Smartphone makers worried over new China requirements

New regulations proposed by the Chinese government to add a new layer of licensing and testing for smartphones are raising eyebrows in the industry after China’s government filed a notification to the World Trade Organization in November.

The regulations, filed by China’s Ministry of Industry and Information Technology to a WTO database of technical barriers to trade, match exactly a draft law circulated this summer for comment by the Chinese government.

At the time industry groups expressed concerns about the measures, which mandate that handset makers ensure preloaded apps and those made available through other means are in accordance with Chinese laws before the phones are licensed to be sold in China. To ensure the smartphones meet requirements, they say, new testing rounds would likely need to be put into place and companies would likely have to notify the Chinese government ahead of software updates.

A content description in the notification reads: “Manufactures of smart mobile terminals [or smartphones] shall register at MIIT if there is significant upgrade of the operating system or addition of preset application software on the smart mobile terminals that have obtained a network access license.”

The document also refers to new standards put forth by the Chinese government, which if passed could force companies to help China’s government identify users and track their application use. The measure is the first major step by China to oversee China’s fast-growing mobile applications market.

China could still adjust the measures as the WTO notification has a 60-day window to request comment from members, analysts say. Trade groups representing a number of Western companies that release software and hardware in China argue that the new regulations would unnecessarily add costs to those hoping to do business to China, and could even force intellectual property transfer in the event they are required to hand over code.

China has long made use of vague standards and other guidelines that are technically voluntary but end up being mandatory in practice. One such example is a Chinese version of the international Wi-Fi standard, known as WAPI, which is virtually unused anywhere else in the world. Although on paper the government only recommends that companies make phones consistent with the standard, analysts say WAPI compatibility has effectively become a precondition to gaining permits to sell devices in China.

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