1. A UK Trade & Investment Mission to China and Korea Wireless Telecomms in China & Korea Country Overviews: Setting the Scene Maurice Potts UK Trade & Investment Tel: 020 7215 2456 Email: maurice.potts@uktradeinvest.gov.uk

2. A UK Trade & Investment Mission to China and Korea

3. Country Overview Within ICT, both Korea and China have a common high view of strategic importance and are seeking to collaborate to advance their own national and joint regional interests. In telecommunications, Korea pioneered its path in the 1990s, with China following Korea’s example over the past decade. Alongside Japan, South Korea is acknowledged as a world leader in the deployment and exploitation of the new communication technologies. China is seeking to emulate the success of its neighbours – for example, the pioneering development and deployment of its home grown TD-SCDMA 3G technology.

4. A UK Trade & Investment Mission to China and Korea Country Overview Although approaches from Asia cannot be transplanted to the UK, lessons must be learned by UK Government and Industry, if the UK is to effectively exploit the country’s strengths and environment to compete at the forefront of the global ICT industry. “Although there are many economic, social, cultural and geographic differences …(from the UK)…this does not mean that their experience should be disregarded, as there is much that the UK can learn from these two countries…” Source: DTI Telecoms Mission, 2005

5. A UK Trade & Investment Mission to China and Korea National Comparators IndicatorChinaKoreaUK Geography CapitalBeijingSeoulLondon Area9,956,960 sq km98,480 sq km244,820 sq km Demographics Population*1.29 billion48.4 million60.4 million Population Growth Rate0.58%0.38%0.28% Urban population**42.99%80.80%89.20% Population density (inhabitants/km2)* 129491243 Life expectancy at birth71.4 yrs76.85 yrs78.38 yrs Ethnic GroupsHan Chinese 92% Others 8% Homogeneous (except for about 20,000 Chinese) White 92.1%, black 2%, Indian 1.8%, Pakistani 1.3%, mixed 1.2%, other 1.6% * Central Intelligence Agency, July 2005 ** UN Common Database, 2005

6. A UK Trade & Investment Mission to China and Korea National Comparators IndicatorChinaKoreaUK Economic Indicators GDP*$2.22 trillion$925.1 billion$1.782 trillion GDP/Capita*$1,700$19,200$29,600 GDP growth*10.70%4.60%3.20% Consumer inflation*1.50%3.60%4.80% Industrial Productivity Growth Rate 10.10%0.90% Unemployment*4.20%3.60%4.80% Imports*$660 billion$214.2 billion$439.4 billion Exports*$961.9 billion$250.6 billion$347.2 billion Expenditure on R&D (as % of GDP) 1.23%2.96%1.90% CurrencyRenminbi (Yuan)WonBritish Pound Mobile penetration420 million38.3 million65.5 million Broadband penetration51.9 million20.5 million8.8 million * Central Intelligence Agency, July 2004

7. A UK Trade & Investment Mission to China and Korea China People and Geography Largest population in the world – approx. 1.3 billion and an area of 9,600,000 sq km. This scale is a key factor in shaping the Chinese perspective on the telecoms industry and its associated technology and standards. Shanghai and Shenzhen – may be considered as representing the commercial and manufacturing centres of China. Shanghai is a city with a dynamic atmosphere of commerce, in every way reflecting its entrepreneurial past and embracing of the market economy. Shenzhen has Special Economic Zone status, and is a rapidly growing industrial region with a population of ‘new immigrants’ from other parts of China and an average age under 30.

8. A UK Trade & Investment Mission to China and Korea China Economic Development & International Trade (1) Continuing growth rates of 10%, which can be traced to major changes over the past three decades (see table on next slide):  move to a more market-orientated economy in 1978;  increased the authority of local officials and plant managers in industry;  permitted a wide variety of small-scale enterprise in services and light manufacturing; and  opened the economy to growing foreign trade and investment (Special Economic Zones - SEZs). Joined World Trade Organisation (WTO) in 2001  legislation aimed at protecting IPR and reducing piracy and China has begun to develop its own IPR, in areas such as telecoms.

