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China Promises Action on Tech Transfers and IP Protection

Phase One of the US-China trade deal has finally been signed, with promises from Beijing that it will improve protection of IP and trade secrets and end forced tech transfers, although security experts will be skeptical.

The majority of the headlines focused on the scrapping of some mooted tariffs on goods from China including mobile phones and computers, as well as promises to increase imports of US goods by $200bn.

However, in the document itself, major sections are devoted to several areas of concern for many US businesses over the past decade or more.

These include the forced transfer of IP to a local Chinese partner that many foreign businesses have been required to follow in order to gain access to the country’s vast market. In the new document, both parties recognize that such transfers should only happen on “voluntary, market-based terms.

“Neither Party shall require or pressure persons of the other Party to transfer technology to its persons in relation to acquisitions, joint ventures, or other investment transactions,” it continued.

The new deal also contains significant new promises by China to improve protection of intellectual property, trade secrets and confidential business information and combat counterfeiting and piracy online.

“China recognizes the importance of establishing and implementing a comprehensive legal system of intellectual property protection and enforcement as it transforms from a major intellectual property consumer to a major intellectual property producer,” it said.

Specifically, China has agreed to impose “heavier punishment” including jail time and monetary fines to deter IP theft.

However, it remains to be seen whether any of the promises made by Beijing are adhered to.

Both the US and UK famously signed an agreement with China in 2015 promising it would cease all economic espionage activity. Experts revealed that activity began to ramp up again from the Chinese side soon after.

China is also increasing its collection of sensitive corporate data from all firms operating within its borders, under a new corporate social credit system, which recently raised alarm bells at the EU Chamber of Commerce in China.

This could effectively achieve the same end for the Chinese government as forced tech transfers, it warned.

“The system of regulatory ratings necessitates the collection of massive amounts of company data, mostly through mandatory data transfers to government authorities, creating an increasingly complete disclosure of a company’s profile,” the report claimed. “Large data transfers are likely to include some sensitive data points, such as technological details and personnel information.”

Researchers have also recently revealed how Chinese state hacking groups are increasingly using local companies as a front for their espionage activities.

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