CHINA INFORMATION TECHNOLOGY LAW NEWSLETTER
Vol. 2, No. 3 -January 29, 2001
TOPICS THIS ISSUE:
- New CNNIC Report Shows Continued Growth
- Domain Name Registration Amendments Proposed
- Nokia to Deliver WAP Services
- China Telecom to Work with Morgan Stanley, Merrill Lynch
- Nokia to Partner with China.com in Broadband Market
- One Hundred Websites in Shanghai get Internet Content Provider Licenses
- Domain Name Registration Booming in Asia
- China uses Internet to Strengthen Supervision, Control of Securities
New CNNIC Report Shows Continued Growth
The China Internet Network Information Center (CNNIC) in January issued its seventh report on China's Internet development as of the end of 2000. The report showed a steady increase in Internet users. The number of Internet users (who browse the Web for at least one hour per week) has grown from 16.9 million to 22.50 six months ago. The majority of them are connected via telephone. Among them, 30.44 percent are woman users. This is higher than the 25.32 percent projected six months ago. According to the report, the majority of users are from the more developed areas in East and South China. The report showed that 80 percent of people use the Internet to read news, send e-mail or look for entertainment. The report also stated that only 31.67 percent of Internet users shopped online. Less than 10 percent of users have ever taken part in online auctions.
(Source: IPR Strategic Business Information Database)
Domain Name Registration Amendments Proposed
The China Internet Network Information Center (CNNIC) is considering several amendments to its domain name registration policies.
If implemented, the amendments would:
1. Relax restrictions on domain name selections -- only those deemed harmful to public interests will be banned. At the moment, several generic words such as "China" may not be used in domain names.
2. Simplify registration procedures -- all applications can be made online. This contrasts the current two-step procedure of online preregistration and subsequent paper application.
3. Grant individuals the right to register domain names. Currently only companies that have a China presence may register domain names. For foreign companies, this means having at least a registered representative office in China.
4. Allow transfer of domain names. At the moment, domain names must first be cancelled and then re-registered by the second party.
5. Set up mechanisms to settle disputes on the registration and use of .cn names. The courts are becoming more popular, but the system is still far from efficient. The test phase of using arbitration for Chinese-language domain names in China began earlier this month, presenting another possibility.
The amendments, if adopted, are expected to come into effect early this year.
(Source: People's Daily)
Nokia to Deliver WAP Services
Nokia Neu CommTech Company Ltd.(Nokia Neu), one of Nokia's joint ventures in China, and the Beijing and Hubei branches of China Mobile Communications Corporation (CMCC) recently signed an agreement for the delivery of WAP services for mobile Internet use in North, Central and Western regions of China.
Deliveries have already begun, and the system will be operational in February this year. Following this agreement, WAP services will be offered to more than one million subscribers in China.
"Nokia is very pleased to co-operate with CMCC to build WAP services which will help drive the growth of mobile Internet services in China," said Mikko Mattila, Deputy General Manager of Nokia Neu, "Together with GPRS, WAP services and applications are the first important step for the delivery of advanced next generation mobile services to the customers."
China is Nokia's second largest market in the world. Nokia's investment in China has surpassed USD one billion. Nokia has established over 20 representative offices, seven joint ventures, one wholly owned manufacturing plant and one R&D center, with over 5,000 employees in China.
(Source: Business Wire)
China Telecom to Work with Morgan Stanley, Merrill Lynch
Morgan Stanley Dean Witter, Merrill Lynch and China International Capital Co., Ltd. (CICC) have been chosen to facilitate China Telecom's planned listing abroad.
CICC, an investment bank, is a joint venture established by Morgan Stanley Dean Witter and the Construction Bank of China.
China Telecom, the largest Telecom Company in mainland China, reportedly will list its initial shares in Hong Kong and New York in the second quarter of 2001. It is expected to raise US $10 to 15 billion, much more than China Unicom received from its listings on the same markets. CICC raised a fund of US $5.65 billion for China Unicom in its initial listing in June 2000.
China Telecom dominates the operation of fixed telephones in mainland China and enjoys preferential treatment by the state. At the same time, China Telecom, like most of the large Chinese companies, has an extremely close relationship with the government.
Soon many of China's industry players will make initial public offerings on foreign exchanges. Chinese firms raised a record RMB 324.9 billion from the domestic and overseas securities market in 2000. China's state-owned enterprises have raised nearly RMB 500 billion (US $60 billion) in total on domestic and overseas markets since 1998. By the end of last year, 1,211 Chinese firms were listed on domestic or overseas stock exchange. The government is eager to bring more of this new form of foreign investment into the country, and is pushing other firms to list as soon as possible.
