China Proposes Prohibiting Forced Technology Transfers

China is expected to prohibit local governments from forcing foreign businesses to transfer technology or illegally restrict their market access, according to a draft law on foreign investment reviewed by the legislature on Sunday.

The law will also ensure foreign investors enjoy equal treatment with domestic counterparts in China, except in those excluded areas specified in a negative list, the official Xinhua News Agency reported.

The Standing Committee of the National People’s Congress (NPC) started to review the foreign investment law on Sunday during its bimonthly session.

The draft law is seen as sending a strong signal of China’s determination to further open up its markets and protect foreign investors’ interests, addressing major complaints from the Trump administration in its trade war with Beijing.

The draft law also stipulates that foreign businesses’ intellectual property will be protected, and their profits in China can be freely transferred out of the country.

The law, if adapted, is expected to replace three existing laws on Chinese-foreign equity joint ventures, contractual joint ventures and wholly foreign-owned enterprises, Xinhua said.

A new law will normally go through several rounds of hearing by the legislature’s standing committee before being approved by the plenary session of the NPC.

Contact reporter Wu Gang (gangwu@caixin.com)