NEW YORK-Concerns are mounting that recent deliberations by federal government leaders in China could lead to a lock-out of foreign investors from its telecommunications services market.
“China has quietly issued a decree calling for termination of Chinese/Chinese-Foreign joint ventures in telecoms by 2000. CCF financing has provided a route for investors to circumvent China’s longstanding prohibition of foreign ownership, operation and management of telecoms enterprises,” said Ken Zita, a New York consultant, in a position paper circulated at the recent ChinaTelecom 2000 conference.
“Since late 1995, CCF has created a means for China Unicom, China’s nascent second carrier, and companies controlled by the People’s Liberation Army to access global capital sources and to compete with China Telecom, the dominant provider,” added Zita.
The CCF has served a similar function in China as that of the high-yield debt market in Western nations, providing capital needed for start-up carriers to compete with incumbents, Zita said. He cited U.S. Commerce Department figures stating that Unicom so far has raised $1.4 billion, or 72 percent of its financing, through CCF structures. It has used most of this capital to finance mobile telecommunications ventures.
The People’s Liberation Army has garnered about $2 billion in foreign investment “in the last several years, mostly for mobile telecom projects,” said Kenneth D.C. Chan, resident partner of Allen & Overy in Beijing.
By comparison, this year alone, the federal government of China may invest as much as $36 billion in telecommunications projects, he said. By 2000, Chan noted, projections are that: the number of wireline phones in the country will have grown to 180 million from 120 million today; the number of wireless phones to as many as 50 million from 20 million today; the number of pagers to as many as 100 million from 60 million today.
Chan said there may be a silver lining to this cloud cast by recent government meetings
