China: WTO entry demands telecoms reform
Oct 26 2000 12:32PM
Homeway
Sweeping staff cuts will be made to China's telecommunications industry
in a bid to sharpen competition in the sector, a China Economic Times
article said, China Daily reports.
The step will be taken to meet the severe challenges China has to face
after its accession to the World Trade Organization (WTO), the article
said.
With a vast territory and 1.2 billion potential consumers, China has the
chance to become the world's largest telecom market.
In the past 20 years China has become the world's most rapidly
developing nation, making foreign companies anxious to enter its
telecoms market.
Three overseas companies -- Motorola, Nokia and Ericsson, have 82% of
the country's mobile phone market.
Due to foreign companies' monopoly of core technology, domestic
producers are in a disadvantageous position, the newspaper said.
Duplicated construction, backward management and marketing as well as
small-scale production are preventing the effective use of funds.
Meanwhile, China faces the pressing task of improving its telecom
service.
The newspaper said the top priority was introducing real competition to
the sector.
Although the Ministry of Information Industry announced a break-up of
China Telecom's monopoly by splitting the mammoth company into four
competing service units (conventional telephones, mobile
communications, paging and satellite telecommunications), the divisions
will produce new monopolies instead of fostering competition.
Official explanations supporting government control are usually based on
the belief that the industry must be protected from foreign firms.
But China's telecoms sector is not as weak as believed, the article
explained.
According to official statistics, the capacity of the public switchboard had
reached 100 million lines by 1997, ranking second in the world.
The number of mobile phone users climbed to 12.23 million in 1997,
ranking third in the world.
With the completion of the nationwide optical-fiber cable network, China
now has a basic telephone network superior even to those of some
developed countries.
The rapid growth has been fueled by massive government investment, but
the input did not yield corresponding output. Profit growth rate was far
below that of investment, noted the paper.
Currently, China Telecom reaps more than 95% of the country's volume
of business in telecom service. But others make losses.
The de facto monopoly enjoyed by China Telecom was to a large extent
built on state protection.
This may have contributed to China Telecom's overwhelming market
dominance in the past, but it will not be enough to ensure that this giant
will be able to survive increasingly fierce competition from foreign
companies, said the article.
When the industry opens its door to foreign companies according to WTO
rules, it will be unlikely that China Telecom can elbow competitors aside
through non-market means.
To face the challenge, China Telecom must heighten its keenness and
make preparation for market competition, suggested the paper.
The government should promote competition by protecting small
telecom companies and pledging vast resources to legal and regulatory
proceedings.
In the context of economic globalization, China should adjust its
telecommunications policies to fit WTO accords.
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