China unveils range of punishments to prevent IP violations

BEIJING • China has announced an array of punishments that could restrict companies' access to borrowing and state-funding support over intellectual-property theft, a key sticking point in its trade conflict with the United States.

News of the measures came just days after President Xi Jinping promised to resolve the US' "reasonable concerns" about IP practices in a statement after meeting President Donald Trump at the Group of 20 summit in Argentina.

China set out a total of 38 different punishments to be applied to IP violations, starting this month. The document, dated Nov 21, was released on Tuesday by the National Development and Reform Commission and signed by various government bodies, including the central bank and supreme court.

"I think it is potentially significant if they are implemented and result in a reduction in IP theft," said Dr Scott Kennedy, a China expert at the Centre for Strategic and International Studies in Washington. "We have been down this road with China many times on IP. The attention companies pay to IP theft has risen dramatically, and despite the great attention it is getting, the violations have increased."

Late last month, Beijing batted down a US accusation that China is continuing a state-backed campaign of IP and technology theft, saying it was based on hearsay and ignores reality.

The Trump administration began levying tariffs on China in July after the so-called Section 301 investigation by the US Trade Representative's (USTR) office alleged that China's IP and technology transfer policies are causing billions of dollars in damage to US companies.

In an update released last month, USTR said China was continuing its unfair IP policies, and it accused Beijing of continuing a state-backed campaign of cyber attacks on US companies that were both intensifying and growing in sophistication.

 
 
 

China said violators would be banned from issuing bonds or other financing tools, and participating in government procurement. They would also be restricted from accessing government financial support, foreign trade, registering companies, auctioning land or trading properties.

In addition, violators will be recorded on a list, and financial institutions will refer to that when lending or granting access to foreign exchange. Names will be posted on a government website.

"This is an unprecedented regulation on IP violation in terms of the scope of the ministries and severity of the punishment," said Mr Xu Xinming, a researcher at the Centre for Intellectual Property Studies at China University of Political Science and Law.

Chinese law enforcers have been hampered by insufficient means of punishment in the past, Mr Xu said, but the new regulations could render IP violators "unable to move even a single step".

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A version of this article appeared in the print edition of The Straits Times on December 06, 2018, with the headline 'China unveils range of punishments to prevent IP violations'. Print Edition | Subscribe