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Forced technology transfer charge baseless

By Zhang Yalin | China Daily | Updated: 2018-05-04 08:02

The US' Section 301 investigation report claims China exerts pressure on foreign companies through shareholding restrictions and administrative licensing procedures to transfer US technologies to China. But decades of China's joint ventures and cooperation with multinational corporations in the machinery manufacturing sector show the claim is untenable, as Beijing has never forced foreign companies to transfer their technologies.

Four decades of reform and opening-up have opened the door to the Chinese market. Thanks to China's huge market potential and abundant labor resources, foreign-funded enterprises have rushed to the Chinese market and established cooperation with Chinese companies to achieve win-win results over the past decades.

In the joint projects between Chinese and foreign enterprises, both parties are independent business entities and voluntarily cooperate under the principles of equality and equal value exchange, consultation and consensus. Besides, after establishing a joint venture with a Chinese company, a foreign-funded enterprise provides relatively advanced technologies in order to better meet customer needs, expand its market share, and maximize the interests of its shareholders. This is nothing but commercial investment.

Besides, the transfer of technology between foreign-funded and Chinese companies is entirely based on mutual agreement, and payment of consideration is made for all technologies provided, which is a voluntary exercise. The technology transferred by a foreign-funded enterprise to Chinese company is more of a paid license for the use of only that technology and does not involve the transfer of technology ownership. As such, instead of weakening the control of foreign-funded enterprises on their technologies, it helps increase their revenue by expanding their technology application market.

Enterprises from developed economies have voluntarily entered into joint ventures and cooperate with Chinese companies to make more profits. So how can they be forced to transfer their technologies? Therefore, the claim of so-called mandatory transfer is groundless.

Reform and opening-up have helped the Chinese economy to develop by leaps and bounds, and the huge Chinese market has brought tremendous profits to foreign-funded enterprises. Foreign-funded enterprises that provide technologies not only receive payment, but also continue to benefit from the follow-up operations of the joint ventures. Moreover, the technologies provided are not the core, advanced technologies of these enterprises; they only serve the purpose of getting returns on their investments.

Through cooperation with Chinese companies, foreign-funded enterprises have manufactured low-cost, high-quality products in China to meet the demands of not only the Chinese market but also many other markets, as well as incorporated those products into their global supply chain, reduced their procurement costs and enhanced their global competitiveness.

Foreign companies operating in China have also shared the dividends of China's reform and opening-up. In the early days of reform and opening up, foreign companies entered the Chinese market and capitalized on the abundant supply of low-cost labor and natural resources, and thus developed more commercial interest in China. With the deepening of reform and opening-up, some multinational companies also built their research and development centers in China, taking advantage of China's growing pool of talents and innovative resources to develop new technologies for global competition.

While such cooperation has improved the level of management and manufacturing in China's machinery manufacturing industry, the development of the manufacturing industry has created more job opportunities.

With the Chinese economy integrating into the global economy, Chinese consumers are demanding much better quality products and services, and environmentally friendly and smart development has become the new trend in the manufacturing industry. It is in this context, and to promote China's industrial upgrading that the Made in China 2025 plan was implemented in 2015.

Manufacturing powers including the United States, Germany and Japan have adopted similar plans. But since Made in China 2025 follows the market-oriented principle, it has no provisions that force foreign companies to transfer their technologies to Chinese enterprises.

More important, foreign enterprises transfer technologies in order to enter a market and increase their incomes. This practice, rather than being exclusive to China, is common in global investment and cooperation.

Therefore, the Section 301 report's claims of "mandatory technology transfer" and "restrictions on the conditions of technology licenses" are baseless accusations that reflect the US' belief in unilateral trade policies, which contravenes international trade rules.

The author is a member of National Manufacturing Strategy Advisory Committee.

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