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 actors located in China have been engaged in sophisticated, targeted efforts to steal IP from U.S. corporate systems.

On a potentially more positive note, China is currently engaged in sustained legal reform efforts, which have resulted in the revision of laws, rules, guidelines, and judicial interpretations across the range of IPR disciplines. This large scale revision of the IPR legal regime presents an opportunity to improve IPR protection and enforcement, and the United States is hopeful that a legal reform effort on this scale signals China's commitment to achieving major improvements. The United States urges China to continue to give due consideration to concerns expressed by the U.S. Government as well as by private sector stakeholders as these revisions proceed through the system.

At the same time, real world conditions for rights holders have overall seen little significant improvement. As in past years, a wide range of U.S. stakeholders in China report serious obstacles to effective protection of IPR in all forms, including patents, copyrights, trademarks, and protection of pharmaceutical test data. As a result, sales of IPR-intensive goods and services in China remain disproportionately low when compared to sales in similar markets that provide a stronger environment for IPR protection and market access. Given the size of China's consumer marketplace and its global importance as a producer of a broad range of products, China's protection and enforcement of IPR will continue to be a focus of U.S. trade policy.

The theft of trade secrets is an escalating concern. Not only are repeated thefts occurring inside China, but also outside of China for the benefit of Chinese entities. Conditions are likely to deteriorate as long as those committing the thefts and those benefitting continue to operate with relative impunity, frequently entering into unfair competitive relationships with their victims. Too often, Chinese authorities view trade secrets cases as routine commercial disputes, rather than as serious violations of law. Particularly troubling are public reports by independent security firms that actors affiliated with the Chinese military and Chinese Government have systematically infiltrated the computer systems of a significant number of U.S. companies and stolen hundreds of terabytes of data, including IP, from these companies. The United States strongly urges the Chinese Government take serious steps to put an end to these activities and to deter further activity by rigorously investigating and prosecuting thefts of trade secrets by both cyber and conventional means.

A further significant concern surrounds the fact that in some cases, central, provincial and local level Chinese agencies inappropriately require or pressure rights holders to transfer IPR from foreign to domestic entities. Sometimes guided by government measures or policy statements intended to promote indigenous innovation and the development of strategic industries, government authorities deny or delay market access or otherwise condition government procurement, permissions, subsidies, tax treatment and other actions on IPR being owned or developed in China, or licensed to a Chinese entity. China has made commitments to the United States on these matters in various contexts; the United States will continue pressing China to comply with those commitments.

The United States takes note of several positive developments. Rights holders report a significant increase in administrative and criminal enforcement against trademark counterfeiting in China. They indicate that the number of administrative enforcement actions more than 32