European Companies Report Increase In Forced Technology Transfers To China

The number of European companies who say they have been forced to hand over technologies to Chinese firms in order to access the world’s second-largest economy has doubled in the past two years, amidst trade tensions between the US and China.

An annual study published by the European Union Chamber of Commerce in China on Monday found that 20 percent of members said they had been compelled to take part in so-called technology transfers, up from 10 percent two years ago.

Nearly 25 percent of those who reported transfers said the practice was ongoing, with 39 percent saying the transfers had occurred less than two years ago.

The acquisition of Western technologies by China is one of the key issues fuelling current trade tensions, and the study indicates that the practice has intensified even as the world’s two biggest economies have engaged in negotiations over the issue.

Negotiations

“Worryingly, 63 per cent of respondents that have felt compelled to transfer technology said it happened within the last two years, and a quarter said the transfer was still taking place at the time of the survey period in January 2019,” the report said.

China has vowed to crack down on the issue, but also denies it exists, with the Communist Party-controlled People’s Daily saying in an editorial over the weekend that complaints were fabricated by the US.

In industries dealing in high-end technologies the incidence of forced transfers was higher, at about 30 percent in the chemicals and petroleum industry, 28 percent in medical devices and 27 percent in pharmaceuticals.

Firms said they felt business conditions  were deteriorating for foreign companies operating in China, with 53 percent saying doing business there had become more difficult in the past year, compared to 48 percent last year.

Companies cited China’s economic slowdown as the top challenge for European companies there this year.

They also had a “bleak outlook” on China’s regulatory environment going forward, with 72 percent saying they expect regulatory obstacles to stay the same or increase in the coming five years.