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Chinese government agencies, including at national, provincial, and local levels, frequently release documents, including regulations, rules, and regulatory documents (e.g., opinions, notices, circulars) that seek to promote China's development into an innovative, IP-intensive economy. The United States recognizes the critical role of innovation in development and in improving living standards in the United States and China. However, the United States has expressed concerns to China regarding China's innovation-related policies and other industrial policies that may discriminate against or otherwise disadvantage U.S. exports or U.S. investors and their investments. Chinese regulations, rules, and regulatory documents frequently call for technology transfer and, in certain cases, require, or propose to require, that eligibility for government benefits or preferences is contingent upon IPR being developed in China, or being owned by or licensed, in some cases exclusively, to a Chinese party. Such government imposed conditions or incentives may distort licensing and other arrangements, resulting in commercial outcomes that are not optimal for the firms involved or for promoting innovation. Government intervention in the commercial decisions that enterprises make regarding the ownership, development, registration, or licensing of IPR is not consistent with international practice, and may raise concerns relative to China's implementation of its WTO obligations.

In November 2009, MOST, NDRC, and MOF issued the Circular on Launching the 2009 National Indigenous Innovation Product Accreditation Work, requiring companies to file applications by December 2009 for their products to be considered for accreditation as "indigenous innovation products." This measure provides for preferential treatment in government procurement to any products that are granted this accreditation, which is based on criteria such as the ownership or development of a product's IPR in China. Subsequently, the United States and U.S. industry, along with the governments and industries of many of China's other trading partners, expressed serious concerns to China about this measure, as it appears to establish a system designed to provide preferential treatment in government procurement to products developed by Chinese enterprises.

In April 2010, MOST, NDRC, and MOF issued a draft measure for public comment, the Circular on Launching 2010 National Innovation Product Accreditation Work. The draft measure would amend certain of the product accreditation criteria set forth in the November 2009 measure, but would leave other problematic criteria intact, along with the accreditation principles, application form, and link to government procurement. In addition, the draft measure originally was to become effective the day after comments were due. The United States submitted comments in May 2010, in which it asked China to suspend the implementation of the indigenous innovation accreditation system and to engage in consultations with the United States to address U.S. concerns about the system. This draft measure was not finalized. At the May 2010 S&ED, China agreed that its innovation policies would be consistent with the following principles: nondiscrimination; support for market competition and open international trade and investment; strong enforcement of intellectual property rights; and, consistent with WTO rules, leaving the terms and conditions of technology transfer, production processes, and other proprietary information to agreement between individual enterprises. In addition, the United States and China began intensive multi-agency discussions of their respective innovation policies. 32