China To Curb Foreign Cell Phone Import, Manufacture
By Lester J. Gesteland
ChinaOnline News
(11/03/1999) In yet another move designed to limit foreign
dominance of the local mobile phone market, China?s Ministry
of Information Industry is preparing to impose import quotas
and production restrictions on foreign-branded wireless
phones.
An article published in the Oct. 30 Zhongguo Zhengquan Bao
(China Securities) detailed MII?s designation of nine local
manufacturers as officially sanctioned mobile phone
producers. "Only the?nine will be given import quotas," the
article said.
(See the Nov. 2 ChinaOnline article, "To Sidestep ?Vicious
Competition,? Beijing Anoints 9 Official Cell Phone Makers.")
The government policy restricting mobile phone manufacture
and importation, yet to be formally announced, will further
promote the development of China?s homegrown mobile phone
industry and will have a direct impact on foreign
manufacturing operations in China.
"Every year foreign manufacturers will have to go to the
government to get licenses (for imports and production)," Mr.
Li Yong, chairman of TEDA, said in an interview with the
Financial Times. TEDA is a technology park in Tianjin City
where Motorola has based much of its China manufacturing
facilities.
The impact on Motorola could be significant, Mr. Li said,
especially if the company is forced to limit production in what
industry experts say is the world?s fastest growing wireless
phone market.
By the end of 1999 there may be as many as 40 mln mobile
phone subscribers in China, according to MII statistics.
Currently almost 90% market share is claimed by Motorola,
Ericsson and Nokia.
MII?s competition-curbing plans don?t come as a surprise to
industry insiders.
"This has been an ongoing discussion that has been going on
for a long time," said Michael Ricks, Erisson?s China head, in
an interview with Reuters. "It?s a normal market risk we?ve
been working with for several years."
"The amount of smuggling that is going on tends to
correspond to the squeeze," Ricks added.
In fact, MII?s latest plan follows efforts designed specifically to
curb illegal imports. In Sept., the ministry instituted a
crackdown on "all telecom equipment that has not obtained
the proper licenses, logos or are in other ways fake."
In order to distinguish between legitimate and counterfeit
goods, all telecom equipment sold in China must carry a
government-issued seal. Telecom equipment makers, whether
local or foreign, must apply for the seals (from the State
Quality Technical Standards Body under MII) and affix them
to their goods.
Billed as an effort to rid the country of "poor quality,
counterfeit equipment," the policy effectively gives MII control
over the supply of foreign branded telecom products sold in
China.
Chinese government officials have been talking for some time
now about instituting quotas and limiting "vicious competition"
in the mobile phone market.
The State Development and Planning Commission earlier this
year publicly announced its plan for foreign products to
occupy no more than 60% of the market next year, with local
makers garnering a 40% market share.
MII has also given subsidies to local wireless phone makers
to set up manufacturing facilities and develop their own
products. These subsidies are being financed through the
issuance of government bonds, telephone installation fees
and a sales tax on mobile phone.
Some commentators see MII?s market-restricting moves as
flying in the face of China?s attempts to enter the World Trade
Organization. Ministry officials do not seem to feel there is a
contradiction, however.
As MII officials have said in the past, even if China wins WTO
accession this year, they will be given at least five years to
liberalize the telecom market. "That should give us enough
time to become competitive," an official said.
To contact Lester J. Gesteland:
P: (312) 335-3022
F: (312) 335-9299
E: lgesteland@chinaonline.com
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