CITIC Pacific Lines Up China Investments

Hong Kong-based CITIC Pacific Ltd. yesterday disclosed a major joint-venture investment in telecom capacity in Mainland China, though leaving operation and management of the network -- for now -- in the hands of mainland entities.

The news comes as reports are circulating that China will accelerate the opening of its Internet and telecommunications markets as major players in Asia and elsewhere are gearing up to enter those markets.

CITIC Pacific yesterday announced the Jan. 5 formation of a joint venture, Lucky Zone Enterprises Inc., with parent company China International Trust and Investment Corp. (CITIC) Beijing and Larry Yung Chi Kin, a director of CITIC Pacific. At the same time, a division of the new venture invested in a 32,000-kilometer fiber-optic network under construction in China.

Hong Kong-based CITIC Pacific also said yesterday that one of its subsidiaries is negotiating to buy 50 percent of Guoan, a subsidiary of CITIC Beijing, for approximately HK$1.9 billion (US$244 million). One of Guoan's major business will be cable television networks.

CITIC Pacific is investing roughly the same amount in the optical fiber network, which the company said it will buy from a third party. For the time being, however, Lucky Zone will rely on CITIC Beijing to arrange with Mainland China-based companies to run the network.

A diversified business focused on infrastructure, CITIC Pacific is also active in trading and distribution.

What the investments spell out is a major push by CITIC Pacific to get a foothold in Mainland China's fast-growing telecom business, currently closed to foreign investment under Chinese law. Since November of last year, foreign companies have been gearing up for a liberalization apparently called for in a deal between the U.S. and China on China's entry to the World Trade Organization (WTO) -- though the exact terms and timing of the moves have not been made public.

Earlier this week, comments reportedly made by China's Minister of Information Industry (MII) Wu Jichuan indicated that a key step toward liberalization may come even before China's accession to the WTO. Some time in the first quarter of this year, foreign firms will be allowed to take 50 percent stakes in ISPs (Internet service providers) in Beijing, Shanghai, and Guangzhou, Wu reportedly said in an interview.

A senior executive at Yahoo Inc., which last year announced plans for an Internet content joint venture in Mainland China, today also expressed hope for early market liberalization.

"We hopefully can take advantage of the gesture," said Savio Chow, Yahoo's managing director for Asia. "Before the recent news, the ministry (MII) has had a very firm stance on no foreign investment."

Yahoo plans to launch a venture with Founder, a Mainland-based developer of software for newspaper and periodical publishing.

CITIC Pacific is in Hong Kong and can be reached at http://www.citicpacific.com/.

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