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Should the West Fear China’s Increasing Role in Technical Standard Setting?

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Should the West Fear China’s Increasing Role in Technical Standard Setting?

As a newcomer to the process, China will surely bring changes. But fears about China’s role are often overblown.

Should the West Fear China’s Increasing Role in Technical Standard Setting?
Credit: Illustration by Catherine Putz

China’s increasing efforts in domestic standardization and active participation in international standard setting has been widely observed. Domestically, China amended its standardization law in 2017, the first amendment since the law was established in 1989. In fact, standardization reform has been rolled out since 2014.

Internationally, from 2011 to 2020, the number of China-occupied secretariats in the International Organization for Standardization (ISO) and International Electrotechnical Commission (IEC) has increased by 73 percent and 67 percent, respectively. Besides, Chinese nationals have been elected as the leaders of the ISO, IEC, and International Telecommunication Union (ITU), which are the three largest and most well-established standard setting organizations in the world. Zhao Xiaogang served as the head of ISO from 2015 to 2017, Zhao Houlin has served as the ITU secretary-general since 2015, and Shu Yinbiao started his three-year term as IEC president in 2020.

China has also spared no efforts to internationalize its standards outside of these international organizations. For instance, as of September 2019, the country has signed standards cooperation agreements with 52 countries or regions through Belt and Road Initiative.

As a late comer in tech governance, China’s increasing activism has caused many worries in Western countries, the founders and dominant players in the existing system. Scholars and commentators have come to a consensus that China will shift the current order of global tech governance, but differ in their explanations of the coming change. Some opine that this is due to the new norms and philosophies that China brings to the table, in while others argue that China’s motivations and approaches used in standard setting are fundamentally different from the West’s.

Are these explanations valid? Do the norms, philosophies, motivations, and approaches of China’s governance in standard setting really differ from Western countries’?

Intellectual property rights (IPR) have been closely associated with technical standard setting. Although China has made huge progress in IPR protection in the recent decades, some critics say its norms for embedded essential IP is different from those in the West. Instead of making profits through monetizing and licensing embedded IP, China is accused of using unique domestic standards to force foreign embedded essential IP owners to lower down royalty fee and increase the profit margin for its domestic manufacturers. This reasoning needs further investigation.

First, the role of China’s government in standard diffusion may have been exaggerated. Although there are unique domestic standards in China, only a few of them are widely commercialized due to both political and economic reasons. Politically, China’s government system has been called “fragmented authoritarianism.” Domestic standards established by different ministries sometimes are not consistent and thus hard to follow. Economically, since lots of Chinese companies are export-oriented, they are more inclined to adopt internationally recognized standards rather than the domestic ones. Therefore, because of these two reasons, the competitiveness or utility of any unique domestic standard is a question mark, let alone comparing them with widely accepted global standards.

Second, Chinese business actors have been increasingly, though slowly, highlighting the role of licensing patents. This indicates that major Chinese companies have worked to comply with the existing norms, regardless of the strategy pursued by the central government. In March this year, Huawei released its White Paper on Innovation and Intellectual Property 2020. From 2019 to 2021, the company estimates it will receive about $1.2 to $1.3 billion in revenue from patent licensing. More importantly, the Chinese 5G giant also announced its license fee structure for 5G smartphones, with a per unit royalty cap of $2.50. After Huawei disclosed its decision, many have wondered whether ZTE, another leading 5G telecommunication company in China, would follow the trend in monetizing its 5G patents.

China has been accused of using standard setting as a protectionist tool, which disrupts international trade. Indeed, the Chinese government has been using standardization as a part of industrial policy – protecting infant industries and promoting indigenous innovation. Also, the unique domestic standard has set barriers for some international companies to enter China’s market. However, using standard setting as an exclusionary strategy is not unique to China. Rather, it has been employed by Western countries for a long time. For instance, in the 1980s, the EU published its own regional standard on high definition television (HDTV), known as Multiplexed Analog Components (MAC), creating a barrier to entry for Japanese companies. More tellingly, the WTO’s Technical Barriers to Trade (TBT) Agreement further indicates that technical standards are a long-existing and frequently used tool for countries around the world.

Last but not least, China’s approach in standard setting also causes concern. China is adopting a top-down and centralized approach while the United States applies a hands-off, market-oriented, and bottom-up one. Besides, some are concerned about China’s advocacy of multilateral governance rather than a multi-stakeholder model (looping in civil society and businesses) in the international arena.

To be sure, China’s methods in standard setting, domestically and internationally, are different from those of the United States. Nevertheless, the rising power shares some features with the EU. The EU has been using a market-driven public-private partnership model. Although technical standards are developed by private standardization bodies, such as Deutsches Institut für Normung (DIN) in Germany, they can also become parts of regulations put forward by EU member states and the European Commission. In some circumstances, EU institutions as well as governments in member states are critical for the successful adoption of standards, as shown in the case of GSM.

In China, even though standard setting has been led by state or quasi-state actors, they cannot dictate the process anymore. Private sector actors have greatly increased their presence in tech governance. For instance, Scott Kennedy noted that although the Science and Technology Division of the former Ministry of Information Industries was responsible for Intelligent Grouping and Resource Sharing (IGRS), government officials rarely attended the meetings of the IGRS working group. More importantly, Kennedy also showed that the contrasting fates of wireless local area networks and home networking were largely determined by the behaviors of business actors rather than the government.

The more recent example of 5G is another illustration of the increasing presence of private actors. Both domestic private companies, such as Huawei, and foreign companies, such as Nokia and Ericsson, have been recognized as major contributors to the 14 5G standards unveiled last January. With that in mind, critiques over China’s multilateral inclination are not persuasive either. Since industry has become more and more important in standard setting and diffusion, China’s government would seek to cooperate and incorporate businesses into the governance structure. It’s true that China has long promoted multilateralism; however, that does not mean that China is against a multi-stakeholder structure.

As a newcomer, China will surely bring changes to the global governance of international standards setting. However, more studies should be done to determine just how “new” these changes are and to what extent that China has been socialized into the existing world order.