The importance of technology standards is becoming a cause for concern nowadays.This paper analyzes market failure and government failure in AVS standard setting process,an important but less-explored issue.The approach adopted extensively is called policy process & instruments analysis framework that combines theories of policy process and policy instruments.The study we have performed shows that it is important to coordinate markets with government in standards setting process for both market failure and government failure that exist.Redefining functions of markets and government in standards setting is essential not only for Chinese government,but also for others.