China rejects Western Mpeg format.
China will have its own audio-video compression standard, as part of moves to shift reliance away from Western formats.
According to a report from wire agency Dow Jones, multinationals like Microsoft, IBM and Philips have already signed up to be part of the new standard's working group.
The new format aims to rival technology from the globally-dominant Mpeg (Moving Picture Experts Group).
Mpeg-1 compression used in the video CD (VCD) format common throughout Asia, while Mpeg-2 is used on DVDs. Mpeg-4 is widely used for compressing video for Web download and streaming and will also be the worldwide standard for streaming multimedia to third-generation (3G) phones.
Hardware manufacturers and content providers pay licensing fees to the Mpeg Licensing Authority (Mpeg LA) for the use of these compression standards. Mpeg LA represents 18 patent holders, including Apple Computer and Sun Microsystems.
China, a key manufacturing hub, is also keen to avoid Mpeg licence fees, said the report. In future, companies selling AV equipment to Chinese consumers will have to pay for the new format's licences, which has been pegged at 1 yuan (7p) per device, much lower than current Mpeg fees.
The competing Chinese standard, known as AVS, will be proposed as a national standard in 2004, according to Huang Tiejun, secretary-general of the Audio Video Coding Standard Workgroup, said the Dow Jones report.
China is not the only Asian country which has developed a rift with Mpeg LA. Japan's mobile video content providers have threatened to drop Mpeg-4 compression technology -- touted as crucial for delivering video to mobile handsets -- unless license fees come down.
China is keen to move its IT infrastructure away from the dominance of Western companies and the fees levied by such firms. Like several other developing countries, it has put official support behind the open-source Linux operating system, and has created its own supercomputers.