Did June 4 Crackdown Put China behind India in Telecom?

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.

Reader Comments

Steven

June 5, 2009 5:25 AM

What joking you are talking about. The standard of a country's industry is foreign involvement? I can tell you that standard is the past after US crisis. At least Chinese will not think so. Chinese has the biggest telecom networks, from fixed line phones, cell phones to internet. China could be the second only to US for the number of big websites and very successful in internet commercials.


TD-SCDMA is a good thing for China's future development. That's our standards and was one of the 3 international standards. We don't need pay fees to other countries. The implementation is slow, but that's the first, we can expected that and can tolerate that. We accumulated the skills in developing standards, in software implementation and chips design. All these skills are more important for us than the system itself.
Bruce Einhorn, please don't turn this website to a joke teller's website.

Steven

June 5, 2009 5:38 AM

China is more family-oriented. TV programs are almost free to everyone and almost all families have their TVs. Movies are not important for entertainment. TV shows are making big money in China. I don't know what good movies Bollywood can make and how much money thy can make. Chinese entertainment industry is way big for sure. CCTV alone makes billions of US dollars each year (that's why it could afford wiered buildings in Beijing).

J

June 5, 2009 2:44 PM

as a Chinese, i very much enjoy western devils' bitter comparison every day while China is getting stronger day by day.

Josh

June 5, 2009 3:24 PM

This is just plain silly.

The true measure of success is how profitable are the telco companies in the either country. By any stretch of the imagination, China telcos companies are by far much more profitable compare to India's. This has propelled innovation in China's manufacturing of telecommunication equipment and gadgets ~ case in point ZTE, and Hua Wei(the next Motorola & Cisco combine beast that will forever change the modern communication market).

One is hard press to find a more exciting telecommunication market than China's, which explain why China's telco are focusing to devour its investment, time and energy on China.

All the above facts are reflected on the telcos share prices. As the current economic crises has thought us, it is the one with the cash is the one that will survives hence my money is no China.

coolhead

June 5, 2009 4:21 PM

Sounds like just a theory. The only facts you gave are China Mobile's only foray abroad and 3G. Don't you also need to tell people about India telecos' (any impressive) foray abroad and 3G in India to support your theory? Do you know that the largest US operator, Verizon, has no foray abroad at all? As far as I know, Indian consumers are today only just getting access to high-speed mobile services in a tiny area of India. TD-SCDMA is a latecomer, but eventually it will save China tons of royalty fee and give them technological independence, which India will never have.

Nope

June 5, 2009 6:30 PM

Is the U.S.'s telecomm sector truely open ? how about the banking sector ? When a Chinese company tried to acquire a small petroleum company in the U.S., it was blocked by congress, this told the whole story about the U.S.

nagaraj subramanian

June 5, 2009 8:46 PM

it is ironic that this author always said that China was superior, however recent events have shown that Openness of Indian Society has created world class companies who have learned to service at the cheapest costs. today, it costs 2 cents/min from america to any indian phone and incidently provided by Tata Telcom and Bharti Telecom. While, ATT costs 45c per minutes, infact it is cheaper to call america from india since costs have fallen as low as 0.9c inclusive of taxes.Indian Telecom has given its shareholder a good bargain in this ride. i hope that countries like china and middle east support democracy so that they can be competitive with India.

Andy

June 5, 2009 10:15 PM

So when the local companies dominate the market and the western ones fail to penetrate the market, the BW will call that market second rate. What else is new here? Oh yeah, now it has a new twist, without western companies in the market, that market must be undemocratic.

Bruce Tiwtass

June 6, 2009 1:39 AM

Fact of the matter is that China is kicking America's backside in virtually every field including Telecom. American companies really need to be worried because the likes of Huawei and others are going to have Cisco and At&t for breakfast.

Ralph Nader

June 6, 2009 1:51 AM

How does America rate viz.a.viz. China?
I think China did a smart thing by not allowing foreign investors to milk their companies.

Interconnect

June 6, 2009 5:35 AM

The sub-continent of India/Pakistan being part of SAARC trade union has several marked developments. Pakistan has de-regulated telecom., sector from the state controlled/owned companies to todays vibrant sector and the telecom regulator. Pakistan where China Mobile, Huawei, ZTE, and many other companies operates has transfered technologies, obtained orders from other operators in the de-regulated market in open competetion with several international companies as Cisco, Ericsson, Siemens Nokia, Qualcomm and many others. Chinese companies won orders from almost all international operators in Pakistan, with strict adherence to IPR being a firm requirements of Pakistan companies. No order was obtained by any Indian companies. Also in collaboration with Etisalat, Warid, Wateen the major operators of Pakistan obtained international orders/contracts in Africa, and emerging markets with the collaboration of Chinese companies being strategic partners in Pakistan. A very positive role by Chinese companies is placed with wireless broadband technologies in Pakistan compared to Motorolla and other international players

Subir

June 6, 2009 5:44 AM

The Indian telcos mentioned in the article are both private domestic companies that have thrived despite strong western players.
Compare that to China's state owned, competition free telcos.
The article reflects on an important ideological difference between the two nations.

