Foreign phone companies line up for Chinese market

Making a telephone call in China can be trying. Parties across town often sound as if they're under water or lost in a welter of snaps, crackles, and pops. Making a long-distance connection can take hours. In front of scarce public telephones, there are what appear to be semi-permanent lines of patient Chinese.

At the first China-United States telecommunications conference, which was held here recently, 100 US businessmen and 150 Chinese officials addressed those problems. The conference attracted 46 US companies eager to tackle the problematic -- but promising -- Chinese market.

The trouble goes beyond mere inconvenience. China's telephone statistics tell a dismal story. The country has fewer than 5 million phones to serve a nation of more than 1 billion poeple. Peking, with nearly 10 million residents, has only 250,000 phones -- half of them installed in the past five years. The number of phones nationwide works out to an average of 0.5 per 100 people, the lowest number in the world (the world average is 12 per 100).

Recently Peking's leaders have recognized that China will not be able to expand its economy without adequate communications. Planners aim to boost the number of telephones nationwide to 33.6 million by the year 2000. That increase would raise to three the number of phones per 100 people. China's telecommunications experts also want to leap from 19th-century technology (many phones in rural areas are hand-cranked) to the latest digital systems.

Those ambitious goals mean a huge market for foreign telecommunications firms. The US Department of Commerce estimates that in the next five years China will spend $5 billion on high-tech communications hardware -- everything from phones to broadcasting satellites. Over the next 15 years that outlay could total $15 billion to $17 billion.

The bad news is that gaining access to that market will not be easy. The Chinese want the latest state-of-the-art technology, which is not always what they need, according to telecommunications experts. In addition, they do not like to give one supplier too many major contracts. ``Because the Chinese buy equipment from so many vendors, they will find it difficult to build coherent telecommunications networks,'' observes one Western salesman of high-tech products.

Such communications giants as ITT, AT&T, Northern Telecom, and Fujitsu are already jockeying for position in the Chinese market, which industry insiders now term the most competitive in the world. The big firms are looking to set up joint ventures in China that will provide switches and lines for municipalities and provinces.

Reaction to the China market at the conference was mixed. ``For a small company like us this is an opportunity to come in at relatively low cost (roughly $10,000) and take a look at what the competition is doing,'' said Garry Jenkins of Cincinnati Bell, an AT&T subsidiary.

Others were not so optimistic. Concluded James Lewis, president of Ameritech International, after assessing the difficulties of doing business in China, ``I doubt that China will be a meaningful market for us.''