China’s fledgling second telecommunications carrier Unicom has joined forces with Canada’s Telesystems International Wireless Ltd to build a digital cellular network in Hunan, China. The 10- year joint venture, Huajia Communication will attempt to compete with the huge Ministry of Posts & Telecommunications by sidestepping strict rules barring foreigners from owning or operating telecommunications systems in China. Direct investment is not possible, it told Reuters, but a foreign firm can form a joint venture with a local, pay for the construction, and hand it over to the Chinese company to operate and return the invested capital using proceeds from operating the system. Once the capital investment is paid off, ownership transfers to the Chinese with subsequent profits divided. China will need foreign investment to meet demand in telecommunications sector. Peking has said investment in infrastructure since 1991 was $29,100m, of which more than $6,000m was foreign capital, despite the ban on foreigners owning or operating telephone systems. Telesystems has pledged to supply a substantial amount of the planned $500m investment even though it cannot own or operate the system.
