WHITE PAPER ON RFID TECHNOLOGY RELEASED

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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?
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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

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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
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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