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6 White Paper on the Business Environment in China
istence of the NSA’s clandestine data mining program na’s top smartphone vendor, according to Canalys, a market
in June. research company, as the Korean smartphone maker struggles
continued in the third quarter, faced with tough competition
“This is all about China using its own technology, and from Xiaomi as well as the launch of Apple’s iPhone 6 and iP-
China building leading technology companies,” said hone 6 Plus. 42 At the same time, tech pundits all over the world
James McGregor, chairman for Greater China at con- have been raving about the debut of the One, a low-budget
sultancy APCO Worldwide. Android smartphone from Shenzhen-based start-up OnePlus,
tipped to be a game-changer because, unlike other Chinese do-
Although Beijing has not prohibited state firms from mestic smartphone manufacturers, the One is bent on conquer-
purchasing Western-made technology services and ing not just China but also, international markets.43
equipment, the government has sent a clear message to
choose Chinese-made equipment first, China-based ex- Also notable is the ongoing implementation of the 3G stan-
ecutives say.18 dard in China, following an initial announcement in December
2008 of a $40 billion investment in third-generation infrastruc-
Video game hardware, however, appear to be less ture over two years. An update on the proliferation of 3G ca-
controversial. In 2013 the Chinese government “temporarily pabilities came in April 2010, when the Ministry of Industry
lifted a 14-year-old ban on selling video game consoles, paving and Information Technology reported that all cities above the
the way for Sony Corp, Microsoft Corp and Nintendo Co prefecture level, most counties and towns, main highways and
Ltd to enter the world’s third largest video game market in tourist destinations would eventually offer 3G connectivity fol-
terms of revenue.” Under the new rules, video game consoles lowing an investment in building more than 400,000 base sta-
manufactured by “foreign-invested enterprises” in Shanghai’s tions totaling nearly $60 billion, up from the previously-report-
new Free Trade Zone will be permitted to be sold on the ed $40 billion. These investments aim to achieve 150 million
Mainland “after inspection by cultural departments.”19 3G subscribers by 2011.27
Formerly the exclusive domain of grey-market importers, game This target was not met (or at the very least is highly im-
consoles are expected to face fierce competition in the mainstream probable to have been met, as final annual totals have not been
from PC-, phone- and tablet-based games—all platforms with released at the time of writing); statistics released in September
which Mainland consumers are already familiar.19 2011 showed a total of 101.86 million 3G subscribers nation-
ally.24
Mobile handsets also figure greatly into China’s machinery
and electrical equipment manufacturing. It is reported that 560 In August 2012, the Ministry of Industry and Informa-
million handsets were produced during 2007 (an increase of tion Technology reported “1.072 billion mobile subscriptions
nearly 17 percent on 2006’s production)20 and with a domestic [of which] 193 million were 3G network service subscribers,”
market of 523 million users as of 2007.21 an increase of 64 million 3G accounts which places the three
mobile operators—China Mobile, China Unicom and China
There were reportedly 600 million handsets manufactured Telecom—at 72.1, 63.7 and 56.4 million 3G subscribers, re-
in the PRC over the course of 2009, of which 168 million were spectively.28
sold domestically.22 China Daily reported more than 106 mil-
lion new domestic mobile phone subscribers that year, increas- Particularly notable is the fact that despite China Mobile
ing the total to 747 million.23 By September 2011, that figure has approximately twice as many overall subscribers as China
was reported as 939 million.24 Unicom, 3G subscription numbers between the two are neck-
and-neck. Earlier this year a Forbes analysis admonished Chi-
Although Korean conglomerate Samsung “is the biggest na Mobile for apparent complacency in the face of increasing
smartphone vendor in China with sales reaching around 70 competition for 3G users; the report also noted that “the fact
million units [in 2012],” it faces stiff competition at the high that China Mobile runs its 3G network on a proprietary home-
end of the market from Apple25and at more modest price points grown TD-SCDMA standard has proved to be a big deterrent
from domestic manufacturers which are quickly gaining on in- for the carrier in securing smartphones compatible with its net-
ternational leaders in terms of execution and sophistication. work. Even the iPhone, which has already been launched on
the other two carriers in China, hasn’t made its way to China
Xiaomi, one such firm, “sold 18.7 million smartphones in Mobile yet.”29
2013” and has projected total sales exceeding 40 million hand-
sets in 2014. “Xiaomi’s handsets,” explains Reuters, “sell for be- China Mobile’s use of TD-SCDMA was mandated by the
tween $130 and $410, much lower than the $740 price tag for Ministry of Industry and Information Technology in 2009,
the least expensive iPhone 5C model or a Samsung Galaxy Note presumably to ensure that China’s indigenous standard would
II, which can retail for $570.”26 succeed regardless of foreign competition.
