No.365 March 20, 2009
Special Issues  
  Roundtable with CNITSEC on Common Criteria
 
USITO event on Wirelss City in Shanghai, March 25, 2009
 

On March 17, 2009, a roundtable was held between USITO member companies/parent association representatives and the China Information Technology Security Evaluation Center (CNITSEC), in which both parties exchanged views on the possibility of increasing US-China dialogue regarding the development of common criteria in China. For more outcomes and meeting contents, please contact USITO policy manager Jimmy Goodrich by jimmy@usito.org

Top Stories

The First Spurned Acquisition Case under Anti-Monopoly Law

On March 18, 2009, the Ministry of Commerce (MOFCOM) of China announced that it has spurned Coca-Cola Inc.'s proposed USD 2.4 billion acquisition of China 's top juice maker Huiyuan Juice Corp. The case, the largest-ever buyout of a Chinese company by a foreign firm, thus becomes the first one turned down by the Chinese government under China 's Anti-Monopoly Law which came into effect last August.

The world's largest soft-drink maker last September offered to take over Huiyuan at a price of USD 2.4 billion. The company then applied anti-trust investigation to the MOFCOM, which officially launched the investigation in November. In an official statement issued this week, MOFCOM said that if the case went into effect, Coca-Cola is very likely to take a dominating position in the domestic market, and the consumers may have to accept the high price fixed by the company as they don't have more choices. MOFCOM also stated it has communicated with Coca-Cola several times asking for changes in the acquisition document while the latter one has failed to meet request.

A few foreign media claimed this turndown as another sign of the protectionism that has been mounting globally as much of the world is gripped by recession. There is also a concern that Chinese firms' overseas acquisition intention may be under stricter scrutiny, such as the Australian government are currently evaluating the Chinese state-owned Chinalco's acquisition on Rio Tinto at a much larger scale of USD 19.5 billion. 3/18/2009, Xinhuanet.com

USITO Notes: The case has again aroused a new round of public debate among Chinese general public. Through a quick browsing over the top news websites, we could see two kinds of mass opinions from the Chinese netizens, who according to some press analysis had influenced MOFCOM's decision of turning down the case (official survey last Fall shows 80% of Chinese netizens are against the deal). The dominant opinion is for sure the public applause on their 'victory', since this would avoid the sale of a top homegrown brand to foreigners. Foreign acquisition of Chinese firms is a brand new and sensitive issue in China , and it may sound unusual to the people if multinationals show interest of buying top Chinese firms. Politically, there are always a lot debate among senior officials, especially on the question of the match between two different political systems and corporate cultures. The other opinion appears relatively non-prevailing but does exists. It says MOFCOM may have done Coca-Cola a favor by rejecting the case, as the deal was made shortly prior to the world financial meltdown; in a TV show last month, the Huiyuan Chairman boasted much about this good price. Coca-Cola may be deeply regretting about that offer since most such assets were revalued much lower since last Fall; hence, China should sell Huiyuan, as juice industry entrance is a low threshold one unlike the high-technologies, it is rather easy for the country to foster another strong brand. As a matter of fact, no argument whatsoever may indicate the prevailing protectionism view on the commonly international business practices.

Unlike the mass public discussion, the government seems taking a more justifiable approach in evaluating the cases. MOFCOM in its press release listed three reasons for rejecting the case, such as the concern over the likely monopoly market situation after the merge and the negative influence on the market's new entrants. It does not list further arguments, such as during the difficult economic period, the government has to rely a lot on the domestic industry to boost economy.

The case can be a milestone one in China 's Anti-Monopoly Law enforcement, being the first one rejected among the 40 plus anti-trust applications MOFCOM has received since August 1, 2009. USITO has been closely following the AML issue in recent years, and has maintained exchanges with the Chinese academia, government and industry for the topic. Members are welcome to contact us if you are interested in extending the discussion.

Expert Appeals to Promulgate Personal Information Protection Law

On Sunday March 15, the 27th World Consumer Rights Day, China's Central Television (CCTV) aired a consumer rights-themed gala as it did in previous years. In the gala CCTV exposed a bunch of consumer rights violation cases, most noteworthy among which was the accusation on China Mobile's infringement on its customers' personal information rights.

The TV program claimed that China Mobile's Shandong branch had been working hand-in-hand with advertising companies to send spam to its subscribers, and the mobile carrier was long exploiting its advantage of large consumer database to disseminate spam messages. Aware of the potential risk, ridiculously, the company adopted some filtering technologies to filter out the government officials from the receivers' list, which further proved that the company is intentionally making full use of its consumer information database.

This is not the first time that CCTV exposes personal information infringement related cases; last year it exposed Focus Media's abusive mobile advertising practices including sending spam and obtaining personal information of mobile users through dubious means. Under this background, many Chinese experts have jointly appealed to the Chinese authorities to promulgate China 's Personal Information Protection Law as soon as possible. people.com.cn, 3/16/2009

USITO Notes: Personal Information Infringement is the major theme for this year's Consumer Rights Day, as a number of the top media carried related stories on this topic. People were prudent to use the word ¡°illegal¡± when talking about this issue, as there is not any applicable laws in China for personal information infringement.

