When we trace China’s efforts in international standard-setting over the past decade, two interesting patterns emerge 

On the one hand, China has demonstrated its strong commitment to current global rules and institutions that pertain to technology: Beijing’s ratification of the WTO Agreement on Trade-related Aspects of Intellectual Property Rights (TRIP) enhanced its participation in key international standard-setting organization, and a series of domestic reforms of intellectual property rights and standard-setting institutions are outstanding examples of progress.

On the other hand, facing the evolution in global technology governance, China progressed through two assertive moves. First, the establishment of new national standards in the country and the internationalization of certain indigenous Chinese technologies as alternative global standards have increased competition and fragmentation in the global technology market. Second, there is a broad trend in China toward a new IP norm: this new practice provides less protection of embedded IP in technology standards than the western convention and calls for inexpensive licensing of embedded IP, in exchange for market expansion of their indigenous technology standards 

Such assertiveness is primarily driven by the rise of China’s technological and economic power. Its future though is still full of uncertainties. China is currently still unable to promote all its indigenous technologies as international standards; its assertiveness is therefore limited. Furthermore, if China cannot achieve further international consensus on its preferred technological rules and institutions, Beijing will have to embrace the risk of a remarkable loss in global trade in exchange for its superiority in global technology governance over the long term.

To comply with global rules and institutions for technologies, China has become an active and consistent player in key international standard-setting organizations and is complying with important international IP agreements. In 1980, China set up its first patent and joined the World Intellectual Property Organization (WIPO). In 1984, it acceded to WIPO’s Paris Convention for the Protection of Industry Property. In the following few years, Beijing also obtained membership in the ISO, the IEC and later the International Telecommunication Union (ITU).

China’s growing compliance with international technology rules and institutions has also led it to conduct its own comprehensive, in-depth institutional reform in intellectual property and technology standardization at home. In 1984, realizing the importance of intellectual property in the upgrading of its technological and scientific capabilities, Beijing passed the 1984 patent law, the first IP law in the country, which offered invention, industrial design, and utility model patents. This law was designed to promote local innovation and seek technology transfer and the diffusion of IP-protected technology. Under the most recent 2014 judicial reform, the Chinese government has decided to set up specialized IP courts to hear intellectual property cases and deal with the increasing number of such disputes.

China has emerged as the world’s most litigious country over IP. In 2015, China’s Supreme People’s Court adjudicated 130,200 IP cases. Over 10 million intellectual property cases were settled in local Chinese courts. Although many international scholars still criticize the weak protection of IP under the current Chinese legislative system, judicial reforms over the past 30 years have significantly improved technology innovation.

Meanwhile, Beijing has also reformed its domestic institutions for technology standardization, with the aim of better complementing the decision-making structure with international standard bodies. In April 2001, the State Council of China decided to establish the Standardization Administration of the People’s Republic of China (SAC), under the supervision of the General Administration of Quality Supervision, Inspection & Quarantine of the People’s Republic of China (AQSIQ).  The functions of this new government agency are to exercise administrative responsibility by jointly managing, supervising and overall coordinating standardization work in China.  The SAC was also designed to act as the official representative of China within the ISO, the IEC, and other international and regional standardization organizations. In 2016, the Chinese government proposed to further revise the Chinese standardization law.

Beijing has not only implemented new national technology standards, it has also, most surprisingly, internationalized some of them to become new or alternative global standards. During this period, China has also gradually transformed its role in the global technology regime, from primarily being an observer to playing a more active role. In particular, under the new “Belt and Road Initiative” (BRI) proposed by President Xi Jinping in 2013, China is seeking to strengthen the distribution of its own national standards in neighboring countries and to position Chinese standards more actively in international standardization. 

Such assertive behavior will have significant implications for the international technology market and global technology governance. Previous international technology standards are associated with a concentrated, even monopolistic global market share: once a technology has been approved as an international standard in international organizations, both developing and developed countries have incentives to comply with this standard. As a result, the company that owns the proprietary standard will achieve global market dominance.

However, when China successfully internationalizes its homegrown technologies as alternative/substitutive global standards and when international organizations opt to allow multiple standards in one sector, firms and consumers in the globalized economy have more standards to choose from when making production decisions. As a result, such efforts are likely to fragment the previously concentrated market and therefore carry the risk of disintegrating the global production network and diminishing the monopolistic market share that is known to be the privilege of many multinational corporations from the developed world.  The degree of fragmentation, according to observers, is dependent upon the market success and global acceptance rate of those standards among emerging powers. 

The fear of redistributing economic benefits fully accounts for the escalating conflict between the US and China over the rise of 5G network standard developed by some Chinese state-owned flagships. At the same time, Beijing’s success in implementing alternative national technology standards will also force multinational enterprises to adjust their formulation of market-entry strategies for the Chinese market. Due to the sheer size of the Chinese economy, the economic impact of those national technology standards will be enormous. Under China’s recent “Belt and Road Initiative”, China’s new approach to international IP practice is likely to be widely adopted by its neighboring states.

Such success will help to expand China’s contradictory IP norms in the global market, which will soften the hard IP norms currently embedded in global technology governance.

 

This article is an excerpt of “China in global technology governance: experimentation, achievements and uncertainties”, in ISPI’s report China: champion of (which) globalization?