China's System for the Administration of Technology Import Contracts: Recent Developments

By Shelly Zhang*, Jones Day, Tokyo

Coupled with the remarkable growth of foreign investment into China,¹ and the parallel growth of the country's economy,² has been the steady rise in technology imports over the last two decades. During the first five months of 2005, China's imports of technology continued to demonstrate sharp growth. According to data from the Ministry of Commerce (MOFCOM), 3,865 technology import contracts were registered during this period, representing a 15.4% increase on those registered in the same period in 2004.³ The aggregate dollar amount of these contracts, furthermore, has increased 27.9% in the latest period to US$70.6 billion. Licence royalties accounted for 68% of the total contract amount, representing US$48 billion. The top five jurisdictions exporting technology to China, according to contract amount, include the EU, Japan, the US, South Korea and Hong Kong. China imported technology in the latest five month period through three principal means: i) the purchase of technological know-how; ii) the purchase of plants, key equipment or assembly lines; and iii) the purchase of technology consultancy or services, respectively accounting for 29.8%, 27.2% and 23.3% of the total.

According to the MOFCOM technology report, foreign-invested enterprises (FIEs) and state-owned enterprises (SOEs) have the greatest need for imported technology. The dollar amount of contracts entered into by FIEs during the first five months of 2005 was US$37.7 billion (53.4% of the total), while SOEs signed on US$26.7 billion (37.7% of the total) of such contracts. Collectively-owned enterprises and privately-owned enterprises respectively accounted for 1.2% and 2.2% of the total US$70.6 million contract amount.