Google, IP struggles fuel U.S. business concerns in China
Recent spotlight on tough regulations faced by U.S. companies in China leads U.S. Commerce to call for more transparency and predictability
U.S. Commerce Secretary Gary Locke on Thursday warned that China must become more transparent and predictable, as a row between Google and China drew concern about the business environment there for foreign companies.
Recent intellectual property rules that could block foreign companies from winning Chinese government contracts, followed by Google's threat this month to leave China due to hacking and censorship, have put a spotlight on the tough regulations often faced by U.S. companies in China.
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"China needs to continue making strides to be more transparent, predictable and committed to the rule of law," Locke said in a speech, according to a copy of his prepared remarks. "If there is backsliding on these issues, it will affect the appetite of U.S. companies to enter the Chinese market and ultimately that will be bad for both the people of China and the United States."
U.S. business associations this week wrote a letter to the Obama administration requesting its help on China's recent intellectual property rules, which the letter said give significant preference for Chinese government procurement to products whose intellectual property is developed and owned in China. The rules run counter to Chinese pledges to avoid protectionism and mark "an unprecedented use of domestic intellectual property as a market-access condition," said the letter, which was posted on the Web site of the Business Software Alliance.
The new requirements would make it virtually impossible for foreign companies to win Chinese government contracts, said Xiang Wang, a Beijing-based intellectual-property partner at law firm Orrick, Herrington & Sutcliffe. To comply with them, multinational companies would have to change their global model for managing intellectual property rights, transferring ownership of the rights to their Chinese subsidiaries rather than just licensing rights to them, he said.
Tough regulatory issues are likely to increase for foreign companies in China as the country keeps rising economically, Wang said.
"China has taken a very strong stance because of its economy," he said.
