More companies forced to handing over tech for China access, report says

More companies forced to handing over tech for China access, report says

May 20, 2019– Mary Greeley News – BEIJING — The number of foreign companies that’s forced to hand over technology in exchange for Chinese market access — an issue that sparked President Donald Trump’s tariff fight with Beijing — has doubled since two years ago despite official promises to end such pressure, a business group reported Monday.

The European Chamber of Commerce in China’s report highlighted enduring complaints about “forced technology transfer” that China’s trading partners say violate its market-opening commitments despite denials and promises of change.

European leaders have criticized Trump’s tactics in confronting Beijing over its technology ambitions but echo U.S. criticisms.

One in five companies that responded to a survey in January, before the latest round of U.S. and Chinese tariff hikes, said they felt compelled to hand over technology, up from 10% in a 2017 survey, the European chamber said.

“It is not something that is back in history. It is still happening now,” a chamber vice president, Charlotte Roule, told reporters ahead of the report’s release. She said ending that “should be a priority.”

The share of companies that said they felt compelled to transfer technology was higher in some fields — 30% in petroleum and chemicals, 28% in medical devices, 27% for pharmaceuticals and 21% in the auto industry. One-quarter of those companies said transfers were happening at the time of the survey.

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The report gave no details of why companies felt compelled to hand over technology. But the heavily regulated economy gives Chinese regulators leverage over companies, and business groups say they sometimes give orders in secret.

Pentagon Brass Bafflingly Accuses Google of Providing ‘Direct Benefit’ to China’s Military

There are many reasons to be critical of Google. But on Thursday, General Joseph Dunford, chairman of the Joint Chiefs of Staff, stopped just short of accusing the tech giant of treason.

General Dunford was more open to going on the attack. When given the chance to elaborate on his concerns, he told Senator Hawley:

More companies forced to handing over tech for China access, report says

You know, senator, I’m nodding my head on exactly the point that you made: that the work that Google is doing in China is indirectly benefitting the Chinese military. And I’ve been very public on this issue as well; in fact, the way I described it to our industry partners is, ‘look we’re the good guys in the values that we represent and the system that we represent is the one that will allow and has allowed you to thrive,’ and that’s the way I’ve characterized it. I was just nodding that what the secretary was articulating is the general sense of all of us as leaders. We watch with great concern when industry partners work in China knowing there is that indirect benefit, and frankly ‘indirect’ may be not a full characterization of the way it really is. It’s more of a direct benefit to the Chinese military.

As they stand, the general’s comments appear to imply that Google’s lack of collaboration with the DoD, coupled with its day-to-day business in non-military activity, somehow provides a direct benefit to the Chinese military by default. An “if you’re not with us your against us” type of mindset that’s simultaneously unnerving and illogical.

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Secretary Shanahan attempted to connect the dots a bit when he explained that “the fusion of commercial business with [the] military is significant,” in China. “Five trillion dollars of their economy is state-owned enterprises, so the technology that is developed in the civil world is transferred to the military world—it’s a direct pipeline,” Shanahan said. Following Shanahan’s logic, it would appear that any American company that develops a product that finds its way to the Chinese market is directly benefitting the Chinese military.

Senator Hawley appeared inspired by the responses and proceeded to repeatedly emphasize that Google, “an American company,” does not want to work with the DoD but is “happy to help the Chinese—at least the Chinese government, that is—the Chinese military at least indirectly.”

Explainer: Who pays Trump’s tariffs, China or U.S. customers and companies?

Trump started raising tariffs on Chinese imports last July over complaints Beijing steals or pressures foreign companies to hand over technology. Europe, Japan and other trading partners echo U.S. complaints that such practices violate Chinese commitments to open its markets and treat foreign companies equally in exchange for access to their markets.

“China’s lagging reform agenda not only holds back economic development, but it has also driven global tension,” said Roule.

Chinese officials deny foreign companies are required to hand over technology. But companies in auto manufacturing, electronics and other industries that want to operate in China are required to be minority partners in ventures with state-owned partners, which forces them to share technology and expertise.

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A law endorsed in March by China’s ceremonial legislature tries to reassure foreign investors by prohibiting use of “administrative measures” to compel technology transfer. Business groups welcomed that but said Chinese officials still have extensive leverage in the heavily regulated economy.

Tech transfer was one of a series of complaints the European chamber said prompts pessimism among companies about whether the ruling Communist Party will follow through on promises to open its markets.

One-third of companies surveyed said they don’t expect ever to see a “meaningful opening” of Chinese markets.

Mary Greeley News

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