Thursday, February 24 9:49 PM SGT
EU Squeezes China On Foreign Ownership
BEIJING, CHINA, 2000 FEB 24 (NB) - By Martin Stone, Newsbytes. European Union (EU) negotiators are reportedly seeking the right to 51 percent foreign ownership of Chinese telecom firms as part of talks centered on China's bid to join the World Trade Organization (WTO).
A Reuters report today said the demand exceeds the 49 percent ownership rights negotiated last year by the US on mobile and fixed-line networks, and 50 percent for value-added services, including the Internet.
The EU's demand is reported as a sticking point in the negotiations over China's potential WTO membership. European telecoms are seeking management control which would give them greater leverage in what is being called the world's fastest growing telecommunications market, Reuters reported.
The report noted that the number of mobile phone users in China nearly doubled to 43 million last year, while Internet users are doubling in number every six months, now totaling about 10 million.
Presently, overseas investment in Chinese telecom operators is forbidden by Chinese law, but Washington wrested a six-year timetable from Beijing that pries open the market, Reuters said.
In value-added telecom services, China agreed to permit foreign participation of up to 50 percent within two years of China's accession to the WTO, while ownership in mobile networks would be phased in gradually, starting at 25 percent after one year in the cities of Beijing, Shanghai and Guangzhou, and rising to 49 percent after five years, according to the report, which added that fixed-line and international long-distance networks would permit 49 percent foreign ownership in six years.
The EU negotiators are attempting to raise the barriers to 51 percent across the board, but might accept 50 percent, with a faster phase-in period, Reuters said.
The report also noted strong resistance within the Chinese government and telecom industry to foreign ownership, prompting analysts to express doubt the EU would succeed.
The EU is also attempting to win more favorable treatment for foreign investors forced to withdraw from joint telecom ventures, Reuters said, adding that Beijing cracked down in 1998 and ordered the ventures to disband. EU negotiators are seeking to recover millions of dollars in back payments owed since China Unicom ceased sharing revenues last October.