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Tech deals benefit US, China
14-01-2004
2004/01/14

Technology contracts worth billions signed between Chinese and American firms on Tuesday in Washington are yet another step to reduce the huge trade deficit between the countries -- but the United States could take more steps to narrow the gap, a senior Chinese official said.

Lou Qinjian, vice-minister of the Ministry of Information Industry said at the contract-signing ceremony: "If the US relaxed strict controls on high-tech exports to China, there would be a definite decrease in the trade deficit."

The US has export controls on goods that could have potential military uses.

US Commerce Secretary Don Evans said the "agreements will help generate corporate revenue, and will support high-tech manufacturing jobs in many American communities". Competitively-priced Chinese products have partly been blamed for the job losses in the US, a sensitive issue -- specially in an election year.

Evans said the technology deals were "another clear demonstration of the growing economic and trade relationships between the two countries".

Among the deals done on Tuesday:

* Motorola signed a US$556 million one-year contract to upgrade China Unicom's GSM network and expand its CDMA network.

The company also clinched a US$510 million contract with China Mobile to expand its GSM network and improve data services in Beijing and 13 provinces. The work is scheduled for completion by the year-end.

* Lucent Technologies signed contracts with China Unicom and China Telecom Corp Ltd worth more than US$350 million.

* UTStarcom signed a US$200 million contract for telecommunications-access equipment in 12 provinces.

* Ericsson signed a US$93 million contract with China Unicom for infrastructure expansion.

Analysts said the slew of deals, apart from reducing the trade deficit, reflect enhanced trade in the IT sector.

"The purchases are a reflection of domestic enterprises' need to further expand their businesses, as many local firms are not able to provide high-tech equipment," said Chen Jinqiao, director of the China Academy of Telecommunications Research under the Ministry of Information Industry (MII).

But he sounded a note of caution.

"The large amount of purchases may also have some negative impact on the research and development of domestic enterprises," Chen said.

"We have long been in an unfavourable position in international competitiveness for lack of key technologies, though we have many advantages such as cheap labour costs.

"Therefore we should work harder to enhance our research and development."

He also called on the United States to loosen controls on transfer of technology.

Analysts agree that the equipment sales are the latest in a series of high-profile deals to offset the trade surplus between the two sides.

In the last two months, Chinese enterprises inked deals worth close to US$9 billion with American giants such as General Electric, General Motors and Boeing; and agricultural-produce contracts.

Chinese officials predict that China's trade surplus with the United States to be US$53 billion for 2003.

"To effectively narrow the trade surplus between the two sides, the United States should further lift its market access and relax export controls to China," said Lu Jinyong, a research fellow at the Research Centre for the WTO under the University of International Business and Economics.

But he saw no immediate sign of further liberalization of US export-control policies with regard to China.

"Such purchases are a temporary measure to balance bilateral trade," he said.

"In the long run, it will fade away as the enterprises become more and more independent,'' Lu said.

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