WHITE PAPER ON RFID TECHNOLOGY RELEASED

UNCLAS SECTION 01 OF 02 BEIJING 014062 SIPDIS USDOC FOR DAS LEVINE AND 4420/ITA/MAC/CEA/MCQUEEN STATE PASS USTR USTR FOR STRATFORD/WINTER/MCCARTIN/GRIER USTR FOR MCHALE/WINELAND NIST FOR JILLA TREASURY FOR OFFICE OF INTERNATIONAL INVESTMENT TREASURY FOR OASIA/ISA-DOHNER AND KOEPKE GENEVA PASS USTR SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ETRD EINV ECPS PGOV ASEC WTRO CH SUBJECT: WHITE PAPER ON RFID TECHNOLOGY RELEASED ¶1. (SBU) Summary: The recent release of the "White Paper on China's Radio Frequency Identification (RFID) Technology and Policy" has raised questions within both industry and government as to which path China will choose as it tries to develop yet another standard with world-wide trade implications. Ms. Zhang Qi, Director of the Ministry of Information Industry's RFID Working Group told Econoff that it was not her plan to "force Chinese standards down anybody's throat." Companies that wanted, however, to import products into China would have to adhere to Chinese standards, just as they currently do with other countries, Qi said. End Summary. ¶2. (SBU) On June 9 2006 the Ministry of Science and Technology (MOST) with the concurrence of 14 "other Ministries and Commissions" released a document entitled "White Paper on China's RFID Technology and Policy". The 18-page white paper reviews the status of RFID technology and identifies sectors for development of RFID technologies and priority application. The white paper calls on China to development its own RFID standards. The white paper is very much a "broad brush" text that leaves questions about coordination with international standards unaddressed. (Note: A single world-wide standard for RFID currently does not exist, although the United States? EPC and Japan's UID are the most popular). China's RFID Standard-Friend or Foe? -------------- ¶3. (SBU) Given the ongoing dispute regarding China's effort to impose its own WAPI standard, the release of the white paper caused some consternation in the U.S. business community. Wal-Mart indicated that any plan to force companies who export products from China to use a Chinese standardized RFID tag would create serious cost overruns and distribution delays. ¶4. (SBU) Ministry of Information Industry (MII) RFID Working Group director Ms. Zhang Qi pointed out to Econoff that in contrast to the wireless encryption standard where there is worldwide accord, RFID standards are still in their genesis. This means that China can play a crucial role in their development. Acknowledging that the white paper stresses the importance of homegrown technologies and standards, Ms. Zhang said that that does not mean that foreign companies would be kept out of the development process. She pointed out that the seven working groups she heads have already presented her with 27 proposals and that many of them were from American companies, including Microsoft, Hewlett Packard and Compaq. She added that she is more than happy to work with nternational organizations such as ISO, and welcomed input from foreign RFID associations and organizations. She underlined her belief in the transparency of the process and referred to her personal website where she outlines many of her views. Ms. Zhang was particularly keen to hear from American associations and industry and was open to Econoff's suggestion that USG agencies that directly deal with RFID issues visit her. ¶5. (SBU) Asked why China did not choose an existing standard, Ms. Zhang said that the subscription fees alone make this option prohibitively expensive as millions of Chinese vendors would have to pay EPC or UID fees to use their standards. (Note: EPCglobal's standards are available for free on their web-site. Those who want to use EPCglobal's system have to pay a subscription fee to be assigned a series of electronic product codes which are uniquely their own. The subscription fee is on a sliding scale and depends on the size and revenue of the company. End Note). A homegrown standard, however, could offset those costs whilst also meeting the white paper's stated BEIJING 00014062 002 OF 002 goals of homegrown technological innovations and the creation of Chinese RFID standards. Ms. Zhang responded to a question about interoperability by saying that China has no intention to force foreign companies to use Chinese standards when products and goods are being exported from China and that individual companies could use whatever RFID technology they wished (Note: For example Wal-Mart which exports over USD 20 billion of goods from China per year has mandated that its top six hundred vendors would have to use EPC's RFID standard by the end of 2006). She went on to say that any company that is importing goods into China and/or those that do business domestically would have to use the Chinese standards. Comment -------------- ¶5. (SBU) Ms. Zhang is a plain-speaking, forceful interlocutor who is clearly eager to interact with foreign visitors and allay fears about China's intentions regarding RFID standards. It is encouraging that such a leading figure in RFID development wishes to engage with the international community at this early stage in China's RFID development. Randt