CHINA INFORMATION TECHNOLOGY LAW NEWSLETTER
Vol. 2, No. 12 - September 11, 2001
TOPICS THIS ISSUE:
- Stricter Regulations Concerning Telecommunication JVs
- Disney Website a Stepping Stone for Searainbow
- International Broadband Forum in Beijing
- New Tel and Xinhua Venture Renegotiated
- China to Hold First International IT Show
- Chinese Authorities and Entrust Inc. Move on China E-commerce
- Western China to Promote Information Sector
- Nasdaq Suspends Trading of Netease.com
Stricter Regulations Concerning Telecommunication JVs
The Chinese Ministry of Information Technology and Telecom Industries recently issued a circular stipulating that all telecommunications joint ventures formed between domestic partners shall directly control at least 51 percent of equity in a relevant company before obtaining a business license.
It was also announced that all newly established joint venture companies not meeting the above conditions shall reapply for a business license.
Under the new rule, all external forces, including those in the radio, movie, and television sectors, are expected to have difficulty entering the telecommunications market by establishing joint ventures with the seven existing major players in the field.
The new rule has erected a genuine "policy threshold" for the radio, movie, and television sector's plan of making an asymmetric entry into the telecommunication market.
Not long ago, ChinaNet launched a formidable offensive in Chongqing, Hangzhou, and Shandong's Zibo, by forming a joint venture with a local government-run operation and by forging an alliance with a local radio, movie, and television operation in order to pressure China Telecom in the telecommunications field, especially in the broadband sector.
Now, under the new regulations, joint ventures like Chongqing Broadband, which controls only 28 percent of equity in ChinaNet, will have to reapply for a business license, which will take some time to complete.
The circular stipulated that even with direct control of at least 51 percent of equity in a joint venture telecommunication company, an existing telecommunication operator shall still submit a report to the Ministry of Information Technology and Telecom Industries or the relevant provincial telecommunication management bureau before obtaining a business license.
The circular also stipulated that a joint venture telecommunications company shall fully comply with its business license in terms of business scope and service coverage in urban areas.
In principle, a licensed telecommunications operator shall be prohibited from setting up several joint venture companies for operating the same business in the same region.
At an international Internet forum held in Beijing last month, Zhang Chunjiang, vice-minister of Information Technology and Telecom Industries, suggested that the units of the Ministry of Information Technology and Telecom Industries and the State Administration of Radio, Movie, and Television be allowed access to the telecommunications market separately.
However, Zhang's proposal was quickly and firmly rejected by the State Administration of Radio, Movies, and Television, which stated that the radio, movies, and television sector "maintains natural monopoly of the telecommunications market throughout the world."
By issuing the above circular, the Ministry of Information Technology and Telecom Industries has made a major move to rectify order in China's telecommunication market, and to prevent external forces, especially those in the radio, movie, and television sector, from making a roundabout entry into the market.
Given this, it seems that China's program for "merging three networks" has an uncertain future.
(Source: Zhongguo Xinwen She News Agency)
Disney Website a Stepping Stone for Searainbow
Searainbow Holding Co. Ltd., the company in charge of managing Walt Disney's Chinese web portal, said that the website is only the beginning.
Company president Kang Jian was reported as saying that the cooperation with the large US group will not be limited to the recent online investment.
Seven large domestic companies, such as Legend Holdings and Jitong, lost bids to Searainbow for the opportunity to work with Disney on the operation of the China-based website. Searainbow said the website will be used to sell Disney goods, and profits will be shared between the partners in the web-based venture.
However, Kang Jian said that Searainbow plans to cooperate with Disney on a number of deals, such as importing and exporting and theme parks.
Searainbow is listed on Shenzhen's A-share market and plans to cooperate with entertainment service providers in other parts of the world, specifically Europe and Asia. Its current strategy is to evolve into a leading digital entertainment service operator in China.
Searainbow began as a manufacturer of chemical fibers in 1999 and is now one of China's largest online game service providers, running sites such as ourgame.com, asiagame.com and xajh.com.
It was also reported that industry analysts see the recent online joint venture as showing that restrictions on foreign involvement in the Chinese Internet sector could be relaxing.
(Source: AFX - Asia)
International Broadband Forum in Beijing
An international forum on broadband streaming technology will be held in the Chinese capital from November 7 to 9.
The 2001 China Broadband Streaming Technology and Application Forum is jointly sponsored by the State Council Information Office and Ministry of the Information Industry. It is aimed at discussing the prospects for broadband streaming technology, which can be used for producing video-on-demand (VOD) used by media nationwide.
Involved in the forum are the Data Communications Bureau of China Telecom, China Central Television Network Department, China Radio International's Department of Network and Information Department.
Worldwide participants will discuss subjects such as broadband network construction, operation and development in China, as well as the most recent streaming technology and applications.
(Source: BBC Worldwide Monitoring)
New Tel and Xinhua Venture Renegotiated
New Tel Limited, a diversified Australian telecommunications group, recently announced significant developments in its joint venture with China's Xinhua News Agency, involving telecommunications ISP infrastructure and portal operations in China.
