There is a clear indication from foreign businesses that they are skeptical about China’s attempt to defuse its confrontation with the United States on trade issues. Their reaction came on the heels of the second biggest economy in the world providing a fresh draft law that bans forced technology transfer. The foreign enterprises think that this will not have any big change from the existing practices. However, the domestic experts differ and believe that this addresses the concerns of multinational firms.
Recently, China has been forced to come out with a draft foreign investment legislation since there have been long-standing complaints about forced technology transfers from foreign nations. Analysts from the country think that the new draft provides enough guarantees for MNCs to invest in the Asian nation. However, critics think that much would depend on the enforcement of the law thus suggesting an element of doubt on the question of execution part.
The latest draft law is an enhanced one from the legislation of 2015 that specifically protects intellectual property rights. However, this remained only on paper and never saw the light of the day. The current draft suggests that forced technology transfer with the help of administrative measure is banned. Therefore, there should be technology cooperation that is “based on voluntarily agreed terms and business practices.” For the American businesses, one of the key complaints is forced technology transfers though it is a common thing for other foreign investors too.
Tensions Will Remain
While the Chinese establishment is trying to defuse or reduce the trade tensions with the United States, Harris Bricken lawyer, Steve Dickinson, has reportedly said that this will not ease tensions. According to him, the system is not dependent on statues but on actual practice. He thinks that the draft proposal is not covering the issue and the American trade representative is also well aware of this. Therefore, he sees the United States ignoring the latest effort.
The Chinese lawyer pointed out that the concerns of foreign governments and companies are beyond forced technology transfers. The country has been drawing flak for violating intellectual property rights of MNCs and just copies foreign technology in high-speed rail and aerospace. The lawyer thinks that draft legislation has failed to consider critical industries such as the internet where foreign enterprises should provide a license to a Chinese firm. For the Trump administration, the contentious issue is the closed internet sector apart from the effective need for technology transfer.