The possible impact of the global financial crisis on China's telecom industry Li Shuping

The possible impact of the global financial crisis on China's telecom industryOn Oct. 9, the Nasdaq, which lists science and technology stocks, plunged more than 5 percent to below 1,700 points, led by big Internet companies like Google, Yahoo and Amazon.

With the bankruptcy of Lehman Brothers, the most serious financial crisis since the subprime mortgage crisis has started. This will of course affect China's telecom industry, but its effect is hard to estimate now.

I'll just briefly share my views on this topic. 1. For the business of Chinese operators, there will be no real effect in the short term, because people will not stop using telecom devices, the Internet or making calls due to the financial crisis. On the contrary, in Europe, the crisis has led to the increased sales of financial publications.

Due to the crisis, people need more ways to communicate, so in this aspect, the crisis is not a bad thing. However, when the crisis becomes more severe, big companies will control their costs and cut down on managerial expenses. Communication expenses will be cut and as a result, in the future, international roaming[ 漫游 ]Fees[ 酬金 ] and telecom service fees for businessmen will need to

be reduced. In the short term, operators' income will not be lowered due to the crisis, but after some time, companies' cuts to communication expenses will affect operators, especially in well- developed areas of China, like Beijing, Shanghai and Shenzhen, where there are more big international companies than in smaller cities. Nonetheless[ 然而 ], the crisis will not a significant effect on operators' businesses.

2. Chinese telecom operators might have more difficulty securing capital. After the telecoms restructure, Chinese operators will all invest huge amount of money in network construction to prepare for the 3G era[ 时代 ]. The crisis might have a direct influence on cash flow. At first, operators' stock prices will be hurt so that they won't be able to get enough capital from the stock market. Secondly, due to the pessimistic[ 悲观 ]

Outlook on the financial situation, collecting capital by issuing bonds might not be practical. Thirdly, foreign companies' investments into Chinese telecom operators might be canceled or delayed. Lastly, due to the global financial crisis and the fact that China has been tightening its monetary policy, it will be harder for operators to get loans from banks, which will put more financial stress on operators.

3. Global manufacturing industries will be hurt. For those international manufacturers who wish to develop rapidly in China, they will be more cautious about their present investment and slow down their development in China. 4. The financial crisis will also slow down the speed at which Chinese manufacturers enter the global market.

At present, products from Chinese manufacturers are mostly sold in emerging markets like the Middle East, South Asia, South America and Africa. The crisis has less effect on these areas, but the crisis will make it even harder for Chinese manufacturers to enter telecom markets of developed countries, despite their low price and good quality of their products and services.

The crisis, and the slowdown in network construction, hurts Chinese operators' international strategy in a short term. 5. The crisis will be a big blow to the future of 3G in China. I have always thought that the nature of 3G is to change operators' business models from focusing on voice services to data services, rather than just being about accelerated network speed.

China's 3G services have just started. In regard to TD-SCDMA, operators and users are mostly concerned about what the new 3G service are going to be. 3G services should be developed by operators as well as the whole of society, but due to the crisis, investment for research and development of new 3G services will be reduced.The financial

pressure will hurt the development of the 3G services over the next one to three years. The global financial crises will of course influence China's economy. How to deal with these effects and how to mitigate[ 减轻 ] the losses caused by the crisis are the questions that the entire Chinese telecom industry should be thinking about.