OVERVIEW

WTO entry has opened the door to foreign investment in the telecom sector. On accession, foreign companies will be able to invest up to 25% in mobile operators rising to 35% one year later and 49% after 3 years. In the same time frame accession will permit 50% ownership of valued added services. Foreign firms will also be allowed to provide private leased circuits to businesses in China and to provide private leased lines between cities in China.

WTO membership also commits China to setting in place a transparent framework for regulating the telecommunications sector as it signs up to the Basic Telecommunication Agreement (which requires introducing cost-based pricing, interconnection rights, an independent regulatory authority and a requirement to be technology-neutral). China will have to abide by the WTO's non-discrimination rules between trading partners, foreign-owned and domestic companies, and between goods produced for export and those for sale at home. Significantly for the UK industry content, it must also respect intellectual property protection agreements.

Overview of Chongqing

Chongqing, located 1500km inland along the Yangtze River, is the only Municipality in western China reporting directly to the central government. It has a land area of 80,000 km2, covering 40 administrative districts and counties (cities). Chongqing has a total population of over 30 million, around 8 million (35%) of who are urban residents. The predominant industry in Chongqing is manufacturing, particularly automotive. Since 1998, Chongqing has placed information industries, environmental protection and pharmaceutics as its three priority industries for development.

In 2005 Chongqing’s GDP reached RMB 310 billion (a year-on-year increase of 11.4 %). Information industry only took 3.3% of the total GDP. The added value for the Primary, Secondary and Tertiary industry were RMB 46 billion, 126 billion and 135 billion, increasing by 4.5%, 12.9% and 12.3% respectively. They contributed 15.1%, 41% and 43.9% to Chongqing’s GDP. The secondary and tertiary industries are the driving forces that push up the GDP growth. The amount of social consumption totalled 110 billion in 2005. Accommodation, transport, communications and education are the key areas for expenditure. The disposable income per capita of urban residents increased to RMB 8,090 (up 12 %) and that of rural residents RMB 2,785 (up 8%). The estimate for GDP growth for 2005 is 11.8%.

Perceptions of the UK in Chongqing

The opening of the Consulate-General in 2000 was seen throughout SW China as a clear sign of the British Government giving the Chinese central government’s Western Development strategy due weight. Local authorities welcome the prospect of more UK business involvement as a result. There has been a consequent increase in the number of UK government-supported activities in Chongqing and an increase in visits by horizontal trade delegations (and by SMEs in particular). There have been large numbers of inward visits including the Deputy Prime Minister (October 2000), the Foreign Affairs Committee (June 2000), Baroness Blackstone (March 2001), FCO Minister Dr MacShane (September 2002), State Secretary for Culture, Media and Sports Tessa Jowell (January 2004). British investors are generally seen as having the right attitude to underpin the scale of development needed in Western China, such as integrity, long-term strategy and commitment, already being the largest EU investors. Many contacts, however, comment on the low profile of UK plc. British companies in the ICT sector in particular have a low profile compared to competitors from other EU countries, the USA, Hong Kong and Taiwan. Some UK companies have already penetrated the local market, including some major projects in the area of telecommunication and digital TV.

Overview of Sichuan

Sichuan province covers 5% of China’s total territory, has a population of over 85 million (of whom around 80% are rural inhabitants) and contributes almost 1/3 of western China’s GDP. Sichuan is rich in natural resources. It has the largest exploitable water resources in China; Chengdu, the capital city, is the political, economic and cultural hub of the province.

In the 1950s, heavy and defence industries were relocated from coastal areas to Sichuan for strategic, rather than economic reasons. The aerospace and nuclear industries remain important; but many of these industries are now being restructured. There is a large pool of technically skilled workers available as a result, augmented annually by graduates from the provinces large number of technical universities and institutes. The cities of Chengdu, Deyang and Mianyang are being developed into a high-tech corridor to take advantage of the skills pool. The provincial government ranks information industry as the No.1 sector to develop in the tenth five-year plan.

In 2005, the provincial GDP growth rose 12.6 percent to RMB 739 billion, the highest growth rate over last ten years. The primary, secondary and tertiary industry took 9.1%, 57.5% and 33.4% of composite GDP respectively. Investment and consumption had strong performance. The total social investment on fixed capital was 346 billion (+31%). The social retail consumption totalled RMB 298 billion (+ 11%). The residential income for Urban residential income per capita reached RMB 8386 (+9%), while the rural income was RMB 2803 (+9.2%). The unemployment rate maintained below 4 percent.

Sichuan has the largest number of foreign enterprises in Western China. There are 7,317 foreign enterprises with an actual investment of $ 11 billion, and 111 of the world’s top 500 enterprises have set up their business in the province. In 2005, Sichuan’s actual foreign investment amounted to $ 5.19 billion USD.

Perceptions of the UK in Sichuan

Sichuan is twinned with Leicestershire; and Chengdu has a friendship link with Salford. Britain ranks No. 7 in the foreign investment in Sichuan. By the end of 2005, there were 75 projects with direct UK investment in Sichuan, with contracted capital of US$197 million, and utilised capital of US$79 million. This represents 1.39% of all the actual utilisation of foreign capital and 1.37% of all the contracted foreign capital in Sichuan. British investment in Sichuan has mainly been in industrial projects and real estate development.

British ICT companies are becoming more and more active in Sichuan, searching business in the area of digital TV development, broadband access and backbone network of telecommunication sector.