Written Testimony of Laura B. Sherman;
Communications Counsel
Paul, Weiss, Rifkind, Wharton & Garrison
Washington, DC

Before the U.S. China Economic and Security Review Commission
January 18, 2002 Public Hearings on

WTO Compliance and Sectoral Issues

TELECOMMUNICATIONS SERVICES IN CHINA:
NOT YET WILDLY ENTHUSIASTIC

I would like to thank the members of the Commission for inviting me to testify on China’s ability to comply with its World Trade Organization (WTO) commitments. With the help of my colleagues in the Paul Weiss offices in Hong Kong and Beijing, I have closely followed the lengthy negotiations which finally culminated in China becoming the 143rd member of the WTO. I have taken a particular interest in China’s commitments in the telecommunications sector because I was part of the U.S. Government team that negotiated what is called the WTO’s 1997 Basic Telecommunications Agreement. When we concluded those negotiations, industry proclaimed itself “wildly enthusiastic.”

I have not heard anyone in industry say they are “wildly enthusiastic” about China’s commitments in the telecommunications and information services sector. Those commitments fall woefully short of full market access. In addition, the Chinese government has made it clear that it intends to “manage” competition.

Recently, the government announced its decision to split China Telecom into totally separate northern and southern companies, creating six state-owned enterprises to provide basic telecommunications services. This restructuring will continue over the next two years until the market is consolidated into four comprehensive operators.

The desire to manage development of the telecommunications and information sectors is also evident in the creation in Fall 2001 of the State Council Information Commission. This Commission, headed by Premier Zhu Rongji, includes two other influential members of the Politburo Standing Committee, Vice President Hu Jintao, who is rumored to be the successor to Jiang Zemin, and Vice Premier Li Lanqing and two other very influential members of the Politburo, Ding Guangen, the head of the Propaganda Department of the Chinese Communist Party, and Vice Premier Wu Bangguo. It replaces the Ministry of Information Industries as the policy-making body, leaving open the question of what MII’s role will be going forward. The creation of the Commission signifies the extreme importance placed by the Chinese government on this industry sector.

While there is no basis for “wild enthusiasm,” there are market opportunities. As I will describe below, the WTO commitments and the implementing regulations go a long way towards clarifying and formalizing the rules for foreign service providers, promoting competition and providing certainty. There remain numerous gray areas and implementation issues. In the long term, however, the introduction of pro-competitive regulation will lead to a more rational Chinese market for telecommunications and information services, to greater opportunities for foreign service suppliers and to better service for Chinese consumers.

China’s WTO Commitments

China has undertaken specific commitments with respect to value-added services and basic telecommunications services, which vary by type of service and geographic region and are phased in over time. There are no restrictions on the ownership interest that can be held by any one foreign entity, other than the total limits listed below, and no limits listed for the number of licenses to be issued. China has not restricted the technological means through which the specified services can be provided (e.g. cable, satellite). Services can be provided through facilities that are owned or leased; China’s WTO schedule contains no limitations on the types of resale that may be employed.

The following chart sets forth China’s commitments in the telecommunications sector.

Internet Services

Although not specifically listed in its WTO schedule of commitments, the Chinese promised certain treatment of Internet services during the bilateral accession negotiations with the United States. The Chinese agree to provide market access and national treatment to foreign Internet Content Providers ("ICPs"), which provide content for the web sites, and foreign Internet Service Providers ("ISPs"), which provide access to the web sites. The commitments relating to ICPs are the same as those for value-added services, set forth above, that is, 30% foreign ownership now for ventures in Shanghai, Guangzhou and Beijing, rising to 50% with no geographic limitations in December 2003. ISPs, in contrast, are treated as if they were fixed wireline services. As a result, implementation of market access will be spread over six years and foreign investment will be limited to 49%.