Reader

June 6, 2009 8:38 AM

After the Mumbai terrorists attack, Indian themselves regret they didn't have the security layer in their own communication system.They had put blind faith in the market alone. But how could they blame a bunch of businessman whom did not put India's national security at first. Everyone knew, they are their just for the money. Then why Bruce Einhorn, the author saying the opposite. 1,He didn't do enough research. 2,He just want to exchange his rant for money. And the Chinese TD-SCDMA is more security tightened communication technology. For Indian's point of view,check out the link below.
http://www.kms.ijis.org/traction/permalink/Public3441

Howard

June 6, 2009 11:44 AM

BT, AT&T, Singtel, Orange, Sprint, Telstra, T-system, ... All of them have opened their business in China serveral years ago, though their market share are ralatively smaller compared with the big 3(China Mobile, China Telecom, China Unicom), each with hundreds of millions of subscribers.

Lucent, Motorola, Nortel, Cisco and Quancomm have started their business in China long ago and made fat profit from the China Telco market. But now they are facing more challenges from local rivals like Huawei and ZTE.

Huawei and ZTE are already doing business worldwide. Maybe one day China Mobile will also open telco business in US, but I'm afraid it maybe be rejected by Washington (again) for "security concerns"...

Anyway, the report is a little biased - an implicit blame of China for "protectionism" is its true agenda.

Nonsense

June 6, 2009 12:49 PM

Tiananmen has anything to do with Telecom? What a far stetch!

huyu

June 6, 2009 1:10 PM

I am Chinese and an under-deserved Anglophile as well. To us Chinese, India is already the world's No.1 Superpower, transending the best traditions of the British Empire every day. No dispute here, and much admired. In PPP terms, India is already the world's No.1 economy, not even the US comes close. India has a super high-tech economy with InfoSys, Wipro, Nano, and much more that the average Chinese never even heard about, in whose unfit minds, they only know about BYD, Hauwei, ZTE, and Lenovo. Never mind, how limited horizons. With the exemplary services of Gandhi, Nehru, and Singh super human politicians, India has a huge population dividend, and as time grows the advantage will become much more pronounced, just imagine millions more Singhs. With her close to 1.1 Billion Software Engineers, they are making this profession obselete. In the next 100 years, India with her super effective democracy will prevail; as we Chinese just pray that India will be also have mercy to leave a bit of room for us Chinese to earn a modest living in our corner of the planet. India just needs to sleep walk through the next 30 years, or better yet with their superior intellectual powers there are more important topics to discuss like whether cats are white or black, or indeed both, whereas us poor Chinese will have to continue to slave under the Sun, rain, and snow just to keep us fed and our kids in school. We may not even afford shelter, but kids have to learn anyway. With the current economic crisis, my salary here in Beijing is shrinking by 8% each year, together with the overall economy, all that necessity is becoming harder day-by-day. In 30 years, I suspect my salary would march on to zero, but then I would also be dead and need not to care. Oh, by the way whatever you hear from our government and the foreign press, if it is good news, just ignore it, it is not quite right, shall we just say. Cheers to India.

Henry L.

June 6, 2009 10:15 PM

What an idiotic writer. Why don't you go and complain that the US have a second rate software and micorship company because Microsoft and Intel have a monopoly over the US market. This is the type of arrogance that led to the bankruptcy of GM and Crysler. What a laughbly title "June 4 Crackdown Put China behind India in Telecom?"

Bin

June 7, 2009 10:12 AM

I have no doubt that both India and China will take their places as great nations, in the not-so-distant future. Both will get there following its own path. It is pointless to compare which path is better, or which country's system is better. The end result is what matters: raising people's living conditions in both countries. The author of this article obviously has his idealogic leaning on western style politic systems. However he has made a gross mistake by superimposing his personal believe on hitory, and stretching and misrepresenting incomplete facts with ideals. The truth is, cencership in China did not start with June 4th. It is so unfortunate to see a second-rate writting on this respectable biz magzine. Who is the Editor-In-Charge:)

John S.

June 7, 2009 12:04 PM

Overall this article is irrelevant.
Few comments:1. Telecom security is crucial to China as well as US, as huawei 3com case suggested. 2. State controled industry(e.g Telecom,Media, Railway) matters much more to China gov than Tiananmen incident 3. China gov apprently knows what they are doing, it has to be in their best interest. 4. It's actually nice that China telecom industry is considered to be a underdog as "2-rate" indicate.Well, wait and see the fall of next telecom GM.

