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Telecommunications and National Goals in China: a Comparative Study of Shaanxi and Shandong

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Telecommunications and National Goals in China: A Comparative Study of Shaanxi and Shandong Tang Suk Ching，Harina A Thesis Submitted in Partial Fulfilment of the Requirements for the Degree of Master of Philosophy in Communication Thesis Committee: Dr. Paul Siu Nam Lee, Chairman Dr. Bryce McIntyre Prof. Tsui Ka Yuen •The Chinese University of Hong Kong June 1999 The Chinese University of Hong Kong holds the copyright of this thesis. Any person(s) intending to use a part or whole of the materials in the thesis in a proposed publication must seek copyright release from the Dean of the Graduate School. fe(^^^ 1 \ m a ji| _ , :�——TiS5^r " M/ ^^^讀 SYSTE^^ x^^^^ CONTENTS ACKNOWLEDGEMENT i LIST OF TABLES AND FIGURES ii ABBREVIATIONS iii ABSTRACT iv INTRODUCTION 1 CHAPTER 1. LITERATURE REVIEW 9 Theoretical Framework in Telecommunications Development 2. PHASES OF TELECOMMUNICATIONS DEVELOPMENT IN CHES[A 20 Minimal Growth: 1949-1965 Slow Growth: 1966-1980 Accelerating Growth: 1981-present 3. TELECOMMUNICATIONS AND NATIONAL GOALS 32 National Goal Before 1978: Defence Consideration National Goal After 1978: Economic Consideration Preferential Policies and Foreign Direct Investment Provincial Telecommunications Policy Regulatory Structure in Telecommunications Sector 4. A COMPARATIVE STUDY OF TELECOMMUNICATIONS DEVELOPMENT D^ SHAANXI AND SHANDONG 46 Provincial Profile: (I) Interior Province: Shaanxi as a 'Defensive Heartland' (II)Coastal Province: Shandong as a ‘Large Agriculture Province' GDP Growth and Telecommunications Development Defence Consideration leads to Telecommunications Growth in Shaanxi Economic Reform leads to Telecommunications Growth in Shandong Conclusion MAPS AND FIGURES 65 APPENDIX 73 REFERENCES 80 ACKNOWLEDGEMENT I would like to express my gratitude to a number of people for their advice and help in this project. My profound thanks to Dr. Paul Lee, Director of the School of Journalism and Communication. His humour, encouragement and unfailing support made this academic joumey enjoyable. I derived the interest in this thesis from his course ‘ Telecommunications Policy'. My special thanks to Dr. Bryce McIntyre and Professor Tsui Ka-yuen. I attended the course 'Economy of China’ by Professor Tsui, and it provided me with invaluable information on economic reforms in China. Thanks also to the staffs of China Telecommunications Construction and E.J. Krause & Associates (HK) Ltd., who provided information on the PT/EXPO COMM China ,98. I attended the exhibition and conference, held in the China International Exhibition Centre, Beijing from October 27 to 31, 1998 and witnessed the rapid telecommunications development in China. My gratitude and thanks for the support of my family, friends and classmates who encouraged me in different ways. My sincere thanks to Professor Lee Chin- chuan and Professor Kuan Hsin-chi for advice given in pursuit of this academic path. Last but not least, my heartfelt thanks to Rev. Jose Serafin for his encouragement. i LIST OF TABLES AND FIGURES Table 1.1 China，s GDP Per Capita by Region and Its Teledensity, 1997 6 2.1 Percentage Distribution of China's Agriculture, Light Industry, and Heavy Industry, in the Gross Value ofIndustrial and Agricultural Production, 1952, 1957, 1960 and 1965 23 2.2 China's Telecommunications Industry,1949-1995 29 3.1 Defence Production Function of the Ministries in the Machine Building Industries, 1960-1964 32 3.2 Defence Expenditure in China, 1950-1995 34 3.3 Main Concepts Proposed by the Party Congresses, 1982-1997 36 3.4 Foreign Direct Investment Used by Different Industries, 1995 39 4.1 Population ofShaanxi,1952-1997 46 4.2 Population of Shandong, 1952-1997 48 4.3 Capital Investment in Agriculture, 1981-1997 50 4.4 GDP Per Capita in Urban and Rural Shaanxi and Shandong, 1952-1997 52 4.5 GDP Per Capita and Teledensity in Shandong and Shaanxi, 1978-1997 53 4.6 Capital Investment in Transportation, Postal and Telecommunications Services in Shandong and Shaanxi, 1978-1997 55 4.7 Telecommunications Development in Shandong and Shaanxi During the Ninth Five-Year Plan, 1996-2000 57 4.8 Third Front Investment as a Proportion To National Investment 59 4.9 Foreign Direct Investment Inflows, 1984-1994 61 Figure 3.1 Structure of Telecommunications Networks in China 62 3.2 Structure of Telephone Networks in China 62 ii ABBREVIATIONS AD Anno Domini AID Agency for International Development BC Before Christ BTO Build-Transfer-Operate C3 3rd Order Exchange Centre CCP Chinese Communist Party CDMA Code Division Multiple Access COCs Coastal Open Cities DDN Digital Data Network ETDZs Economic and Technological Development Zones FDI Foreign Direct Investment FYP Five Year Plan GDP Gross Domestic