China is gearing up to stop local governments from making foreign companies transfer their proprietary technology to Chinese partners, reported The Financial Times.
According to a report in The Financial Times, the government in China is taking steps to address one of the biggest complaints the U.S. has with China, as the two countries are embroiled in a trade war that has resulted in tit-for-tat tariffs. The paper reported the government is mulling replacing its foreign investment law, which industries can have foreign investors and partners and the conditions in which foreign companies can enter the market. Under the new law, technology “cooperation” should be determined by talks between the two companies, and local governments and officials can’t use any methods to force the transfer of technology, reported The Financial Times.
“The foreign investment law is meant to promote and protect foreign investment and ensure foreign businesses enjoy fair treatment, which will boost their confidence in the Chinese market,” official news agency Xinhua reported, according to The Financial Times.
The draft law also prohibits local government from putting on the books policies and practices that infringe on the legal rights and interest of foreign investors or create illegal barriers to enter or exit the market. While the move on the part of China would show it is committed to adhering to global trade rules, analysts told the Financial Times that China uses an informal method to put pressure on foreign companies to transfer the technology. “More needed than simple rule changes. Reducing coercive tech transfer would require banning and penalizing informal demands and threats, [and] heavily constraining industrial policy that directs and constrains investment,” Scott Kennedy, director of the project on Chinese business and political economy at the Center for Strategic and International Studies in Washington, tweeted, according to The Financial Times.