China will stop forced tech transfer: vice minister

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An Apple store in Beijing on Sept. 28, 2019. (Image credit: TechNode/Coco Gao)

China will no longer force foreign firms to transfer technologies in order to access the market, Wang Shouwen, a vice commerce minister said at a press conference in Beijing on Tuesday.

Why it matters: Forced tech transfer and the unequal playing field conditions on China’s mainland have been issues at the heart of the US-China trade war.

  • Wang signaled new directives that will add to the Foreign Investment Law effective in 2020, barring the use of “administrative tools” which force foreign companies to hand over trade secrets.
  • Beijing will refine policies so that foreign and domestic companies have equal market access to new energy vehicle production, Wang said.

Details: The new measures are aimed to bring about a transparent and predictable investment environment in order to stabilize foreign investment flows, according to Wang.

  • A spokesman for China’s Foreign Ministry, Geng Shuang, said at a separate event that lead negotiators from China and the US have had conversations over the phone recently and will do again so in the future.

“Administrative organs may not implicitly or explicitly force the transfer of technology by foreign investors or foreign-invested enterprises.”

—Wei Ye, Commerce Ministry official 

Context: Wang’s pledge did not address the joint venture mechanism which forces foreign enterprises to partner with a Chinese company in order to operate in China, frequently creating conditions for unintended tech transfer.

  • In July 2019, major California-based chipmaker AMD denied claims of wrongdoing for passing chip designs to its Chinese partners.
  • China has long been accused of requiring foreign tech firms to give up intellectual property in exchange for access to the world’s second-largest economy. A 2019 survey by the European Union Chamber of Commerce showed that 20% of European firms doing business in China had been subject to forced tech transfer, up from 10% in 2017.

Briefing: European firms say forced tech transfers rising in China

  • Earlier this month, US President Trump revoked a $250 billion hike in tariffs that would have gone into effect on Oct. 15 after striking a tentative agreement on increased protections for intellectual property rights, agricultural goods, enhanced access to China’s financial markets, and currency policy.
  • China and the US are now working on the text for the so-called “Phase one” trade deal announced by the US president on Oct. 11.
  • Washington’s tariffs have caused foreign firms to withdraw or halt investment and production in China amid an economic downturn.
  • After Apple announced it was considering shifting 15% to 30% of its production out of China, Foxconn, a major supplier, unveiled a plan to move production to South and Southeast Asia to minimize tariff impact.