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The US-China Commercial Relationship

China's new law outlaws forced technology transfer

Mar 19 , 2019

CGTN Editor's note: Kong Qingjiang is the dean of the School of International Law under China University of Political Science and Law. Dr. Zhou Weihuan is a senior lecturer at the Faculty of Law, UNSW Sydney, and a Member of the Herbert Smith Freehills China International Business and Economic Law (CIBEL) Centre. The article reflects the authors' opinions, and not necessarily the views of CGTN.

China has just adopted its Foreign Investment Law (FIL), which will come into effect on January 1, 2020, and replace the existing three laws governing foreign investment.The FIL contains one relevant provision to address the issue of forced technology transfer.

Article 22 provides that technology cooperation between foreign and Chinese entities shall be undertaken voluntarily based on commercial rules.

The terms and conditions for such cooperation shall be negotiated by the entities themselves. All levels of government and their officials are prohibited from forcing technology transfer through administrative means.

The legislators must have had the knowledge that a large number of the forced technology transfer accusations are not as solid as they sound. Yet, the FIL still incorporates the provision banning forced technology transfer.

It can only be interpreted that the Chinese authorities are sincere in prohibiting the practice of forced technology transfer, for they are aware stronger protection of intellectual properties is instrumental to the nurturing of an innovation-friendly environment.

With the adoption of the FIL, it is now clear to all that China has outlawed the alleged law and practice concerning forced technology transfer. The challenges, which were raised by the U.S. and the EU, had lost their legal basis.


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