Chinese telecoms chief calls for more protectionism

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The chairman of ZTE, one of China's biggest telecommunications equipment companies, has urged the government to do more to protect domestic companies from foreign competition in their home market.

Hou Weigui, ZTE co-founder and chairman, told the Financial Times, in his first interview with an international media organisation, that China was much more open to foreign equipment vendors than other countries and too little was being done to support Chinese companies. His highly unusual call for action from Beijing reflects dissatisfaction among China's telecoms manufacturers over foreign rivals' dominant role in the market and what they see as a failure by state-owned operators to favour local suppliers.

Any attempt by Beijing to respond to such complaints could have major implications for companies such as Nokia, Lucent and Alcatel. With annual telecoms industry capital expenditure of more than Rmb200bn ($25bn) a year since 2000, China has become an important source of demand for such companies.

Mr Hou said: ?We hope that our government will offer reasonable protection for our own manufacturing sector under the framework of the World Trade Organisation and in accordance with regulatory practice of every country around the world. Action has been too weak on this front.?

While China's rising trade surplus has been causing international tensions, Mr Hou's call for more industry protection highlights the fact that the country is already much more open than Japan or South Korea were at similar stages of their economic development. Analysts say Chinese companies must compete domestically with multinational rivals that are increasingly able to take advantage of the country's low-cost manufacturing and R&D resources. While Japanese and South Korean companies were able to fund overseas expansion because of their profitable domestic markets, many Chinese companies following the government's call to ?Go Global? do so in the hope of winning higher margins than they can at home.

Mr Hou, whose company is China's second largest telecoms equipment vendor and an increasingly important player in international markets, declined to offer detailed suggestions on how the government should support local companies. He said: ?Our government [should] look at how other people do it, and should learn from the experience of Europe and the US, of France, India, South Korea and Japan.? Some Chinese officials have been promoting adoption of the Beijing-backed TD-SCDMA ?third-generation? mobile standard by Chinese operators as a way of supporting domestic manufacturers.

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