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Likewise, Kyle Freeman, International Business Last May, Chinese ambassador Zhang Xiangchen
Advisory Manager at Dezan Shira & Associates, said, said, “There is no forced technology transfer in
“Though the new law is a step in the right direction China” even though a 2018 survey by the American
to address certain concerns of foreign investors, in its Chamber of Commerce found that one-in-five
current form, it is fairly light on actual substance and respondents felt pressured to transfer technology in
should be read as an overarching framework.” exchange for market access.
In his press conference, Premier Li said the In addition to concerns over the law’s vague
government is aware of these issues and that they wording, some observers believe that new provisions
will be remedied with the issuance of subsequent could in fact empower the government to target
implementation directives. “The government will businesses as retaliation in the event of a dispute
introduce a series of matching regulations and with a foreign country.
directives to protect the rights and interests of foreign
investors, such as on working mechanisms for handling According to Liu, language that foreign investments
complaints filed by foreign-invested enterprises.” could be expropriated under “special circumstances”
and “for the public interest” and are subject to broad
Li continued, “These will be the important things national security reviews give the Chinese government
for the government to do in the following weeks and a statutory basis to retaliate against a foreign company
months to see that this law will be truly operable.” in the event of an international dispute.
Concerns over negative impact of the For the time being, however, most foreign investors
new provisions will be more concerned with the law’s practical day-
to-day implications for doing business in China.
Despite the assurances from Li, many analysts Freeman suggested that most foreign investors will
are unsure whether forthcoming guidelines will likely take a wait-and-see approach before assessing
fully address their concerns. This is partly because the law’s impacts: “One of the main concerns of
Chinese laws tend to be intentionally vague, thereby investors that will still persist is that the on-the-
empowering local officials to interpret rules themselves. ground reality of industry-specific laws, regulations,
While this strategy allows local officials to interpret and and local administrative approvals, or ‘window
adapt laws according to local conditions and needs, it guidance’ may impede full market access at the
also makes them less consistent and transparent for implementation level.”
foreign investors.
Freeman concluded that “most articles within
Even more fundamentally, critics are skeptical over the law lack substantial details and require further
how the law will end forced technology transfers and clarification. The subsequent provisions of detailed
IP theft; in practice, the government could turn a blind implementation rules, especially their timeliness and
eye to enforcement. interpretive content linking to other laws, will be
critical in the successful implementation of the Law.”■
For example, although the law now formally bans
forced technology transfers, government officials About China Briefing
have said that such transfers were already illegal,
downplayed their prevalence, or said that they did not China Briefing is produced by Dezan Shira & Associates. The firm
occur at all. assists foreign investors throughout Asia from offices across the
world, including in Dalian, Beijing, Shanghai, Guangzhou, Shenzhen,
and Hong Kong. Readers may write china@dezshira.com for more
support on doing business in China.
5 AmCham South China
Likewise, Kyle Freeman, International Business Last May, Chinese ambassador Zhang Xiangchen
Advisory Manager at Dezan Shira & Associates, said, said, “There is no forced technology transfer in
“Though the new law is a step in the right direction China” even though a 2018 survey by the American
to address certain concerns of foreign investors, in its Chamber of Commerce found that one-in-five
current form, it is fairly light on actual substance and respondents felt pressured to transfer technology in
should be read as an overarching framework.” exchange for market access.
In his press conference, Premier Li said the In addition to concerns over the law’s vague
government is aware of these issues and that they wording, some observers believe that new provisions
will be remedied with the issuance of subsequent could in fact empower the government to target
implementation directives. “The government will businesses as retaliation in the event of a dispute
introduce a series of matching regulations and with a foreign country.
directives to protect the rights and interests of foreign
investors, such as on working mechanisms for handling According to Liu, language that foreign investments
complaints filed by foreign-invested enterprises.” could be expropriated under “special circumstances”
and “for the public interest” and are subject to broad
Li continued, “These will be the important things national security reviews give the Chinese government
for the government to do in the following weeks and a statutory basis to retaliate against a foreign company
months to see that this law will be truly operable.” in the event of an international dispute.
Concerns over negative impact of the For the time being, however, most foreign investors
new provisions will be more concerned with the law’s practical day-
to-day implications for doing business in China.
Despite the assurances from Li, many analysts Freeman suggested that most foreign investors will
are unsure whether forthcoming guidelines will likely take a wait-and-see approach before assessing
fully address their concerns. This is partly because the law’s impacts: “One of the main concerns of
Chinese laws tend to be intentionally vague, thereby investors that will still persist is that the on-the-
empowering local officials to interpret rules themselves. ground reality of industry-specific laws, regulations,
While this strategy allows local officials to interpret and and local administrative approvals, or ‘window
adapt laws according to local conditions and needs, it guidance’ may impede full market access at the
also makes them less consistent and transparent for implementation level.”
foreign investors.
Freeman concluded that “most articles within
Even more fundamentally, critics are skeptical over the law lack substantial details and require further
how the law will end forced technology transfers and clarification. The subsequent provisions of detailed
IP theft; in practice, the government could turn a blind implementation rules, especially their timeliness and
eye to enforcement. interpretive content linking to other laws, will be
critical in the successful implementation of the Law.”■
For example, although the law now formally bans
forced technology transfers, government officials About China Briefing
have said that such transfers were already illegal,
downplayed their prevalence, or said that they did not China Briefing is produced by Dezan Shira & Associates. The firm
occur at all. assists foreign investors throughout Asia from offices across the
world, including in Dalian, Beijing, Shanghai, Guangzhou, Shenzhen,
and Hong Kong. Readers may write china@dezshira.com for more
support on doing business in China.
5 AmCham South China
