Doing Business with China
Basic telecommunication services (ie relay of voice or data)
Foreign service suppliers are permitted to establish joint ventures in accordance with the following conditions:
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For mobile services foreign investment in the joint venture can amount to a maximum of 25 per cent upon accession, 35 per cent after one year and 49 per cent after three years. For fixed-line services the foreign investment in joint ventures is opened only three years after China's accession up to a maximum of 25 per cent. This is to be increased to 35 per cent after five years and 49 per cent after six years.
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Initially these joint ventures will be allowed to operate services in and between the cities of Shanghai, Guangzhou and Beijing. This would be expanded to include Chengdu, Chongqing, Dalian, Fuzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shenyang, Shenzen, Xiamen, Xian, Taiyuan and Wuhan.
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The commitment covers domestic and international voice and facsimile services, packet-switched and circuit-switched data transmission services. It also extends to domestic leased circuit services.
Problems are already reported to have arisen in the mobile services market since accession. Foreign companies looking to establish joint ventures have to wait almost a year for the Chinese authorities to process applications for a mobile telephony permit. Furthermore, new regulation has set the Chinese partner's required capital inputs, at a level that is well above what is conceivable for most potential Chinese partners. The Chinese authorities are also looking to reduce the number of joint venture partners available by reducing the number of domestic telecom companies from seven to four large state companies. The WTO-compatibility of some of the manoeuvres of the Chinese authorities is doubtful.
Value-added telecommunications services
This covers electronic mail, voice mail, on-line information and database retrieval, electronic data interchange, enhanced/value added facsimile services, code and protocol conversion, on-line information and/or data processing.
Foreign investment in a joint venture can amount to a maximum of 30 per cent upon accession, 49 per cent after one year and 50 per cent after two years. These joint ventures are allowed to operate services in and between the cities of Shanghai, Guangzhou and Beijing from the date of accession. This will be expanded to include Chengdu, Chongqing, Dalian, Fuzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shenyang, Shenzen, Xiamen, Xian, Taiyuan and Wuhan one year after accession. Two years after accession all geographic restrictions will be abolished.
Specific rules concerning anti-competitive behaviour in the telecommunications sector
China has also undertaken to respect the obligations contained in the so-called 'Reference Paper'. This WTO document defines a number of regulatory principles for the telecommunications sector and includes measures to prevent anti-competitive behaviour such as cross- subsidization and also sets out rules concerning licensing criteria, universal service, and the independence of the regulator .