China is drafting a plan to encourage private capital investment in the telecommunications industry, allowing private sector and State-owned telecommunications operation companies to form a new firm, according to unnamed experts who have knowledge of the matter, the Securities Daily reported Thursday.

The information has not been confirmed by the Ministry of Industry and Information Technology (MIIT), but some scholars and experts claim they have learned about the matter, only the details are still under discussion.

"Inititally there was only one telecommunications company and then it was divided into several firms. Private capital has already invested in this industry for a long time, and it should be further encouraged," Liu Chunru, the deputy secretary-general of the Electronic Science and Technology Committee at MIIT, told the reporter.

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Press spokesman for the China Telecommunications Corporation (China Telecom) Li Jun revealed "We did hear news related to this but the specific plan and the effect on China Telecom is not clear yet."

"I know of this plan advising on the development of the telecommunications industry and the opening up of the market. It is beneficial to have a diversified telecommunications market, and although this is just a pilot scheme, at least the MIIT is taking a stand" , Zhu Hongbo, vice president of Nanjing University of Posts and Telecommunications said.

The monopoly position of the telecommunications industry, with private investment largely kept out of the market, has always been controversial. Despite the favorable policies outlined in the plan, private companies still face several challenges to enter the market, including management and operating experience, and innovation capacity.