China's Ministry of Information Industry's Telecommunications Administration Bureau is planning to establish a credit system designed to improve quality control among the nation's mobile handset manufacturers.

The proposed credit system, comes on the heels of consumer complaints about mobile handset quality and after-sales services.

In the following months the bureau will work jointly with other government agencies to ensure that all mobile handset makers are in compliance with industry standards, Lu Yang, deputy director-general of the bureau,

said late last month in Beijing at 2005 China Mobile Telecommunications Industry Summit Forum.

The bureau will set up a system to better monitor and respond to complaints from consumers regarding handset models. The gleaned information will be combined with related information from the China Consumers' Association (CCA) and the State Administration for Industry and Commerce to identify companies responsible for putting handsets of poor quality onto the market.

Regular and random inspections will focus on handset manufacturers that have received frequent complaints over quality issues.

The monitoring system is expected to be up and running by this summer.

Mobile handsets now top complaints among all products and services among Chinese consumers, according to the China Consumers' Association (CCA).

The handset quality problems come as the country's National Development and Reform Commission (NDRC)continues to implement a new licencing policy for mobile handset manufacturers that was launched earlier in the year.

Late last month the NDRC newly-approved five domestic producers of cellular handsets, including Huawei Technologies,Aux,and GaoTong Technology Industry, Hisense and Daxian Pantech Telecom.

Huawei says it will introduce its CDMA handsets to the domestic market as soon as possible.

According to the NDRC, the five new comers are expected to produce a total of 11 million mobile handsets annually.

Deemed a lucrative business, the mobile handset industry is attracting more and more participants.

Sources close to the NDRC said that though the NDRC has warned potential applicants to revalue the investment risks and market conditions before joining the fray, there are still many enterprises are queuing for the mobile phone handset manufacturing licences.

The increasing number of participants in the sector is expected to accelerate the reshuffling of the handset manufacturing industry.

China's domestic handset producers are experiencing heavy competition from both home and abroad.

Leading domestic handsets vendors including TCL, Bird, Amoi and Chinese Kejian all saw diminishing handset sales last year.

According CCID Consulting, domestic handset vendors are losing their fortresses with their market shares shrinking 3.8 percentage points to 49.1 per cent last year. Analysts with the firm say that the country's handset manufacturers need to enhance their research and development, upgrade their technological prowess and improve the quality of their products.

The analysts say that low prices and localized marketing strategies are no longer the panacea they once were for domestic vendors.

International handset vendors such as Nokia, Motorola and Sony Ericsson are regaining their strong momentum in the domestic market by launching new products as well as lowering handsets prices.

But at the same time, constant price wars have already eroded profit for the handset industry.

"The declining profit has made handset manufacturing a high risk industry," said He Shiyou, vice-president of ZTE.

Source: China Daily