The Power Behind Chinese Telecom Giants

January 13, 2021 Updated: January 14, 2021

News Analysis

The New York Stock Exchange (NYSE) announced on Jan. 6 that it would resume delisting the three Chinese telecom stocks—China Mobile, China Telecom, and China Unicom (Hong Kong)—after saying it would stop doing so on Jan. 4.

The NYSE said in a statement published on its website that it had scrapped the plans after “further consultation with relevant regulatory authorities in connection with Office of Foreign Assets Control.”

On Dec. 31, NYSE initially announced that the delisting was in compliance with a November executive order prohibiting American investments in Chinese companies tied to the Chinese military. These three stocks would stop trading by Jan. 11, after which the delisting procedures would begin, according to the former announcement.

Unlike U.S. telecom companies., Chinese telecom companies are state-run. But how are they tied to the military?

Epoch Times Photo
The China Mobile logo is displayed at the Mobile World Congress in Barcelona, Spain, on Feb. 26, 2019. It is one of three Chinese telecom firms that will be delisted from the New York Stock Exchange. (Pau Barrena/AFP via Getty Images)

Three Telecoms

In China, the communications industry is a monopoly industry, which only has three players: China Mobile, China Telecom, and China Unicom.

China Mobile’s ultimate controlling shareholder China Mobile Communications Group Co., Ltd. is a state-owned enterprise (SOE). China Mobile was born from the 1999 break-up of China Telecom, which originated as a Chinese state agency of the Ministry of Posts and Telecommunications. China Unicom (Hong Kong)’s controlling shareholder China Unicom is another SOE.

All three companies are ultimately managed by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC). The State Council, under the premier, is the highest authority in the Chinese state (which is in turn subordinate to the Chinese Communist Party). The fates of these companies, in fact, are determined by high-ranking Chinese Communist Party (CCP) officials and their families.

The three Chinese mobile carriers actively develop their new networks and technologies to support the Chinese regime’s developing strategies, such as the Internet of Things (IoT) and mass surveillance.

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Surveillance cameras are seen on a corner of Tiananmen Square in Beijing on Sept. 6, 2019. (Greg Baker/AFP via Getty Images)

On Nov. 26, 2020, at the World 5G Convention in Guangzhou, Tong Jilu, chairman of China Tower, announced that in a little over the one year since 5G was commercialized in China in November 2019, it had built more than 700,000 5G base stations in China.

China Tower is an SOE established in July 2014 by merging the telecom tower businesses among China’s three telecom giants: China Mobile, China Unicom, and China Telecom. These three telecom companies are China Tower’s main customers and shareholders.

At the PT (Postal and Telecommunications) Expo China in October 2020, Liu Liehong, vice minister of Ministry of Industry and Information Technology (MIIT), said that China had to have over 150 million 5G terminals.

The three Chinese mobile carriers have made a combined 5G investment at $12.72 billion for the first half of 2020, according to Telecom TV.

State-run CCTV quoted China Securities, a Chinese investment bank and brokerage firm, on Oct. 20, 2019 that the number of 5G base stations would be twice the number of 4G stations, and the operators’ investment in 5G network construction might reach a total of 1.23 trillion yuan (about $190 billion) in 8 to 10 years, an increase of 68 percent over the 4G investment.

facial recognition cameras Huawei
A display for facial recognition and artificial intelligence is seen on monitors at Huawei’s Bantian campus in Shenzhen, China, on April 26, 2019. (Kevin Frayer/Getty Images)

Just as other large-scale Chinese companies have done, the three telecoms chose to fulfill their financing needs in the U.S. capital market. However, these three companies are involved in so-called military-civil fusion projects, which means the companies would share all their advanced technologies with Chinese military—People’s Liberation Army (PLA).

For example, the state-run PLA News reported on Dec. 12, 2016 that China Mobile would cooperate with the PLA army in seven areas, which include “building the infrastructure, guaranteeing the emergency communication, setting up the command and dispatch systems, building up smart military camps, protecting the information securities, and training informatization talents.”

The U.S. government recognized that the three Chinese telecom companies are involved in the PLA’s development.

On Nov. 17, 2020, the No. 13959 executive order “Addressing the Threat from Securities Investments That Finance Communist Chinese Military Companies” listed all three telecom companies as linked to the CCP military.

