Perhaps you are lucky to live trhough it, lots of not so good stuff going on in that area.
any comments on this
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industry is regulated by the Ministry of Information Industry, and MII, as it is called, is headed by ultranationalist Wu Jichuan. Minister Wu, a 1950s thinker in charge of a twenty-first-century industry, is the single biggest roadblock to China's development in this area.
Wu's passion is control, and the object of his affections is the Directorate-General of Telecommunications, a state-owned enterprise providing services under the China Telecorn name. Until 1994, China Telecom enjoyed a complete monopoly over China's then-archaic telecommunications industry. In that year China United Telecommunications Corp., better known as "Unicom," began operations, but government regulation deliberately starved the upstart competitor. As a consequence, Unicorn turned to dozens of eager foreign companies that had been seeking entry into China.
As they do now, Chinese regulations prevented foreigners from directly owning, operating, or managing telecom networks. In response, Unicorn cleverly skirted the rules by establishing so-called China-China-Foreign joint ventures (CCFs). Although these arrangements took various forms, CCFs were usually made up of joint ventures layered one on top of the other and involved the payment of fees to foreign parties. The fee structures permitted the foreigners to receive payments without acquiring actual ownership, which would have violated Wu's regulations. Under CCF schemes, Unicorn, with Wu's knowledge, raised about US$1.4 billion (70 percent of its total funding) from the world 's largest telecom operators. This allowed it to somewhat loosen China Telecom's stranglehold. More important, Unicorn got foreign technology. And there was one other thing: foreign investors perfected the art of using fees to avoid Chinese ownership restrictions, an art that would be used in ducking similar restrictions in the closely related Internet sector.
Once telecom technology was safely in the door, Wu declared CCFs "irregular" and ordered them disbanded. It took more than two years after Wu's declaration for foreign investors to reach a resolution with Unicorn over how much they should be paid. Some of the CCF partners call it expropriation in light of the valuable rights they were forced to surrender. However you look at it, this is a disgraceful chapter in China's relationship with foreign investors.
Wu's success with Unicorn naturally encouraged him to take on the Internet operators that were buying ownership stakes in China's fledgling industry. Everyone was at this party, including the giants such as America Online. Even ordinary folk got to drink from the punch bowl: the stock of China.com Corporation, listed on Nasdaq in July 1999, more than tripled in value on the first day of trading. The intersection of technology and China is called hysteria, and in those days the stock price of Chinese dot corns traveled in only one direction. Foreigners, however, were having too much fun at this gathering, at least according to Wu. In September 1999, he announced that all such investments were illegal, single-handedly igniting a fire in the ballroom as he had done earlier with Unicorn's CCFs. There were consternation, rage, and disbelief as foreign Internet investors wailed upon hearing Wu's pronouncement. The conflagration ultimately had to be doused by President Jiang Zemin himself as he sealed November's WTO agreement with the United States. Foreign companies will be able to own up to 49 percent of Chinese Internet companies one year after accession (and 50 percent after two years). Yet the agreement also means, as a practical matter, that existing investments, as illegal as they may be, will not be disturbed.
The convoluted structure that Sing Wang and the lawyers created may no longer be necessary. But business, especially when it's tech-related and has something to do with China, has a momentum and logic of its own. Seven out of ten deals will crash and burn, Wang says as he sits at the White Swan Hotel. The remaining three will make you rich.
Zhang's deal will go forward with its ungainly structure. "Close fast" is the mantra, and close it does-so fast, in fact, that Wang does not even have time to visit Zhang's premises before he commits millions of dollars with his signature. It's as if he were buying this Internet company over the Internet. Investors, says one Hong Kong lawyer, "aren't even waiting for the details, as soon as they hear it is an Internet company they ask where they can wire the money."
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