FDI in the Chinese Telecommunication Industry

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FDI in China Telecommunication Industry (Nokia in China)

FDI are crucial part for developing and expanding the infrastructure in order to gain capital and new technology. Foreign direct investment can spark growth and create national wealth, but competition among companies, local and multinational alike, diffuses the benefits. Government policies designed to protect incumbents, high tariffs and joint-venture and local content requirements. China is success to attract investors to make FDI in Mainland China while other countries are facing a number of challenges and downturns. In 2003 China received US$53.5 billion out of a global total of US$560 billion and in 2002 received US$52.7 billion out of US$580 billion beating United States as the first place recipient. China performance is anomalous but may also be instructive in gauging the determinant of FDI in emerging markets. There are two keys in China's success, first is their tightly-knit political system, involving closely-knit business government networks of influence which is close to the optimal conditions of property rights provision. Second, is although the overall size of FDI is quite high but China does not yet allow FDI into basic telecommunication service provision, this condition is totally different with others developing countries. The credible commitments are also made China can expand networks and increased the FDI. China makes reasonably strong commitments even though it only has a weak domestic liberalization program. China acceded to the WTO on December 11, 2001 and made commitments in goods and services including telecommunications. Prior to the accession, China allowed joint ventures with foreign company in equipment manufacturing and infrastructure building, and invited portfolio investments in mobile telephony and Internet-related arms. The accession agreement allows joint ventures for Shanghai, Guangzhou, and Beijing in value-added services upto 30%, and up to 25% for basic (terrestrial and wireless) voice and data services. The geographical restrictions are removed and foreign equity caps raised to 49% or 50% for value-added services within two years of accession, within three years for mobile and data services, and within six years for domestic and international services. This event also triggered a huge investment of monetary and human R&D capital. Many foreign investors came to China announced to have establishment or expansion in China R&D center. The increasing total amount of FDI to China can be seen as the following table (Summarized from People’s Daily, International Trade Daily, and China Daily). Company| Date of Announcement| Size of the new R&D center| Nokia| November, 2001| 500 researchers, it is the second Nokia’s R&D center in China| Motorola| November, 2001| It is the Motorola’s 19th R&D center in China. In the next 5 years inChina, Motorola will increase its researchers up to 5000 and invest1.3 billion dollars in R&D activities.| Microsoft| January, 2002| 100 full-time researchers and several hundreds visiting researchersand engineering students.| Honda| January, 2002| $17 million investment|

GE| February, 2002| 400 researchersIt is the third largest R&D center of GE.| Honeywell| March, 2002| 30 researchers|
NEC| March, 2002| 50 researchers (up to 500 researchers by 2005)The size of this telecommunication R&D center is only behind itscounterpart in NEC’s headquarters.| Oracle| March, 2002| 100 staff membersIt will become Oracle’s strongest R&D base outside the UnitedStates within five years.| Japan Koito Manufacturing| April, 2002| $12 million investment| Sun Microsystem| April, 2002| Sun will shift 10 per cent of its R&D work to this Chinese center.| Hewlett-Packard| May, 2002| 200 researchers (up to 2000 researchers in 5 years)| Ericsson| May, 2002| It is Ericsson’s 7th R&D center in China| Dell| July, 2002| 270 researchers...
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