This executive order states that the CCP exploits the U.S. capital market to fund its military and intelligence apparatuses and develop threats to the United States. And it bars American investments in such military-civil fusion companies.

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Chinese troops march during a military parade in Tiananmen Square to mark the 70th anniversary of the founding of the People’s Republic of China in Beijing on Oct. 1, 2019. (GREG BAKER/AFP/Getty Images)

Powers Behind

5G is one of markets in which the Chinese regime wants to be a leader.

Bloomberg reported in May 2020 during CCP’s “two sessions”—the annual meetings of the CCP’s top legislature and top advisory body—that Xi Jinping backed a plan to invest about U.S. $1.4 trillion over six years to 2025 for 5G and AI development. The CCP calls it the “new infrastructure initiative.” Huawei is a key contributor in the plan, the report emphasized.

The head of the Department of Information and Communications Development of MIIT Wen Ku said in October 2020 at the PT Expo in Beijing that China’s 5G industry chain includes Huawei, ZTE, Ericsson, Nokia, China Xinke, Inspur, and so on.

Huawei was established by Ren Zhengfei, a former PLA officer, in 1987. Financial Times quoted a former Huawei executive in December 2018 that “things took off like crazy” after Ren met Jiang Zemin, the then head of the CCP, in 1994.

Huawei won the contract to build the first telecommunication network for PLA in China in late 1990s. It also played a key role in the “Golden Shield” project, a nationwide surveillance project that Jiang Zemin and his son Jiang Mianheng championed.

Self-exiled Chinese billionaire Guo Wengui revealed in his media channel in 2019 that Huawei was quickly developed with the strong support from Jiang’s family.

Huawei and 5G network logo
A smartphone with the Huawei and 5G network logo is seen on a PC motherboard in this illustration picture taken on Jan. 29, 2020. (Dado Ruvic/Reuters)

It’s an open secret in mainland China that between the 1990s and 2010s, Jiang Mianheng was in charge of China’s telecom industry. Chinese people nicknamed the industry Jiang’s “Telecom Empire” and Jiang Mianheng “the Telecom King.”

China Unicom, one of the three telecom giant companies to be delisted, merged with China Netcom in 2008. Jiang Mianheng once held China Netcom via the Shanghai Alliance Investment Ltd. (SAIL).

Founded in September 1994, SAIL was quickly flush with cash—it seemed through Jiang Mianheng‘s close connections with the cream of the Party elite, given that his father was the most powerful man in China.

The company initially made investments into Shanghai’s telecommunications infrastructure and tech firms and has engaged in other high profile projects over the years—massive state construction projects, entertainment companies, and ventures with Hollywood studio DreamWorks, Microsoft, etc..

But SAIL remained a shady operation since its inception—it held no opening ceremony and never released business reports. It does not even appear to have a website.

For years, SAIL was registered under Jiang Mianheng’s name although it was ostensibly the investment arm of Shanghai city government. SAIL was widely understood in China at the time to function as something like Jiang Mianheng’s personal piggy bank.

Jiang Mianheng, son of former Chinese communist leader Jiang Zemin, hosts the 2011 annual work meeting of the Chinese Academy of Sciences. Jiang stepped down from president of the Chinese Academy of Science’s Shanghai branch, announced by official on Jan. 8, 2015. (Screen shot via China Academy of Sciences)
Jiang Mianheng, son of former Chinese communist leader Jiang Zemin, hosts the 2011 annual work meeting of the Chinese Academy of Sciences. Jiang stepped down as president of the Chinese Academy of Science’s Shanghai branch, announced by officials on Jan. 8, 2015. (Screen shot via China Academy of Sciences)

In 2014, this freewheeling period came to an end, with the firm integrated into the central government’s SASAC. It’s unclear when SAIL changed its registered legal representative, which should be in the early 2010s.

Beijing-based commentator Hua Po told The Epoch Times in September 2014 that the move—taking oversight of SAIL from the Shanghai city government to SASAC based in Beijing—was “possibly an attempt to whitewash Jiang Mianheng’s involvement.”

In fact, these companies are not only generate money for the officials, but also execute the CCP’s agenda.

An April 2020 statement by U.S. Department of Justice said that the nature of China Telecom’s U.S. operations is to “provide opportunities for PRC (CCP regime, People’s Republic of China) state-actors to engage in malicious cyber activity enabling economic espionage and disruption and misrouting of U.S. communications.”