Power Electronics

China Moves Toward Indigenous Innovation

Beijing has proposed rules that U.S. businesses say would lead its government agencies to buy high-tech and other goods only from companies that develop the technologies in China. It also plans to subsidize Chinese companies in industries such as clean energy.

China's policies to encourage what is known as "indigenous innovation" have moved to the top of the list of trade concerns for U.S. businesses. For some, they are nearly as important as the disputes over China's currency and the piracy of music CDs and Hollywood movies in that China hasn't yet formally adopted the government procurement rules. But according to a survey in March by the American Chamber of Commerce in Beijing, 37 percent of U.S. information technology companies said they were losing sales because of other "indigenous innovation" policies already in effect.

U.S. companies argue that the rules are intended to force them to partner with Chinese companies and turn over technology and intellectual property to them. Doing so would qualify them to sell to Chinese government agencies.

But Pat Mears, director of international commercial affairs at the National Association of Manufacturers, said that given China's poor record in protecting patents, copyrights and other intellectual property, most U.S. companies prefer to keep their most vital technologies - "the crown jewels" - outside China. China's "indigenous innovation" policies reflect its long-standing desire to move beyond assembling goods for foreign powerhouses and create its own global brands.

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