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China is gearing up to prevent local governments from transferring their proprietary technologies to Chinese partners, according to The Financial Times.
According to a report by the Financial Times, the Chinese government is taking steps to address one of the biggest complaints that the United States has had with China, as the two countries are involved in a trade war that has led to premium rates. The document states that the government is replacing its foreign investment law, which industries may have foreign investors and partners, and the conditions under which foreign companies can enter the market. According to the new law, "cooperation" technology should be determined by the talks between the two companies and local governments and officials can not use any method to force the transfer of technology, reported the Financial Times.
"The Foreign Investment Act aims to promote and protect foreign investment and guarantee fair treatment to foreign companies, which will increase their confidence in the Chinese market," reported the Xinhua news agency, according to the Financial Times .
The draft law also prohibits local government from implementing policies and practices that violate the legal rights and interests of foreign investors or create illegal barriers to enter or exit the market. While China's movement shows that it is committed to respecting the rules of global trade, analysts told the Financial Times that China uses an informal method of putting pressure on foreign companies to transfer technology. "More than just changes to the rules are necessary: Reducing coercive technology transfer would require the prohibition and penalisation of informal requests and threats, [and] "The strongly binding industrial policy that drives and constrains investment," commented Scott Kennedy, director of the project on economics and Chinese political economy at the Center for Strategic and International Studies in Washington, according to the Financial Times .
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