Strategies for Participating in China’s Standards Regime

Though China’s evolving standards system differs from its Western counterparts, US companies can take steps to participate.

by Ryan Ong

China’s standards and conformity assessment system shapes many hot button issues—from product safety to indigenous innovation. For companies across sectors, standards are crucial to building and expanding product markets, as they provide the “ground rules” under which new products enter the market and existing products compete. Companies that can navigate the standards landscape gain a significant advantage. They can understand the rules for selling products and gain the ability to shape standards in ways that maximize their products’ advantages while avoiding unnecessary design, production, and compliance costs.

Efforts to boost China’s standards regime

PRC government officials and organizations have significantly increased their standards-related activities in recent years. Though the PRC Standardization Law dates back to 1989, China’s surge in standards activity is more recent (see Standards Primer). In 2002, as part of the 10th Five-Year Plan (FYP, 2001-05), a group of PRC government agencies launched a multi-year research project to study and suggest specific improvements to modernize China’s standards system. China announced the results of that study in 2005, setting key goals to build a complete national technical standards regime on par with international systems, boost Chinese participation in regional and international standards-setting activities and groups, and increase the number of Chinese standards adopted by international standards-setting bodies. Though these results were never formalized or incorporated into further government regulations, they have guided the thinking of government officials.

Since the study’s release, the PRC government has drafted and implemented many new standards in areas such as agriculture, energy and the environment, food safety, health, and information technology (IT) and telecom. According to June 2009 figures from the Standardization Administration of China (SAC), China has 23,843 national standards, more than 12,000 of which are under revision. Since 2005, foreign companies have seen notable improvements to China’s overall standards regime, including the quantity and quality of standards and the evolution of the standards development process. Foreign companies today note better transparency, greater access to standards-setting activities, and stronger links between China’s standards-setting groups and their international counterparts.

Despite these encouraging signs, foreign companies still face significant barriers to full participation in China’s standards-setting system. While some companies have found avenues to participate in standards development and implementation, others seem to be blocked at every turn. To navigate China’s standards system, companies must fully understand it and develop a roadmap tailored to their industry and to their company’s unique strengths and challenges.

Company participation in standards-setting through technical committees

China’s standards are drafted and revised through formal and informal channels that vary between the type of standards and industries involved.

Most national standards are drafted and revised through technical committees (TCs), which are responsible for setting priorities and work plans within their individual technical standards area and for drafting and revising those standards. TCs fall under the supervision of SAC, though SAC can designate other agencies and organizations to oversee TC work. Many of these designees are PRC government agencies such as the Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ), the Ministry of Industry and Information Technology (MIIT), and the Ministry of Public Security, but others specialize in standards work. For example, the Chinese Electronics Standardization Institute—a research and policy group set up under the aegis of SAC, MIIT, the Ministry of Science and Technology, and the State Council Information Office—oversees TCs in the electronics sector and plays a large role in setting the industry’s standards policy and direction.

As of February 2011, official SAC lists included roughly 500 separate TCs, ranging from committees that deal with standards for product voltage, current, and frequency (TC 1), to standards for mobile laboratories (TC 509). Depending on the TC’s scope, activity, and membership, the committee may feature formal and informal subgroups for more specialized standards areas. For example, TC 15, which handles plastics, includes eight active subcommittees on topics such as polyvinyl chloride (PVC) resin products (SC 7), petrochemical plastic resin products (SC 1), and thermoset polymers (SC 11). Most TCs feature about 20 members, including technical experts and company representatives, and are headed by a standing secretariat led by a public-sector technical expert.

The selection process for TC members differs between committees. Though SAC attempted to standardize TC membership rules in 2008 with the release of draft Requirements for the Establishment of Technical Committees, many stakeholders resisted the changes, particularly foreign companies that would have been allowed to participate only as non-voting observers. The final draft of the requirements, passed in January 2009, deleted those provisions, thus leaving decisionmaking on membership rules and processes to individual TCs.

Since 2009, some companies have reported selection processes that have allowed individuals seeking TC membership to be openly considered based on evidence they provide to committee leadership. How a leadership committee evaluates a potential TC member can vary, however. Several factors influence TC membership decisions, including the prospective company’s operations, employees, and investment in China, participation by the company in overseas or international standards groups related to the TC’s coverage area, and the company’s overall experience with relevant technical areas. Most TCs examine the technical expertise of potential members to evaluate what they can contribute to the committee’s work. Technical contributions can include intelligence on new developments in the international standards-setting arena.

