A Dragon Backs Down
Are they backing down?
Back in December, Beijing came up with an intriguing variation on a “Buy China” procurement policy. They amusingly chose to call it an “indigenous innovation” policy, demonstrating Chinese subtlety. What it did was create an extra hurdle to getting your company’s products listed in the book of approved suppliers that procurement officers all over China use to source goods for government agencies and government-owned firms. Yes, they are “free” to purchase things that aren’t in the book, but it is not clear that would be beneficial to one’s career, shall we say. “Indigenous innovation”, simply put, requires that many “high tech” products sold to the Chinese government must have had their R&D work done in China, conveniently excluding most of the technologies that Western companies have developed over the years. The policy insisted that products on the approved list must “have Chinese intellectual property and proprietary brands” and that any intellectual property must be “totally independent of overseas organizations or individuals.” Beijing expressed surprise that anyone might think this could be discriminatory. You can read more of the details here.
“Indigenous innovation”, predictably, caused an uproar among the many companies that have invested in China, but use non-Chinese technology, and among those who have sold or have visions of selling their tech products in China. The policy contributed greatly to a sharp decline in impressions of China in a recent survey of members of the American Chamber of Commerce in China. I am sure that companies such as Apple, Intel and others have taken it up forcefully in meetings with Chinese counterparts, as have the American and other western embassies. That it came in the same timeframe as the Google withdrawal only added to the bad timing and ill-considered policy development.
The Wall Street Journal reported Wednesday that China’s Ministry of Science & Technology has issued a new draft procurement policy that leaves out most of the “indigenous innovation” policy, including the passages quoted above. Instead, the new rules merely require that companies wishing to sell to the Chinese government must own or have a legal right to use their IPR in China. Can’t quarrel with that.
But non-Chinese companies are still suspicious, given the upset caused by the previous rules and general discontent with conditions for doing business in China. Companies and embassies are combing the new draft to see what lies beneath the surface and to make sure that “indigenous innovation” doesn’t come back to bite them. As one industry spokesman put it: “We have to fully digest this. The language is still vague.” The dragon is not trusted, it seems.
