Wednesday, Jul 26, 2017, 8:44 PM CST – China

Commentary

China’s new economic strategies require an overhaul of its telecommunications industry

‘Internet Plus’ and ‘Made In China 2025’ cannot thrive if the national telecoms network is monopolized by a few big hitters

Following a call from Chinese Premier Li Keqiang for major Chinese companies to reduce charges and increase the speed of their Internet services, China Mobile, the leading State-owned telecommunications giant, was also reported to have launched a reform plan regarding its salary structure, which may see the salaries of its senior executives halved.

China’s telecommunications industry has long been criticized as a virtual monopoly dominated by three major State-owned companies – China Telecom, China Mobile and China Unicom. With all three under the administration of the same agency, China’s “Big Three” have effectively established an oligopoly over the entire market, resulting in comparatively expensive and slow broadband Internet that has delivered massive profits to service providers.

For years, calls have been growing to reform the telecommunications industry either by introducing more competition or reforming these profit-driven companies into non-profit Internet service providers charged with facilitating economic development.

However, China’s three telecommunications giants have remained unscathed despite several rounds of anti-monopoly investigations into their business practices. As China’s leadership now faces an economic slowdown at the same time as it is attempting to restructure the economy, the highly-monopolized and inefficient telecommunications sector has become a major thorn in the side of reformers.

Earlier in March, Li released a grand plan called “Internet Plus,” which he said aimed to “integrate mobile Internet, cloud computing, big data, and the Internet of Things with modern manufacturing, to encourage the healthy development of e-commerce, industrial networks and Internet banking, and to get Internet-based companies to increase their presence in the international market.”

In June, China unveiled the “Made in China 2025” strategy, which identified nine key tasks which needed to be completed in order to overhaul commerce: improving manufacturing innovation, integrating information technology and industry, strengthening the industrial base, fostering Chinese brands, enforcing green manufacturing, promoting breakthroughs in 10 key sectors, advancing restructuring of the manufacturing sector, promoting service-oriented manufacturing and manufacturing-related service industries, and internationalizing manufacturing.

To push these two strategies forward, a competitive telecommunications infrastructure needs to be put in place. Successful reform of telecoms will have a major multiplying effect on the successes of China’s overall plan for economic reform and restructuring.

The recent initiative to lower service charges levied by China’s telecommunications giants will surely put a dent in their profits. It is not surprising, therefore, that this initiative has been met with resistance from these companies. But for the sake of China’s broader economic wellbeing, the government needs to muster the political will to confront its chronic communications problem. 

The author is a senior commentator with NewsChina’s sister publication China Newsweek

China’s three telecommunication giants have remained unscathed despite several rounds of anti-monopoly investigations into their business practices

 

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