China to raise penalties on IP theft in trade war compromise

China's chief trade negotiator Vice-Premier Liu He arriving for trade negotiations with the US in Washington on Oct 10, 2019. PHOTO: REUTERS

BEIJING (BLOOMBERG) - China said it will raise penalties on violations of intellectual property rights in an attempt to address one of the sticking points in trade talks with the United States.

The country will also look into lowering the thresholds for criminal punishments for those who steal IP, according to guidelines issued by the government on Sunday (Nov 24). It didn't elaborate on what such moves might entail.

The US wants China to commit to cracking down on IP theft and stop forcing US companies to hand over their commercial secrets as a condition of doing business there. China said it's aiming to reduce frequent IP violations by 2022 and plans to make it easier for victims of transgressions to receive compensation.

The two countries are working towards a partial trade deal and leaving the more controversial issues for later discussions.

China's chief trade negotiator spoke last week about its plans for reforming state enterprises, opening up the financial sector and enforcing intellectual property rights (IPR) - issues at the core of US demands for change in China's economic system.

"Strengthening IPR protection is the most important content of improving the IPR protection system and also the biggest incentive to boost China's economic competitiveness," according to the guidelines. Local governments will be required to implement the strengthening of IP rights, it said.

In May, the US added Huawei Technologies Co to what's known as the entity list, in an effort to block US companies from selling components to China's largest technology company. Huawei is accused of being a threat to America's national security, and has denied those claims.

Last week, Chinese President Xi Jinping said his nation wants to work towards a phase-one trade agreement with the US that's based in part on "equality". That's a guiding principle that US President Donald Trump said, just hours later, that he doesn't share.

"This can't be like an even deal, because we're starting off on the floor and you're already at the ceiling. So we have to have a much better deal," Mr Trump said in an interview last Friday on Fox News.

Negotiators from both countries have been talking regularly, trying to bridge the remaining differences on issues including Chinese pledges to buy American farm products, protect intellectual-property rights and open its economy further to foreign companies. They have struggled to agree on exactly what tariffs each side would roll back as part of the agreement's initial step.

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