China Mobile is coming under pressure from Chinese government regulators to drop its RF SIM technology and to adopt NFC instead, the Shenzhen Economic Daily reports. The article has been picked up by Information Week, which explains that:

China’s main technology regulator, the Ministry of Industry and Information Technology (MIIT), appears to be behind the surprise move to pick one technology. It appears keen to avoid fracturing the market and allowing China to fall behind in mobile payment, which is already commonplace in Japan and South Korea.

China’s fast-growing debit-card market and point-of-sale terminal infrastructure also adds pressure to the regulator to ensure that newly deployed terminals are compatible with mobile payment technology.

Suspending the RF-SIM system would be a major blow to China Mobile. The state-run company has reportedly already purchased 1 million RF-SIM cards and has issued them for use in places like the 2010 World Expo in Shanghai. It has also ordered 10,000 to 15,000 terminals to read the cards, but has yet to deploy all of them.

A key advantage of RF SIM is that it can be easily retrofitted to existing mobile phones. But, since it operates at 2.4GHz rather than NFC’s 13.56MHz, RF SIM terminals are incompatible with NFC terminals and there has been a danger that two incompatible standards would evolve in China.

Last month, eighteen Chinese banks, the national bank card association China UnionPay and both of China Mobile’s two rival mobile network operators joined together to form the Mobile Payment Industry Alliance, with the aim of creating standards and a business model for the delivery of NFC and mobile payments services across China.

Both China Unicom and China Telecom are now working with technology providers to deliver their own NFC compatible solutions that can be retrofitted to existing mobile phones as well as with handset manufacturers developing phones with built-in NFC functionality.

China Unicom and China UnionPay, for example, are testing an NFC-enabled version of Motorola’s iSim technology (pdf) in the city of Changsha. iSim is a thin, 0.4mm flexible wafer containing an additional chip able to handle a range of functions that can be placed over the subscriber’s original SIM. Optionally, an antenna which wraps around the phone’s battery can also be included.

China Telecom, meanwhile, is using Watchdata’s SIMpass technology in a number of applications in the province of Jiangsu. The SIM+antenna technology is already used for transportation applications in a number of Chinese cities and in Thailand and 11,000 locations in Nanjing and Suzhou City — including buses, taxis, gas stations, supermarkets, pharmacies, salons, laundries and restaurants — have now been equipped to accept contactless payments.

And at Nanjing Zhongshan Institute and Yangzhou Technology Institute, China Telecom has equipped 20,000 university students with a SIMpass which they can use to pay for meals at the canteen, access medical care, borrow books from the library and pay for local public transport. Later this year, China Telecom plans to add Nanjing City card functions to SIMpass and there are also plans to further extend it into the social security and banking sectors in Nanjing.

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