Following is the speech by the Secretary for Information Technology and Broadcasting, Mrs Carrie Yau, at the Corporate Counsel Forum Luncheon of the Inter-Pacific Bar Association 12th Annual Meeting and Conference today (May 3):
Ms Chan, distinguished guests, ladies and gentlemen,
Thank you for inviting me to speak at the Corporate Counsel Forum luncheon today. I feel most honoured to address such a distinguished audience of business lawyers from the Asia-Pacific region. For those who come from overseas, a warm welcome to Hong Kong, Asia's world city. And I wish you all have fruitful discussions and gain useful insights during the forum in the coming few days.
Today, I would like to share with you a topic that is relevant to all of us, i.e. business opportunities in the information technology and telecommunications field in Mainland China with its accession to the World Trade Organisation (WTO), and the opportunities in particular for legal professionals.
IT and Telecommunications Development in Mainland China
I would like to first give you a brief overview of the latest IT and telecommunications development in China. Just to cite you some statistics. In the past decade, the number of fixed telephone lines in China has grown by 27 times from 7 million in 1990 to the present 190 million. The number of mobile users has recorded an even greater growth of 8 000 times during the same period, from a mere 20,000 to the present 160 million. China has now overtaken the United States to become the country with the greatest number of mobile phone users in the world. The growth is phenomenal. But China's fixed line penetration rate currently stands at only 14% and mobile penetration rate at 11%. There is therefore huge potential for further development.
As regards Internet service, in December last year, China had an external Internet bandwidth of 7,600 megabytes, which represented nearly 3 times increase compared with previous year. The number of Internet-connected computers has grown from 9 million to 12.5 million in the same period. The number of Internet users has also registered a steady growth, from 22 million to 34 million. Looking at these figures in the context of China's 1.3 billion population, there is still a lot of room for growth.
IT and Telecommunications Market Liberalisation after WTO Accession
China's entry to the WTO will serve as a catalyst fuelling further development and opening of its market. Vice-President Hu Jintao recently estimated that China's imports will reach U$$1.5 trillion in the next five years as the country opens its market to trade and investment. No doubt a sizable portion of this will come from the IT and telecommunications field. Indeed, as published by the Ministry of Information Industry, the spending of China's telecommunications industry on fixed assets jumped by 36% in the first quarter of this year to US$2.3 billion, a clear sign that operators have increased their expenditure on equipment to respond to the opening up of the market.
China has pledged to open the market of telecommunications services by phasing out geographical restrictions and allowing foreign ownership up to 50% in certain areas. For example, the geographic restrictions on mobile services will be phased out in five years, with immediate opening in Beijing, Shanghai and Guangzhou. Consultancy services related to hardware installation and data processing are open to foreign service providers. Foreign service providers are also allowed to provide software implementation services through a joint venture, with foreign majority ownership permitted.
These present huge business opportunities to the rest of the world. To explore the enormous China market, Hong Kong, as its special administrative region and strategically located at its doorstep to the world, has a distinct role to play, especially in the IT and telecommunications field. We have knowledge, skills and experience in building up a world class telecommunications infrastructure, as evidenced by the excellent local and external connectivity we enjoy in Hong Kong. We also lead in mobile applications and services, with a mature market of 85% mobile penetration rate. Our computer and Internet penetration rates are comparable to any other advanced economies. We have also established comprehensive telecommunications network closely connecting the Mainland and Hong Kong. With our experience in Mainland business and knowledge about its market operation, bilingual language capability, cultural affinity and geographical proximity, Hong Kong's IT and telecommunications companies have a clear competitive advantage in exploring business opportunities in the Mainland market. And we can be the strategic partners of other overseas enterprises which would wish to explore the Mainland market. Indeed, over 3 200 overseas companies now use Hong Kong as their regional headquarters or regional offices, the highest number ever in our history. And the figure speaks for itself.
Specifically, Hong Kong's IT and telecommunications industries can apply their expertise and talents in a number of areas. First, Hong Kong may act as a telecommunications hub for the Mainland and the rest of the world, given our excellent connectivity with the Mainland and the rest of the world. Second, flourishing under a more liberal community environment, Hong Kong could develop into a content hub serving both the Mainland and South-east Asia. In this respect, Hong Kong could explore the development of Chinese websites, e-commerce application packages and other telecommunications products that embed Chinese cultural, social and economic features. Third, China is a large country and wireless applications and services will have enormous potential for development. Our expertise and experience in developing advanced mobile telecommunications services will be crucial to enable us to play a key role in this area.
Development of IT products, including software, is another area for partnership between Hong Kong and the Mainland. We are right next door to a major IT product manufacturing centre in China, the Pearl River Delta. Overseas IT companies can use Hong Kong as an operational base and launching pad for developing their operations in the Mainland. Hong Kong companies, with their rich management experience and competitive edge in the development of software and IT products, can bring the latest innovations and technologies, crucial venture capital and customer management techniques to Mainland companies, and develop viable business models to help Mainland companies translate their innovative ideas into workable commercial plans.
Opportunities for Business Lawyers
As more IT and telecommunications companies explore the Mainland market, the role of business lawyers will become increasingly important. Investments in telecommunications infrastructure are of significant size and of long term nature. Overseas investors will need professional legal advice, especially in the early stage of China's accession to WTO, to strengthen their confidence to make investment in the Mainland. Also, to compete in the international market, Mainland companies have to develop more sophisticated IT and telecommunications products and services, and they would need legal advice on issues such as intellectual property rights to safeguard their interest. I am sure that there are numerous opportunities for lawyers to help both Mainland and overseas IT and telecommunications companies to achieve their goals and reap the exciting potential ahead. No doubt Hong Kong will also have a key role to play, with our well established common law system, the rule of law and an independent Judiciary. We can be the crucial place where contracts can be made and where disputes can be resolved through our court system or efficient arbitration service, and where the interest of both Mainland and overseas parties could be properly safeguarded.
To conclude, China's entry to the WTO will create many new business opportunities, especially in the IT and telecommunications field. Various support and professional services will be required. The legal profession stands to gain from these developments. I look forward to seeing further co-operation among the IT, telecommunications and legal professionals in the region to explore the Mainland market.
End/Friday, May 3, 2002