mobile communications, paging and satellite telecommunications), the divisions will produce new monopolies instead of fostering competition.

Official explanations supporting government control are usually based on the belief that the industry must be protected from foreign firms.

But China's telecoms sector is not as weak as believed, the article explained.

According to official statistics, the capacity of the public switchboard had reached 100 million lines by 1997, ranking second in the world.

The number of mobile phone users climbed to 12.23 million in 1997, ranking third in the world.

With the completion of the nationwide optical-fibre cable network, China now has a basic telephone network superior even to those of some developed countries.

The rapid growth has been fuelled by massive government investment, but the input did not yield corresponding output. Profit growth rate was far below that of investment, noted the paper.

Currently, China Telecom reaps more than 95 per cent of the country's volume of business in telecom service. But others make losses.

The de facto monopoly enjoyed by China Telecom was to a large extent built on State protection.

This may have contributed to China Telecom's overwhelming market dominance in the past, but it will not be enough to ensure that this giant will be able to survive increasingly fierce competition from foreign companies, said the article.

When the industry opens its door to foreign companies according to WTO rules, it will be unlikely that China Telecom will elbow competitors through non-market means.

To face the challenge, China Telecom must highten its keenness and make preparation for market competition, suggested the paper.

The government should promote competition by protecting small telecom companies and pledging vast resources to legal and regulatory proceedings.

In the context of economic globalization, China should adjust its telecommunications policies to fit WTO accords. [Source: chinadaily.com.cn]



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