China rolled out drafting work for its first Personal Information Protection Law in 2003 and worked out the ¡°Expert Proposal for Formulating China's Personal Information Protection Law¡± in 2005. At the current stage, the State Council's Information Management Office is in the process of drafting the Law, after which it will go through China 's legislation procedure. Though there is few official update on the development, we found in the Web that the State Council has completed the drafting work in August 2008, and ready for entering the Procedure. But the public remain unaware of any timetable for the official promulgation.

In an interview with an professor from China University of Political Science and Law, we're told that before the Law is available, in strict sense Chinese people will continue to be in an unfortunate defect of any applicable rules or regulations on personal information rights; if there must be one, the Article 101 in the ¡°General Principles of the Civil Law of the People's Republic of China¡± could be a somewhat related term. The problem with this Article lies in that it appears too broad and lacks any enforceable measures. For the China Mobile Shangdong case, this term is obviously not applicable.

Tax breaks and grants given to boost service outsourcing

The Chinese government announced it will give tax breaks and subsidies to encourage the growth of service outsourcing nationwide. The details to boost the development of service outsourcing were outlined in a document drafted by the MOFCOM and approved by the State Council. The government will offer service outsourcing companies a subsidy of up to RMB 4,500 (USD 662) a year for every college graduate employed on a contract of at least one year. Detail

Rural project welcomes 14 PC vendors

14 PC makers have been approved to join the "subsidized home appliance to rural areas" project which aims to boost consumer spending to improve the daily life of 800 million Chinese peasants. Detail

China Unicom runs video call tests in 20 cities

China Unicom has made progress on its WCDMA network and carried out a series of video call tests in more than 20 Chinese cities. It planned to build its 3G network in 55 cities in the first half of 2008 and to expand to 282 cities by the end of this year. It also plans to launch its 3G services based on WCDMA technology in May. Detail

SINA's net profit up 54% in 2008

Nasdaq-listed SINA Corp, a leading internet portal in China, just announced its 2008 financial results, which showed a net profit rise of 54% from a year earlier. The company realized USD 88.8 million in net profit in 2008, largely attributable to its online advertising business. Its net revenue rose 50% year on year reaching USD 369 million, of which USD 258.5 million came from its advertising business. Detail
Selected Chinese Media Reports

Regulations

MIIT to Accelerate Legislation Pace for Telecom Law

According to an MIIT official, with a view to stimulating the telecom market competition and promoting the development of the telecom industry, MIIT will focus on pushing forward the submission of the Telecom Law for review and discussion by the NPC Standing Committee. The news release posted on the website of MIIT declared that MIIT will work for the drafting and improvement of a series of laws and regulations relating to the information technology industry this year. Chinese Text

MIIT Bans VoIP Service

On March 17, the Ministry of Industry and Information Technology published the Notice Concerning Follow-up Work after 3G Licensing, specifying the business scope for three telecom carriers. According to the document, WiFi and VoIP services continue to be banned. Although three telecom carriers are all allowed to deliver IP phone service, they are limited to phone-phone services alone. Chinese Text

China to Adjust Telecom Regulatory Policies

At a workshop held recently by China Academy of Telecommunication Research, a signal was released that China 's telecom regulatory policies will be adjusted in 2009, and more implementation rules will be published, including rules on joint construction and sharing of telecom infrastructures. Chinese Text

National Antibacterial Standards Published

The enforcement of national antibacterial standards for household electrical appliances relieved household appliances makers. The national antibacterial standards for household appliances refer to series of the national standard Antibacterial and cleaning function for household and similar electrical appliances. Of which, GB 21551.1-2008 General requirement of antibacterial and cleaning function for household and similar electrical appliances took effect on March 1, 2009. Currently most vendors are up to this standard. Chinese Text

3G Mobile Communications

China Mobile Urged to Focus on TD-based Fixed Services

The Ministry of Industry and Information Technology has required China Mobile to give priority to developing TD-Based fixed-line services, and accelerate the deployment and operation of TD services through delivering TD-based fixed-mobile converged services. Sources said that according to MIIT's instructions, branches of China Mobile are authorized to provide TD-related fixed communication services, while China Railcom operates other fixed communications services. Chinese Text

MIIT Instructs China Mobile to Investigate SMS Spam

Following the unveiling of China Mobile Shandong branch's non-compliant action on CCTV on March 15, which drew wide concern, MIIT instructed China Mobile to conduct an overall and thorough investigation of the event, and an investigation report shall be submitted within a specified time-limit. Chinese Text

Huawei Wins Big Contract from China Telecom

China Telecom's first round of centralized procurement of EV-DO handsets has concluded with Huawei winning an attractive contract for the fashionable design, powerful functions and multiple 3G features of its first 3G handset type C7600. Experts said the success of Huawei should be attributed to its consistent input into 3G sector. Chinese Text

