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Though already one of the largest in the world, China's telecommunications sector will continue to expand in the coming decades. Though great in aggregate, China's telecommunications sector is still small on a per capita base, which implies the huge growth potential for China's telecommunications sector.At present, development in China's telecommunications sector is uneven with both regional and urban-rural imbalances. Reforms and China's WTO membership will lead to further deregulation and hence increasing competition in the telecommunications sector.

Infrastructure

	1997	1998	1999	2000	2001
Telephone main lines (000)	70,269	86,984	109,015	144,594	183,745
Telephone main lines (per 100 people)	5.7	7.0	8.7	11.5	14.4
Phone sets (000)	100,303	125,257	161,460	211,893	263,963
Mobile subscribers (000)	13,770	24,669	42,153	86,866	150,361
Mobile subscribers (per 100 people)	1.12	1.99	3.36	6.88	11.81
Internet users (000)	1,891	4,429	10,802	20,186	41,050
Internet users (per 100 people)	0.15	0.36	0.86	1.60	3.22
Personal computers (stock per 1,000 pop)	6.00	8.89	12.2	15.8	19.5

Source: Economist Intelligence Unit ⁹

China has built up a telecommunications network centered around 22 capital cable lines and accompanied by multiple means of communications networks such as microwave, satellite, telephone, mobile phone, digital communications, and multi-media communications. The digital data communications network reaches 90 percent of the cities and counties throughout the country, and the public computer network covers 239 cities.

China’s domestic satellite system ahs 55 earth stations is in place, and for international satellite system, China has 5 Intelsat (4 Pacific Ocean and 1 Indian Ocean), 1 Intersputnic (Indian Ocean Region) and 1 Inmarsat (Pacific and Indian Ocean regions); several international fiber-optic links to Japan, South Korea, Hong Kong, Russia, and Germany.

China has several submarine cables, Sino-US, Sino-Japan and Asian-Europe. The first phase of Sino-US submarine cable has been put into commercial business and the second phase is in construction. The cable is 27,000 km and invested by China, USA, Hong Kong and South Korea. ¹⁰

Major Players ¹¹

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Services Players

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Fixed line China Telecom, Unicom and some local cable TV networks

Paging Unicom and many other providers

Mobile China Mobile, Unicom, Great Wall and potential entrants (China Satellite,

China Telecom)

IP telephony Unicom, China Telecom, Netcom, Jitong and China Mobile

Data China Telecom, Unicom, Netcom, Jitong, China Mobile and potential

entrants (e.g. the cable TV networks)

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Deregulation

	Deregulation Status	Comments
Voice	Partially liberalized market	Only few companies are allowed to provide voice services. China Telecom, China Unicom.
Cable	Monopoly	Controlled by Chinese government in different levels.
Television	Monopoly	China has 3,240 television broadcast stations, of which 209 are operated by china Central television, 31 are provincial TV stations and nearly 3,000 are local city stations. Private TV station is forbidden in China.
Radio	Monopoly	Chinese radio broadcast stations, AM 369, FM 259, shortwave 45, are under control of Chinese government in different levels. The private ownership of radio broadcast station is not allowed.
Mobile	Partially liberalized market	Only few companies are allowed to provide mobile services.

Recent growth in China’s telecommunications sector is also driven partly by deregulation and subsequent emergence of competition in this sector.

The presence of several domestic carriers and participation of foreign providers (legally or illegally, e.g. the call back services and internet telephony) has brought about an era of great expansion as the major players compete for market shares. As a result, competition has significantly lowered the cost of access to the telecommunications services. For example, the installation fees to the fixed line services were adjusted twice several times in 1990s and on an average fell from about 2571 yuan (or US$321) in 1995 to 200 yuan (US$25) in 2002. The mobile phone services and access to internet have also become more affordable. Those price changes boosted consumer demand dramatically and hence stimulated growth in the past decade.
China’s telecommunications sector has moved away from state ownership and monopoly to state control through shareholding and competition.
Foreign companies are allowed to sell advanced equipment to China and to create joint ventures to manufacture telecommunications products, to provide services to Chinese enterprises, and to hold stakes of up to 49% in mobile and fixed-line services, and 50% in value-added services. ¹²

Some areas (e.g. paging, mobile phones and data communications) are more deregulated and more competitive. But, deregulation in large is incomplete. Telecoms legislation is still at the infant stage and has for a long time been mainly supported by fragmented administrative decrees. The first Telecommunications Act was out only in September 2000. Its enforceability is yet to be tested. Many other issues such as property rights, foreign participation and interconnection remain unresolved. Some problems such as private ownership are associated with the transitional nature of the Chinese economy. Others interconnection are industry-specific. At present, competition mainly occurs in wireless and other value-added services. In particular, there is little competition in the fixed line service sector. Mandatory interconnection was not effectively enforced in the past. Interconnection has become the bottleneck in the industry. Those problems are yet to be solved in the near future. It is anticipated that recent reforms and China’s WTO membership will lead to further deregulation and growth in this sector.