The Regulatory Framework

China began a number of years ago to institute a regulatory framework for the telecommunications and information services sectors. From September 2000 until spring 2001, China issued The Telecommunications Regulations of the People's Republic of China (“Telecom Regulations”), Measures for the Administration of Internet Information Services, Regulations for the Administration of Internet Electronic Notice and Interim Measures for the Administration of Posting News on Websites.

Since then the Ministry of Information has issued a Revised Catalogue of Classes of Telecommunications Businesses and, most importantly, from the WTO perspective, the long-awaited regulations governing foreign investment – Provisions on the Administration of Foreign-Invested Telecommunications Enterprises (“Foreign Investment Regulations”).

I would like to briefly review the Telecom Regulations and the Foreign Investment Regulations in light of China’s WTO commitments and then describe the remaining gray areas and issues of concern for full WTO implementation.

Telecom Regulations. These regulations formalize the MII as the country's regulator, authorized to issue licenses and adopt regulations. Consistent with its WTO obligations, Article 4 of the Regulations states that the regulator will "promote development, openness, fairness and impartiality." Whether MII can truly distance itself from China Telecom and the other state-owned carriers and act transparently and impartially remains to be seen.

The Regulations (as modified by the Revised Catalogue of Telecom Businesses) define telecommunications services as either "basic" or “value-added." Attachment 1 sets out a breakdown of the services, which generally correspond to the WTO categories. The list provides some certainty but, unfortunately, includes many overlapping businesses and is confusing in terms of whether certain services are basic or VAS. It does make clear, however that a number of services which are categorized as “basic” will be regulated as “value-added.” This could be important because value-added services, as noted above, are subject to the more favorable foreign investment and geographic WTO commitments. It is not clear, however, that services categorized as value-added services for purposes of the Telecom Regulations will be treated as value-added services for foreign investment purposes.

Having defined the various types of services, the Telecom Regulations focus mainly on competition safeguards and interconnection for wireline services, both key components of China’s WTO commitments. Many of the concepts in the Reference Paper have been adopted. The Telecom Regulations prohibit any telecommunications service provider from engaging in anti-competitive activities, such as providing below-cost services, granting unreasonable cross subsidies, and engaging in activities, which constitute unfair competition.

The Telecom Regulations impose interconnection obligations on “dominant carriers,” tracking the Reference Paper definition of a a "major supplier" closely. Dominant carriers have to provide interconnection to competitors at points where it is technologically feasible and economically rational. Interconnection must take place within a set timetable, with no unreasonable delays and on a transparent and nondiscriminatory basis. Dominant carriers must publish a set of rules that include timing and provide unbundled network elements. As required by the Reference Paper, the Regulations establish a dispute settlement mechanism in the event the carriers cannot agree on interconnection. Thus in the area of competition safeguards and interconnection, at least on paper, the PRC appears on track to implement its WTO commitments.

Licensing requirements for basic services providers are another story. While some of the licensing provisions are consistent with the WTO obligations, others do not appear to be. On the “plus” side, the Regulations require (i) MII to give reasons for denying an application for both basic and value-added licenses and (ii) the relevant licensing authority must make a decision within 60 days of receipt of an application for a value-added services license and 180 days for a basic services license.

The criteria for obtaining a license, however, are problematic. In order to get a basic services license, a company must be a “sole purpose entity,” which does not provide other services. It is not clear whether this requirement can be satisfied by establishing a sole-purpose subsidiary to carry on the telecommunications business, while its parent undertakes other services. More disturbing, however, is the requirement that at least 51% of the equity of the licensee must be owned by a state-owned enterprise. This limitation appears to be inconsistent with China's commitments and severely limits the number of potential joint venture partners.

Another provision of the Regulations that appears to be inconsistent with China's WTO commitments is the requirement that all international telecommunications traffic must past through a single "international gateway bureau" established and approved by MII. This provision is a limitation on the way foreign investors can provide service and the type of service provided. When China's commitments on international services come into force in 2004, this provision will severely limit the ability of foreign investors to provide international telecommunications services.

