THE ECONOMIST: China is writing the world’s technology rules

A smartphone is a testimony to the power of standardisation. Comprising components from hundreds of suppliers, it can find a signal almost anywhere in the world and connect to a wide array of ancillary devices all because countless companies have subjected themselves to a common set of technical specifications.

How such rules are set is a mystery to most people. Global bodies such as the International Organisation for Standardisation (ISO) and the International Telecommunication Union (ITU) periodically convene companies and technology wonks to thrash out agreements. For decades that process has been dominated by America, Germany and Japan, whose companies have benefited handsomely from the system. IBM, an American computing firm that holds over 100,000 patents, earned a handy $US366 million ($550m) last year from licensing its intellectual property. Qualcomm, an American semiconductor firm whose technology is ubiquitous in wireless devices, makes around a quarter of its gross profit from licensing.

Governments have long recognised the value in setting standards. Britain and Germany once tussled over the specifications for telegrams. Today the battle over standards is between China and the West. At stake is the future of technologies ranging from wireless communication to quantum computing and artificial intelligence (AI).

In recent years China has been growing more assertive in the standard-setting process. Last month the ITU approved three new technical standards that will be embedded in sixth-generation (6G) mobile technology. The rules relate to how networks integrate AI and produce immersive experiences in areas such as virtual reality. They were developed by the Chinese Academy of Sciences (CAS), which is controlled by the central government, and China Telecom, a state-owned firm.

Despite the efforts of America’s government to keep Chinese equipment out of mobile networks in as many countries as possible, wireless technology has continued to become steadily more Chinese. Thanks in part to the uptake of its standards abroad, Huawei, a Chinese maker of telecom gear, has made more money since 2021 licensing its technology to companies than it has paid them for theirs.

China’s growing role in standard-setting extends well beyond mobile networks. Chinese companies such as Xiaomi, a maker of smartphones, and BOE Technology, the world’s biggest producer of LED screens, also appear to be benefiting from royalties linked to technical standards. Hikvision, a Chinese maker of surveillance technology backed by China’s government (and blacklisted in America), has been increasingly involved in standard-setting. China has even been playing a leading role in shaping early global standards for quantum technology.

Unlike the West, which has tended to defer to private companies and industry associations in the standard-setting process, China’s approach is led by its government. In 2018 it set out a plan for the country to be at the forefront of technical standards in areas ranging from telecoms to drones and AI by 2035. Chinese standards are developed within institutes established under government ministries. Efforts are co-ordinated by the Standards Administration of China (SAC), which organises most of the country’s interactions with global standards bodies.

Standards officials from the West are envious of such lavish attention. On visiting China, one was amazed to discover that there were tens of thousands of people focused on standards development across the country, and that senior members of China’s bureaucracy had a strong grasp of complicated technical rules.

The Chinese government has also made a concerted push to have its officials appointed to international standards bodies. They have held senior positions at a number of top organisations and have filled the technical committees where decisions are made. Many meetings on global standards now take place in China.

China’s government has sought to alter how standards are set as well. It has tried to shift attention away from company-led confabs towards the ITU, a UN body where it has greater influence. It has also arranged more than 100 bilateral standards agreements, mostly with countries in the global south. During a conference with African leaders last month it added new deals with Benin and Niger.

Double standards

Such agreements give China greater backing for its preferred technical specifications at bodies such as the ITU, notes Alex He of the Centre for International Governance Innovation, a Canadian think-tank. Even if that fails, China could still benefit from the adoption of its standards in countries with which it has established bilateral agreements. Western firms that refuse to adopt Chinese standards may find themselves locked out of those markets.

For China’s government, more than company profits is at stake. Standards can encode social values deep within a technology. Many features of the Western-designed internet, for example, have tended to promote individual privacy over centralised control, thereby irking China’s authoritarian government.

In recent years it has thus been campaigning to rewrite the standards that underpin the internet. In 2019 and 2022 Huawei proposed alternative internet protocols at the ITU that would have enabled a far greater level of government control. Neither was successful, but they did receive support from member states such as Iran, Russia and Saudi Arabia.

In April the Trade and Technology Council, a forum for co-operation between America and Europe on economic issues, released a statement saying that democracies must remain the vanguard of emerging technologies, including by setting the standards that underpin them.

China’s growing clout in the global standard-setting process has not been missed by policymakers in America and Europe. Like China, they are beginning to interfere more in the standard-setting process, says Tim Rühlig of the European Union Institute for Security Studies, another think-tank.

America’s CHIPS and Science Act, signed into law in 2022, gave the National Institute of Standards and Technology, a government body, the job of developing standards for AI and cybersecurity, and expanded its role in co-ordinating America’s engagement with international standards bodies. Across the Atlantic, some policymakers want the European Telecommunications Standards Institute (ETSI) to play a bigger role in countering China’s growing influence at the ITU and other global bodies.

In the process, the West has been abandoning its commitment to a bottom-up, market-based approach to setting technical standards. “We are being forced to undermine a system that has been very effective and that we have profited from for a long time,” laments Mr Rühlig. In more ways than one, China is making the West play by its rules.