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China Unicom could look very different in a month or two

Location China. Green pin on the map.

Chinese government owned telco China Unicom is about to undertake quite a fundamental change after filing to the Shanghai Stock Exchange unveiled plans to attract more private investment.

Rumours of such a move were circulated towards the end of last week, though this filing does paint a more complete picture. Reuters recently reported that some of the country’s largest tech players, Alibaba, Tencent, Baidu and JD.com, were about to buy their way into the operator, which has been struggling in recent months. In is believed that the Chinese government is searching for a bit of inspiration from the private sector to turn around fortunes. The injection from the four organizations could be as high as $12 billion.

China Unicom is the third player in the trio of government owned telcos in China, the others being China Telecom and China Mobile, though its relatives do not seem to be facing such problems on the same scale. Though this is not a problem unique to the telco space, across various verticals, government-owned business in China are dealing with tough conditions.

One explanation for the downturn in government-owned performances might simply be investments being spread too thin. The internet is important, but so is every other pie the government has its fingers dipped into. It is tricky to figure out how many Chinese State-Owned Enterprises (SOEs) there actually are, as estimates range from 100,000 to 250,000 from a variety of sources, it is certainly a large number, all of which require some attention.

The mixed ownership model between Government and private investors is becoming increasingly popular though. Encouraging private investment is a great way to fast forward developments, for example the digital economy here, essentially lasering cash from similar organizations into specific use cases. It is certainly a change in the Chinese status quo, but it does make sense from a business perspective.

Whether this means the sharply monitored telco industry will receive a bit more freedom remains to be seen, though we doubt it to be completely honest.


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