China’s TIC industry

Despite some recent opening up of China’s testing, inspection and certification (TIC) industry there is still some way to go before foreign-invested players can be considered to be on an equal footing with their Chinese counterparts. Yushun Wong, Executive Vice President of TÜV Rheinland Greater China and board member of the European Chamber’s South China Chapter speaks to EURObiz about the TIC industry in general and specifically their work with sustainable energy solutions.

What is your general opinion of China’s TIC industry?

In the domestic testing market, foreign-funded players are in the minority. In November 2015, the application for China Compulsory Certification (3C) testing laboratories for four types of products was opened. However, although testing labs can now submit applications any time, international inspection and certification bodies can still only compete in the non-mandatory or voluntary certification market. The reason is that most international inspection and certification bodies have a limitation in the testing scope of GB[1] standards. Meanwhile, the China Quality Certification Centre dominates the local mandatory CCC certification market for 146 types of products under 18 types of product categories.

The Chinese Government is now determined to accelerate the opening up of the local TIC market, which will bring new development opportunities. We certainly hope to participate in this opening and we will continue to actively search for partners nationwide, without ruling out acquisitions or the establishment of joint ventures.

What are your thoughts on China’s plan to integrate TIC institutions?

March 2015 saw the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) issue the Guidance for Consolidation of National Quality Management Inspection, Testing and Certification Organisations (Guidance).

The Guidance proposes the conversion of inspection and testing agencies into enterprises, to open up the TIC market, with sectoral monopolies and industrial barriers being broken down to allow for market supervision. The Guidance further recommends the introduction of a competition mechanism, the establishment of a mechanism for external evaluation and a constraint mechanism that penalises dishonest behaviour, in order to safeguard the public credibility of the TIC industry.

While this seems to be an opportunity, it is also poses a challenge. State-owned inspection agencies used to have a market share of over 50 per cent, leaving around 30 per cent for foreign counterparts and around 10 per cent for private players. The Guidance suggests gradually opening up 50 per cent of the TIC market, and transforming state-owned agencies into enterprises for full participation in market competition. As third-party agencies, TIC players face challenges in improving business competence, integrity and public credibility. Following consolidation, the more accessible TIC market would be able to encompass an improved and more orderly inspection mechanism, while providing a higher level of service.

Integration will be a gradual process due to the fact that there are just too many state-owned enterprises (SOEs) and local inspection bodies managed by various government offices amassed on the market, each with its own varying pace of marketisation in different applications. Most local inspection agencies have their own niches, including accumulated reputation, extensive knowledge on related regulations, policies and technical markets, and years of industry experience. These happen to be areas that global participants that operate in China are lacking in. Meanwhile, there are many small players on the local front seeking a means to stand out. International TIC agencies may decide to explore various cooperation possibilities with local peers, such as technical cooperation.

What are the biggest market access problems for foreign TIC companies in China?

Following the Third Plenum’s Decision, issued in November 2013, the Chinese Government introduced a management model of pre-establishment national treatment with a negative list to simplify and streamline the registration process for TIC companies, decrease accreditation items and allow enterprises to apply for a business licence before applying for accreditation.

However, too many administrative examinations and approvals are required for TIC companies to start business in China in comparison to other countries, and accreditation items often overlap in some way. In addition, the AQSIQ, local Quality and Technology Supervision Bureaus, and local Entry-exit Inspection and Quarantine Bureaus are currently gradually imposing higher requirements on routine supervision for TIC companies and setting strict access requirements for carrying out Chinese mandatory certification business. We are looking forward to further opening up.

Will the launch of the Guangzhou Free Trade Zone facilitate any positive changes for foreign TIC companies?

Following the launch of the zone on 31^st December, 2014, the State Council published the Notice on Issuing the Construction and Implement Plan of Nansha New Zone, Guangzhou Municipality of China (Guangdong) Pilot Free Trade Zone, which outlines a plan to create a high-tech cluster for inspection and testing. Authoritative certification, accreditation, inspection and testing institutions from Hong Kong, Macao, mainland China and other countries are encouraged to establish branch offices and to develop business in the hi-tech service cluster in Nansha New Zone.

The strengthening of cooperation in technology and standard research for product inspection and testing between Guangdong, Hong Kong and Macao is impelling the establishment of third-party inspection and testing platforms, and gradually improving their reliability. China is also piloting the mutual recognition system of certification and related testing business of Guangdong, Hong Kong, Macao and countries along the Silk Road Economic Belt.

These actions, along with the provision of equal treatment in establishing joint-ventures and solely-invested certification and inspection institutions and laboratories in mainland China, will help create a more open market environment.

Can you tell us a bit about your work in the area of the certification of battery electric vehicles (BEVs)?

We first established our Battery Lab in 2009, and have been successfully testing commercial batteries and light electrical vehicle (LEV) batteries for all world markets. In 2014, we issued about 600 IECEE CB certificates and will increase that number to 900 in 2015. In 2014 our laboratory expanded, and we have now incorporated the testing of electric vehicle (EV) batteries and electrical storage systems (ESS). Since the opening of the new lab facility we have engaged in several research projects for Huawei (ESS), and in research testing for VW, Ichi and others.

The city of Shenzhen began the process of introducing BEV taxis onto its streets in 2011. Has this continued, and is this something you would expect to see happening in more cities in China in the future?

Yes, it should happen in other cities as well.

The deployment of BEV taxis in Shenzhen was a large-scale investment covering not only taxi vehicles but also providing the necessary infrastructure, with a network of charging stations appropriate for the wide use of these specific type of taxis. These BEV taxis have been in continuous use since then, together with hybrid buses and pure battery electric buses. The benefit is that it helps to tackle the challenge of air pollution in highly populated areas, a topic of ongoing concern in China and other countries.

You’re also involved in the inspection and certification of photovoltaic products aren’t you?

We entered the testing and research of related photovoltaic products 30 years ago. As early as the 1990s, we started to participate in the photovoltaic roof plan launched by the German Government, and played a leading role in the establishment of standardisation for related photovoltaic products and systems. Of late, we have founded test laboratories with advanced facilities in major photovoltaic production bases and application markets, including Germany, China, Taiwan, Japan, India, and the US. Our testing and inspection area covers almost the entire industrial chain, including solar cells, photovoltaic modules, photovoltaic parts and photovoltaic systems.

How is TÜV Rheinland positioning itself in light of China’s economic slowdown?

From our perspective, there has been a noticeable decrease in Chinese exports and weak customer demand from outside China, affecting the certification industry as a whole. Fortunately, during our 26 years in China we have diversified into the industrial, railway, food, renewable energy, e-mobility and e-commerce markets, with increased local demand ensuring the continuous expansion of our operations.

TÜV Rheinland is a global leader in independent inspection services, founded over 140 years ago. The group employs 19,300 people in 69 countries worldwide. Our independent experts stand for quality and safety for people, technology and the environment in nearly all aspects of life. TÜV Rheinland inspects technical equipment, products and services, and oversees projects and processes for companies. Our experts train people in a wide range of careers and industries. Our service scope includes industry and energy; transportation; machinery; electric and non-electric products; food; management systems; and training and consulting.

[1] Guobiao: China national standards issued by the Standardisation Administration of China (SAC)