On 12 May 2003, the Standardisation Administration of China (SAC) approved the Chinese WLAN standard GB15629.11-2003. The Chinese standard is similar to the IEEE 802.11 standard but uses a different, Chinese developed security protocol called WLAN Authentication and Privacy Infrastructure, or WAPI. Implementation of the Chinese standard became compulsory on 1 December 2003, although a grace period until 1 June 2004 was allowed during which non-compliant products imported or manufactured under valid contracts signed before 1 December 2003 could be sold in China. From 1 June 2004, all wireless networking equipment sold in China was to have incorporated the WAPI encryption scheme.

Several multi-national companies consider that WAPI is based on old technology, performs poorly and is insecure. They also argue its imposition would create a burden for manufacturers, who would have to meet one standard for China and another for the rest of the world. The US government argued that imposing WAPI would create a dangerous precedent for using technology as a trade barrier. The chipmaker Intel decided that its Centrino wireless PC chips would not support WAPI, meaning that from 1 June 2004 Intel’s customers would not be permitted to sell, in China, notebook computers that contain the Centrino chip.

In order to comply with the WAPI standard, foreign vendors would have to enter into a co-production agreement with one of 11 local companies designated by the Chinese government. Some Chinese technology companies have in the past been reluctant to pay substantial royalties to license intellectual property to use international standards. A number of industry analysts have suggested that the development and attempted imposition of China’s own standards is driven by a desire to avoid the payment of such royalties.

Following intense lobbying from both the US government and industry, Vice Premier Wu Yi announced on 21 April 2004 that China would indefinitely postpone the mandatory incorporation of WAPI. This apparent climb down has been seen as a pragmatic and positive decision. The exclusion from China of the Centrino chip would have been unpopular with Chinese consumers. It is also hoped that China may work with an organisation like IEEE in an open manner to establish WAPI as an international standard.

What is not yet clear is whether China’s announcement is part of a wider trade agreement involving, perhaps, a US withdrawal of its recently announced WTO case against China for China’s practice of giving substantial tax rebates to semiconductor companies that manufacture in China.