WTO accession, impediments to FDI, and the market opening of basic telecom services in China

- We develop a new barrier index that incorporates important recessive impediments.
- A multiple-angle method with a firsthand firm-level survey is employed in identification of important and effectively influential barriers.
- Analytic hierarchy process (APH) is applied in determining the weight of each impediment.
- The fact that there is still no FDI in China's basic telecom services despite relaxed government policies after WTO accession in 2001 is largely attributable to the recessive non-policy factors.
- Neglecting recessive barriers causes overestimation of the opening level and thus bias or blind spots in policy making.

This paper analyzes why no foreign direct investment (FDI) has entered basic telecom services in China despite relaxed government policies after the World Trade Organization (WTO) accession in 2001. A new indicator of barriers to FDI incorporating the policy and non-policy impediments has been developed with multiple sources of data including a first-hand survey and interview. Analytic hierarchy process has been applied to reduce arbitrariness in assigning weight to each impeding factor. Results indicate that there is no significant reduction in the actual level of openness to FDI in the sector over the past decade of post-WTO period, which is largely attributable to the recessive non-policy factors. Policy implications are discussed.