China eases govt procurement rules on tech

BEIJING, CHINA: China has abandoned parts of an "indigenous innovation" push in government buying of high-tech products that has rankled the Obama administration, EU and foreign companies, fearing protectionist barriers.

China's Ministry of Science and Technology flagged the partial retreat on government procurement rules in draft rules put on its website over the weekend, and in comments by a Ministry official on Monday.

The draft 2010 rules on applying to have high-tech products qualify for the program to encourage homegrown technological development say companies must show that the relevant patents and trademarks are registered in China.

This marks a step back from broad rules issued last year that indicated companies had to prove the relevant patent was developed solely in China or trademark lodged first in China.

That was a difficult hurdle for many multinationals with complex, border-spanning research, and alarmed the United States and European Union, both worried about access of their companies to China's huge government procurement sector.

"National indigenous innovation accreditation will treat equally all businesses in China established according to the law," said an unnamed MOST official in an interview posted on an official news website on Monday.

The proposed easing of requirements comes at a time when China and the United States have been seeking to smoothen strains that have upset relations in the first months of this year, including quarrels over currency policy and trade, Tibet and Taiwan, and China's controls on the Internet.

Expensive foreign technology

Deputy U.S. Trade Representative Demetrios Marantis said last week he would be visiting China to press for a rollback of the "indigenous innovation" rules.

A USTR report last month said that China's "indigenous innovation" effort was unfairly cutting out foreign companies.

Beijing has said its companies have for too long relied on expensive foreign technology, and that it wants to encourage greater homegrown innovation.

The European Union Chamber of Commerce in China said on Tuesday it welcomed the latest rules and the long period for companies to comment on them.

"This is an important sign that policymakers in China recognise the role that fair competition plays in developing and enhancing China's high-tech capabilities, and that foreign-invested companies can make a valuable contribution," the Chamber said in an emailed statement.

The draft Chinese rules have been released for public comment until Sept. 10 on its website (program.most.gov.cn/).

The rules say companies seeking to have computer, energy, communications, and other technology qualify for consideration in government procurement must "possess registered trademark exclusive rights or usage rights in our country for the product".

Products "must have intellectual property rights or intellectual property right usage permits in our country," the Chinese-language draft document says.

Foreign companies may still face conditions on standards and other elements of the purchase programme that could make qualifying difficult.

"The draft seems to be a softening of the requirements, opening more to foreign companies, and that has to be welcomed as a step in the right direction," an executive with a U.S. technology group said.

"But this is a document and we have to see how it is implemented," said the executive who requested anonymity, saying he was not authorised to go on the record until his group had fully studied the implications of the new rules.