China’s ICT Standards Policy Risks Global Technology Isolation

WASHINGTON (December 15, 2014) – China has made the development of indigenous technology standards, which are often separate from internationally accepted norms and whose incorporation is sometimes required to sell ICT products in China, a central component of its economic development strategy. China’s promulgation of indigenous technology standards is intended to advantage its domestic producers while blocking foreign competitors and reducing royalties that Chinese firms pay for foreign technologies. However, such practices will have the unintended consequence of isolating Chinese technologies and ICT products from global markets, making it difficult for them to achieve the scale required to successfully compete internationally, as Japan experienced with its inability to sell mobile devices developed for its unique home market on a global scale.

The Middle Kingdom Galapagos Island Syndrome: The Cul-De-Sac of Chinese Technology Standards, a new report by the Information Technology and Innovation Foundation (ITIF), analyzes China’s current technology standards policy and argues that the push for indigenous standards will ultimately only serve to limit China’s ability to sell its ICT products and technologies globally. Moreover, these types of polices distort trade, hamper the global innovation ecosystem, and increase the cost of ICTs around the world. The authors conclude by offering recommendations for how China can improve its approach to standards development in a way that benefits China’s ICT enterprises, China’s consumers of ICT products, and the broader global economy.

“The ‘Galapagos Island Syndrome’ refers to the development of isolated markets for technology products because those products either used domestic, as opposed to global, technology standards or were designed to cater only to local markets,” notes Stephen Ezell, Senior Analyst with ITIF. “This is the main reason Japanese cell phones have not succeeded globally despite their technological advantages. China risks similar negative consequences if it adopts indigenous standards that isolate Chinese ICT products from global markets, thereby reducing those products’ functionality and exportability.”

Instead of indigenous technology standards, the report argues China should adopt an “open participation model” for standards development that is voluntary, transparent, open, and non-discriminatory for all stakeholders, including foreign companies. Furthermore, China should align its standards (at the national, industrial, and provincial levels) with international processes and use international standards as the basis of Chinese standards and regulations wherever practical.

“China can and should push to improve domestic industries and expand global market share for its technology products, but this effort should not be undertaken at the expense of the global trade system or done in a way that does more harm than good to the Chinese economy,” adds Robert Atkinson ITIF President and report co-author.

Read the report.