Is China telling 'Net investors to get lost?

With China's 'Net usage more than doubling this year, investors gobbled up shares of China.com in the Web portal company's July IPO. Now comes word that China will enforce its policy prohibiting foreign investment in 'Net businesses. Or will it?

With China's 'Net usage more than doubling in the first six months of this year, investors licked their chops and gobbled up shares of China.com in the Web portal company's July IPO. Now comes word that China will start enforcing its policy prohibiting foreign investment in 'Net businesses. Or will it?

"The current policy does not allow that," the Financial Times quoted China's Minister of Information Industry Wu Jichuan as saying about foreign investment in 'Net companies. "We will correct these irregularities." He added that China "still needs to strengthen its management over the information content business." Neither 'Net content providers nor ISPs are open to outside investment, Wu said.

The crackdown casts doubt on western investments that have sought to capitalise on China's leap online, the Times noted. International companies are involved in many leading Chinese content providers. America Online Iowns 10% of China.com, and Dow Jones and Intel are among the backers of portal Sohu.com. The Times reported it was unclear how these stakeholders might be affected, but added that Wu wasn't making an idle threat: Last year, he ordered the closure of 40 foreign investments in mobile telephone services, which had been part of a joint venture with China Unicom, the Mainland's number two telecom provider. However, so far, only one of the disputed investments has publicly been dissolved.

Associated Press (AP) ran with the Financial Times story, calling the announcement typical of China's resistance to foreign involvement in telecom and other tech industries it regards as strategically important. But a later AP filing by Elaine Kurtenbach that posted on the Los Angeles Times Web site disputed the FT account. At the news conference announcing enforcement of the ban on foreign investment in 'Net and other telecom services, Wu didn't respond to questions about how China would carry out enforcement. Nor would he specify as to how the ban applied to 'Net businesses, Kurtenbach wrote. As for the Times' quote, Wu claimed "his comments had been misinterpreted but did not explain how," Kurtenbach wrote. Seems like bureaucrats are the same no matter where you are.

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