US telcos too broke, scared to come to China: ex-official

China’s entry into the WTO ten years ago  might have been a big deal for China and the global economy, but it’s been a complete bust for telcos.

The sector is locked behind a series of barriers, many in breach of China’s commitments a decade ago.

Yet that hasn’t stopped China’s key WTO telecom negotiator, Liu Cai, coming up with his own explanation for the absence of foreigners.

In an interview with newspaper 21cbh.com Liu, who was head of policy and regulation of the then-MII, said:

“US basic telecommunications, like telephone networks, are all losing money on a big scale. What are they going to do in China? ... the willingness to compete with China Mobile doesn’t exist.

 “... basic telecoms in the US is a weak sector. It would be difficult to compete with China Telecom. We have home turf dominance and they would be doomed to be unable to pass us. Therefore they don’t dare come.”

 This is nonsense on so many levels: US carriers aren’t going broke and they would love the opportunity to get into a fair fight with lumbering quasi-monopolies like China Telecom. Plus Liu seems to have forgotten that under his rules foreign telcos must take one of the fearsome local carriers as a partner.

Liu, who retired in 2002, was the telecom point man in the protracted negotiations, reporting directly to MII boss Wu Jichuan. He is still active in the industry, holding the post of vice-chairman of the China Institute for Communications.

The interview is revealing about some of the key decisions in the WTO talks, in particular the last-minute decision to double the foreign shareholding limit in VAS to 50%. (Liu’s explanation: because Wu was asked to by Zhu Rongji.)

But he made it clear that the MII’s prime goal in the process was to ensure the exclusion of foreigners from telecoms.

“We can put ourselves in the shoes of Minister Wu: if a 50% foreign-invested telecom company came in, how would we manage [it]? At the time we really were not sure.

 “If the US took 49% [shareholding in a basic telecom operator] then what would follow? Because with just a 25% minority shareholding you basically can’t take part in management. In the main it’s still us who have the final say; at least it’s Chinese people who have the final say, [or] the Communist Party who have the final say.”

Under the US-China WTO agreement,  signed on November 18 2001, foreign investment of up to 49% in basic telecom services would be allowed after three years. China agreed to allow up to 50% investment in VAS services.

To date, apart from a joint venture between AT&T and Shanghai Telecom in which the US firm has a minority stake, no foreign carrier has set up either a basic or VAS business in China.

AmCham Beijing describes telecoms as one of a number of sectors from which foreign companies are “partly or completely barred.”