Persistent challenges with participation

For many companies, participation in standards-setting and standards policy discussions remains a challenge. In the US-China Business Council’s (USCBC) 2010 member priorities survey, only one in five respondents involved in standards described their ability to participate in China’s standards-setting activities as “good,” with most reporting an “average” or “poor” capacity. The challenges companies face in standards participation vary and include a lack of transparency in standards-setting, inadequate harmonization with international standards, and required disclosure of sensitive information. Thirty-five percent of USCBC survey respondents said that participation in TCs remains one of their top concerns about China’s standards and conformity assessment system.

Barriers to participation in China’s standards system can stem from practical concerns. In established TCs and standardization groups with full membership, existing members often have no desire to reshuffle membership and admit new players. Other companies limit their participation in TCs because of constraints on the human or financial resources they can devote to standards activities. (According to the 2009 PRC Administrative Rules for National Technical Committees, individuals may not serve on more than three TCs simultaneously.) Finally, some foreign companies that might otherwise be active in TCs choose not to participate because of committee policies or practices. For example, China’s standards development process lacks clearly defined policies on treatment of intellectual property rights (IPR). This shortcoming is concerning to many companies that fear participating in standards-setting activities could force them to disclose or contribute their IPR at low or zero-royalty rates.

In other cases, however, participation barriers are strategic rather than logistical. Foreign firms are sometimes excluded or limited in TCs because existing players want to protect their market position or because of perceived national security concerns. National security issues have been a major concern for IT companies in particular. Several important standards policy-making groups—such as those that deal with the encryption-related trusted computer module (TCM) and multilevel protection system (MLPs) standards—have excluded foreign IT company participation, despite those companies’ considerable technical expertise and interest in assisting committees. In other cases, TCs have allowed foreign companies to participate but have limited them to observer status or partial involvement, in which companies may participate in discussions about certain standards areas only. For example, foreign companies have been allowed to observe some subcommittees and working-level discussions in committees, but have been turned down from others.

Foreign companies have a mixed record of participation in industry and local-level standards-setting activities, partly because these standards are less important for many companies and feature a wider variety of standards-setting groups. Some industry associations are active on standards issues and open to limited foreign participation. For example, the China Communication Standards Association has permitted several foreign companies to participate in its standards-setting activities through existing joint ventures—though at a significantly higher cost than their domestic counterparts.

Some companies have addressed limits on their ability to participate by finding alternative ways to interface with standards-setting groups. For example, a company may be able to participate as a technical advisor on standards-setting groups even if the company cannot be a full member. Other companies have sought to bolster their technical credentials—and thus their chances of being invited to participate in standards activities—by encouraging staff to publish in key industry journals or present at influential conferences and events in the standards community. Companies have also used their participation or leadership in international standards activities to build relationships with Chinese standards officials and groups. In addition, some companies have been able to use the prospect of participation in international standards-setting activities to create more opportunities for standards-related interaction.

Best practices

Companies that wish to participate in China’s standards-setting system must be able to work within China’s regime and adapt to its top-down approach and weak emphasis on voluntary standards-setting (see the CBR, January-February 2010, Standards in China: Behind the Headlines). Companies that aim to participate should consider a few steps.