Product GNP Gross National Product GSM Global system for mobile communications GVIAO Gross value ofIndustrial and Agricultural output GVIO Gross value ofIndustrial output ImExCom Import, Export and Trade Commission INTELSAT International Telecommunications Satellite Organisations ITU International Telecommunication Union LDCs Less Developed Countries MEI Ministry ofElectronics Industry MII Ministry ofInformation Industry mmb Machine building industries MPT Ministry ofPosts and Telecommunications NDIO National Defence Industries Office NDSTC National Defence Science and Technology Commission NPC National People's Congress OECD Organisation for Economic Co-operation and Development P & T Posts and Telecommunications PLA People's Liberation Army PRC People's Republic of China PSTN Public Switched Telecommunications Network PTA Posts and Telecommunications Administration PTB Posts and Telephone Bureau PTT Provincial postal, telephone and telegraph RMB$ Renminbi (Chinese currency) SEZs Special Economic Zones SOTE State-Owned Telecommunications Enterprise SPC Stored Program Control VANS Value-Added Networks VSAT Very Small Aperture Terminal WTO World Trade Organisation iii ABSTRACT China's economic reforms since 1978 have generated an enormous demand for telecommunications development. Yet China's approach to telecommunications development is governed by two opposing characteristics of its political economy. First, it is a one-party state struggling to maintain control of a diverse territory. The control of the basic telecommunications infrastructure is viewed as essential. Second, economic growth has occurred in the context of an increasingly multinational, competitive, and information-intensive economy that led to further reforms and decentralisation. There was an increasing demand from foreign investors for liberalisation of the telecommunications industry, especially when China strove to join the World Trade Organisation (WTO). The telecommunications sector has become a site of intense inter-provincial struggles and foreign pressure. This study analyses the relationship between economic growth and telecommunications development in China. There are two distinct, but related sets of considerations that are fundamental to its telecommunications growth - national policy goal and strategic factor. Policy goal is directed towards the political and economic objectives while strategic factor is operated under national defence. A comparative study of telecommunications development in Shaanxi and Shandong and its relation with national policy goal and strategic considerations is undertaken. It was found that telecommunications development in China depends not merely on economic factor, but also on non-economic factors such as political, historical and national security considerations. iv 中國電訊與國家目標： 陵西省及山東省的比較研究(撮要） 自一九七八年中國經濟改革以來，加速了電訊發展的需求。然 而，中國電訊的發展是由其兩極化的政治經濟因素所控制。其一是中 國作為一黨政府，為有效管治遼闊的疆土，認為對基本電訊建設控制 是必須的。其二是中國經濟增長的範#延伸至跨國、镜爭及知識密集 型，這導致進一步的改革及下放權力°而中國政府致力加入世界貿易 組織，更引發海外投資者對開放中國電訊市場的要求不斷增加。因 此，中國的電訊界成為了省政府相互統逐及海外壓力的交匯。 這篇論文旨在研究中國經濟增長及電訊發展的關係。中國的電迅 增長有著兩種獨特但有關連的基本因素所影響一國家政策目標及戰 略考慮。前者源自政治及經濟目標，而後者建基於國防需要。此文是 根據此兩種因素，對映西省及山東省的電訊發展作出比較研究。結論 顯示，中國的電訊發展不單受經濟因素影響，亦受非經濟因素包括政 治、歷史、國家安全等所牽制。 V INTRODUCTION Telecommunications is now widely recognised not only as public services but also as valuable economic resources. It has become an increasingly important infrastructure for economic growth and development.^ However, it was not until the mid-1980s that the State Council in China commissioned and endorsed proposals to give telecommunications development a key role in the national economy (Zita, 1987). The background for this policy was threefold. First, the Open Door Policy enabled China to expose to the world economy. Special Economic Zones (SEZs) were formed and foreign investment was encouraged. The lack of a modem telecommunications infrastructure would hinder national economic growth. Second, the issue of national security. China is a vast country with different languages, including eight major dialects, ethnic groups, cultural tradition, and local loyalties. Hence, long distance telecommunications are essential both for effective military manoeuvring, and for national identification. Third, modernisation is the central theme of the economic reform. China has placed great stress on the importance of technology transfer. Telecommunications as infrastructure is an essential requirement for the effective deployment of information systems and wider application of computer networks. ^ Prior to the economic reform, the military establishment and defence strategy had a strong impact on telecommunications development in China. During the mid- 1 Melody, W.H. (February 1999). 'Telecom Reform: Progress and Prospects'. In Telecommunications Policy. 23(1), pp.7-34. 1 1960s and 1970s, China suffered from political
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