sector.[1] Many telecommunications services remain "off-limits to foreign operators."[2] Instead, with limited exceptions, [3] foreign telecommunications companies must enter into joint ventures that are at least 50 percent owned by a Chinese party.[4]
The joint venture agreements often require U.S. companies to turn over their technology, proprietary know-how, and intellectual property to their Chinese partners, an exchange referred to as "forced technology transfer."[5] Former U.S. Treasury Secretary Timothy Geithner described the practice:
We're seeing China continue to be very, very aggressive in a strategy they started several decades ago, which goes like this . . . you want to sell to our country, we want you to come produce here. If you want to come produce here, you need to transfer your technology to us.[6]
The European Union Chamber of Commerce in China reported in May 2019 that "results from its annual survey showed 20% of members reported being compelled to transfer technology for market access, up from 10% two years ago."[7] In addition, "nearly a quarter of those who reported such transfers said the practice was currently ongoing, while another 39% said the transfers had occurred less than{
- ↑ Office of the U.S. Trade Representative, Exec. Office of the President, Findings of the Investigation Into China's Acts, Policies, and Practices Related to Tech. Transfer, Intellectual Prop., & Innovation under Section 301 of the Trade Act of 1974 26, 28 (Mar. 22, 2018) [hereinafter 2018 U.S. Trade Representative Report].
- ↑ Yang Zhou, Regulation of Telecommunications Sector in China: Overview, Zhong Lun (Aug. 16, 2017), http://www.zhonglun.com/Content/2017/08-16/1841302098.html#co_anchor_a836533_1.
- ↑ In 2019, the Chinese government removed restrictions on three categories of value-added telecommunications services: multi-party communication, store-and-forward, and call center businesses. Foreign ownership of businesses providing these services is now permitted. See Zoey Ye Zhang, China's 2019 Negative Lists and Encouraged Catalogue for Foreign Investment, China Briefing (July 10, 2019), https://www.china-briefing.com/news/chinas-2019-negative-lists-encouraged-catalogue-foreign-investment/.
- ↑ See Regulations on the Administration of Foreign-Invested Telecommunications Enterprises, Art. 6 (promulgated Feb. 6, 2016), https://china.lexiscn.com/law/law-english-1-3161594-T.html?crid=1ffa565c-d660-b54d-6325-79b30208a4f5&prid= ("The proportion of capital contributed by the foreign investor(s) in foreign-funded telecommunications enterprise that is engaged in basic telecommunications services (other than radio paging services) shall not ultimately exceed 49%. The proportion of capital contributed by the foreign investor(s) in a foreign-invested telecommunications enterprise that is engaged in value-added telecommunications services (including radio paging business as part of its basic telecommunications services) shall not ultimately exceed 50%.").
- ↑ See, e.g., Karen Sutter, Cong. Research Serv., IN11208, U.S. Signs Phase One Trade Deal with China 1 (2020); U.S. Trade Representative Report, supra note 15, at 19.
- ↑ Wayne M. Morrison, Cong. Research Serv., RL33536, China-U.S. Trade Issues 44 (2018). China publicly committed to rectifying this problem in 2016, but evidence indicates that the problem still exists. Id.
- ↑ Michael Martina, China's Tech Transfer Problem is Growing, EU Business Group Says, Reuters (May 20, 2019).
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