TAC

June 7, 2009 1:39 PM

I think this will be an interesting topic unfolding in the future. Asia Chronicle (www.asiachroniclenews.com) can help provide further depth into the situation.

Jos

June 7, 2009 1:39 PM

China's telecom company Huawei Technologies was ranked as the largest applicant in 2008 under WIPO's Patent Cooperation Treaty (PCT), with # 2 being Panasonic Corp of Japan, and # 3 being Philips Electronics of Holland.

In 2008, total number of worldwide PCT patents filings:

-- Huawei, as a single company of China: 1737

-- India, as a whole NATION combined: 766


Dear Bruce Einhorn, test your body tempreture please, I insist.

@Jos

June 8, 2009 2:54 AM

Congratulations. It is indeed an eye-opener that the Chinese are so innovative. I am so impressed by the number of patent filings by Huawei.

As a WIPO employee, I am so glad that there are idiots in the world who make us rich and keep us busy. Way to go...Huawei.

Han

June 8, 2009 12:15 PM

Chinese government made the right decision to not open telecom market to foreign company, so that we can build our own standard, the one fits our own need.

david

June 9, 2009 2:25 PM

About 10,000 years ago, when I was a child in Hong Kong, I remember the British government forced the Kowloon Motor Bus Co. to buy double-decker buses and forced the Hong Kong schools to buy British text books, reason: buy products from the mother country. There is nothing wrong for the Chinese people and the Chinese government to have their own system: namely, TD-SCDMA.

Titan_2000

June 9, 2009 4:45 PM

A simple fact:
Check the call rate in skype, viopdiscount, jajah, nonoh, gizmo or whatever you can find. Name ONE which rate from USA to India is cheaper than that to China.

WangLi

June 11, 2009 2:02 AM

Mr.Einhorn, do you know China Mobile is working with Vodafone on 4G TD-LTE network? Do you know TD-LTE based on TD-SCDMA is more effective in use of frequency domain? Give me any Indian tel company that has the tech power that match what China Mobile has. If you think the big three in China sleep in same bed and are competition free, verify your assumption next time when you go to China.

Almost all East Asian countries have their own dominant domestic players, and I don't see anything wrong with it. If Indian like foreign players to dominate their market and rip away profit, that's their choice.

Teo Qui

June 16, 2009 5:10 AM

Interconnect
June 6, 2009 05:35 AM

Interconnect,

That was a futile post by you, much like what I could be doing now by posting if your senses have taken a vacation. To compare India and China IN Pakistan is to compare China and the US in North Korea. China can do whatever it wants with Pakistan, using it as a buffer against India's growth. You also didn't know that besides granting them a few licenses, Pakistan has also transferred a gargantuan piece of land which is called 'Aksai Chin' to China which it had seized from India in 1947. You also might not know that China vetoed the UNSC attempt to ban the Lashkar-e-Tayyaba- a terrorist group banned by the US, EU and India and which carried out the Mumbai attacks. You might also not know that China is helping devlelop a superport at Gwadar, Pakistan near the India coastline to prevent the chances of an Indian naval attack at the port of Karachi.

Again, by comparing the two in Pakistan you've shown how much you know about the markets in these countries. The comments here have been intelligent so far, PLEASE keep it that way.


and @ Jos

Coming as it most likely from the resident of a country where the intellectual property protection standards are as slipshod, vague and incoherent as Uranus, one could take that with a pinch of salt. China using the number IP filings as a measure of its capabilities is as misleading as the North Korea touting its nuclear weapons as a prrof of its 'technological superiority'. Yeah....sure.. Now go run along.

WankerLi

June 16, 2009 5:16 AM

@ Wang Li

Tech power?

Really?

Technology is usually based on patents. Surely you are talking of the great protection afforded by China to IP of others. If you are, then you made a good point. I can say this because I am also from the 'Perpertration of Profitable Propaganda for the People Politburo'. More power to you comrade!

Jim

June 17, 2009 1:51 PM

No point comparing India to China. China is way ahead of India and in a different league altogether. Indians would do well to realize that stop embarassing themselves by trying to compare themselves to China.

WangLi

June 19, 2009 1:50 PM

@WankerLi

Let talk about patents. China filed ten times patents than India, and Huawei is number one worldwide in filing international patents in 2008, passing power-house like IBM and Philips (search google). Now, how many patents did telecom companies in India file last year? Give me your numbers to prove India is better techanically than China.

hi

March 2, 2010 1:57 AM

guys this is 1 world and we're all living in it peace:P

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