China to invest $120bn in telecoms

China plans a modern network and broadband internet

China has revealed a plan to spend $120bn developing its telecoms and IT industries over the next five years, the official China Daily newspaper said.

The Ministry of Information Industry said funds will be raised on international and domestic capital markets as such a huge investment cannot be funded from government allocations alone.

International fundraising will also serve to transform the investment mechanism in the sector to allow the entry of private and foreign funds, Lu Xinkui, Vice-Minister of Information Industry, said.

News of the investment strategy came just days after it emerged that Prime Minister Zhu Rongji is to head a new panel of senior ministers to co-ordinate the development of telecoms and IT.

The spending strategy fleshes out the government's commitment to make information industries a "major pillar" of the economy under the 2001-2005 Five Year Plan.

Spending boost

The major share of spending will go on telecoms, which will get 500bn yuan (£40.9bn; $60.24bn), the Ministry of Information Industry said.

The next biggest recipient is electronic information technology, with 400bn yuan ($48.19bn), with the postal services sector receiving 50bn yuan (£4.09bn; $6.02bn).

The destination of the remaining funds was not given.

Unhealthy division

Analysts have greeted news of the new telecoms commission with jubilation, seeing it as likely to speed up the development of broadband internet, cable TV and other services.

Previously responsibility for the information industries was split between at least three ministries.

Observers said the development of China's information industries was hampered by the separation or telecoms regulation, carried out by the Ministry of Information Industry, from IT regulation, the responsibility of the electronics ministry.

Meanwhile, policy on the development of the cable network was handled by the State Administration of Radio, Film and TV.

Senior ministers from all these departments will sit on the new policy-making panel.

China has pledged to develop broadband internet services in time for the 2008 Beijing Olympics.