The Office of the U.S. Trade Representative (USTR) has released an updated Section 301 report concerning China’s forced technology transfers and infringement of intellectual property rights. This report updates the original March 22, 2018 investigation findings and follows the U.S. government’s imposition of import tariffs on July 6, 2018, August 23, 2018 and September 24, 2018 on approximately $250 billion of Chinese products as part of the Trump administration’s response to China’s unfair trade practices. “We completed this update as part of this Administration’s strengthened monitoring and enforcement effort,” USTR Robert Lighthizer said. The report concludes that “China fundamentally has not altered its acts, policies, and practices related to technology transfer, intellectual property, and innovation, and indeed appears to have taken further unreasonable actions in recent months.” The updated report highlights these continuing trade practices by China:

  • Cyber-enabled Theft – The report states that China continues to conduct and support cyber-enabled theft and intrusions into the commercial networks of U.S. companies, as well as other means, in attempts to illegally to obtain information. This conduct provides the Chinese government with unauthorized access to intellectual property, including trade secrets or confidential business information, as well as technical data, negotiating positions and sensitive and proprietary internal business communications.
  • Foreign Ownership Restrictions – While China relaxed some of its foreign ownership restrictions and made certain other incremental changes in 2018, the report indicates that the Chinese government persists in using foreign investment restrictions to require or force the transfer of technology from U.S. companies to Chinese entities.
  • Discriminatory Licensing Restrictions – The report notes that (1) China continues to maintain discriminatory licensing restrictions by denying foreign patent holders basic patent rights to stop a Chinese entity from using the technology after a licensing agreement ends and (2) the United States has requested consultations and is pursuing dispute settlement under the provisions of the World Trade Organization.
  • Foreign Direct Investment in the United States – Despite a decline in Chinese investment in the United States in 2018, the report concludes that the Chinese government continues to direct and unfairly facilitate the systematic investment in, and acquisition of, U.S. companies and assets by Chinese entities, to obtain cutting-edge technologies and intellectual property and to generate large-scale technology transfer in industries deemed important by state industrial plans.
  • “Made in China 2025” – Since the initial Section 301 investigation findings, the report states that China has intentionally downplayed and limited attention to its technology-related industrial policies, even though it still targets the same high-technology industries. Instead, China continues to set explicit market share and other targets to be filled by Chinese producers both domestically and globally.

The USTR has indicated that it intends to continue its efforts to monitor any new developments and actions regarding China’s acts, policies and practices related to technology transfer, intellectual property and innovation.