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 The United States is encouraged by China's December 2013 Joint Commission on Commerce and Trade (JCCT) commitment to undertake an Action Program, which includes concrete actions to address enforcement, enhance public awareness, and require strict legal compliance with respect to trade secrets. The United States also welcomed China's December 2014 JCCT commitment to protect from improper disclosure trade secrets submitted to the government in administrative or regulatory proceedings. China also affirmed that it is conducting a legislative study of a new trade secrets law. The United States urges China to address past weaknesses in the law and to do so expeditiously. The United States continues to engage with China as it advances legal and regulatory reforms to better protect trade secrets.

Software Legalization by Government Entities, Online Copyright Piracy, and Other Concerns

Software Legalization

The United States continues to urge all levels of the Chinese government, as well as state-owned enterprises (SOEs), to use only legitimate, licensed copies of software. China reported that from 2011 to 2014, software legalization was completed at government offices of all levels. In 2014, inspection teams dispatched by the Inter-Ministerial Joint Conference on Promoting Use of Authorized Software Inspections identified problems among local governments, including the continued use of unauthorized software and incomplete implementation of software asset management tools. Despite China's attention to the concern, U.S. software companies have seen only a modest increase in sales to government agencies, and specific information about the procedures and tools used to ascertain budget or audit information remains unavailable.

Software legalization efforts have extended to China's SOE sector. Losses by software companies due to piracy at SOEs and other enterprises remain very high. To the extent that Chinese firms do not pay for the software that runs many of their operations, they reap a cost advantage relative to competitors who pay for legally acquired software. The United States remains committed to working with China to continue to address these challenges.

Online Piracy

Despite bilateral commitments to increase IPR enforcement, online piracy in China persists on a large scale. China has the largest Internet user base in the world, estimated at around 650 million, with nearly 560 million mobile web users. Despite national campaigns and the leadership of the Leading Group, widespread piracy affects industries involved in the distribution of legitimate music, motion pictures, books and journals, video games, and software. For example, industry reports that in 2013, the revenues from digital music sales in China were $65.4 million, compared to potential sales of over $1.2 billion if China's per capita spending were on par with that in Thailand, a country with a roughly equivalent per capita GDP and substantial 37