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WAPI, TD-SCDMA, EVD: the list of home-grown Chinese technology standards has been piling up, a testament to the country’s ambitions to create a technology industry that will one day rival those of the US, Europe and more advanced Asian countries.

However, these efforts face significant hurdles at home and abroad and have yielded few results.

The country has notched up big gains playing by international rules, but risks remaining a low-value manufacturer in a world where the superior profits for invention go elsewhere.

It is not hard to see why China has been drawn by the attractions of developing home-grown approaches to advanced technology, such as WAPI (for Wireless Lan Authentication and Privacy Infrastructure) and EVD (Enhanced Versatile Disc), a rival to next-generation formats such as HD-DVD and Blu-ray.

The standards effort, began in earnest in 2001. In a technology world increasingly dominated by open standards, being able to influence how the rules are set is a competitive consideration.

Tech companies able to implant some of their own intellectual property in an industry-wide standard have a built-in headstart when it comes to creating products.

That was the incentive for TD-SCDMA, says Yang Hua, secretary-general of the industry alliance behind the wireless standard. By creating its own alternative to the WCDMA and CDMA 2000 standards, he says, China hopes to create a niche for its companies in the crowded 3G mobile world.

Domestically, local tech standards hold another allure: the chance to carve out a corner of the market that is beyond the reach of international tech giants, even if that risks infringing the rules of the international trading system.

There are also clear financial attractions. The main reason for all these Chinese standards is to avoid the patent fees that are otherwise due to foreign tech companies, says Wang Gang, chief technology officer of Funinhand, a Shanghai company that is developing multimedia software for mobile devices, based on international standards.

While there may be strong incentives for China to push for home-grown technology standards, there have been few lasting results.

That partly reflects forceful US efforts to hold China to its international trade obligations. WAPI, which had been promoted on the grounds that China needed a domestic security standard for WiFi networks, drew strong complaints from the US government and companies such as Intel, which said that it amounted to a technical barrier to trade under World Trade Organisation rules.

A bigger obstacle, however, is the ambivalent attitude of China’s authorities and tech companies to the push for localised technology. In a country where pragmatism often holds sway, there is little consensus over the value of home-grown rules.

Different branches of government often take different approaches to the same issue. “There isn’t some grand Chinese army, all marching in the same direction,” says one veteran western observer. “The right and left hands don’t necessarily care about each other.”

Tech companies also face conflicting interests. A standard promoted locally may not serve a big enough market to justify the investment needed to participate.

Western mobile technology companies, not surprisingly, are quick to argue that these local standards efforts will damage the competitiveness of the indigenous technology industry. “If they go local, they will only pull their own companies back,” says Simon Leung, head of Motorola’s Asia Pacific operations.

Chinese companies with ambitions to play on the world stage agree. Mr Wang at Funinhand says China should appeal to international standards bodies rather than create domestic technologies.

There are signs that China’s standard-setting efforts are adapting to take account of these shortcomings and international misgivings. TD-SCDMA, for instance, has international approval and has won the support of western tech companies, albeit grudging.

Chinese companies are also working hard on the IPV6 internet protocol and Fourth Generation wireless technologies that could underpin the next wave of internet development.

Given the country’s new-found clout, efforts such as those seem likely to earn it a more influential seat at the standard-setting table in future.

Copyright The Financial Times Limited 2017. All rights reserved.
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