||This study provided a comprehensive overview of the economic context of formulating 3G licensing policy in China and Hong Kong SAR. Due to differences in the underlying economic system and industrial structure, policy considerations for 3G licensing in China and Hong Kong SAR differ substantially. For China, 3G provides a golden opportunity to its mobile communications manufacturing industry. It seems that China is currently at a turning point in terms of using domestic market in exchange of foreign technology to the strategy of using domestic market in exchange of domestic industrial development. If TDSCDMA is proven to be a feasible technology for commercial application, China might be able to repeat its achievement in fixed telecommunications system manufacturing, and the huge Chinese mobile market will create a new growth economy for China. More importantly, if TD-SCDMA dominates the Chinese mobile market - a market that covers almost a quarter of the world's population, it is quite possible that TDSCDMA will be diffused to other economies, including Hong Kong SAR. Therefore, the fortune of TDSCDMA is not just relevant to Chinese manufacturing industry, but also to foreign vendors. The establishment of the TD-SCDMA forum in later 2000 is a clear sign that foreign vendors have realised the implications of the Chinese standard to their future business. 3G implies an opportunity for China, but imposes some challenges on Hong Kong SAR. Due to limited spectrum, it is unclear whether the current competitive 2G market can be successfully transferred to a competitive 3G market in the future. Also, OFTA's traditional licensing and regulatory scheme for 2G services has also been threatened by the economic and technical constraints of 3G services. Whether or not the innovative 3G licensing framework and open network requirement of the Government will be successful remains to be seen. 3G mobile is not just an innovative technology and service, but it also brings about new economic and regulatory dynamics. It seems difficult to formulate a harmonised regulatory framework, because economies with different economic considerations might focus on different aspects of 3G development, like we have seen with China and Hong Kong SAR. Nevertheless, the common objective remains to derive the maximum benefit for the overall economy.