CHINA INFORMATION TECHNOLOGY LAW NEWSLETTER
Vol. 3, No. 3- March 12, 2002
TOPICS THIS ISSUE:
- Breakthrough for foreign majority ownership in the telecom industry
- The Regulation of Foreign Telecom Equipment
- New domain name dispute resolution center
- Sina.com forms new company
- FIEs improve access to Chinese software market
Breakthrough for foreign majority ownership in the telecom industry
The October 23, 2001 Memorandum of Understanding between the Ministry of Information Industry and Alcatel establishing Alcatel Shanghai Bell shows that a foreign joint venture partner now can own a majority of a Chinese telecom company. Previously, according to state policy and the 1997 MOFTEC Catalogue for Investment Guidelines, the telecom industry was off limits to foreign partners. After China acceded to the WTO, however, regulations were issued permitting equity joint ventures in this sector. But Alcatel had been granted an interest exceeding 50% in the joint venture even before China's WTO accession.
The deals cost US$ 312 million and brought Alcatel's share ownership to over 50%. Alcatel's purchased 10% of the company from Shanghai Bell's Chinese shareholder and 8.35% from the Belgian government. Shanghai Bell has become a company limited by shares and will be a vehicle for Alcatel to integrate its China operations. Alcatel Shanghai Bell becomes the center for Alcatel's Asia-Pacific operations.
(Sources: BizShanghai, South China Morning Post)
The Regulation of Foreign Telecom Equipment
The Ministry of Information Industry and the State Development Planning Commission traditionally protect the import and manufacture of telecom equipment in China. But China's WTO commitments include a technology-neutral policy concerning telecom services, meaning the market will determine which technology is used. Also, purchasers of telecom equipment are not to discriminate against imports, and restrictions on manufacturing telecom equipment in China have been eased. China has agreed to lower customs duties on imported telecom equipment and there are no longer requirements to purchase locally produced equipment. Other changes regard network access permits, type approvals and the adoption of standards. The MII must issue decisions on network access permits within 60 days of issuance of the quality test report by the State Bureau of Quality, Supervision, Inspection and Quarantine (SBQSIQ). If access is denied, reasons for the denial must be set forth. Also, access shall be handled according to any mutual recognition agreement that is in effect, which should ensure automatic approval of imported telecom equipment that has already been certified in the home country of APEC members and the US. Imported radio transmission equipment will need type approval as well as a "mechanical and electrical import license" from MOFTEC and a safety license from the SBQSIQ. As for standards setting, China is not allowed to set standards that cause unnecessary obstacles to trade. Countries do have the right to set standards for health, safety and security reasons but it seems China's standards are not transparent.
(Source: The China Business Review)
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New domain name dispute resolution center
The new center was launched recently and is a collaboration between CIETAC (China International Economic and Trade Arbitration Commission) in Beijing and the Hong Kong International Arbitration Center. The new center will handle disputes concerning high level domain names containing .com, .net, and .org. It also offers an on-line service to help solve disputes in an economical way. Other domain name dispute resolution centers are located in the US and Switzerland.
(source: Xinhua News Service)
Sina.com forms new company
The Chinese Government emphasizes the building of the infrastructure of information technology. In that spirit Sina.com started a new Internet Technology Services Company that will provide enterprise solutions to government, media, finance, education, and chemical and fashion industries. Previously Sina.com provided solutions for domain registration, enterprise software and consulting.
Sina.com is still involved in a copyright dispute involving the other major Chinese portal operator, Sohu.com. The portals have sued each other for copyright infringements and unfair competition. Sohu has also accused Sina of using its website to spread false facts about Sohu. There seems to be little chance of settling this out of court.
(Sources: South China Morning Post, PR Newswire)
FIEs improve access to Chinese software market
Prospects for the software industry are bright as tariffs come down, government regulations are liberalized and piracy is fought more efficiently. Examples of preferential policies that have been implemented are VAT refunds for R&D and expanded production; newly established, approved enterprises will not have to pay any income tax for the first two profitable years, and then only half for the next three years. WTO commitments include elimination of tariffs on software imports over three to five years and the opening up of distribution channels. Apart from national policies that have been implemented, there are also municipal incentives, such as in Beijing, where preferential land prices and assistance to foreign managerial and technical personnel have been offered to new companies.
The crackdown on piracy and illegal usage of software is another factor that has a positive effect on the software market and will increase profitability of companies. This trend is clear from a number of successful court cases for plaintiffs, who have been awarded damages for software copyright infringements.
(Source: UPGRADE magazine)
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