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Post Transferring Technology to China: Is This "Theft"?
Created by John Eipper on 08/26/19 3:54 AM

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Transferring Technology to China: Is This "Theft"? (Patrick Mears, -Germany, 08/26/19 3:54 am)

I would like to comment on John E's question concerning China's alleged "dishonest dealings on. . .intellectual property" in his comments on Tor Guimaraes' recent post titled "A Defense of Trump?"

President Trump is leading the pack alleging that China has "stolen" intellectual property from foreign investors who have established subsidiaries in the People's Republic of China and is demanding that this practice stop.

Admittedly, I am not 100% acquainted with all of these instances where IP has been transferred to Chinese entities, particularly to Chinese joint-venture partners of foreign investors in areas other than the motor vehicle industry. However, I have done quite a bit of reading on the creation of motor vehicle manufacturing affiliates in the PRC by Western automakers, e.g., Michael Dunne's American Wheels, Chinese Roads: The Story of General Motors in China (2011), Jim Mann's Beijing Jeep: A Case Study of Western Business in China (1989), and Martin Posth's engaging 1000 Days in Shanghai: The Volkswagen Story--The First Chinese-German Car Factory (2008). I am not sure that this characterization reflects reality.

I understand that the quid-pro-quo insisted upon by the Chinese government for the entry of Western automakers into the Chinese market after "The Gang of Four" was dispatched was that these auto assemblers would agree to enter into joint ventures with Chinese partners, typically state-owned enterprises (SOEs), on a 50-50 basis, and that the non-Chinese joint venturers would be required to agree to share their technologies with those SOEs. This was the price to be paid by Western automakers for entering what has since become the world's largest market for the sale of motor vehicles, and the profits accruing to these foreign automakers have been handsome indeed.

Furthermore, it seems to me that these Chinese SOEs would likely have good reason to have access to these technologies since they might very well be determined to be liable for any damages caused to persons or property resulting from improper design and/or engineering of these vehicles. Some of the Western automakers entering the China market early took pains to avoid these transfers of technology (e.g., Volkswagen, by sending to its newly established Shanghai plant only "complete knock-down kits" from Germany to China that required only assembly in Shanghai), but as time progressed, this strategy became infeasible and these technologies were shared with the Western automakers' Chinese counterparts.

in any event, I would be interested in learning from other WAISers if they believe that there is more to this story than what I have been led to believe through my research, which is admittedly some years old.

JE comments:  We tend to think of "intellectual property theft" in the most blatant terms, such as reverse-engineering a gizmo or pirating films/music.  Patrick Mears reminds us that the Chinese situation is not so simple.  How do we view joint ventures entered into freely by Western corporations?  Is it theft when you willingly hand something over?

Tor Guimaraes takes up the China question, next.

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