China has unveiled new guidelines about the protection of intellectual property, a move that could mark a big step toward appeasing the United States, and may even help pave the way for a long-awaited trade truce.
Beijing’s announcement Sunday was short on detail, though the country did indicate that it could introduce stronger IP protections and toughen punishments on those who infringe them. Such measures could address a concern that Washington has been railing on for ages.
President Donald Trump has repeatedly voiced his concerns about technology theft by the Chinese government, a problem US officials estimate has cost the US economy billions of dollars in revenue and thousands of jobs. Protecting IP has been one of the US government’s core demands as the two countries try to negotiate a deal to end a damaging trade war.
Chinese officials, meanwhile, have repeatedly rejected accusations that foreign companies are treated unfairly, arguing any tech secrets handed over were part of deals that had been mutually agreed upon.
Even so, Chinese officials have tried to mollify some of the US government’s concerns about IP in the past as a way to move the two countries toward a trade deal. Now, they appear to be doing so again.
“China is definitely offering up some pretty attractive olive branches,” said Stephen Innes, chief Asia market strategist for AxiTrader.
While the United States and China have expressed hope that a “phase one” trade agreement could come soon, nothing has been set in stone. Part of the problem is that China wants the United States to roll back tariffs, something Trump has been reluctant to approve.
The United States, meanwhile, wants China to implement sweeping structural changes, including significant reductions in the state’s role in the economy — along with more concrete ways to protect foreign IP. Experts have dismissed some of the most drastic demands as unlikely because they are at odds with the fundamental ways in which China’s government works.
But Beijing has indicated in the past that it is willing to make some changes to protect foreign companies that operate in China. Last December, for example, the government promised to implement new measures targeted at preserving foreign IP. A law containing those rules will take effect next year.
According to Sunday’s guidelines, China plans to study the necessity and feasibility of drawing up a basic law for IP protections. The government also said it would significantly increase the penalties of stealing IP and use technology to clamp down on bad behavior.
Those rules aren’t likely to make it into a “phase one” deal between the two countries, said Michael Hewson, chief market analyst for CMC Markets in the United Kingdom. But he said the news does appear to “hold open the prospect” of more progress if an initial deal is actually signed.
China’s announcement on Sunday also suggests that officials are eager to reach a deal, Innes said. The trade war has damaged China’s economy, which was already suffering from weaker domestic demand.
The country looks likely to take another hit soon, too. US tariffs on another $156 billion worth of Chinese goods are scheduled to go into effect December 15.
“[China knows] if they don’t make structural concessions, Trump will likely levy more tariffs,” Innes said.
Trump also wants a deal, he said, adding that IP concessions would give Trump “something to beat his chest about.”
Trump said in October that the two sides had reached a “substantial phase one” deal that he expected would take up to five weeks to finalize. That deadline came and went, leaving many uncertain about what will come next.