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China Emerging as a Key Player in Shaping Global Technology Standards


CHINA, Aug. 12 /Xinhua-PRNewswire/ -- China is no longer content with just
being the world's pre-eminent manufacturer: it is increasingly active in the
development of global technology standards, Deloitte finds in a study released
today. The report, "Changing China," details how China's standards
initiatives will shape global competition in the technology, media and
telecommunications (TMT sector) for years to come.
China's current position as the leading consumer and producer of many
technology products -- along with its healthy long-term growth prospects --
puts it in a strong position to influence standards in both its own and global
markets. As China's standards become more widely accepted, Chinese firms will
increasingly direct the global technology sector.
"China is able to use the lure of its massive markets and spectacular
growth as leverage in the standards war. Global technology and
telecommunications companies need to review China's standards initiatives and
collaborate, where appropriate, with Chinese companies in standards
development," says Charles Yen, TMT National Leader for Deloitte in China.
In the report, Deloitte identified three practical strategies for China to
go about promoting its unique technology standards:

-- Offer a lower cost substitute to a standard that already exists
-- Establish a new standard in its home market, then export that standard
after achieving critical mass and economies of scale
-- Join an international coalition, using the appeal of its domestic
market as leverage

Chinese government agencies and companies are undertaking all of the above
strategies. "China's big push into standards is not without risk. Its effort
will be most effective when its standards initiatives align with market forces,
international standards, and the interests of multi-national coalitions," said
Mr. Yen.
"Technology vendors that misjudge the impact of China's standards
revolution could find themselves at a significant disadvantage, with their
position in the market increasingly over-taken or encroached upon."
Practically there are four strategies for technology firms to consider as
China's technology standards are being shaped:

-- Collaborate with standard setters
-- Compete selectively, focusing on areas where standards are harder to
mandate
-- Innovate specifically for the Chinese market
-- Seed emerging markets to encourage growth and establish early control

"Firms with a strong base of support among Chinese companies and consumers
are in the best position to promote their own standards. Those lacking
widespread support would be wise to co-operate instead of competing,"
continued Mr. Yen.
From operating systems and software applications, to storage media,
wireless communications and satellite positioning, Chinese government agencies
and companies are working to shape new technology standards for economic
advantage. Deloitte expects Chinese manufacturers to begin by building
critical mass of support at home, then exporting their technologies to
emerging markets such as Southeast Asia and the Middle East.
"Technology companies must carefully monitor China's actions, assess the
implications of Chinese standards, and amend their strategies accordingly,"
added Mr. Yen. "Companies that don't may find themselves locked out of the
world's largest and fastest growing marketplace, which is increasingly defined
by standards that originate in China."
Examples highlighting China's impact on standards include:

Technology:

Operating systems
-- The Chinese government recently announced a major commitment to Linux
and announced it was drafting a new "standard" specifically for the
Chinese market that might be made compulsory for all IT vendors and
service providers.
-- The Chinese software industry is still in its infancy and China wants
to source software or create its own software that is affordable to the
masses.

RFID
-- China established a working group to draft and develop national
standards for RFID tag technology. Some reports indicate the group is
adhering to international standards, while others suggest the group is
planning to go its own way. An incompatible RFID standard could pit
the interests of China's emerging IT industries against the interests
of major purchasers of Chinese products.

Media:

EVD
-- Chinese companies are trying to promote a successor to the DVD optical
disk standard, called Enhanced Versatile Disc (EVD), which has better
sound and picture quality than DVD.
-- Chinese companies are constrained by hefty DVD royalties, which range
from $15 to $22 on players that today often retail for less than $60.
A consortium of China's leading makers of DVD players holds the EVD
patents, and collects royalties.

Audio video coding
-- China is developing its own standard technology for compressing audio
and video. The new standard, calls AVS, is competing with MPEG-4 and
H.264 to replace the current worldwide compression standard, MPEG-2.
-- EVD is currently based on MPEG-2, but a switch to AVS is expected --
allowing Chinese manufacturers to produce state-of-the-art video
players based entirely on Chinese technology standards.

