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US and China spar over ‘forced technology transfer’ claims

Chinese representatives have rejected US claims made at the World Trade Organisation (WTO) that foreign companies hoping to break into the Chinese market are forced to share their technologies.

The spat is the latest episode in a long-running dispute between the US and China over the alleged obligations of foreign companies to share valuable knowledge with Chinese companies while carrying out business operations in China.

These claims have resulted in two high-profile lawsuits and plans by the Donald Trump administration to place tariffs worth $50bn (£38bn) on Chinese imports, sparking fears of a trade war.

Last year, the Pentagon published a report recommending that US regulators are given greater control over Chinese investments in sensitive emerging technologies developed in the US which could be considered national security threats, such as machine learning for military applications.

During the latest WTO dispute, Dennis Shea, the US Ambassador, commented that due to China’s licensing and administrative regulations and vague investment rules, “forced technology transfer” is often an unwritten rule when doing business in China, particularly when partnering with state-owned or state-directed Chinese companies.

“This is not the rule of law. In fact, it is China’s laws themselves that enable this coercion,” Shea told the WTO’s Dispute Settlement Body, according to Reuters. “Fundamentally, China has made the decision to engage in a systematic, state-directed, and non-market pursuit of other members’ cutting-edge technology in service of China’s industry policy.”

Shea added that this was a “lose-lose proposition” for all foreign investors, not just Americans, and the competitiveness of other nations could suffer if China was not held to account for its policies. China’s representatives have denied these accusations.

“There is no forced technology transfer in China,” Zhang Xiangchen, China’s Amabassador, said at the meeting. “Nothing in these regulatory measures requires technology transfer from foreign companies.”

According to Zhang, the US was the main beneficiary of technology transfer. He added that the US had not provided any evidence to back up its claims of forced technology transfer, and that the accusations remained “pure speculation”. If the US is to impose tariffs on China as retribution for forced technology transfer, the White House will require the backing of the WTO.

According to Xinhua, China’s state-owned press agency, China has failed a request for consultation within the WTO’s dispute settlement framework in response to the White House’s announcement of the increased tariffs.

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