China market

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CHAPTER 4
INDUSTRY BACKGROUND

4.0 INDUSTRY BACKGROUND
Since the 1990s, China’s deepened reform has created numerous opportunities for MNCs to establish the long-standing presence in China, particularly the infrastructure sectors, such as energy and communications, which used to be under tight control by the government. On the other hand, the obstacles are still huge for MNCs’ penetration inChina’s market. It is necessary for the researcher to give an overview of the industry background of the two joint ventures prior to case studies.

4.1 AN OVERVIEW OF CHINA’S TELECOM SECTOR
China has become the second largest telecom market, having installed 186 million lines, with 157 million fixed-line phone subscribers (See the Figure 12.0). China’s

mobile subscribers have alsoincreased to more than 110 million and 65% annual growth. In 2000, total telecom revenue grew 33%, to $37 billion. By 2005, according to Bear Stearns’s market forecast, revenues should hit $70 billion. That is creating a ‘bonanza’ for foreign suppliers

4.1.1 MARKET GROWTH DRIVERS
With worldwide deregulation and rapid technological progress, China saw the need to end the fragmentation of its telecomindustry. Subsequent reform and restructuring increase transparency of policies and regulations to improve the foreign-related economic legal network.

Deregulation of The Telecom Sector
The Ministry of Post & Telecommunications (MPT) note 1.0 had the sole regulatory and operating power over the public telecom network in China. China Telecom, a body directly under the MPT, is the dominantoperator in China’s telecom market. However, its monopoly was broken by the incorporation of China Unicom note 2.0 and Jitong Corporation in 1994 (See Figure 13.0).

One notable development has been the creation in 1998, of the Ministry of Information Industry (MII), which was formed from the amalgamation of the former MPT and the MEI (Ministry of Electronics and Information). The MPT and MEI havebeen involved in a long-term struggle for control of various segments of China's telecom manufacturing and operating base. As the new regulatory body responsible for the telecom market, the MII’s mandate is to separate government functions from

Note 1.0: The MPT administration is divided into a three-tier hierarchy with the national MPT at the top in charge of public telephone network services.Provincial PTAs (Post & Telecom Administrations) report directly to the national MPT and are responsible for all intra-provincial network development and operations. Municipal PTBs (Post & Telecom Bureaus) report to the PTAs and handle telecommunication service and network maintenance in rural areas.

Note 2.0: In mid-1994, China Unicom (Liantong) was approved by the state council as the country’ssecond carrier. It has the backing of three powerful ministries: MEI – its main mover, MOR (Ministry of Railway) and MEP (Ministry of Electric Power).

operations and manufacturing. Another important initiative undertaken by the government has been the long-awaited restructuring of China Telecom. The giant was broken up in 1999 into four separate telecom group corporations: China Telecom(mainly focus on fixed-line operation and service), China Mobile, China Satellite and China Paging, initialise a competitive market environment and separate business interests from regulatory functions. Followed by the entry of new players, such as China Netcom in April 1999 and China Railcom, the telecom market was driven to further opening up. The liberalisation will force China’s telcos to providebetter service and boost productivity. These companies need state-of-the-art equipment.

Technological Progress
The telecom market is being driven by particularly strong growth in mobile and data communications, which accounted for 15% of total telecom investment in the 9FYP of China see note 3.0. GSM (Global System for Mobile) networks and CDMA (Code Division Multiple Access) networks were...
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