China's state-run Xinhuanet Web site reported this week that a government research group will develop a China-only DVD format. The news agency quoted Lu Da, deputy director of the National Disc Engineering Center, as saying the Chinese DVD format will be based on "the prevailing format of HD DVD" but would be "incompatible with the HD DVD systems."

"With such format and related standards," Lu was quoted as saying, "we could have our own voice in the DVD industry."

Xinhuanet said a new Chinese DVD format is scheduled to hit the market in 2008.

Licensing fees to overseas vendors account for an officially estimated 40 percent of the DVD players sold in China, Lu said. The new Chinese format is seen as way to avoid licensing fees by breaking the "monopoly of foreign companies in DVD manufacturing," the news agency said.

It's unclear so far what impact China's move will have on the ongoing format battle between backers of the HD DVD and Blu-ray Disc formats for next-generation DVDs.