9. A UK Trade & Investment Mission to China and Korea China Economic Development & International Trade (2)

10. A UK Trade & Investment Mission to China and Korea China Economic Development & International Trade (3) At start of 2007, China stood as the 2 nd largest economy in the world at about US$10 trillion (measured by domestic Purchasing Power Parity). By end 2008 expected to overtake Germany as the third largest economy (measured by exchange rate), and to overtake Japan by 2020. The Central Committee of the Chinese Communist Party’s 11th 5-year plan for 2006 – 2010 targets a ‘relatively conservative’ 45% increase in GDP.

11. A UK Trade & Investment Mission to China and Korea China Significance of ICT to the Chinese Economy The electronic information products industry is China’s largest industry (by sales revenue), a position it has held since 2003, with an annual sales revenue of 4.75 trillion Yuan ($617 billion) in 2006. Telecommunications plays a major role in this figure, with mobile phone production volumes estimated at 450-480 million units in 2006, and representing almost 50% of the world’s mobile phones. In 2006, China’s electronic and information products exports were $364 billion, representing 37% of China’s total export volume. Electronic and information imports import volume was $287 billion and representing 36% of China’s total import volume.

12. A UK Trade & Investment Mission to China and Korea China Significance of ICT to the Chinese Economy, cont. ITU estimates of teledensity in China in 1990 were 1%. By end 2006 this teledensity figure was 63%, comprising 371m fixed line subscribers and 481m mobile subscribers. Broadband subscribers in China have grown from 20m in mid 2004 to 52m by early 2007. Huawei and ZTE, continue to be the most prominent exporters in the Chinese telecoms market, with the former adopting a more aggressive international profile 2005: 58% of Huawei’s & 36% of ZTE’s sales were exports

13. A UK Trade & Investment Mission to China and Korea South Korea People and Geography South Korea is home to a population of 48m, 80% of the UK figure, within an area of less than 50% of the UK. Almost 50% of the country’s population live within the Greater Seoul Metropolitan Area, reflecting the central role the city has played in South Korea's economic development. The very high density of housing (high rise) has made a major contribution to Korea’s success in rolling out new telecommunications infrastructures, through a reduced cost of deployment/head. The population is very IT-literate, due as a direct result of an active government policy of public provision of IT training during the economic downturn of the late 1990’s.

14. A UK Trade & Investment Mission to China and Korea South Korea Economic Development & International Trade Since the early 1960s, South Korea has achieved an incredible record of growth and integration into the high-tech modern world economy. Today Korea’s GDP per capita is two thirds that of the UK and is reported as being the 10th largest economy in the world. This success through the late 1980s was achieved by a system of close government / business ties, including directed credit, import restrictions, sponsorship of specific industries, and a strong labour effort. In 2005 total exports measured $228bn, with 22% of exports destined for China, and 15% to the USA.

15. A UK Trade & Investment Mission to China and Korea South Korea Significance of ICT to the Korean Economy (1) Some 45% of Korea’s exports today are ICT-based, and the bulk of export growth is ICT related, with this sector continuing to show high growth year on year. In January 2007, Korea’s Ministry of Information and Communication (MIC) reported that Korea had shipped a total of $113 billion worth of ICT goods overseas in 2006, up 10.8% from the previous year. IT imports in 2006 grew 9.1% year-on-year to $58 billion, bringing Korea’s trade surplus in the IT sector to a record high of $54 billion. The exports of IT products in 2006 were mainly driven by semiconductors, digital TVs and flat panels.

16. A UK Trade & Investment Mission to China and Korea South Korea Significance of ICT to the Korean Economy (2) Investment in Research and Development, has shifted towards and increased proportion of “R” rather than “D”. Korean companies recognised that they needed to compete against the US and Europe for high technology development rather than against China for low cost manufacture. This is the case, particularly within the ICT-related companies, such as LG and Samsung, both of whom are now amongst the world industry leaders in several of their fields of activity, including mobile communications.