China Seeks To Develop Its Own High-Tech Standards - InformationWeek

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China Seeks To Develop Its Own High-Tech Standards

China wants to embrace technology--but on its own terms, so it's shunning foreign-invented tech protocols and inventing its own.

BEIJING (AP) -- DVD? China's trying to do it one better--with a technology called EVD.

CDMA? The digital cell phone standard is so 2003, the Chinese say. Give TD-SCDMA a try instead.

Intel Corp.'s Centrino and Microsoft Corp.'s Windows? If you're doing business with Beijing, better bone up on WAPI and Red Flag Linux, too.

These days, China's dominant message is this: We'll embrace the world--but on our terms. And nowhere is this more evident than in the realm of high technology, where behind the acronyms is a battle of standards that could have global repercussions.

Pushed by their government, Chinese firms are shunning technological protocols invented abroad and developing their own.

They want Chinese-made video discs to run on Chinese-invented players. They want Chinese consumers linking up with China-developed mobile gadgets.

This trend goes beyond commercial and security concerns. Cultural pride is at stake: A once-great China humbled by Western powers in the 19th century doesn't want to be undercut again.

"Dependency on foreign technology and ways to escape it, I think, have been very important themes in modern Chinese history," said Richard P. Suttmeier, a University of Oregon professor who studies China's technology policy for the National Bureau of Asian Research.

China, the inventor of everything from printing to gunpowder, sat still for centuries as the West advanced. Now it is racing to catch up and develop the latest cell phones, computer security tools, and more so it can be a world leader once again.

As Suttmeier sees it, China's secondary status in technology has given birth to a kind of "techno-nationalism."

This year, the Ministry of Science and Technology plans to spend $1.3 billion primarily "to fuel the country's high technology," according to the official newspaper China Daily.

In some cases, China is tired of paying foreign patent fees for products made and sold domestically--such as with DVD players, for which Chinese firms must pay $4.50 per machine to the six Japanese companies that developed the underlying DVD technology.

With computer operating systems, the secretive communist government is concerned about relying on a foreign-invented product like Windows. It has been promoting as more secure the homegrown Red Flag Linux, based on an open-code operating system.

While some of China's efforts appear iffy thus far, investors and companies around the world are paying close attention: Nobody wants to miss the boat in selling to 1.3 billion Chinese.

China has to plot a careful strategy, though, or it risks creating domestic standards incompatible with the rest of the world.

A classic example of the consequence is Sony Corp.'s failed Betamax videocassette recorders. Though Betamax is the pioneering technology, it lost out to VHS because Sony wouldn't let other firms make Betamax machines.

Chinese policy is already raising concerns.

In December, U.S. businesses reacted with alarm when Beijing said it would require wireless equipment makers to use a Chinese encryption technique known as WAPI, even though it fails to work well with chips based on the popular Wi-Fi used elsewhere. The U.S. government stepped in, and China agreed to delay the requirement.

Enforcement would mean foreign firms would have to deal with Chinese competitors to get the technology, a move that protects domestic firms and hinders U.S. wireless-chip manufacturers like Intel.

Sowing further market confusion, Chinese firms have started selling their own DVD technology called EVD, or enhanced versatile disc.

Another key battleground is third-generation cell-phone technology, known as 3G, which is set to replace the current technology, or 2G.

"The 2G domestic market is almost completely taken up by overseas products," Zhou Huan, president of China's Datang Telecom, said in a statement responding to faxed questions. "In facing the 3G challenge that is to come, our national information industry cannot tolerate a repeat of this kind of phenomenon."

Datang, whose majority owner has close ties with the government, is pushing homegrown 3G technology called TD-SCDMA, following on the heels of CDMA standards used in the United States, Europe, and Japan.

Zhou estimates the mainland market for 3G and related business could be worth as much as $2.9 trillion, and he wants that money going to Chinese firms.

Given the size of China's market, even the threat of a domestic 3G standard could be enough to force foreign firms to lower their patent fees. That might be Beijing's plan all along, said Duncan Clark, managing director of the BDA China Ltd. consultancy.

But Clark is pessimistic about the commercial prospects of China's TD-SCDMA and said politics doesn't always make for good business decisions.

"Nationalism is the last refuge of the scoundrel," Clark said. "You wave the flag if you need financial assistance, because maybe you're not able to compete."

For one thing, a homegrown format like EVD would become useless if few movies are released for it.

Demand in China has been limited so far. Even the People's Daily newspaper, mouthpiece of the ruling Communist Party, has reported on its Web site that Chinese consumers are frustrated that their new EVD players can't play DVDs.

As for shunning CDMA, not only is China already behind on its own version, but it risks isolating itself--and falling behind the rest of the world. For example, the effort might hurt Chinese companies trying to export cell phones.

"It's a risky strategy," Suttmeier said. "It could backfire."

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