To help facilitate new companies that want to list, China will speed up preparations for the establishment of joint venture securities firms and fund management firms. The country now has 10 fund management companies.
Overseas investors in Chinese companies are always concerned about the risk due to the regulatory environment in China. In the West, industries band together to lobby the government for preferential policies. In China, these entities, regardless of industry, are much more within the governmental structure itself.
Therefore, as Beijing formulates its policies in the telecommunication industry, it should consider the effect those policies will have on the stock prices of corporations like China Telecom. Over time, this may act to influence Beijing's policy decisions and hopefully moderate government action.
However, Chinese corporate entities do not necessarily have an effective means to persuade the government to protect the company's investments. Pressure on Beijing will most likely come from foreign exchanges rather than China's domestic boards. China's exchanges, in Shanghai and Shenzhen, are growing rapidly, but have yet to reach full maturity. China's stock markets increased by more than 50 percent in 2000. By the end of last year, stock exchanges at the country's two boards in Shanghai and Shenzhen reported unprecedented hikes of 51.7 percent and 58.1 percent respectively.
The Shanghai and Shenzhen B-share indices for foreign investors increased by 130 percent and 60 percent respectively last year. China's B-share markets grew into one of the best newly emerging markets in the region in 2000.
Investors in China's exchanges are either oblivious to the risk to start with or willing to accept the risk to take advantage of the "upside". Regulatory risk on the domestic boards will only show up as a mild damper on growth. The foreign boards will not be so kind. As more and more wealth is at stake, Beijing will certainly learn to move more carefully and prudently.
(Sources: China Daily, People's Daily)
Nokia to Partner with China.com in Broadband Market
Nokia and China.com recently announced an agreement to cooperate in a broadband network application service project, the first product jointly launched by a dotcom and a telecom in China.
Last year Nokia (China) Investment Co. Ltd. signed an agreement with China.com to jointly develop broadband application services. It is hoped that the cooperation would help Internet operators to expand broadband service in providing diversified services for China's Internet users.
The agreement would have Nokia providing system integration on the broadband network, and China.com, with its subsidiary websites serving as Internet content providers, providing application services.
Wang An, vice president of Nokia (China) company said that the cooperation will be conducive to further development, thus helping Nokia to lead the broadband business in China. With China's pending accession to WTO, Wang believes that China's broadband market is promising, and the cooperation will help create a "win-win" deal for the two parties.
(Source: People's Daily)
One Hundred Websites in Shanghai get Internet Content Provider Licenses
One hundred websites in Shanghai recently received Internet content provider (ICP) licenses from the Ministry of Information Industry (MII). Regulations on Internet content service, issued last September by the State Council, stipulate that websites providing news and information on education and health care must get approval from State authorities before January 31.
Unlicensed websites are to be penalized or shut down. Each licensed operator is required to post a banner of certification on its homepage, displaying the license number and detailed information on the company. The license is valid for one year only.
(Sources: People's Daily, China Daily)
Domain Name Registration Booming in Asia
The Asia-Pacific region saw the fastest growth in domain name registration in 2000. China leaped to 11th place in the world in the number of domain names registered. Among the cities with the most registered domain names, Hong Kong ranked fourth, and Beijing, 10th.
(Source: chinadaily.com.cn)
China uses Internet to Strengthen Supervision, Control of Securities
Beginning March 1, 2001, all firms wishing to issue securities in China must provide potential buyers with online information. The China Securities Regulatory Commission (CSRC) recently issued administrative orders targeted at improving company disclosure, and controlling insider trading and market manipulation.
In addition, the CSRC will strengthen regulations on the establishment of intermediary organizations, training of professionals and crime prevention in the securities sector.
The regulations require the company president, general manager, financial director, secretary to the board of directors, and the project caretaker of the lead underwriter to be interviewed, with the interview available through an online feed. The listing company must also sign an affidavit as to the truthfulness and completeness of the company's disclosures.
Securities law in China is in its infancy, and there are many problems to be solved. Disclosure laws and penalties for fraud are desperately in need of strengthening, and this new regulation is sure to be followed by more disclosure laws.
(Sources: People's Daily, China Daily)
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The China Information Technology Law Newsletter is intended to be used for news purposes only. It should not be taken as comprehensive legal advice, and Lehman, Lee & Xu will not be held responsible for any such reliance on its contents.
