Chinese Technological Standards

This Christmas, when you buy that new Blue Ray DVD player, you run the risk of not being able to play movies from certain movie studios for an unknown amount of time. Similarly, if you buy a Microsoft Zune, you won’t be able to use your massive iTunes library you’ve assembled piecemeal for 99 cents a song.

At times, it seems like the US personal / entertainment electronics industry is being ground to a halt by digital rights management (DRM). While Hollywood, Sony, and most of the outside world have been squawking over the next format of high capacity DVDs, China has just developed their own standard, EVD. EVD boasts big sound, big storage, and big screens without the license fees to foreign companies who administer the DVD standard and products. With over 80% of the world’s DVD players made in China, Chinese electronics companies and consumers have lost the incentive to pay license fees to play their own movies. They plan on phasing out domestic production of DVD only-players by 2008.

The personal music player market in China has also created an interesting situation concerning a general disregard for DRM. Consumers in the US often factor buying decisions of mp3 players on the after sales music delivery services: by an iPod, use iTunes, buy a Samsung and use Yahoo Music, or buy a Zune, and use Microsoft’s network (or illegal downloads, of course). As a result, the few products that have captured significant market share remain in dominance. Similarly, phone manufacturers are still bogged in their efforts with DRM and haven’t produced a half decent mp3 hybrid phone.

The Chinese market, on the other hand, has very little respect for digital rights management and music player brands, both big brand and no-name, are a dime a dozen. This trend has been drastically beneficial for the development of Chinese brands, and even more beneficial for the Chinese consumer. Without DRM locking consumers into a product, mp3 players are a low priced commodity product, and phones are considered anemic if they can’t play mp3s, mp4s, AVI, and mpegs.

This by no means justifies the rampant violations of intellectual property here in China, just merely an observation that the vacuum of DRM has allowed the consumer electronics market to focus solely on something fairly important: the consumer.

As a result, the Chinese consumer electronics market has become so competitive beyond the realm of protecting after-purchase license fees, that it is starting to dictate the technological standards it will be using, and how they are managed. While the current lapse of DRM rights will not last forever, the jump-start of the current situation has given this market a significant fast-forward. Foreign-owned firms of consumer electronics will have an even more paramount challenge in capturing the market in China: a significant amount of domestic competition already in tune with the Chinese consumer.

Environment

Development over the last two decades has catapulted China into one of the world’s largest economic powers. The opportunity costs of manufacturing the world’s goods have however come at a high price. Most notably, the environment has taken a back seat to economic development; China current is home to 7 of the world’s top 10 most polluted cities. However, help from the World Trade Organization (WTO), Non-Governmental Organizations, and other global communities have enabled more outlets for environmental concerns.

Bates: I recently visited Intel’s new chip manufacturing plant which hosted a non-profit forum in Chengdu. The intended purpose was to increase awareness to other MNC’s and domestic companies on Environmental Health & Safety (EHS) standards and best practices. Most firms present were Chinese companies, which gives me the impression that environmental compliance and safety has begun playing a greater role to both foreign and domestic firms.

Dietz: As symbolic as Beijing has become for the upcoming 2008 Olympics the city still remains a very polluted city. However, the city is like that dirty mangy mutt you had as a child. Even though that mutt is less than attractive and smells of wet mange you begin to grow to love the puppy. Such is Beijing and many other cities throughout China. Even though many cities are heavily polluted the unique characteristics and history propels one to in someway help during it's critical development.

Bates: The use of blogs in China is rising and has also been used to increase awareness and corrective measures. Recently, one Chinese blogger began writing about a local company who had been spilling its wastes into his village’s local water supply. Appropriate organizations looked further into the issue and authorities sought legal action and corrected the issues. Even though there was damage, at least at this point corrective measures are beginning to take form.

Dietz: In the past, Deng Xiaoping once famously said of China’s economy: “Black cat or white cat, all that matters is that it catches mice”. However, recently said by The World is Flat author Thomas Friedman, It doesn't matter if the cat is White or Black just as long as the cat is GREEN!! The current sacrifices of growth are not sustainable to ensure it's future prosperity.

If China is to continue developing at it's current rate it desperately needs reform and to institute environmental controls in order to continue it's economic prosperity. Certainly, as the world visits China in 2008 it will see upsides and downsides to development. However, with foreign investment increasingly becoming apparent and to sustain it's own development, China is and will be instituting more controls on Environment and Health issues.