China: Forced Technology Transfer and Theft?

April 20, 2018 9:30 AM
Photo Credit: 
REUTERS/Erik De Castro

The increasingly accepted narrative in the West, especially in the United States, is that China acquires technology mostly through forced technology transfer from multinational companies investing in China and through outright theft. Overlooked are the data that suggest the popular narrative exaggerates the magnitude of China's forced technology transfer and theft and does not allow for the possibility that China's protection of intellectual property is improving rather than worsening.

In fact, China's payments of licensing fees and royalties for the use of foreign technology have soared in recent years, reaching almost $30 billion last year, nearly a four-fold increase over the last decade.

Chinese payments for the use of foreign intellectual property, 1997–2017

Furthermore, China ranks fourth globally in the amount it pays to acquire foreign technology, well behind Ireland, the Netherlands, and the United States, but ahead of Japan, Singapore, Korea, and India. However, licensing fees in Ireland and the Netherlands are paid mostly by foreign holding companies that are legally domiciled in these countries for tax reasons. Since the subsidiaries of these holding companies using the licensed foreign technology are located in other jurisdictions worldwide, China probably ranks second globally in the magnitude of licensing fees paid for technology used within national borders.

Top 15 countries paying highest charges for the use of foreign intellectual property, 2016

Comments

Sherry Mason

Hi Nicholas,

You certainly have opened a new line of thought. China certainly has the image, and one can't deny it has rather earned the image. 

That said, China is eyeing for global technology and business leadership. And for a would-be leader, the crown of "Forced Transferer" fits rather ill. So my belief is China is on the way to a lot of corrections, lest the ghost come back to haunt it....

We have written a piece on this too: https://bit.ly/2JqruKu And we'd be glad if you let us know what you think of it.

Thanks

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