China promises no forced tech transfers, access to finance

China on Tuesday promised more improvements in conditions for foreign companies, including an end to officials pressing them to hand over technology – a key irritant in its tariff war with Washington.

The announcement adds to a drumbeat of market-opening promises by the communist government, which is trying to make China’s cooling, state-dominated economy more productive.

Beijing also will ease restrictions on foreign competitors in some newly opened finance businesses, the Commerce Ministry said.

Complaints about Beijing’s technology ambitions helped to spark its tariff war with President Donald Trump.

Trade negotiators are working out details of an October 11 agreement under which President Trump delayed a planned tariff hike on Chinese imports. Trump said Beijing agreed to buy more American farm goods in exchange, though China has yet to confirm details of its commitment.

Business groups welcomed the agreement as a possible step to breaking a deadlock in the 15-month-old conflict, though the two sides have yet to report progress on their core disputes over Beijing’s trade surplus and technology policies.

Those include complaints from Washington, Europe, and other trading partners that Chinese development plans are based in part on stealing or pressuring companies to hand over technology.

Authorities will be banned from “explicitly or implicitly” pressuring companies to give up technology, said a ministry official, Ye Wei.

That pledge, if carried out, builds on a law enacted in March that prohibits use of “administrative tools” to force companies to give up industrial secrets. Business groups said that might leave officials free to use other leverage.

“Administrative organs may not implicitly or explicitly force the transfer of technology by foreign investors or foreign-invested enterprises,” Ye said.

SHARING TECHNOLOGY

That still leaves open the question of foreign companies that are required to work through joint ventures with Chinese partners. For such ventures to function, the foreign partner often must hand over technology or teach a potential competitor how to develop its own.

China is trying to appeal to foreign companies, some of which have postponed or shifted investments to other countries out of concern about the impact of US and Chinese tariff hikes.

A ministry statement also promised to “eliminate all restrictions on the scope of business” of foreign banks, securities companies and fund managers. It pledged to “remove the requirement on total assets” for establishing a foreign-owned bank. “We will move faster to open finance industries,” said a deputy commerce minister, Wang Shouwen.

Wang gave no details, but business groups say high requirements for capital might keep foreign investors out of Chinese financial industries. They say restrictions on licensing and operations also might discourage potential competitors.

Beijing has issued a series of market-opening promises over the past two years, including abolishing limits on foreign ownership of companies in auto manufacturing, securities, banking, insurance and futures trading.

Full foreign ownership of futures traders will be allowed as of January 1, 2020, followed by mutual fund companies on April 1 and securities firms on December. 1. Until now, foreign investors have been limited to owning 51 per cent of such businesses.

AP