Author: Tronserve admin
Thursday 5th August 2021 01:01 PM
China's Technology Tactics Irk Its Trading Partners
Over four decades, Beijing has cajoled or pushed foreign companies to hand over technology. And its trading business partners say if that failed to work, China stole what it wanted. Communist leaders deflected demands for change until foreign frustration appeared into a showdown with President Donald Trump. He sent shockwaves through their export industries by slapping punitive tariffs of up to 25% on Chinese goods.
Europe, Japan and other trading partners object to Trump's tactics but echo American complaints. They say Beijing's tactics break its market-opening commitments under the World Trade Organization. American prosecutors go further. They say the Communist Party is the ringleader of a global industrial spying operation. Chinese leaders have promised better patent protections and other legal changes. Foreign experts say that will make little difference if the party won't enforce them.
The share of companies in a survey by the European Union Chamber of Commerce that said they felt obligated to hand over technology doubled from two years ago to 20 percent. "It is unacceptable that this practice continues," a chamber vice president, Charlotte Roule, said Monday. "Ending its persistence needs to be a priority."
Here are some tactics Beijing's trading partners complain it uses to improperly obtain foreign technology.
The strongest tool in Beijing's arsenal is the longstanding requirement for companies in most industries to work through state-owned local partners.
The aim is for the Chinese partner to master and subsequently displace its foreign competitor. Some balked but thousands of companies cooperated as the price of admission to the most populous global market.
Many companies say Chinese partners comply promises not to abuse their access to technology. But some say partners have copied chemical formulas, industrial processes and other secrets for their own operations, sometimes with local government support. Beijing denies it forces foreign companies to hand over technology, but joint ventures don't work without foreign technology and manufacturing expertise.
In the auto industry, China has promised to lift requirements for joint ventures and allow full foreign ownership by 2023. Experts say that suggests they believe Chinese automakers no longer need foreign tutors.
Pressure to hand over technology pervades Chinese law and action by regulators. Beijing promised when it joined the WTO in 2001 to treat Chinese and foreign companies likewise. But 18 years later, business groups and governments say foreign companies still face special burdens, including sharing technology.
The European Union filed a WTO challenge last June to Chinese laws on technology licensing it says discriminate against foreign companies. It said China's own companies are free to negotiate licensing terms, but Beijing directs terms and conditions for foreign companies. A law approved in March bans using "administrative measures" to command foreign companies to hand over technology. Business groups welcomed that but said Chinese officials can easily still use other pressure tactics.
Business groups say Chinese regulators misuse a 2008 Anti-Monopoly Law to pressure foreign companies in negotiations on technology licensing.
The law includes a strange provision prohibiting "abuse of intellectual property right." Lawyers say that runs counter to the spirit of patents and copyrights, which are meant to encourage technology creation by giving the owner a short lived monopoly and the right to charge others for using it. Lawyers said Chinese regulators at times intervene in contract negotiations and push foreign companies to adopt lower fees by threatening to launch an anti-monopoly investigation.
Authorities also use "window guidance," or verbal orders given in secret, to compel companies to support Chinese technology development in ways the government is not going to publicly acknowledge. A decade ago, for example, global automakers assented to help Chinese partners create new local brands.
That injected foreign expertise into fledgling brands the Communist Party hoped sooner or later will compete in global markets in ways joint venture vehicles made under foreign brand names cannot.
It made life more challenging for automakers by spreading their resources more thinly and adding to competition in a glutted market. Despite the fact that, global automakers said they had commercial motivations and regulators denied they applied any pressure. The real reason? Industry researchers say regulators told automakers in private they had to cooperate if they wanted permission to grow production of their own brands.
MORE REGULATORY PRESSURE:
Regulators also pressure foreign companies to support potential Chinese rivals develop technology. Global companies in engineering, software, pharmaceuticals and other fields have set up research centers with Chinese partners. Many say they are to take advantage of China's scientific talent pool, but such arrangements benefit potential Chinese competitors and are different abroad.
This month, Microsoft Corp. opened an artificial intelligence research lab in Shanghai with the state-owned Zhangjiang Group. Other prominent examples include General Motors Co.'s Pan-Asia Technical Automotive Center with state-owned SAIC Motor. SAIC is the key Chinese manufacturing partner for GM and Volkswagen AG but also sells its own auto brands.
AND MORE REGULATORY PRESSURE:
Companies complain regulators use patent, safety and other official examinations to learn about technology, regularly including employees of Chinese rivals in review panels. Companies are required to provide what they say is an unusually large amount of information about products and industrial processes, including competitive secrets, to obtain patents or approval for operations.
The Wall Street Journal in September reported an employee of a foreign automaker as saying there was "clear evidence of collusion" between regulators and Chinese automakers. The employee said regulators asked for blueprints of components the company was trying to prevent its Chinese partner from seeing but ignored other parts of the vehicle.
For years, the ruling party has rewarded businesspeople, academics and others who "localize technology" — a euphemism for unauthorized copying of foreign know-how — with promotions, research grants, money and public praise. Security researchers say the government operates a network of research institutes and business parks to turn stolen technology into commercial products.
In 2013, three Chinese scientists at New York University were charged with sending U.S. taxpayer-financed research on magnetic resonance imaging to a Chinese government-run institute. Other Chinese-born researchers in the United States have been charged with stealing chemical, seed, turbine and other technologies. Prosecutors say some had partners waiting in China to turn them into products.
American prosecutors say when all else fails, top-level state companies steal foreign secrets. Pangang Group, a steelmaker owned by China's Cabinet, was indicted in 2014 on U.S. charges it paid industrial spies to steal a process from DuPont for making titanium dioxide, a white pigment universally used in toothpaste, Oreo cookies and other products.
Defendants including an industry consultant and a retired DuPont employee confessed working for Pangang. But the case stalled because prosecutors had no access to Pangang Group and Chinese authorities took no action.
U.S. prosecutors say the Communist Party uses its military wing's cyber warfare skills to steal commercial secrets. The People's Liberation Army is regarded as, along with the U.S. and Russian militaries, a leader in research on breaking into or disabling an enemy's computer networks. Security experts say hackers thought to be Chinese soldiers or military contractors have stolen secrets including product designs, chemical processes and details of commercial negotiations.
In 2014, five members of China's military cyber warfare unit were indicted on U.S. industrial spying charges. The following year, President Xi Jinping agreed with President Barack Obama to avoid using military resources to steal commercial secrets. But the U.S. National Security Agency said in November that Beijing appeared to be violating its pledge. In October, an employee of China's main spy agency was charged with trying to steal trade secrets from U.S. aviation and aerospace companies.
This article is originally posted on manufacturing.net