China Maps Telecomm Investor Plan for March

Electronic News, Jan 24, 2000 by Richard Bruner

China has taken an important step toward opening its telecom and high-tech market to foreigners.

Several Chinese newspapers on Jan. 10 carried the story of Wu Jichun, Minister of the Information Industry, explaining that a draft of telecom administration provisions will be completed by the end of March. According to Hui Pan, chief economist for Information Gatekeepers Inc., Wu told Chinese newspapers his ministry is "formulating the basic principles and legal basis for liberalization and introducing competition. It's very positive news." The administration provisions will be the basis for a new telecom law.

Significantly, the provisions are expected to go into effect even before China becomes a part of the World Trade Organization (WTO).

China in November signed an agreement with the United States, saying it would set certain trade standards enabling it to join the WTO. However, it must still sign treaties with the Europeans and other members of the trade organization. Once it joins the WTO, it must adopt trade legislation that is consistent with international standards.

Frank Fan, research fellow in international communications for the Center for Strategic and International Studies (CSIS), said, "China's legal and legislative framework is not very compatible with international standards right now. The Chinese are trying to do something to improve the framework, but it may take some time. The government has made the commitment to change and is moving in that direction. But it definitely will take some time to set up a good legal framework to protect foreign investors or manufacturers."

Pan was more optimistic. He described China's timetable for the new provisions as being very aggressive. He said the provisions would establish rules "so that foreign companies will know what is allowed and not allowed."

The minister said China will open its telecom value-added services -- including ISP Internet service -- to foreign investment. However, foreign investment in such services will not exceed 50 percent. "This conforms with the WTO obligations that China agreed to with the United States."

Wu's Ministry of the Information Industry (MII) covers not only telecommunications, but also computers, electronics, and governmental functions of the cable TV industry. The ministry was formed in March 1998, absorbing three earlier ministries. Last October, it clarified a regulation relating to cable TV, ruling that cable operators could not enter the telecommunications sector. Now Wu hinted a change is coming. "He said the convergence of the two services is the wave of the future," Pan said.

"The telecom law has been under discussion for more than two years," Pan said. "A draft was circulated for comment among ministries for more than two years. But because of ministerial conflicts and infighting, the telecom law was never drafted. There is no telecom law now. Instead, the ministry publishes directives on an ad hoc basis.

"China's earlier promises (in trade negotiations) were not this aggressive. If this provision is to be implemented in the first quarter of this year, that means we are only three months away from seeing the transparent provisions governing foreign investment in this area, even before China enters the WTO."

An indication of China's efforts to restructure its telecom market is the progress of its reorganization of what was China Telecom, the state-owned company that operated all types of telecommunication in China, according to Pan.