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China after West’s tech dominance

China after West’s tech dominance

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The recent entry of China’s Xinwei Telecom Enterprise Group into the Cambodian telecom market is part of a bigger, state-sponsored push to introduce Chinese products in emerging markets, analysts said.

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While Western-made and -owned mobile technologies have become widely used standards in the developed world, China’s own standards, such as TD-SCDMA and Xinwei’s McWILL, are appearing in emerging markets with the help of preferential loans from state banks.

“The developed world already has its own wireless standards and is unlikely to buy into the Chinese version, so Chinese companies have been aiming at developing countries instead. It seems like they’ve already had success setting up infrastructure with their technical standards in Africa and other developing regions,” said Matthew Luce, a Chinese technology analyst at a Fortune 500 science and technology firm.

China has pushed its homegrown standards in an effort to avoid a reliance on Western technology, as well as the royalties associated with using it, Luce said.

In addition to doing business in North Korea, Myanmar and the US state of Alaska, Xinwei has a presence in seven African nations including Zimbabwe and Chad.

In the latter it has deployed voice services, according to the company’s website. Xinwei’s reach extends to five continents and 21 countries outside of China.

Chinese technology companies such as ZTE and Huawei “seem likely to displace Western suppliers” in emerging markets, according to a US-China Economic and Security Review Commission report issued in January 2011.

While Chinese technology firms have been primarily active in supplying equipment and devices abroad, Xinwei’s Cambodia plans haven’t followed the same model.

The company is fully licensed by the Cambodian government to provide fixed-line, mobile and ISP services at fourth-generation broadband speeds, according to official documents posted on the company’s website.

The ease in acquiring operations licenses in the Kingdom – which insiders have said come at a price of US$1 million – may have encouraged the company to roll out top-to-bottom operations.

“To see them take it all the way to the operational level is unique. But Cambodia’s one of the few countries where you can still get a license no questions asked,” said Marc Einstein, a Tokyo-based telecoms analyst at Frost & Sullivan.

Still, opening new markets for Chinese-developed technologies and devices is the end goal, Einstein said.

Analysts agreed that state-funding or preferential loans from Chinese banks would most likely be at work for Xinwei’s entry into the Cambodian market.

“We do see significant support for overseas expansion for both the Chinese operators and equipment vendors and efforts to promote Chinese-controlled standards,” Tucker Grinnan, a Hong Kong-based analyst at HSBC Securities Asia Ltd, told the Post earlier this year.

In 2010, a Belgian company accused ZTE and Huawei of receiving unfair assistance from China Development Bank which would allow the companies to undercut the market for modems, according to the report from the US-China Economic and Security Review Commission.

“If you mean Chinese companies getting noncompetitive loans from Chinese banks, you can count on that kind of behaviour,” Luce said on the potential of state-backing for Xinwei.

Preferential loans would be part of China’s development strategy for its “national champion” companies, he said, although he also noted that the practice was not unique to China.

Xinwei has entered a few developed nations, one being the United States.

Despite Congress’ trepidation in the face of domestic Chinese-telecom presence, the company operates internet services in Alaska.

Xinwei’s website called the market “of strategic importance” and claims to be one of the biggest internet service protocols in the region.

While China’s Huawei and ZTE, two of the world’s largest technology equipment manufacturers, have denied connections to China’s People’s Liberation Army, Xinwei’s website lists its core industries in national defense and military industry.

The US-China Economic and Security Review Commission report identified several national security risks associated with stateside telecommunications investment from China.

Xinwei has remained quiet on work in North Korea, referring to its operations there as “private cooperative information” on its website.

The company has declined several interview requests, but online job advertisements showed it’s currently hiring network engineers for its launch in Cambodia.

Officials at Cambodia’s Ministry of Posts and Telecommunications said Xinwei had not specified when the company’s services would be available.

To contact the reporter on this story: Don Weinland at [email protected]

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