Table of contents
Cover page…………………………………………………………………………………………1
Table of contents…………………………………………………………………………………..2
Abstract……………………………………………………………………………………………3
Introduction………………………………………………………………………………………..4
The current status of the privatization for china…………………………………………………..4
Deregulation of telecommunication industry in China……………………………………………4
Benefits since de-regulation……………………………………………………………….………5
Competitive Environment in China telecommunication industry…………………………………6
Level of Competition in China telecommunication industry………………………………………7
The dominant carrier in the industry………………………………………………………………7
The Competitors in the industry…………………………………………………………………..7
Internet services in the industry……………………………………………………………………8
Other issues in the industry………………………………………………………………………..8
Conclusion…………………………………………………………………………………………9
References………………………………………………………………………………………..10
Abstract
The paper analyses the deregulation and privatization of the telecommunication industry in China. The aspects discussed are the current status of the privatization for china, Deregulation of telecommunication industry in China, benefits since de-regulation, competitive environment in China telecommunication industry, level of Competition in China telecommunication industry, the dominant carrier in the industry, the competitors in the industry, internet services in the industry, and other issues in the industry.
Introduction
The telecommunication sector in china has developed at a high rate due to the new policies developed by the government, such as privatization and deregulation. Privatization refers to the transfer of ownership of publicly held enterprises to the private sectors. It also refers to the liberalization of the market where the private sector acquires more participative role in the development of the economy. Privatization brings about competition in the market as more private enterprises enter the market. Since 2001 the government of China has allowed more privatization of many sectors of the economy. This has increased the income generated by the private enterprises (Wong, 2002).
The current status of the privatization for china
The current status of privatization in China indicates that the private sector has taken a great deal of the economy and it has contributed a lot to the gross domestic product of the country. The telecommunication industry in China has been deregulated and the role of private sector is increasing at a very high rate. The economy has witnessed a high growth over the last decade after the deregulation and privatization of public corporations (Reuvid and Li 2005).
Deregulation of telecommunication industry in China
Before the deregulation of the telecommunication industry, the Ministry of Post and Telecommunications (MPT) issued regulations about the operations of the industry. To deregulate the industry, the government replaced the MPT with the Ministry of Information Industry (MII). The MII has been provided with the mandate of supervising and issuing minimal regulations to the industry. The overall effect of introducing the MII was the increase in competition, establishment of new markets such as the internet, expanding the mobile network, increased economic growth as well as an increase in the number of mobile phone subscribers (Wong, 2002).
The telecommunication industry of China has been expanding since 1990s. The factors causing the steady expansion are the high rate of economic growth, improvement in technology, low tax rates, and several institutional changes introduced by the government. According to Zielinski (2005, para. 2) “for the past few years the driving force of change in China’s telecom sector has been the country’s commitment to liberalization under the 2001 WTO membership agreement.” After the privatization and liberalization of the economy the country experienced a great increase in the revenues collected from the telecommunication industry. In 2004 the industry contributed approximately $46.53 billions. This was a 12.8 percent increase from the previous year (Wong, 2002).
Benefits since de-regulation
The Chinese government has achieved great benefits since the privatization programmes were implemented. The contribution of the industry to the gross domestic product has increased since privatization was started. The foreign investment has increased in the industry; with companies such as Vodafone, AT&T among others entering the market. The privatization and deregulation of the telecommunication industry has increased competition. Increase in competition has reduced the prices of the products offered in the market by the industry as well as improving the quality of products (Wong, 2002). An increase in the sales volume in the industry has been realized since the government introduced institutional changes in the 1990s.
Source: China Statistical Yearbook, 1990, 1995, 2000
The sales revenue increased after the deregulation of the industry. The growth rate in the telecommunication industry was higher in the second half of the 1990s as compared to the first half as indicated in the chart.
Competitive Environment in China telecommunication industry
The Chinese telecommunication industry has a competitive environment where there are many domestic and foreign companies participating in the economy. The government has privatized most of its industries. In addition, the government has also conformed to the rules provided by WTO to deregulate the economy. Several companies form the domestic and foreign investors have penetrated the market (Reuvid and Li 2005).
Level of Competition in China telecommunication industry
Perfect competition exists in the Chinese economy. Before the deregulation of the telecommunication industry, only one company existed in the market, Telecom. Unicom emerged in 1994. Other companies later penetrated the market, for example, Jitong and Netcom. The Ministry of Information Industry (MII) was established in the late 1990s to issue some regulations to the industry (Reuvid and Li 2005).
The dominant carrier in the industry
The most dominant carrier in the telecommunication industry in china is the China Mobile. The company has acquired tremendous success and profit in the market. The company was founded in 1987. Since 1996 the company has registered a huge amount of profit and no other company has been able to overcome its dominance in the market. China Telecom had acquired monopoly in the industry before the emergence of Unicom, causing very high prices on cell phones (Reuvid and Li 2005).
The Competitors in the industry
The main competitors in the industry are drawn from the public sector, private sector and foreign investors. The public companies in the industry are China Unicom, China Satcom and the China Telecom. Lu Ding (2003, pg. 231) suggested that “even though China Mobile and China Telecom remain the most dominant companies in China, the other six companies, especially Unicom, Railcom, and China Netcom can become very tough competitors.” Motorola has also entered the telecommunications industry of China. Sony Ericsson has been participating in the industry (Reuvid and Li 2005).
Internet services in the industry
The MII controls Internet Service Providers (ISPs). The introduction of MII was a major step towards privatization and deregulation in the internet provision industry. More than 300 ISPs were issued with licenses to operate in the country in 1999. Internet service providing companies were also allowed to operate in the economy, for example, China Telecom, China Unicom, Jitong Communications, and China Netcom. According to Lu (2003, pg. 132) in 1999 “China Telecom Company was divided into four separate companies: the China Telecom Group Corporation, the China Mobile Telecom Group Corporation, the China Paging Telecom Group Company, and the China Satellite Telecom Group Company (Wong, 2002).
Other issues in the industry
The number of mobile subscribers has increased after the emergence of many companies in the industry. The customers in the market can now enjoy low prices. This has been created by the high competition inn the market. From the diagram below, the number of mobile phone subscribers has increased since 1999 and is projected to increase in the future.
Source: www.online.wsj.com/article/SB.html
Conclusion
China has experienced an expansion in the telecommunications industry after the deregulation and privatization policies were introduced. The market has experienced a lot of competition with entry of many participants emerging from the public sector, private sector and the foreign investors. The government has realized a lot of benefits from the deregulation programmes. Telecom Company has dominated the China telecommunication industry but after the deregulation of the industry the company has experienced a lot of competition as more companies enter the market.
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