The Regulations prohibit transmission of broad categories of information: (i) material which opposes the basic principles of the PRC Constitution, (ii) material which jeopardizes national security or national unity, (iii) material which disseminates rumors, disrupts the social order or damages social stability and (iv) material which damages State religious policies or advocates sects or feudal superstitions. The Regulations require the service provider to stop transmitting the illegal information if it learns of it, preserve relevant records and report the transmission to the relevant authorities. While a WTO member is allowed to take actions inconsistent with its obligations if "necessary for the protection of its essential security interests," this part of the Telecom Regulations creates extreme uncertainty for service providers. It is a potential trap for foreign investors since it is not clear what kind of information is prohibited and the practical means by which such transmissions can be stopped or preserved (other than through wiretaps).

Foreign Investment Regulations. The Foreign Investment Regulations, a translation of which is included as Attachment 2, provide that foreign investment (including investment from Hong Kong, Macao and Taiwan) is permitted only in the form of a Chinese-foreign equity joint venture; no wholly foreign-owned enterprises may be established. The Regulations differentiate between joint ventures providing basic telecoms services and those engaged in providing value-added services in terms of minimum capital requirements and qualification criteria, as set out in the following chart.

The Foreign Investment Regulations state the geographic scope for foreign-invested joint ventures will be determined by MII. This will allow MII to gradually lift geographic restrictions in accordance with China’s WTO commitments. The Regulations also provide that the maximum percentage foreign investment will eventually rise, again in accordance with the WTO commitments.

The Foreign Investment Regulations require a cumbersome approval process. The venture must get an Approval Opinion from MII, followed by an Approval Certificate from the Ministry of Foreign Trade and Economic Cooperation (MOFTEC). The principal Chinese investor then needs to obtain an Operating Permit from MII and finally register the joint venture with the State Administration for Industry and Commerce.
MII has set deadlines for its actions, promising to complete the examination of a basic services joint venture within 180 days and joint venture for interprovincial value-added services within 90 days of receipt of the application. Some projects require approval by the State Development and Planning Commission or the State Economic and Trade Commission, in which case the period for examination will be extended by 30 days. MOFTEC is supposed to complete its review within 90 days of receiving the application.

Outstanding Issues

Both the Telecom Regulations and the Foreign Investment Regulations are a mixed bag. They represent a faithful implementation of WTO commitments in the more technical areas, such as competition safeguards and interconnection and the beginning of transparency in a country where the rules have not been clear for many years. But the respective regulations are disappointing in the following respects.

Taken together the Telecom Regulations and the Foreign Investment Regulations severely limit the pool of Chinese joint venture partners. As noted above, the Telecom Regulations require that a basic services licensee must be 51% owned by a state enterprise. The Foreign Investment Regulations stipulate that a telecom joint venture must be an equity joint venture, to which the Chinese party contributes cash, tangible assets or a limited kind of intangible assets equal to its equity interest in the joint venture. So a foreign investor is limited to partnering with the state-owned enterprises with cash or assets to contribute to the joint venture.

The approval process remains long and complicated. The deadlines for MII and MOFTEC approval are such that it could easily take nearly a year to establish a basic telecom services joint venture and more than half a year to establish an interprovincial value-added services joint venture. The process is further extended by the need to develop and submit the various business plans and joint venture documents for approval. In addition, none of the regulations make clear the criteria that MOFTEC will apply in reviewing applications.

The regulations do not address the complex questions raised by the geographic limitations in the WTO commitments. Are the restrictions related to where the joint venture operates or where it is set up? For example, will a joint venture to provide paging services established in Beijing be allowed to provide service in Tianjin upon commencement of operation or only after all the geographic restrictions are lifted for those services in December 2003. Will foreign investment be permitted in an Internet Content Provider established in Shanghai that operates a web site that can be accessed from other cities in China, as well as from anywhere in the world? Until these questions are answered, foreign investors will be unable to finalize or even initiate their investment plans.

