Cisco Inc announced a US$50 million investment on Wednesday in the newly public China Communications Services Corp (CCS, 中國通信服務), making the US network-equipment maker the largest foreign investor in the Chinese telecom.
CCS, formerly a subsidiary of the state-controlled China Telecom Group (CTG), went public earlier this month on the Hong Kong Stock Exchange. CTG, as well as state-controlled China Mobile and China Unicom, are the other big investors in CCS.
CCS helps large Chinese service providers such as China Netcom design and build Internet and other telecommunications networks.
With the newest investment, Cisco has committed more than US$700 million in venture funding to nearly 30 Chinese companies. Other recent investments include e-learning company Ambow (
But doing business in China remains risky -- even for Cisco, the most highly valued company in Silicon Valley, with a market capitalization of nearly US$165.5 billion.
Google Inc, Yahoo Inc and Microsoft Corp came under political fire earlier this year for operating in China. The country's communist government is holding 260,000 people in ideological "re-education" camps, according to the US State Department.
After the Tiananmen Square Massacre of 1989, Congress prohibited US companies from exporting products used for crime detection and control.
The sanctions apply to old-fashioned items such as handcuffs and guns -- not modern technology from blue-chip tech companies. But a growing number of human rights advocates and politicians -- including Representative Tom Lantos -- are asking the Commerce Department to modernize the list of prohibited items.
Advocates say the Department of Commerce should ban some software -- which Chinese officials could use to compile databases of suspected enemies of the state -- and some telecommunications technology that could help the government identify dissidents or censor information.
It is unclear how long Cisco -- which is ambitiously expanding in China, India, Russia and other developing nations -- can stave off a political backlash.
Earlier this month, the school board in Dover, Pennsylvania, voted to delay the purchase of a US$416,000 phone system from Cisco for fear the contract could contribute to oppression in China. The board is studying Cisco's effect on China's rights abuses.
"It's a risky market," said analyst Erik Suppiger of Pacific Growth Equities. "But with a quarter of the world's population it's one you can't run away from."
Cisco does not break down profits by country, but executives are committed to helping build the telecommunications infrastructure in China, the world's largest mobile communications market. They say investing in CCS will help improve human rights.
"We want to help build innovation and drive middle-class growth. It paves the way for strong economic growth that builds a broader base in the economy within China," said Ned Hooper, Cisco vice president of corporate business development. "China is one of the most important of the emerging and new markets ... not only because of the scale but the innovation that's going on there."
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