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Will Chinese Telecommunications Privatize?

According to a release yesterday from the MIIT (Ministry of Industry and Information Technology) reported by TechinAsia today, the telecommunications industry is encouraging and seeking private investment from individuals. This is a strange turn of events for China in several ways, given the fact that there is generally little support for privatization in China’s mostly state-owned telecom sector.

We reported last month that the speed of Internet in China lags embarrassingly behind many other nations largely because of slow adoption and state-control of the industry. While the release does not indicate an immediate change in these circumstances, it could mean that the industry may finally begin to open up to more efficient business models.

Perhaps the MIIT’s request shows the beginning of a new general trend. Last year an investigation was begun to explore whether or not China Unicom and China Telecom were effectively using their monopoly control to keep prices abnormally high for Internet users in China. Though there has been little new talk about these investigations, it could be a sign that the market is opening up. By the time 4G becomes available, the industry structure could be very interesting.

While Chinese companies are attempting to expand and to reach other markets, they often run into political opposition due to their close ties with the state. In the US notably, Huawei has had considerable difficulty–even though it is private–gaining access to the American market because of Congressional opposition to what is seen as a potential security threat. China Mobile has also run into the same issue trying to gain a license in the US (here’s an interesting piece on that over at China Hearsay).

Let’s hope for some improvement in the next year or two.


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