Finally, there is the question of how foreign investors can resolve disputes about China’s implementation of its WTO commitments. MOFTEC is establishing a formal “inquiry point” where foreign investors can bring issues of non-compliance. But this inquiry point has been described as the first step on formal WTO dispute settlement. Foreign investors need a more informal means of addressing problems. Hopefully, over time staff at MII will develop their own expertise about WTO obligations so that MII can address disputes about implementation by its own bureaus and by provincial telecom regulators.
In conclusion, foreign investors are not wildly enthusiastic about their current chances in China’s telecommunications and information services sector. But significant progress has been made. I believe that the Chinese government recognizes the need to develop the telecommunications and information sectors of the economy as a driver for growth in other sectors. If this attitude prevails, perhaps China will accelerate the implementation of its WTO commitments and provide true opportunities for foreign investors.

Attachment 1
The Revised Catalog of Telecoms Businesses (June 11, 2001)

On June 11, MII issued a revised version of the catalog of telecoms businesses attached to the Telecom Regulations. The items marked by an asterisk (*) are treated as value-added services for purposes of implementation of China’s WTO commitments.

Basic Telecommunications Businesses

• Domestic fixed telephony (long distance and local)
• Mobile telephony (Analog mobile (large region wireless mobile,* analog trunk,* analog cellular), digital trunk, 2G digital cellular (TDMA, GSM andCDMA, 3G digital cellular
• Satellite communications (satellite mobile, satellite fixed, satellite transmitter lease and sale, VSAT*)
• Internet and public data transmission services (Internet backbone network data transmission, other data network transmission (x.25, DDN, ATM, frame relay), public telegram & user telegram, wireless data transmission)
• Lease or sale of network elements (bandwidth and optical communications wavelength, cable, optical fiber, optical cable, communications conduits)
• Network access and hosting (network access, cable access, wireless access, network hosting)
• international data, international video and graphic communication)
• Paging* (one-way and two-way)
• Resale* (resale of basic telecoms )
• International telecoms and infrastructure business (lease and sale of international ground bandwidth, optical wavelength, cable, optical fiber, optical cable and other network elements, international satellite dedicated line, international long distance telephony

Value-Added Telecommunications Businesses “(“VAS”)

• Fixed telephone network VAS (telephone information services, call center services, voice-mail, video conference service)
• Mobile network VAS
• Satellite network VAS
• Internet VAS (Internet access service, Internet data center, Internet information service, Internet VPN, Internet video conferencing service, Internet call center, other Internet VAS)
• Other data transmission network VAS (computer information service, electronic data exchange, voice-mail, e-mail, facsimile storage and relay, VPN

Attachment 2
Decree No. 333 of the State Council of the People's Republic of China

The Provisions on the Administration of Foreign-Invested Telecommunications Enterprises have been adopted at the 49th regular meeting of the State Council on December 5, 2001. It is hereby promulgated and shall be implemented as of January 1, 2001.
Zhu Rongji, Prime Minister December 11, 2001

Provisions on the Administration of Foreign-Invested Telecommunications Enterprises

Article 1. These Provisions are formulated in accordance with the relevant laws and administrative regulations governing foreign investment and the Telecommunications Regulations of the People's Republic of China (the "Telecommunications Regulations") in order to meet the needs of opening the telecommunications industry to the outside world and promote the development of the telecommunications industry.

Article 2. Foreign-invested telecommunications enterprises refer to enterprises that operate telecommunication businesses jointly established in accordance with law by foreign and Chinese investors in the People's Republic of China in the form of Chinese-foreign equity joint ventures.

Article 3. Foreign-invested telecommunications enterprises that engage in the operation of telecommunications businesses shall, in addition to these Provisions, comply with the provisions of the Telecommunications Regulations and other relevant laws and administrative regulations.

