China to Further Open Telecom Market: Official

A senior Chinese official said December 4 in Hong Kong that China will further open up its telecom market, enhance international cooperation and make efforts to narrow the digital divide between China and developed countries.

Wu Jichuan, China's minister of information industry, said at the International Telecommunication Union ITU Telecom Asia that in the present world, the digital divide between developing and developed countries is continuously widening, seriously undermining the healthy development of the world economy.

"In our opinion, the information network is a global issue and every country, especially developed countries, bears the responsibility to take measures and make effective efforts to narrow the divide," said Wu.

Wu pledged that China will further strengthen cooperation in various forms with countries in Asia and the world as a whole, absorb advanced technologies, import more foreign capital and learn other countries' experiences in management.

"We will, in a more opening-up gesture, actively take part in international competition and join hands with other countries in pushing ahead the development of the info-communication industry and embrace the arrival of the information era of the 21st century," Wu said.

As for telecom development in China, Wu said that thanks to the support and importance given by the government, China's info-communication industry has achieved eye-catching progress. Since the 1990s, he said, the growth of China's telecommunication industry has outpaced that of the GDP by 20 to 30 percentage points.

Up to September this year, users of fixed-line and mobile telephones in China had exceeded 200 million and the penetration rate of fixed-line and mobile phone users had ranked number 2 in the world, with an 11-percent penetration rate of the fixed-line users and a 5.5-percent penetration rate of mobile phone users, according to Wu.

Users of the Internet in China also had reached more than 20 million and information applications and services such as e-commerce, e-media, distance education and e-health are all developing rapidly, said Wu.

Meanwhile, reforms of China's info-communications have also accelerated, Wu said, noting that the monopoly in all telecom fields, including basic telecommunications, value-added telecommunications and info-communications has been broken and a market competition mechanism is in place.

Wu predicted that the info-communication industry of China will grow by more than 20 percent over the next five years and the telecom market will double its current scale in five years.

He unveiled China's strategy for the new century, including speeding up construction of a new-generation info-communication network, reviving product manufacturing and the software industry, developing the information service industry and further transforming the government's role in the development of the telecom industry.

AT&T Allowed in shanghai

China has given the go-ahead for AT&T, the largest US telecom operator, to set up a US$25 million broadband Internet joint venture in Shanghai, in a historical step designed to further open up the nation's tightly-controlled telecommunications market to foreign competition.

AT&T will have 25 per cent stake of the joint venture, Shanghai Symphony Telecom Co., Ltd, with the remaining shares going to Shanghai Telecom, the Shanghai subsidiary of China Telecom, the country's largest telecom operator, and Shanghai Information Investment Inc, a Shanghai government-funded business.

The joint venture makes AT&T the first foreign player in China's telecom sector, which analysts believe will strengthen foreign confidence to pump billions of dollars into potentially the world's largest telecom market.

Analysts said the deal will serve as a role model for foreign investors in the State-gripped market and other foreign firms are expected to follow the AT & T example when China enters the World Trade Organization.

However, there are still concern about how far the Chinese Government will commit itself to foreign telecom players in the period leading up to WTO entry.

And analysts said China's fledgling legal framework for foreign investment will take time to upgrade.

Nevertheless, the atmosphere now is jubilant - because the deal has been made after eight years of negotiations.

The start-up will provide a broadband Internet service in Pudong for multinationals like Shanghai General Motors and CitiBank Group, linking the companies' local networks with their headquarters in the US.

"The move has made history,'' said John Huang, a partner at AllBright Law Office responsible for the legal side of the deal.

China has, for a long time, banned foreign investment in the telecom business, citing concerns about the exposure of state secrets and the inability of domestic telecom operators to compete effectively against foreign competitors.

However, foreign investors have pinned their hopes on entering the telecom services market in China as cut-throat competition in the telecom equipment market among global giants like Nokia, Ericsson, Motorola, Lucent and Alcatel has watered down profit margins.

Huang said Monday, December 4, that overall investment in China's entire telecom sector is expected to hit US$500 billion in the next two decades.

"China is such a big opportunity for multinational telecom operators that they will always be watching the market here,'' said Gordon Orr, the managing director of the US firm McKinsey & Company's Greater China Office.

More good news is that China has been moving towards a solid legal framework for foreign investment, analysts said.

For example, one of the most striking efforts was a new rule in September which defined the telecom business areas and the role of foreign investors.Basic telecom services like fixed-lines, satellite and mobile networks are still off-limit.

But foreigners can now get up to a 49 per cent stake in joint ventures with Chinese firms in some areas including Internet access, e-mails and data transmission. "The regulation will be a guideline for investment. A clear regulatory framework will strengthen foreign confidence,'' said Orr.






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