The network, named CDMA (code division multiple access), operates in five major Chinese cities with 550,000 users.

"The handover will contribute substantially to improving our market competitiveness in the following years," said a spokesman from China Unicom, currently the sole CDMA operator in China.

The spokesman said CDMA operates in five cities including Beijing, Shanghai and Tianjin.

Analysts pointed out that the handover was in line with a Ministry of Information Industry (MII) commitment to develop the CDMA system in China.

"China's policy to develop CDMA technologies has always been the same," said Wu Jichuan, minister of information industry,late last year.

China Unicom gained governmental approval in March last year to merge with the Great Wall Telecom Corp., a joint venture between the military and China Telecom.

Qualcomm Inc, a US company that concentrates on CDMA technologies, in February agreed with China Unicom to deliver second generation CDMA technology to establish a nationwide mobile network with 50 million lines.

But only days later, rumors began that the plan had been postponed indefinitely, and concerns over CDMA have lingered ever since.

In a move that is likely to help China Unicom's CDMA project, the government is pressing ahead with plans to put the company in charge of mobile telecom networks previously operated by businesses affiliated to the Chinese military.

Prior to a 1998 decision to ban the nation's forces from doing business, the military set up networks with China Telecom, the nation's largest phone company.

One of the military's best-known ventures was Great Wall Telecom, which operated trial CDMA networks in four cities.

The military will have to give up these networks, according to Jiang Shaobing, deputy head of the MII's Department of Planning.

"All mobile business will be transferred from the military (to China Unicom)," he said.

Yang Xianzu, general manager of China Unicom, said, "We have always had a positive and practical attitude towards the CDMA issue."

China Unicom now has more than 18 million users, of which 13 million registered during the year 2000.

The company has invested about 7 billion yuan (US$845 million) in establishing a nationwide CDMA network with an initial capacity of 2 million lines last year, a capacity that will be expanded to 10 million lines and 160 cities this year.

The company hopes that the CDMA network, a system that is standard in the United States, will eventually be able to compete with the GSM network dominated by the China Mobile Telecommunications Corp.

The CDMA equipment currently in use was provided by Lucent Technologies, Motorola, Samsung and Nortel Networks.

(China Daily 01/03/2001)