Article 4. Foreign-invested enterprises may engage in basic telecommunications businesses and value-added telecommunication businesses. The specific distinction between the categories of telecommunications businesses set out in the Telecommunications Regulations shall apply.

The geographic scope in which foreign-invested telecommunications enterprises may operate shall be determined by the supervisory department for the information industry under the State Council in accordance with the relevant provisions.

Article 5. The registered capital of a foreign-invested telecommunications enterprise shall comply with the following provisions:

(1) The minimum amount of the registered capital of a foreign-invested telecommunications enterprise operating a telecommunications business nationwide or in several provinces, autonomous regions or municipalities directly under the central government shall be RMB2 billion in the case of a basic telecommunications business or RMB 10 million in the case of a value-added telecommunications business.

(2) The minimum amount of the registered capital of a foreign-invested telecommunications enterprise which operates a telecommunications business within one province, autonomous region or municipality directly under the central government shall be RMB200 million in the case of a basic telecommunications business or RMB 1 million in the case of a value-added telecommunications business.

Article 6. The capital contribution ratio of the foreign investor in a foreign-invested telecommunications enterprise operating a basic telecommunications business (other than wireless paging business) shall ultimately not exceed 49%.

The capital contribution ratio of the foreign investor in a foreign-invested telecommunications enterprise operating a value-added telecommunications business (including the basic telecommunications business of wireless paging) shall ultimately not exceed 50%.

The capital contribution ratio between the Chinese and the foreign investor of a foreign-invested telecommunications enterprise in different periods shall be determined by the supervisory department for the information industry under the State Council in accordance with the relevant provisions.

Article 7. To operate a telecommunications business, foreign-invested telecommunications enterprises shall satisfy the conditions for the operation of basic telecommunications businesses or value-added telecommunications businesses set forth in the Telecommunications Regulations in addition to the conditions set forth in Articles 4, 5 and 6 of these Provisions.

Article 8. The principal Chinese investor of a foreign-invested telecommunications enterprise operating a basic telecommunications business shall satisfy the following conditions:

(1) be a company establish in accordance with law;

(2) have appropriate funds and specialized staff for operating activities;

(3) meet the prudential and industry-specific requirements stipulated by the supervisory department for the information industry under the State Council.
The principal Chinese investor of a foreign-invested telecommunications enterprise referred to in the preceding paragraph means the investor who makes the largest amount of capital contribution among all Chinese investors and whose capital contribution accounts for over 30% of the total amount of capital contributions of all Chinese investors.

Article 9. The principal foreign investor of a foreign-invested telecommunications enterprise operating a basic telecommunications business shall satisfy the following conditions:

(1) have enterprise legal person status;

(2) have obtained an operating permit for basic telecommunications businesses in its country or territory of incorporation;

(3) have appropriate funds and specialized staff for operating activities;

(4) have a good record and operating experience in basic telecommunications businesses.
The principal foreign investor of a foreign-invested telecommunications enterprise referred to in the preceding paragraph means the investor who makes the largest amount of capital contribution among all foreign investors and whose capital contribution accounts for over 30% of the total amount of capital contributions of all foreign investors.

Article 10. The principal foreign investor of a foreign-invested telecommunications enterprise operating a value-added telecommunications business shall have a good record and operating experience in value-added telecommunications business.

Article 11. For the establishment of a foreign-invested telecommunications enterprise operating a basic telecommunications business or operating a value-added telecommunications business in several provinces, autonomous regions or municipalities directly under the central government, the principal Chinese investor shall submit an application and the following documents to the supervisory department for the information industry under the State Council:

(1) a project proposal;

(2) a feasibility study report;

(3) qualification documents or relevant confirmation documents of the investors of the joint venture as set forth in Articles 8, 9 and 10 hereof; and

(4) supporting documents or confirmation documents regarding other conditions necessary for operating basic or value-added telecommunications businesses as set forth in the Telecommunications Regulations.