• Analyze the landscape  Based on the company’s key products and manufacturing processes, company personnel should research the status of relevant standards in China. Companies should learn which TCs and industry associations are active on standards that affect their products and processes, the involvement of Chinese and foreign competitors in these groups, and how PRC standards compare with international standards. In some areas—such as energy efficiency and smart grid technology—where varying groups are competing for standards leadership, multiple groups may be active on different aspects of a product or technology.
• Audit company resources  Companies should assess the amount of time, resources, and technical expertise they have to invest in standards issues. They should pay particular attention to resources that can be used in China and what resources have already been allocated on international standards activities. Companies should also work internally to build a more cohesive standards team and consider how to tie standards work to their broader product strategies in China.
• Assign strategic priorities  Companies should determine which resources to allocate to specific standards areas and how to best use the resources. Potential strategies include monitoring standards-related informational channels, such as government and association websites, databases, and newsletters; building relationships with standards-related officials and groups, including formal and informal industry groups, research and technical institutions, and government-affiliated groups and agencies; and formally participating in standards-setting activities.
• Assemble your pitch  Companies looking to build relationships with standards officials or seeking formal participation in standards-setting activities should gather information about themselves and their resources to make the case that they should be involved in standards discussions. This pitch should include information about the company’s operations and investment in China, but it should pay particular attention to the company’s potential technical contributions to standards development.
• Approach targeted standards groups  Based on the information collected, companies should reach out to relevant standards groups to offer expertise and explore possible participation at the appropriate level. Depending on the standards area, it may make sense to approach and interact with multiple standards-related groups to broaden potential information and participation channels.
• Advocate on technical grounds  Once a company begins to participate, it should remember that the technical experience that enabled participation in the first place continues to hold the most value in standards-related discussions. When lobbying on a particular standard, technical concerns and proactive technical fixes make more convincing arguments to standards developers than market access issues or market impact assessments.

Strategies for success?

China’s standards system is difficult and rapidly changing, making it challenging for companies to navigate. Despite the challenges, some foreign companies can point to successes—concrete instances where they were able to navigate and even guide the development of standards in key areas. To be successful, US companies must devote the time and resources to understand the differences between China’s system and those in other markets, determine what level of involvement is necessary for their product and technology areas, and build the channels and relationships necessary to participate in the system.

[box]

Standards Primer

China’s current standards system evolved out of an older state-planning regime in which standards were set by industry-specific government agencies with the goal of spurring economic development. Today’s system retains aspects of that regime, despite attempts to modernize and respond to China’s rapidly developing market economy. The Standardization Administration of China (SAC), created in 2001 underneath the Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ), is the main agency tasked with building and overseeing China’s standards. SAC manages and supervises China’s standards system and standardization activities and represents China in many key international standards groups. Other government agencies—including AQSIQ, the Ministry of Agriculture (MOA), and the Ministry of Industry and Information Technology (MIIT)—also manage some standardization activities for certain industries and represent China in specific international standards bodies.

China maintains four types of standards that can affect companies and their products.

• National standards  Most national standards, known as guobiao (GB), are overseen by SAC, though some are managed by other agencies, such as MIIT, MOA, and the Ministry of Environmental Protection. Overseen by SAC, technical committees (TCs) draft, revise, approve, and manage national standards. Individual standards have the two-letter “GB” abbreviation, followed by a number and the year the standard is implemented. For example, GB 14887-2003 is a national standard for traffic signals and lights, originally approved and implemented in 2003.
• Industry standards  Industry standards, known as hangbiao, are drafted by industry associations and standards-related organizations. These standards are identified by two-letter abbreviations, many of which reflect China’s earlier state-planning regime. For example, “YD” is the abbreviation for many telecom products, because such standards were originally developed under the umbrella of the former Ministry of Post and Telecommunications (youdian bu).
• Local standards  Provincial-level regulators oversee local standards, or dibiao (DB), which are generally drafted to cover standards “gaps.” Such gaps may include areas that lack national or industry standards but require safety, hygiene, or other restrictions (such as for local food or health products). Given their limited geographic scope, local standards are generally managed by local branches of AQSIQ. Such standards are enumerated with a “DB,” followed by a province code. For example, a standard starting with “DB 44” refers to a local standard developed in Guangdong.
• Enterprise standards  Companies have the option to develop and register individual company standards, known as qibiao. These standards lay out additional technical requirements on top of national, industry, or local standards, and are used by companies to enforce standards internally or to demonstrate publicly the technological level or quality of their products.

National, industry, and local standards can be mandatory or voluntary, with voluntary standards adding a “/T” after the two-letter abbreviation at the beginning of the standard name.

Because tracking different types of standards is a challenge for many companies, some firms focus resources on national and industry standards, as these generally have the broadest impact on their products. The mix of standards that companies should follow most actively, however, may vary depending on each company’s industry, product mix, and available resources.

—Ryan Ong
[/box]

[author] Ryan Ong ([email protected]) is director, Business Advisory Services, at the US-China Business Council. He is based in Washington, DC. [/author]