China has developed a huge telecommunications sector. Today China is one of the largest telecom subscribers in the world’s telecommunication market. China’s telecommunications industry started to expand during early 1990s due to economic growth, technological improvements, low tax rates, and institutional changes, which allowed competition. Figure 1 shows that electronic-telecom industry had the fastest growth of sales revenue during 1990-2000 in the manufacturing sector. [pic]
Source: China Statistical Yearbook, 1990, 1995, 2000
The situation in telecommunication industry today differs from the one that was a decade ago. This paper focuses primarily on current issues in telecommunication industry. It briefly discusses government regulation of the telecommunication infrastructure since the People’s Republic of China was established (1949), outlines current government policies, describes major companies in telecommunication business and their competition, and provides information on recent developments of the telecommunications industry.
GOVERNMENT REGULATION OF THE TELECOMMUNICATION INDUSTRY During the Mao Zedong’s years (1950’s-1970’s) mainly politicians and military personnel were allowed to use telecommunications service in People’s Republic of China. Telephones were considered luxurious goods. In 1949 there were only 263,000 telephones with 310,000 telephone lines (Ding Lu, 2003). But at the end of the Cultural Revolution politicians realized that industrialization process in modern society could not be accomplished without reliable communications systems. And in 1975 the number of the telephone lines increased to 3.48 million (Ding Lu, 2003). In 1970’s the State Council enabled the Ministry of Post and Telecommunications (MPT) to operate post and telecommunications sectors. Under MPT local post and telecommunications administrations (PTE) were established to help develop post and telecommunications industries. Telecommunications services were allowed to set prices on their own telephone rates which could not exceed MPT’s prices. Starting in 1980’s the state became an active financial supporter of telecommunications industry. The government issued a “three 90%” policy, according to which MPT was allowed to keep 90% of profit and 90% of foreign exchange earnings and in addition, repayable loans did not include 90% of central government investment (John Wong, 2002). In 1988 the “sixteen character” policy was implemented. It was based on four principles: MPT should be in control of planning the industrial development and coordinate with local authorities, all administrative levels should be equally responsible, and infrastructure’s construction should “mobilize resources from all concerned” (John Wong, 2002). According to Ding Lu, in 1990’ the investment in telecommunications industry was shared among three sources (2003). 40 % of the investment was coming from users sector as a fee for installation, 30% from domestic and foreign government loans, and the other 30% from PTE’s profits (Figure 1.). Before 1990’s only one monopolistic telephone company, Telecom, controlled by MPT, was on China’s market. In 1994 another phone company, Unicom, emerged. It was established to unite the domestic network. Later other...