China's Telecommunications: Present and Future

Working Papers

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June, 1997

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By the end of 1995, China had built the world's ten largest telecommunications networks and the industry was growing at a faster rate than any other sector of the booming Chinese economy. For example, the country's 40 million telephone subscribers with 50 million telephone numbers represented an average annual growth rate of nearly 100 percent over a ten-year period. Internet users served by ChinaNet jumped from 6,000 in 1995 to 53,739 in March 1997. Progress was qualitative as well, as China procured state-of-the-art fiber-optic and satellite technologies and narrowed the gap between itself and the United States and between its own urban and rural areas. The achievement can be attributed to the government's commitment to telecommunications as the key to further development--a commitment backed by preferential policies; to foreign financial and technical support; and to changing attitudes of the Chinese people themselves.

However, China faces some major problems. The gap in living standards between coastal and interior provinces is widening, as people migrate from poor villages to increasingly affluent cities. The government must focus more on developing isolated regions. Rapid development of telecommunications cannot be sustained under a government monopoly, which aids the government's economic and security interests but discourages foreign companies from investing and transferring technology. At the same time, there has been little headway in developing domestic telecommunications products. Management of the industry is chaotic in the absence of clear regulations, and a multilayered bureaucracy encourages wasted resources, duplication, red tape, and corruption. Political problems are likely to emerge as telecommunications continues to help open Chinese society and young Chinese come to embrace Western industrial culture.

Nevertheless, China is destined to become and remain the world's "super market" as long as it remains politically stable in its transition from a plannned to a market economy. Telecommunications will continue to play a key role during this transition.

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