Chinese companies are being urged to play a greater role in drafting standards for radio-tag technology, which is expected to revolutionize the manufacturing and retailing sectors.

The technology, called radio frequency identification (RFID), also referred to as a supercharged version of the barcode, can help track goods, automate banking services and improve product quality.

"Chinese industries and businesses should work together, and co-operate with relevant foreign companies, to set a unified standard for RFID," said Zheng Xinli, vice-director of the Policy Study Office under the Central Committee of the Communist Party of China.

"An alliance will significantly help promote the setting of standards in China, in boosting exports of Chinese products and in promoting foreign trade."

Zheng made the remarks recently in Beijing, during a global forum on RFID technology.

China lags far behind other countries and regions in setting technology standards.

About 99.8 per cent of the technology standards used in China were set by other countries or foreign companies, Zheng said.

"That is in stark contrast with China's status as a major global trading power," he said.

The Chinese Government allocates only 80 million yuan (US$9.64 million) annually to help fund technology standards, he noted.

"That (the inadequate funding) has substantially dented China's research and development (R&D) involving technology standards. That, in turn, negatively affects economic development and foreign trade."

As a result, alliances of businesses and industries are critical for setting standards, he said.

Xu Qin, deputy director-general of the Department of High-tech Industrial Development under the National Development and Reform Commission, said the government will assist with the setting of an RFID standard, and with relevant policies and promotions of RFID applications.

"The application of RFID will result in a revolution within the retail sector, and in a dramatic impact on the global economy and trade," Xu said.

"A country, a business or an organization cannot, alone, cope with all the challenges that result from the implementation of RFID. A joint effort is vital."

The Chinese Government has established a National Auto-ID Standard Working Committee to develop standards with Chinese intellectual property rights (IPRs).

The committee has 16 members and more than 40 domestic research institutes are applying for membership to get involved in the business of setting the standards.

China, Japan and South Korea are making joint efforts to develop RFID standards. They are following a similar alliance that was formed to develop standards for the Linux operating system.

The United States and Europe are working on their own standards, which they hope will become the global standard.

RFID is gaining increasing traction as global technology giants, such as IBM and HP, and even the US military, are investing a lot in the technology's development.

Market research firm Allied Business Intelligence (ABI) estimates global revenues generated from tags, readers and software and services could reach US$3 billion by 2008.

China should strive to grab at least one-third of the RFID market, said Edward Q. Zeng, chairman and chief executive officer with Sparkice, China's leading e-commerce company.

Sparkice is a member of the National Auto-ID Standard Working Committee. Zeng has been asked to help the committee co-ordinate its activities with foreign entities.

Widespread application of RFID can result in substantial economic benefits.

For example, RFID application in the dispatching system of China's Ministry of Railway will save more than 300 million yuan (US$36 million), said Dai Dingyi, vice-chairman of China Federation of Logistics & Purchasing.

The world's largest retailer, Wal-Mart, has announced it will require its top 100 suppliers to use RFID tags on pallets and cases by January.

Wal-Mart has predicted its annual purchase from China, over the coming five years, will reach US$25-30 billion.

Many Chinese exporters will likely be affected if they ignore the RFID technology.

China's home appliance retailing giant, Gome, on October 11 launched a test shop for RFID, under a deal with Sparkice, to promote the technology.

"RFID will be a critical technology in developing the logistics industry," Dai said.

(Business Weekly 10/20/2004 page14)