The scheduled meeting earlier this month between representatives of Chinese ministries involved with RFID and representatives of the U.S. government and various RFID groups, organized by the U.S. National Institute of Standards and Technology (NIST), was cancelled by the Chinese due to "visa problems."  Some insiders believe the meeting was cancelled because the Chinese feel that U.S. interests are too closely tied to those of EPCglobal.  Others feel it's just politics as usual.

Whatever the reason, it's a clear indication that the Chinese want a strong voice in deciding how RFID will be used in global trade. And, if Wal*Mart can be viewed as a 5,000 lb. gorilla (that's used to getting what it wants), China may well be a 10,000 lb. gorilla.

China, and other Pacific Rim countries, has expressed their displeasure at not having been included in the development of the "global" EPC standard.  They see it as entirely too "western" oriented.  So, even if Wal*Mart and other trading partners in the west want China to embrace the EPC system, it seems clear that China has no intention of simply giving in.

Some of the major sticking points are financial.  Chinese companies don't want to have to pay EPC for a company ID which they do not see as a value-added proposition.  China has its own company identification codes and believes these codes should be equally acceptable for global trade.  And there's some justification -- or at least an ISO/IEC standard -- that would allow them to do so: 

ISO/IEC 15459-1, Information Technology - Unique Identification of transport units.  This standard establishes procedures to assign "issuing agency codes" to recognized coding authorities so that its company ID codes can be globally unique.  For example, the standard assigns the digits 0-9 to GS-1 (EAN/UCC).

There is a view in some U.S. companies, albeit a minority view, that the code itself doesn't matter.  What matters is the data.  In other words, whether EPC, D-U-N-S, the Chinese NPC or some other code is used to identify a company, if it's unambiguously identified (as with ISO/IEC 15459), it's usable.

The U.S. Department of Defense, for example, uses several different coding systems in its supply depots.  For war goods, they use military codes; for aircraft parts they can also use the International Air Transport Association (IATA) coding structures; for consumer goods they can use GS-1.  While not a simple system, it is workable because each code is uniquely identified.

The Chinese are also not entirely happy with the idea of sharing shipment information through the EPCglobal system.  And, as might be expected, the issues of intellectual property (IP) royalties are also a factor.

The situation is a bit more complex than that, however.

First, there's no single authority for RFID in China.  Several different ministries have authority in different areas and there's no clear indication that these ministries are in agreement on the how RFID should be implemented.  [This is not unlike the situation in other countries where one agency has the authority to regulate radio emissions, while another has the authority to regulate or mandate the use of RFID in certain applications, and yet another has a budget to implement pilot programs.]

Equally important, however, is the widely held view in China that "the 21st century belongs to China."  It's easy enough to understand that perspective: for the first five months of 2005, the U.S. ran up a $72.5 billion trade deficit with China --- more than the U.S. trade deficit with Japan and OPEC combined.  And, while foreign trade is of critical importance to China, China may be more important to companies that import a major percentage of their products from them.  This gives China considerable leverage in the world marketplace and, particularly, with those customers who have mandated EPC labeling.

But that may all change.  The recent announcement that China will unlink the Yuan from the U.S. dollar might be another complicating factor.  It is expected that once the Yuan is freely traded in the international monetary market, it will rise in value against the U.S. dollar and other world currencies.

The U.S. government has been pressuring China for monetary reforms since the belief is that the linkage has kept Chinese goods artificially cheap in the U.S.  If Chinese goods become more expensive, Wal*Mart and other companies may begin to look for other supplier countries.  If this happens, China will lose some of its leverage.

However, if China does manage to foment a crack in EPCglobal's apparent monopoly on RFID for global trade, it might encourage other countries to pursue a similar, separate but parallel track for company ID.