China Telecom Kicks off 3G Trials in Some Regions

On March 16, China Telecom Jiangsu and Shanghai branches kicked off 3G trials in Jiangsu and Shanghai respectively, first delivering pilot 3G services to users of My e-home. My e-home, as China Telecom's killer service offering, is a service package integrating fixed line, broadband, and PHS or CDMA services. Chinese Text

China Mobile to Launch TD Handset Bidding Process

A China Mobile official told the media that China Mobile is planning to launch a bidding process for implementing the joint R&D and production of TD-SCDMA handsets, with special R&D and production funds coming from China Mobile. China Mobile will invest about RMB 600m in two planned projects. This is the first time China Mobile funded the R&D and production activities of handset vendors. The purpose of China Mobile is to accelerate R&D of TD handsets through giving financial aids to key vendors. Chinese Text

China Telecom Holds Value-added Services Salon

A workshop titled China Telecom Mobile Value Added Services Developer Salon was held by China Telecom Internet and Value-added Services Operation Center on March 18. 350 representatives from over 200 partner enterprises participated. This has been the first salon activity centering on mobile value-added services sponsored by China Telecom since it took over CDMA assets. Chinese Text

 

Innovation

IPv6 Becomes First Communication Project under Stimulus Package

Sources said that the planning of main projects to be launched under the economic stimulus package is primarily based on the national eleventh Five-Year plan and other mid- and long-term plans, and the requirements for selecting the projects will be raised by NDRC and MIIT. The projects that qualify should be those conducive to promoting the development of the whole industry chain and expanding the investment in relevant sectors. IPv6 technology upgrading project is the first project receiving the state investment in the communication sector. Chinese Text

National Innovation Capability Rankings: China Ranks 27th

Latest survey published by Boston Consulting Group showed that U.S. fell to No. 8 in innovation capabilities, ahead of Japan (9th) and Germany (19th) but far behind Singapore (1st) and South Korea (2nd). China ranked 27th . Chinese Text

Asian Telecom Carriers Plan Third Submarine Cable

Sources from Chunghwa Telecom said several Asia-Pacific telecom carriers are planning to build the third Asia-Pacific submarine optical fiber cable, including Chunghwa Telecom , China Telecom and China Unicom. This cable, 11,000 km long, features a transmission capacity of more than APCN2, and will cost a total of USD 500m . Chinese Text

Semiconductor

CYIT Partners with Infineon

Chongyou Information Technology, a Chongqing-based TD chip supplier, signed a strategic cooperation agreement with German semiconductor vendor Infineon, and this demonstrated CYIT's ambition to be among TD handset chip suppliers. According to an insider, the partnership with infineon will provide CYIT a short cut to enter TD handset market. Chinese Text

China 's DRA Becomes Blue-ray International Standard

On March 18, the Blue-ray Disc Association announced that China 's proprietary DRA audio technology has been approved as the international standard. DRA technology was developed by Guangzhou-based Digital Rise Technology after six years R&D efforts. According to Digirise General Manager Zhong Jinsong, DRA features better compression capability compared with other audio technologies and can contain more high-quality audio information. Chinese Text

Countdown Begins for CMMB Nationwide Operation

Sources told the media that 17 provincial branches of China Satellite Mobile Broadcasting Corporation have obtained the license for operating CMMB services. According to a senior executive, the end of this year will witness the establishment of all the provincial branches, and kick-off of nationwide CMMB operation. Chinese Text

Experts Call for Compulsory Reliability Standards for Flat Panel TV

At the workshop on industry standards for reliability of flat panel TV held on March 13, experts said that a national standard for flat panel TV reliability should be urgently developed in China to solve frequent-occurring problems of blank-screen, blue-screen and exorbitant repairs. Chinese Text

Internet

GAPP to Enact Policies Stimulating E-Games Export

An official from General Administration of Press and Publication said on March 16 that GAPP is considering enacting preferential policies for export of e-game products, including preferential tax policy and financial aids. He added that GAPP is planning to organize Chinese e-game makers to conduct overseas promotional activities. Chinese Text

Ministry of Culture to Enhance E-game Surveillance

As the competent authorities in charge of e-game and cartoons products, the Ministry of Culture will increase surveillance efforts for the operation of e-games, and release implementation rules, an MOC official said on March 18. She added that MOC will focus on promoting the growth of a ¡°green¡± e-game industry, and guiding the healthy development of e-game products. Chinese Text

Software

Legitimate Software Used in 112 SOEs

By the end of 2008, legitimate software has been widely used at headquarters of 112 SOEs under the central government. Before November 2008, funds used for purchase of legitimate software exceeded RMB 45m . As of this March, the expenditure has amounted to more than RMB 100m . The budget for this whole year is expected to exceed RMB 160m . Chinese Text

USITO selected and translated the news summaries above. If you are interested in learning more details about the above Chinese language links, you are welcome to contact us (wenjie@usito.org) to sponsor the translation of that report.

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