A huge market, competitive labour costs and high skills are the three major assets enjoyed by the sector, but experts and officials believe that the industry still has a long way to go.

It is no wonder that China registered such dramatic development over past decades.

For example, revenue from China's telecom and postal sectors reached 281.59 billion yuan (US$33.9 billion) in the first half of the year, a year-on-year rise of 13 per cent, despite the sluggish international market.

The nation's IT industry notched up an added value of 741.6 billion yuan (US$89.3 billion) last year, accounting for 6 per cent of China's 2003 gross domestic product.

"Lots of issues remained to be addressed for our further development and for China to grow into an IT power," said Wang Jianzhang, director of the Comprehensive Planning Department under the Ministry of Information Industry.

The ministry has a number of concerns, including laws and regulations, inter-operability and prices wars between telecom operators, soaring prices for raw materials such as steel, alumina and plastics, energy shortages, and increasing international trade disputes and trade barriers.

But Wang and fellow industry experts are very confident that China is likely to sustain its development this year given enhanced domestic demand resulting from the country's developing strategies such as rejuvenation of the old industrial base in northeastern China and further development of the nation's western regions.

Lots of business opportunities exist for enterprises thanks to intensified market competition and reform of the telecom sector.

And increasing number of policies are being introduced which will create a more open and sound business environment.

Telecom Law

The ministry is speeding up the introduction of a telecommunications law in order to rid the sector of malpractice and ensure its healthy development.

Sources close to the ministry said a draft telecom law will be submitted for approval to the State Council, China's cabinet, at the end of the month.

But the ministry official cautioned that it will be some time before the law takes effect, as it requires support from the National People's Congress, China's legislature, after it receives the nod from the State Council.

The telecom law will be a great step forward for the country's telecom industry, according to analysts.

Currently only a telecommunications regulation guides the telecom industry's development.

Chen Jinqiao, director of the China Academy of Telecommunications Research under the ministry, said that the existing regulation is no longer compatible with the development of the sector, given the rapid pace at which this is now taking place.

The sector's players are sparing no efforts in their bids to grab an increased market share.

China had more than 600 million telephone users by the end of June this year, according to the latest figures.

And mobile phone users make up the majority, surpassing fixed line telephone users, reaching 300 million.

Ministry figures indicated that China Mobile maintained its leading role, with a market share of 36.9 per cent, with China Telecom commanding 31.1 per cent by the end of June this year.

China Netcom has a 16.1 per cent share, China Unicom comes in at 14.3 per cent, with China Satcom and China Tietong having a combined share of 1.6 per cent.

"We need a more profound telecom law to better supervise the market and protect the interest of both telecom operators and subscribers," Chen said.

According to the source, issues such as universal service, government supervision and subscribers' obligations and rights have already been included in the draft law.

Su Jinsheng, director of the Telecommunications and Administrative Bureau, said that the ministry is constructing a supervision system to oversee the interoperability between telecom operators in order to guarantee interoperability between telecom operators.

"The system is scheduled to be built later this year or early next year," he said, adding it will play a great role in improving interoperability.

3G issue

As far as 3G is concerned, he reaffirmed that the central government will maintain its cautious attitude on the issuance of 3G licences.

"We are actively conducting experiments to work out which licence issuance plan is the best," Wang said.

China is in the best position to find out what suits the nation best, given that all of the world's leading technologies, equipment and terminals are currently being tested in China, he said.

The voice business will continue to take a dominant position of 95 per cent in the early stages of 3G.

A suggestion has already been sent to the National Development Reform Commission and the ministry, but a final decision has yet to be made, which he hoped could be reached by the end of the year.

The remark echoed analysts prediction that the ministry is likely to issue 3G licences before the end of this year.

China is likely to see the co-existence of three 3G standard European-based WCDMA (Wideband Code Division Multiple Access), US-based CDMA 2000 and homegrown TD-SCDMA (Time Division Synchronous Code Division Multiple Access), the analysts said.

The ministry reiterated that it will strictly observe the country's World Trade Organization (WTO) commitment to gradually open the telecom sector.

"Regarding controversial issues such as value-added telecom services, we are working on that to have a more detailed classification to avoid any misunderstanding," he said.

He said that the Chinese Government was actually going further in this regard than the WTO commitment requires.

"There will be three to four new foreign investors involved in the country's telecom industry later this year or early next year," Wang said.

US giant Microsoft is likely to team up with a Shanghai-based company in the next few months, he disclosed.

Universal service

"A universal telecom service is a key aspect of balancing the development of the telecom industry," said Wang.

According to the official, the Ministry of Finance, the Ministry of Information Industry (MII) and the National Development Reform Commission are jointly working to raise a universal service fund to develop universal service in rural areas.

After the fund is ready, the job will be mainly led by the MII.

In fact, the project, which aims to connect all the villages in the country's rural areas, has already been carried out by telecom operators.

The country's major telecom operators are undertaking a pilot scheme to connect the six major telecom operators in five northern and western provinces and autonomous regions including Sichuan, Shaanxi, Guangxi, Henan and Inner Mongolia.

After the pilot, more villages in rural areas will be connected.

The nation recruited 27.65 million new fixed line subscribers in the first five months of this year. But only 24 per cent of these were from rural areas.

Currently, the telephone density in rural areas is only 13 per cent, compared with the national average of 23.7 per cent.

According to the blueprint, China will connect 95 per cent of the nation's almost 40,000 villages in the rural areas by the end of 2005.