China Issues Guidelines on Intellectual Property Transfer Due to National Security

China has issued new guidelines on the transfer of intellectual property from domestic companies to foreign investors in the context of heightened global tensions regarding technology theft and has also introduced new tax incentives for semiconductor manufacturers to reduce dependence on imports.

According to the guidelines published on Thursday, the government will now have to approve every transfer of intellectual property in the segment of integrated circuit boards, software, and new varieties of agricultural crops. The aim of the guidelines is “to protect national security and significant public interests,” the government stated.

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– The introduction of the guidelines is an important step in protecting national security, said Zhang Zhicheng from the State Intellectual Property Office in an interview with China Daily.

The move is also in line with international regulations, emphasized Zhang, reminding of “similar verification systems in the European Union and Japan.” U.S. President Donald Trump announced new tariffs on Chinese imports due to “theft” of intellectual property, which has fueled fears of a trade war.

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Beijing also introduced new tax incentives and exemptions for semiconductor manufacturers on Friday, aiming to reduce dependence on imports. Manufacturers will be exempt from corporate income tax for a period of two to five years, after which they will be able to claim deductions, the Ministry of Finance announced on its website.

Companies producing chips based on 65-nanometer technology and with investments exceeding 15 billion yuan (2.39 billion dollars) will be exempt from corporate income tax for a period of five years. In the case of companies producing chips based on 130-nanometer technology, the exemption will last for two years.

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The exemptions cover a wide range of products, from basic to cutting-edge chips. China is largely dependent on semiconductor imports, which rank among the largest import items by value. Beijing aims to outpace foreign competition and become the leading semiconductor manufacturer by 2030.

The U.S. President, on the other hand, is asking China to purchase more semiconductors from the U.S. to modify the planned introduction of tariffs on Chinese products.