A National People's Congress deputy has proposed opening China's telecommunications market to domestic privately owned enterprises before the sector is opened to foreign investors after it joins the World Trade Organization (WTO).
Wei Wenlin, a senior professor of technology at Qinghua University, submitted the proposal which was supported by many other deputies, including Li Yining, a famous economist from Beijing University.
"Obstacles to private enterprises should be eliminated completely," said Wei, "The government should give them equal rights to compete with State-owned firms."
According to recent statistics, the telecom sector's income was 243.3 billion yuan (US$29.38 billion) by the end of 1999. It contributed 3 percent to the country's gross domestic product. Sales volume of telecom-related products exceeded 430 billion yuan (US$51.93 billion). Internet users have increased 13 times within two years from 670,000 to 8.9 million at the end of 1999.
But private firms have not been given access to the most profitable aspects of the telecom service sector, except those allowed to enter the Internet service provider (ISP) and part of the paging businesses. The industry is controlled by State firms including China Telecom and China Unicom.
Wei said the Telecommunications Law, which is being discussed by legislators, should give equal rights to private firms.
The Sino-US agreement signed last year on China's WTO entry marks China's first agreement to open its telecommunications sector to foreign investors, both with regard to the scope of services and to direct investment in telecommunications businesses.
Under this agreement, China will allow 49 percent foreign investment in all services, and will allow 50 percent foreign ownership for value-added services in two years and paging services in three years.
Industry experts have said the opening of China's telecom market will for the first time result in real pressure upon the country's telecom equipment suppliers, especially service providers.
Many business insiders worry that tough competition together with foreign investors will hurt the big two, China Telecom and China Unicom.
Both of them have remained silent when asked to comment on the Sino-US WTO deal. But some burgeoning private firms have displayed confidence.
"Sooner or later, China's WTO access is unavoidable, and we have made preparations for the great change," said Zhou Huan, Chairman of Datang Telecom (Group) Corp.
With the development of private firms in the ISP and paging businesses, telecom powers are eyeing the big profit margins available in mobile phone, fixed line and Internet content providing fields.
Allowing domestic private firms to enter the field first and compete on an equal basis would be a good rehearsal, Wei said. That will only make both private and State firms more competitive, will benefit both and consumers.
But strict regulations are needed to avoid shoddy services and economically suicidal price wars.
Wei said allowing more investors in the field would reduce profit margins, but not profit volume. With more services provided, the "cake" will only grow bigger.
More rivals in the field could be expected to hasten structural and management reform of the State firms while generating more business opportunities for the whole industry, Wei said.
(China Daily March 12, 2000)
