China Forcing Technology Transfer

Since the early 1990s, China has been in development of a high-speed railway system in their country. In 2003 China abandoned efforts to independently build super-fast trains and instead entered into joint ventures with foreign companies to finish completion of the railway. Executives of the international companies involved, however, claim that China forced them to transfer their technology in order to gain access to the Chinese market. This is not the first in a series of claims in which manufacturers state that China forced the relinquishment of proprietary information before any contract would be signed.

He Huawu, chief engineer at the Ministry of Railways in China, did confirm that China’s trains are based on foreign technology, and greatly modified by Chinese engineers. He pretend though that the transfer of technology was not forced.

Under the assistance of the Alliance for American Manufacturing (AAM), Peter Navarro authored the book “Manufacturing a Better Future for America” which deals with current challenges facing the Unites States’ manufacturing sector. In the chapter entitled “Benchmarking Foreign Advantages”, Navarro investigates the issue of forced technology transfers in Chinese contract negotiations.

“One of the most potent weapons China has used to move up the value chain is forced technology transfer,” writes Navarro. “It is only through the acquisition (rather than internal development) of sophisticated technologies that Chinese companies have been able to rapidly enter and expand in sophisticated industries such as automobiles, aircraft, pharmaceuticals and other high-tech areas.”

One of the major issues at the forefront of America’s manufacturing woes is our inability to enact fair trade deals with other countries. Trade deals as they are in their current form are a large contributor to our long-standing and enormous trade deficit. China’s anti-foreign and regressive drive to develop foreign technologies as their own will continue to fuel trade disputes.

A report released by The U.S. Chamber of Commerce said China was abusing the allure of its vast market to push foreign companies to transfer their latest technologies to Chinese competitors. This was a “blueprint for technology theft on a scale the world has never seen before,” it said. The report only adds to the strength of claims and concerns by foreign businesses and governments over Chinese policies and market restrictions.

“Indigenous innovation is a massive and complicated plan to turn the Chinese economy into a technology powerhouse by 2020 and a global leader by 2050,” said the U.S. Chamber of Commerce, the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors and regions, as well as state and local chambers and industry associations.

Inevitably, according to the current trend, America will be the largest contributor to China’s rapid and large growth, as well as the biggest loser. This trend can already be seen when examining the U.S.-China trade deficit, which has been growing at an enormous rate since 1985, and in 2009 alone reached $226.9 billion. Over the three-year period of 2007-2009 our trade deficit with China totaled $753.4 billion dollars. That amounts to more than the U.S. spent combating the financial crisis via the TARP funds.

“The belief by foreign companies that large financial investments, the sharing of expertise and significant technology transfers would lead to an ever-opening China market is being replaced by boardroom banter that win-win in China means China wins twice,” the report said.

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