In June 2019, Bloomberg reported:

It’s been one of the most contentious fronts in the U.S.-China trade war: so-called forced technology transfers. The term refers to ways in which companies from the U.S., Europe or elsewhere that want to operate in China are induced to part with their know-how. It may be through a simple requirement to form a joint venture with a local firm, or more insidious methods such as overly intrusive factory inspections. What might once have been a mere annoyance has taken on more serious implications as China has developed into a strategic competitor, especially in growth areas such as artificial intelligence. The Chinese government dismisses allegations of strong-arming as “utterly unfounded,” describing any exchanges as voluntary and conducted on market principles. A 2018 report by the U.S. Trade Representative quoted one ex-White House official as saying the transfers are voluntary in the same way a business proposition from mob boss Vito Corleone in “The Godfather” was.

Does China force US companies to hand over technological secrets to do business in China?


1 Answer 1


It depends who you ask. The EU and the US have filed WTO actions claiming that China does that as prerequisite for allowing market access (typically in joint-venture form, another mandate of Chinese laws/regulations). E.g. the EU (DS549) WTO complaint says

Pursuant notably to Articles 7, 11, 26 and 27 of the JV Regulation, details about the technology transferred to the joint venture by the foreign partner are part of the information that must be submitted to the Chinese authorities for examination to obtain approval of the joint venture. In particular, Article 27 provides that the technology contributed by the foreign parties shall be subject to the examination and approval by the competent authorities.

The US has joined that dispute and also filed another one (DS542) which e.g. says

China denies foreign patent holders the ability to enforce their patent rights against a Chinese joint-venture party after a technology transfer contract ends.

That in particular involves article 43(4) of the same JV Regulations ("Regulations for the Implementation of the Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures").

Neither of these disputes have been adjudicated by the WTO yet. DS549 is still in the consultations stage. DS542 has advanced to panel stage, but the US has requested (and China agreed) to suspend the panel's work several times, presumably due to more direct negotiations taking place between the parties.

See these threads on Politics SE for more details of what's alleged

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