Telecommunications:

Cellular networks
-- China has its own globally approved standard for 3G and as the world's
largest market for mobile communications, is well positioned to take a
lead role in defining the 4G standard.

Satellite positioning systems
-- China recently chose Europe's Galileo system over the U.S. military's
Global Positioning System. The push into satellite positioning systems
has significant commercial and geopolitical ramifications.

About Technology, Media and Telecommunications
The Global Technology, Media and Telecommunications (TMT) Industry Group
consists of more than 5,000 partners, directors and senior managers supported
by thousands of other professionals dedicated to helping clients evaluate
complex issues, develop fresh approaches to problems and implement practical
solutions. TMT has dedicated practices in 45 countries and centers of
excellence in the Americas, EMEA and Asia Pacific. We serve nearly 80 percent
of the TMT companies in the Fortune 1,000. Clients of global TMT practices
include the world's top software company, computer manufacturer, wireless
operator, satellite broadcaster, advertising agency and semiconductor foundry
-- as well as leaders in publishing, telecommunications and peripheral
equipment manufacturing. We work across all service lines: assurance and
audit; risk consulting; tax advisory; business and technology consulting;
financial advisory and corporate finance; mergers and acquisitions and
Sarbanes Oxley compliance. Our practitioners invest vigorously in
understanding and promoting the TMT sector, generating world-class insight via
Deloitte Research; identifying upcoming industry leaders through the
Technology Fast 500 programs and polling leadership opinions via our Global
CEO survey.

About Deloitte Touche Tohmatsu
Deloitte Touche Tohmatsu is an organisation of member firms devoted to
excellence in providing professional services and advice. We are focused on
client service through a global strategy executed locally in nearly 150
countries. With access to the deep intellectual capital of 120,000 people
worldwide, our member firms, including their affiliates, deliver services in
four professional areas: audit, tax, consulting, and financial advisory. Our
member firms serve more than one-half of the world's largest companies, as
well as large national enterprises, public institutions, locally important
clients, and successful, fast-growing global companies. For regulatory and
other reasons, certain member firms do not provide services in all four
professional areas.
Deloitte Touche Tohmatsu is a Swiss Verein (association), and, as such,
neither Deloitte Touche Tohmatsu nor any of its member firms has any liability
for each other's acts or omissions. Each member firm is a separate and
independent legal entity operating under the names "Deloitte," "Deloitte &
Touche," "Deloitte Touche Tohmatsu," or other related names. The services
described herein are provided by the member firms and not by the Deloitte
Touche Tohmatsu Verein.

About Deloitte's China national practice
Deloitte's China national practice is one of the nation's leading
professional services providers with nearly 3,000 people in 10 offices located
across the most vibrant economic areas in China including Beijing, Dalian,
Guangzhou, Hong Kong, Macau, Nanjing, Shanghai, Shenzhen, Suzhou and Tianjin.
As early as 1917, we opened an office in Shanghai. Backed by our global
network, we deliver a full range of audit, tax, consulting and financial
advisory services to national, multinational and growth enterprise clients in
China.
We have considerable experience in China and have been a significant
contributor to the development of China's accounting standards, taxation
system and local professional accountants. We also provide services to around
one-third of all companies listed on the Stock Exchange of Hong Kong.
Our China national practice entity is a member of the global organisation
Deloitte Touche Tohmatsu which is one of the leading professional services
organisations delivering world-class audit, tax, consulting and financial
advisory services with 120,000 people in nearly 150 countries. Deloitte
Touche Tohmatsu is a Swiss Verein, and each of its member firms is a separate
and independent legal entity.

Issued by Deloitte Touche Tohmatsu in Hong Kong. For further information,
please contact:

Dickie Luk, Hong Kong
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