China Standards 2035 Strategy: Recent Developments and Implications for Foreign Companies
On July 8, 2022, the State Administration for Market Supervision (SAMR) and 16 other departments issued the National Standardization Development Action Plan (the Action Plan), laying out specific implementation road maps to the National Standardization Development (NSD) Outline, which was released in October 2021. The Action Plan provides a glimpse into the Chinese state’s strategic approach toward technical standards.
Following the ‘Made in China 2025’ strategic plan, China officially launched the ‘China Standards 2035’ strategy in 2018, aiming to create a blueprint for the Chinese government and leading tech companies to set global standards for emerging technologies, such as 5G, Internet of Things (IoT), and artificial intelligence (AI).
Promulgated in 2021, the NSD is the first official document in this area and offers a clear vision for Chinese companies to improve their technical capabilities and promote standardization in the coming decade. The Action Plan then lays out the concrete steps in respective sectors for implementation before the end of 2023.
What is included in China’s Action Plan for developing national standards?
The Action Plan encompasses a total of 33 articles, covering a full range of diverse sectors, including manufacturing, information technology, service industry, carbon standardization and upgrading, ecosystem protection, and rural revitalization. These articles can be categorized into three main brackets: The first bracket, consisting of articles 1 to 21, advocates for the effective standardization of high-quality economic and social development services; the second, from articles 22 to 30, focuses on the development of standards through efforts coordinated by the government; the third bracket, consisting of articles 31 to 33, discusses incentive policy to enhance guidance and supervision of the standardization process.
The China Standards 2035 strategy empowers Chinese enterprises to participate in standardization, with the incentive being that they can benefit from the economic gains that come with licenses and royalties. Further, greater compatibility following technical standardization will enable different companies to work seamlessly, improving efficiency throughout the whole supply chain and leaving more resources to drive innovation. This is critical for the Chinese companies involved in setting norms and will obtain them higher comparative advantages.
Overall, China views standardization as a way to strengthen its research and development (R&D) ecosystem by elevating whole-sector capacities, particularly in critical and emerging industries like AI, quantum computing, and biotechnology. The Action Plan offers concrete measures that links the process of developing standards and technological innovation to promote industry optimization and upgrades. In the past, China’s sector standard codes were fragmented. There was also no clear boundary between national standards and sector standards, as both were options for standardizing a technology, causing confusion among overseas stakeholders. Streamlining and integrating these codes reduce the complexity of the standards system and improve management efficiency.
In recent years, China is striving to play an increasing role in the formulation of international standards to shape the future direction of tech development. The Action Plan, in articles 17 to 21, also stresses greater involvement for China in international standard-setting bodies. Being able to determine the standards allows a country to gain more control over system design and rulemaking – it can also grant them a premium position in the global market as they possess first-mover advantages in key sectors.
Innovation is key to lead the formulation of industry standards.
In recent years, China has increased its number of ISO and IEC proposals, reaching an annual growth rate of 20 percent, which demonstrates China’s growing involvement in the standard-setting arena. ISO refers to the International Organization for Standardization and IEC refers to the International Electrotechnical Commission, both of which are international standard-setting agencies focusing on information and communications technology (ICT).
Likewise, technology patent applications from China also witnessed an increase of 23.8 percent in 2021, ahead of all other countries. Huawei, the Chinese giant in the ICT industry, continues to lead in patent applications in digital communication with 3,544 applications submitted in 2021, ahead of other brands like Ericsson, Qualcomm, and Samsung.
Meanwhile, significant investments in advancing technologies remain one of China’s main priorities. In 2021, China’s digital economy was worth over RMB45 trillion (US$6.72 trillion), accounting for 39.8 percent of GDP, according to official data. The 14th Five Year Plan (14th FYP) lays out plans to stipulate the value-added of digital economy businesses to its GDP to 10 percent by 2025. Following this guidance, the government is pushing the digital transformation of Chinese industries to reach new heights and stay integral to the global economy in the coming decades.
Another key focus of the Action Plan centers on the buzzwords “green” and “ecosystem.” China also views technical standards through the lens of green and sustainable development. The Action Plan mentions carbon-neutral standards, which are instrumental in saving energy, regulating large-scale energy consumption, and maintaining energy efficiency. This is in line with China’s broader dual carbon goals as it furthers support for renewable energy and sustainable development.
With a significant head start compared to other countries, China has already captured the renewable energy market and become a global leader in solar power and electric vehicle (EV) batteries. Currently, China has one of the largest and fastest growing energy storage markets in the world, overtaking Europe and the United States. Developing technical standards is an effective way of maintaining this dominance in the extremely lucrative renewable energy and EV market. The transitional process to meet higher environmental standards will also create new opportunities.
What are the implications and potential benefits for foreign companies?
On the one hand, the proposed China standards may impose additional requirements on foreign businesses –they have to follow corresponding China standards to operate in or sell to this vast market.
Nevertheless, this does not mean that foreign suppliers are shut out the door. As reflected in the Catalogue of Encouraged Industries for Foreign Investment, foreign businesses are specially welcomed in many sectors, especially those that have an expertise in a certain area, such as high-end manufacturing, energy saving and environmental protection technologies and advanced services, and so on.
Foreign firms are suggested to actively participate in the development of China standards to minimize the potential side effects. As standard-setting is a highly specialized process, international companies with expertise in different areas can actually play a strong role in it, which in turn will better position them to benefit from it.
On the other hand, China’s increased involvement in standards-setting could contribute to public good and improve the competitiveness of China-based businesses. Foreign companies can also benefit from the country’s overall economic performance and supply chain efficiency.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.
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