 |
| All hail great American leader Trump! Sort of. |
One of the main grievances the United States has had about Chinese trade practices concerns requiring knowledge transfer to domestic firms. To Westerners, such provisions are increasingly questionable intrusions on their intellectual property rights at a time when PRC firms are not so far behind their developed-world counterparts or even surpass their knowledge in certain respects like in 5G.
It is certainly up for debate whether China or the United States is being hurt the most amid Trump's ongoing tariff-slapping frenzy, but that the Chinese are eager to have these tariffs removed is beyond any doubt. We recently received evidence of this assertion with their "legislature" quickly passing a law watering down these technology transfer requirements:
The National People's Congress voted 2,929 in favour of the law -- with eight against and eight abstentions -- barely three months after a first draft was debated, an unusually quick turnaround for the legislature, which meets once a year. The move comes as US and Chinese negotiators hold complex talks aimed at resolving a months-long trade war that has pounded businesses with tariffs on $360 billion in two-way commerce.
Although the specifics are not yet definitive, the rough outlines appear to be like so:
That said, foreign investors are still, rightly, more concerned with how these IP law changes are implemented than what is written on paper:China will also amend its intellectual property law and "introduce a punitive damages mechanism to ensure that all infringements will be seriously dealt with", Chinese Premier Li Keqiang told reporters at the end of the parliament's two-week session. The changes will "ensure violators have no place to hide", he said.Under the bill, foreign investors will enjoy the same privileges as Chinese companies in most sectors, except those placed on "negative lists", officials say.
Tim Stratford, chairman of the American Chamber of Commerce in China, said "the last minute efforts are appreciated". But, he added, the changes "only address a small slice of the overall set of concerns our members have about the uneven playing field foreign companies encounter in China".
The chamber was concerned about vague language in provisions that allowed local governments to expropriate investments that "harm public interest" and the inability to appeal against the outcome of national security reviews.
Jacob Parker, Beijing-based vice president at the US-China Business Council, welcomed the "positive language" in the bill but added that "real investment on the ground will depend on how narrowly tailored those negative lists are going forward".
Businesses are still concerned that industry-specific laws and local administrative approvals may impede full market access despite provisions in the negative list.
As always, implementation is going to be more important to foreign investors as to whether their longstanding IP concerns are met or otherwise. And, I suspect this story will continue long after Trump has departed the scene.
