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China plans to address tech transfer issues in foreign investment law revamp

China seeks to ban forced technology transfers to Chinese partners, as part of its efforts to revamp its foreign investment law and open up its economy, the official Xinhua news agency reported.

A draft bill to replace laws on Chinese-foreign equity joint ventures, non-equity joint ventures and wholly foreign-owned enterprises has been submitted with the National People's Congress Standing Committee. The current foreign investment laws are deemed ineffective in the changing economic scenario.

The proposed law emphasizes technological cooperation between foreign investors and China, as guided by business needs, while safeguarding the intellectual property rights of foreign partners, according to the Dec. 23 report.

Technology transfer is one of the key points at the center of the trade dispute between the U.S. and China, the two largest economies in the world. Foreign investors have complained that they are forced to transfer technology to Chinese companies, which positions them to compete with foreign partners through Chinese parent companies.

The draft bill follows a recent World Bank report, calling China to address trading partners' concerns over technology transfer and reciprocity in investment conditions. World Bank also recommended that China further trim its negative investment list, comprising industries in which foreign investment is either prohibited or restricted, and limit it to industries involving national security.

China cut the total number of restricted and prohibited items on the negative list to 48 from 63 in June.

Meanwhile, the European Commission recently broadened the scope of its tech transfer case against China at the World Trade Organization.