The supervisory department for the information industry under the State Council shall examine the above documents from the date of its receipt of the application. If the application is for operating a basic telecommunications business, it shall within 180 days complete the examination and decide to grant or refuse approval. If the application is for operating a value-added telecommunications business, it shall complete the examination within 90 days and decide to grant or refuse approval. Where approval is granted, an Examination and Approval Opinion For the Operation of Telecommunications Business With Foreign Investment will be issued; where approval is refused, the applicant shall be notified and reasons specified in writing.

Article 12. For the establishment of a foreign-invested telecommunications enterprise operating a basic telecommunications business or operating a value-added telecommunications business in several provinces, autonomous regions or municipalities directly under the central government, when its principal Chinese investor submits an application in accordance with Article 11 hereof, it may, based on the actual situation, first submit documents other than the feasibility study report, and submit the feasibility study report after the examination, acceptance and written notification by the supervisory department for the information industry under the State Council. However, the interval between the date on which the notice of examination and acceptance is issued and the date on which the feasibility study report is submitted shall not exceed one year and such period will not be included in the stipulated time limit for examination and approval.

Article 13. For the establishment of a foreign-invested telecommunications enterprise operating a value-added telecommunications business within one province, autonomous region or municipality directly under the central government, its principal Chinese investor shall submit an application and the following documents to the telecommunications administration authority of the province, autonomous region or municipality directly under the central government:

(1) a feasibility study report;

(2) qualification documents or relevant confirmation documents as set forth in Article 10 hereof; and

(3) supporting documents or confirmation documents regarding other conditions necessary for operating value-added telecommunications businesses as set forth in the Telecommunications Regulations.

The telecommunications administration authority of the province, autonomous region or municipality directly under the central government shall sign its opinion within 60 days from the date of its receipt of the application. If it consents to the application, it shall forward the application to the supervisory department for the information industry under the State Council. If it does not consent to the application, it shall notify the applicant and specify reasons in writing.

The supervisory department for the information industry under the State Council shall complete the examination within 30 days from the date of its receipt of the application documents with the signature for consent by the telecommunications administration authority of the province, autonomous region or municipality directly under the central government and decide to grant or refuse approval. Where approval is granted, an Examination and Approval Opinion For the Operation of Telecommunications Business With Foreign Investment will be issued; where approval is refused, the applicant shall be notified and reasons specified in writing.

Article 14. The main content of the project proposal for a foreign-invested telecommunications enterprise shall include: names and basic condition of the parties to the joint venture, the total amount of investment, registered capital, investment ratios each party, categories of businesses for which the application is made and joint venture term of the proposed enterprise.

The main content of the feasibility study report of a foreign-invested telecommunications enterprise shall include: the basic condition, service items, business projections and development plans, analysis of investment returns and anticipated business hours of the proposed enterprise.

Article 15. If, in accordance with the relevant provisions of the State, the investment project to establish a foreign-invested telecommunications enterprise must be examined and approved by the department in charge of planning under the State Council or the department for general administration of the economy under the State Council, the supervisory department for the information industry under the State Council shall forward the application documents to the department in charge of planning under the State Council or the department for general administration of the economy under the State Council for examination and approval before issuing the Examination and Approval Opinion For the Operation of Telecommunications Business With Foreign Investment. With respect to investment projects forwarded to the department in charge of planning under the State Council or the department for general administration of the economy under the State Council for examination and approval, the period for examination and approval may be extended by 30 days.

