Chinese Telecommunications Policy Examined: The Case for Reform

Abstract

China's entry into the World Trade Organization offers China a rare opportunity to advance its communications capabilities, but the government must recognize that protecting its favored domestic companies and funding antiquated technology won't allow the country to benefit from everything WTO membership has to offer. China's entrance into the WTO has raised the stakes for domestic companies, particularly with the government expected to issue new telecommunications rules this year. There is tremendous growth potential in the Chinese telecommunications market, given that the World Bank estimates about three-quarters of the country's 1.3 billion citizens have never made a phone call. But those citizens won't be served by policies focused on government ownership and the creation of national champions. One concept that the Chinese government must grasp is that the creation of an advanced communications network is vital for economic growth overall, regardless of whether that network is indigenously owned or not. By placing the focus on the competitiveness of its state-owned firms, China is sacrificing both the development of a competitive domestic environment and the quality of its national communications infrastructure. By shutting out potential competitors, the Chinese are simultaneously passing over the latest communications technology as well as the investment capital that is needed to construct state-of-the-art infrastructure.