USTR Updates Section 301 Report Ahead of US-China Negotiating Meeting

The Office of the U.S. Trade Representative released a 53-page update to the Section 301 investigation that says there has been no fundamental change in China's "acts, policies, and practices related to technology transfer, intellectual property, and innovation, and indeed [it] appears to have taken further unreasonable actions in recent months." This Nov. 20 report, which comes 10 days before USTR Robert Lighthizer, President Donald Trump and other administration officials meet with China's president and negotiators, seems to counterbalance Trump's sunnier tone of late (see 1811190032).

The very first section of the report says Made in China 2025 is alive and well despite Trump telling reporters on Nov. 9 that "China got rid of their 'China ’25' because I found it very insulting." The USTR report says: "in the period following the publication of the Section 301 Report, China has deliberately downplayed the importance of and reduced official media attention on the Made in China 2025 policy. In late June, China’s Internet Propaganda Ministry reportedly circulated a Propaganda Oral Notice directing media outlets to “not make further use of ‘Made in China 2025,’ or there will be consequences."

"Despite this transparent attempt to deemphasize Made in China 2025 in public, China continues to implement this industrial policy on a large scale." Derek Scissors, a Chinese expert at the American Enterprise Institute, has said in the past that Trump is likely to reach a settlement that leaves Made in China 2025 intact (see 1806190034).

The report also says that China's cybertheft and hacking is increasing, not abating, and that there have been attacks in cloud computing, the Internet of Things, artificial intelligence, biomedicines, civilian space, alternative energy, robotics, rail, agricultural machinery, and high-end medical devices sectors between mid-2017 and mid-2018. "China’s cyber-enabled theft of intellectual property and sensitive commercial information exhibits increasing sophistication. According to cybersecurity experts quoted in a June 2018 report, China’s state-supported hackers have developed new ways of concealing their attacks," the report says.

The report also referred to criminal prosecutions of Chinese espionage players, in aerospace and in semiconductor chips. In the case of Micron, which led to an export restriction on the Chinese firm accused of the theft, the stolen trade secrets could be worth $8.75 billion, the report said.

"Despite the relaxation of some foreign ownership restrictions and certain other incremental changes in 2018, China’s acts, policies, and practices related to forced technology transfer in China persist," the report said. And, it said, the Chinese government continues to try to get technological advancement by buying or investing in American companies.