China's Telecommunications Revolution (review)

Restaurants and shops are clustered together on a high street because, although they may be competitors, together they form a focal point in the community—a spot associated with good times and happy memories in the minds of customers and, therefore, a place to return to often. So, too, is the study of telecommunications in China. Imagine my surprise one day, walking down through the book exhibit of a research conference, to come upon Eric Harwit's concise book China's Telecommunications Revolution when I had just struggled to publish my own From Iron Fist to Invisible Hand: The Uneven Path of Telecom Policy Reform in China. Having now recovered my composure, I am delighted for this opportunity to review Harwit's book, our convergent evolutionary paths serving as assurance that we inhabit one of the hippest corners in the study of China.

Harwit's and my book in some respects cover very similar material—a recounting of the entry and exit of a purposefully limited number of telecommunications operators, the history of government control in the sector, the inescapable impulse to control the content of communications exhibited at every level of the state. Few industries permeate the everyday life of the ordinary citizen that can be—and are—so manipulated by the government. At the same time, there has been huge growth in services, subscribers, and investment in telecom over the past thirty years. Therein lies the nub of the question, the light that draws researchers like flies to this sector. How can obvious success be reconciled with openly authoritarian dictates? Furthermore, in the end, is this a good thing after all?

Harwit tackles this question by deploying industrial policy theory. He argues that the Chinese state plays a very beneficial role in the development of the telecommunications sector—services, Internet, and equipment. If the government has a clear long-term goal that serves a public need, then it is possible for industrial policy to succeed. He notes, however, that in the case of the telecom sector, the Chinese state encouraged vigorous competition in order to achieve its goals; also, it succeeded in managing good central-local relations, which enhanced success. However, he also argues that foreign technology and expertise can enhance development—this occurred in the equipment sector, but not in the telecom service sector. Finally, he identifies corruption as limiting and detrimental to economic development.

Harwit's juxtaposition of both telecom service and telecom equipment illuminates the state's attitude toward foreign participation. In telecom service, foreign investment was exceptional and then eventually banned to a significant extent, despite World Trade Organization commitments to the contrary. In the telecom equipment sector, allowing purchases of foreign equipment and permitting joint ventures have allowed an industry to evolve with some of the most competitive players in the global market today—ZTE and Huawei. Which path is better? While Harwit is not explicit in the comparison, the absence of foreign participation on the service side may have opportunity costs. While telecom service flourished and grew, how much more might it have developed had foreign participation been permitted?

Underlying the state's resistance to foreign investment in telecom service is its concern that foreign commercial control would lead to foreign political control of China's communications network. Harwit addresses this phenomenon directly in his chapter on the evolution of the Internet. That chapter provides the history of the repeated and varied legal instruments used by central and local governments to keep discourse on the Internet from too vitriolic criticism of the state, measures that extend, Harwit argues, to limiting people's access to the Internet. Again, the industrial policy of managing competition in the telecom service sector has some roots in the ideological concerns of the state. A trade-off of the success of the industrial policy is potentially political, not just economic.

In his discussion of the digital divide in China—the gap between the availability of telecom service in wealthy areas compared...