As a result of changes in the financial markets globally over the past six months, and the technology sector generally, the company has successfully renegotiated the terms of the agreements to reflect the value of Internet businesses today.
New Tel has secured an approximate 90 percent reduction in the consideration payable for the businesses to be acquired under the transactions.
Under the renegotiated terms, the consideration for Xinhua Internet Company Limited will be 30 million New Tel shares, reduced from 120 million New Tel shares; and Chinaworld Internet Technologies purchase consideration will be $1.2 million, reduced from $24 million. The remaining terms of the transaction remain unchanged.
In addition, considerable progress has been made in obtaining the necessary approval from the Chinese authorities to proceed with the project.
(Source: World IT Report)
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China to Hold First International IT Show
The first China International Information Technology Exhibition, sponsored by the Ministry of Information Industry (MII), will be held in Beijing from December 13 to 16.
The China Economic Information Network announced that patent technologies, inventions, products based on new Information technology (IT), computers and software, telecommunications and Internet technologies and household appliances will be displayed at the exhibition.
The exhibition, to be held annually, is organized by the China Electronics Science & Technology Exchange Center under the MII.
(Source: EMEconomy.com)
Chinese Authorities and Entrust Inc. Move on China E-commerce
To meet a booming online banking demand, The China Financial Certification Authority (CFCA) plans to use Entrust's enhanced Internet security to issue 100,000 Digital ID's.
The China Financial Certification Authority, a joint venture of 13 leading commercial banks under the direct leadership of the People's Bank of China, will use enhanced Internet security solutions from Entrust Inc. to enable safe and secure online transactions for more than 100,000 corporate banking customers and Chinese stock traders.
The CFCA plans to issue more than 100,000 digital certificates or IDs in the next six months to corporate banking customers and Chinese stock traders whose online transactions are valued at over US $1 billion.
The certification authority is the largest secure e-commerce infrastructure effort ever undertaken in China, and is expected to accelerate the adoption of e-commerce in China.
The CFCA, which provides security services for China's entire financial sector, including national and regional banks, stock brokerages, enterprises and e-commerce sites, is quickly becoming the key security driver for China's e-commerce infrastructure. In a pilot program, the CFCA had issued through its 13 member banks about 15,000 digital IDs from Entrust to help secure those financial institutions' online banking services.
"We highly value the security offered by Entrust's Internet security solution," said Liu Da Long, general manager, China Financial CA Center. "Based on the success of our initial pilot, we are now ready to expand production to support a broad range of e-commerce payment functions in the capital region around Beijing and at many other locations in China."
The CFCA project - which includes Entrust enhanced Internet security solutions running on Sun Microsystems platforms - will enable the Chinese banking system to implement secure e-commerce activities, such as Internet banking, business-to-business transactions, online electronic bill payment and online brokerage services.
Entrust's enhanced Internet security software ensures end-user identification based on digital IDs, entitlements, verification, privacy and security management capabilities.
"In terms of Internet financial services potential, China holds significant untapped potential," said Edward Kountz, senior analyst of Mobile Financial Strategies, TowerGroup. "As Chinese Internet and mobile Internet penetration continues to rise, leading domestic and global financial institutions will continue to look for ways to reach new and existing customers via self-directed electronic access. The introduction of security tools that can support this adoption is a critical step in this process," Kountz continued.
Bill Conner, president and chief executive officer of Entrust said "the success of the project is another testament to Entrust's focus on penetrating key vertical markets containing lead adopters of enhanced Internet security solutions and services. As China gains Internet users at a rate of more than 100 percent each year, and as more governments and businesses around the world move more valuable and sensitive services and data online, the demand for enhanced Internet security continues to grow."
The CFCA is planning to continue its work with Entrust to capitalize on Entrust's portfolio of enhanced Internet security offerings and capabilities. Plans are underway to extend online security to customers in other sectors using wireless and virtual private network technologies.
(Source: Business Wire)
Western China to Promote Information Sector
The western regions, where the IT industry has been traditionally weak, will soon see development in the Information sector, said Lu Xinkui, vice-minister of Information Industry, in his speech to the China Western Forum, which began in Xi'an on September 4.
Lu said that while four provinces in the west are listed as the country's least information-developed areas, none were ranked in the country's top ten. "The discrepancy between the western and eastern regions will be deepened if western people cannot keep up with the digitizing process," he emphasized.
The vice-minister promised that more funds will be invested in the construction of telecommunications networks to increase the use of telephones, mobile phones and the Internet.
Meanwhile, information technology and related products will be developed as the region's economy improves and the application of these technologies will be promoted.
Lu said that information services including e-commerce, education and medical care are expected to be introduced.
Lu said he believes an open environment in western regions will attract more foreign capital to invest in these sectors as well as their developed eastern counterparts.
(Source: Xinhua News Agency)
Nasdaq Suspends Trading of Netease.com
Nasdaq recently announced the halting of the trading in Netease.com shares until the company has fully satisfied a request for more information.
Last week, Netease announced it had completed a revised annual report, and hopes to submit it to Nasdaq in time to prevent a threatened delisting.
In a related development, it was recently reported that China's Sinohome Internet Technology was negotiating a takeover of Netease.com.
(Source: China Daily)
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