China reportedly set to open operators to private investment

The Chinese government has released a statement encouraging private investment in the telco sector to drive the country’s competitiveness in the internet-defined economy.

In a move to reverse the perception that state owned-enterprises are clunky, over-staffed and lethargic operations, the CPC Central Committee and the State Council has issued a notice granting ‘free rein to telecommunications companies in the development of the internet’, according to Reuters. The objective seems to be to reduce operating costs of the telcos, while also encouraging adoption of new technologies to create new services.

Back in 2015, the government announced it would seek to overhaul corporate governance in underperforming state owned-enterprises, though how this will take effect in the telco industry is unknown for the moment. The Chinese government has a history of wanting to have its cake and eat it too.

It is saying all the right things to encourage the image of a modern capitalist marketplace, while at the same time lurking dauntingly in the background akin to a totalitarian government. It’s an interesting predicament for ambitious businessmen looking to capitalize on one of the world’s most attractive markets.

China Mobile is the largest operator in the world, with China Telecom in the top ten, accounting for around 850 million and and 220 million subscribers respectively. It certainly looks like an attractive proposition, but what hasn’t been made clear is the role of the private investors. Is this simply a case of buying shares or will they have a more vocal position to decide on the future of the business?

While the ‘mixed-ownership’ structure could be a risk considering the country’s reputation for controlling tendencies, the notice will certainly turn a few heads in the industry considering the fortunes which could be made in the country.