Article 16. For the establishment of a foreign-invested telecommunications enterprise, in the case of a foreign-invested telecommunications enterprise operating a basic telecommunications business or operating a value-added telecommunications businesses in several provinces, autonomous regions and municipalities directly under the central government, the principal Chinese investor shall submit the contract and the articles of association for the proposed foreign-invested telecommunications enterprise to the department in charge of foreign economic relations and trade under the State Council on the strength of the Examination and Approval Opinion For the Operation of Telecommunications Business With Foreign Investment; in the case of a foreign-invested telecommunications enterprise operating a value-added telecommunication business within one province, autonomous region or municipality directly under the central government, the principal Chinese investor shall submit the contract and the articles of association for the proposed foreign-invested telecommunications enterprise to the department in charge of foreign economic relations and trade of the people's government of the province, autonomous region or municipality directly under the central government on the strength of the Examination and Approval Opinion for the Operation of Telecommunications Business with Foreign Investment.

The department in charge of foreign economic relations and trade under the State Council and the departments in charge of foreign economic relations and trade of the people's governments of the provinces, autonomous regions and municipalities directly under the central government shall complete the examination and approval within 90 days from the date of receipt of the contract and the articles of association for the proposed foreign-invested telecommunications enterprise and decide to grant or refuse approval. Where approval is granted, a Foreign-Invested Enterprise Approval Certificate will be issued; where approval is refused, the applicant shall be notified and reasons specified in writing.

Article 17. The principal Chinese investor of the foreign-invested telecommunications enterprise shall handle the procedure for the Operating Permit for Telecommunications Business with the supervisory department for the information industry under the State Council on the strength of the Foreign-Invested Enterprise Approval Certificate.
The principal Chinese investor of the foreign-invested telecommunications enterprise shall handle the procedure for registration of the foreign-invested telecommunications enterprise with the administrative department of industry and commerce on the strength of the Foreign-Invested Enterprise Approval Certificate and the Operating Permit for Telecommunications Business.

Article 18. To operate an international telecommunications business, a foreign-invested telecommunications enterprise must be approved by the supervisory department for the information industry under the State Council and operate through the International Telecommunications Exit and Access Bureau established with the approval of the supervisory department for the information industry under the State Council.

Article 19. If a foreign-invested telecommunications enterprise violates the provisions of Article 6, the supervisory department for the information industry under the State Council shall order it to correct the situation within a prescribed time limit and impose a fine between RMB 100,000 and RMB 500,000. If the correction is not made within the prescribed time limit, its Operating Permit for Telecommunications Business shall be revoked by the supervisory department for the information industry under the State Council, and its Foreign-Invested Enterprise Approval Certificate shall be cancelled by the supervisory department for foreign economic relations and trade which originally issued the same.

Article 20. If a foreign-invested telecommunications enterprise violates the provisions of Article 18, the supervisory department for the information industry under the State Council shall order it to correct the situation within a prescribed time limit and impose a fine of between RMB 200,000 and RMB 1,000,000. If the correction is not made within the prescribed time limit, its Operating Permit for Telecommunications Business shall be revoked by the supervisory department for the information industry under the State Council, and its Foreign-Invested Enterprise Approval Certificate shall be cancelled by the supervisory department for foreign economic relations and trade which originally issued the same.

Article 21. If approval of an application to establish a foreign-invested telecommunications enterprise is fraudulently obtained by submitting false or forged qualification certificates or confirmation documents, the approval shall be void, a fine between RMB 200,000 and RMB 1,000,000 shall be imposed and the Operating Permit for Telecommunication Business shall be revoked by the supervisory department for the information industry under the State Council, and the Foreign-Invested Enterprise Approval Certificate shall be cancelled by the supervisory department for foreign economic relations and trade which originally issued the same.

Article 22. If a foreign-invested telecommunications enterprise violates the Telecommunications Regulations and other relevant laws and administrative regulations in the operation of telecommunications businesses, it shall be punished by the relevant authorities according to law.

Article 23. Overseas listings by domestic telecommunications enterprises must be examined and agreed by the supervisory department for the information industry under the State Council and approved in accordance with the relevant provisions of the State.

Article 24. These Provisions shall apply by reference to companies and enterprises of the Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan Area investing in telecommunications businesses in mainland China.

Article 25. These Provisions shall be implemented as of January 1, 2002.