In the summer of 2014, Xiaomi surpassed Samsung as Chi- In late 2010, China Mobile began a Ministry of Industry
154
istence of the NSA’s clandestine data mining program na’s top smartphone vendor, according to Canalys, a market
in June. research company, as the Korean smartphone maker struggles
continued in the third quarter, faced with tough competition
“This is all about China using its own technology, and from Xiaomi as well as the launch of Apple’s iPhone 6 and iP-
China building leading technology companies,” said hone 6 Plus. 42 At the same time, tech pundits all over the world
James McGregor, chairman for Greater China at con- have been raving about the debut of the One, a low-budget
sultancy APCO Worldwide. Android smartphone from Shenzhen-based start-up OnePlus,
tipped to be a game-changer because, unlike other Chinese do-
Although Beijing has not prohibited state firms from mestic smartphone manufacturers, the One is bent on conquer-
purchasing Western-made technology services and ing not just China but also, international markets.43
equipment, the government has sent a clear message to
choose Chinese-made equipment first, China-based ex- Also notable is the ongoing implementation of the 3G stan-
ecutives say.18 dard in China, following an initial announcement in December
2008 of a $40 billion investment in third-generation infrastruc-
Video game hardware, however, appear to be less ture over two years. An update on the proliferation of 3G ca-
controversial. In 2013 the Chinese government “temporarily pabilities came in April 2010, when the Ministry of Industry
lifted a 14-year-old ban on selling video game consoles, paving and Information Technology reported that all cities above the
the way for Sony Corp, Microsoft Corp and Nintendo Co prefecture level, most counties and towns, main highways and
Ltd to enter the world’s third largest video game market in tourist destinations would eventually offer 3G connectivity fol-
terms of revenue.” Under the new rules, video game consoles lowing an investment in building more than 400,000 base sta-
manufactured by “foreign-invested enterprises” in Shanghai’s tions totaling nearly $60 billion, up from the previously-report-
new Free Trade Zone will be permitted to be sold on the ed $40 billion. These investments aim to achieve 150 million
Mainland “after inspection by cultural departments.”19 3G subscribers by 2011.27
Formerly the exclusive domain of grey-market importers, game This target was not met (or at the very least is highly im-
consoles are expected to face fierce competition in the mainstream probable to have been met, as final annual totals have not been
from PC-, phone- and tablet-based games—all platforms with released at the time of writing); statistics released in September
which Mainland consumers are already familiar.19 2011 showed a total of 101.86 million 3G subscribers nation-
ally.24
Mobile handsets also figure greatly into China’s machinery
and electrical equipment manufacturing. It is reported that 560 In August 2012, the Ministry of Industry and Informa-
million handsets were produced during 2007 (an increase of tion Technology reported “1.072 billion mobile subscriptions
nearly 17 percent on 2006’s production)20 and with a domestic [of which] 193 million were 3G network service subscribers,”
market of 523 million users as of 2007.21 an increase of 64 million 3G accounts which places the three
mobile operators—China Mobile, China Unicom and China
There were reportedly 600 million handsets manufactured Telecom—at 72.1, 63.7 and 56.4 million 3G subscribers, re-
in the PRC over the course of 2009, of which 168 million were spectively.28
sold domestically.22 China Daily reported more than 106 mil-
lion new domestic mobile phone subscribers that year, increas- Particularly notable is the fact that despite China Mobile
ing the total to 747 million.23 By September 2011, that figure has approximately twice as many overall subscribers as China
was reported as 939 million.24 Unicom, 3G subscription numbers between the two are neck-
and-neck. Earlier this year a Forbes analysis admonished Chi-
Although Korean conglomerate Samsung “is the biggest na Mobile for apparent complacency in the face of increasing
smartphone vendor in China with sales reaching around 70 competition for 3G users; the report also noted that “the fact
million units [in 2012],” it faces stiff competition at the high that China Mobile runs its 3G network on a proprietary home-
end of the market from Apple25and at more modest price points grown TD-SCDMA standard has proved to be a big deterrent
from domestic manufacturers which are quickly gaining on in- for the carrier in securing smartphones compatible with its net-
ternational leaders in terms of execution and sophistication. work. Even the iPhone, which has already been launched on
the other two carriers in China, hasn’t made its way to China
Xiaomi, one such firm, “sold 18.7 million smartphones in Mobile yet.”29
2013” and has projected total sales exceeding 40 million hand-
sets in 2014. “Xiaomi’s handsets,” explains Reuters, “sell for be- China Mobile’s use of TD-SCDMA was mandated by the
tween $130 and $410, much lower than the $740 price tag for Ministry of Industry and Information Technology in 2009,
the least expensive iPhone 5C model or a Samsung Galaxy Note presumably to ensure that China’s indigenous standard would
II, which can retail for $570.”26 succeed regardless of foreign competition.
In the summer of 2014, Xiaomi surpassed Samsung as Chi- In late 2010, China Mobile began a Ministry of Industry
154
