Posted by: Bruce Einhorn on June 5, 2009
Not often that you see someone comparing China’s telecom sector unfavorably to India’s. China has the world’s largest cellular market and, in China Mobile, the world’s largest cellular operator. India is growing fast but it got a much later start and it’s nowhere close to the size of the Chinese market. So have a look at Telecom Asia blogger Robert Clark’s take on yesterday’s 20th anniversary of the Tiananmen Square crackdown in Beijing. Clark ties the June 4 crackdown leading to the government censorship and ownership limits that have had a stifling impact on what he calls China’s “second-rate” telecom industry. Because of the regime’s interest in maintaining control, he writes, “China cannot permit the growth of an open and competitive telecom industry. It refuses to allow private or – in breach of its WTO commitments - foreign players into the market.”
Clark’s right, Beijing was talking a different game back when it was angling to enter the world trade club. Consider this article from the People’s Daily in May, 2000 with the laughably wrong headline “China Braces for Cut-Throat Competition after WTO.” The official Party paper went on to report, “The telecom market, one of the country’s most promising sectors, will eventually be opened to foreign investors, even though domestic players are not believed strong enough to compete with their multinational partners.”
However it’s now 2009, almost eight years since China entered the WTO, and China has cut-throat competition only if by cut-throat competition you mean “three companies all controlled by the state.” Meanwhile, as Clark points out, India has allowed significant foreign investment in its telecom sector, and has strong world-class players as a result. “Compare China’s system of state-controlled quasi-monopolies with India’s open telecom sector, which has allowed private businesses to nurture world-class telcos such as Bharti and Tata Communications. China Mobile’s sole foray abroad has been to buy the smallest and weakest player in Pakistan. Its political stunt in trying to buy into Taiwan is now an embarrassment. Seven years after 3G was launched worldwide, Chinese consumers are today only just getting access to high-speed mobile services, while their government has spent billions on the TD-SCDMA boondoggle.”
And what’s true for the telecom industry is true for other Chinese industries deemed too sensitive for foreigners to touch. Compare China’s entertainment industry, for instance, to Bollywood to see another example of the government dooming its own companies to second-rate status by refusing to loosen its grip.