In April, the Chinese Ministry of Science and Technology (MOST) made available for public comment a draft notice outlining a series of proposed changes to rules which relate to the country’s indigenous innovation policy. The proposal – “Notice on Indigenous Innovation Product Accreditation in 2010” (English translation) – drafted in conjunction with National Development and Reform Commission, and the Ministry of Finance will relax a number of requirements for foreign products seeking accreditation and listing upon the approved government procurement lists.

As part of the indigenous innovation policy, MOST issued a notice in November 2009 which established a catalogue of products from which public institutions are restricted to purchase within 6 key strategic sectors; namely computer and application devices, telecommunication products, offline appliances, software, alternative energy and equipments, and high-efficiency energy-saving products.

Many observers were alarmed by the introduction of a public accreditation system, and by the IPR requirement in particular. In an open letter, the BSA highlighted the following to be of immediate concern:

“The criteria for eligibility for the catalogue is that the products contain intellectual property that is developed and owned in China and that any associated trademarks are originally registered in China.“

The major changes between the Ministry’s November 2009 publication and the draft proposal are in three categories, as outlined by the US-China Business Council:

• Intellectual Property: The new version now allows accreditation for products based on foreign IP which is licensed in China; as opposed to products being based solely on IP developed and owned in China as before.
• Trademark Registration: The new policy no longer requires trademarks to have been first registered in China. Applicants must still have exclusive rights to the product’s trademark in China.
• Technology Requirements: Originally accreditation required the product to “possess highly advanced technology that reaches or surpasses international standards”. However the new policy is more lenient, instead focusing on energy efficient and environmentally friendly or alternatively technology of a significant improvement over existing technology.

The Chinese ministry insist that the motivation for these changes flows from a “need to draw in increased foreign investment in the high tech industry”, downplaying the role of International pressure in these changes. However while US trade officials have greeted the development cautiously, those in the EU met the April 10th announcement with considerably more optimism. A spokes person from the EU chamber of Commerce stating that:

“This is an important sign that policymakers in China recognise the role that fair competition plays in developing and enhancing China’s high-tech capabilities, and that foreign-invested companies can make a valuable contribution.”

In response to the draft policies, a number of commentators have questioned whether the changes are big enough. In an open letter addressed to MOST commenting on the changes (found here) the U.S. Information Technology Office (USITO) highlight a number of specific issues they have with the proposed changes, in addition to indigenous innovation generally. Broadly speaking, these specific issues relate to the following:

• The unclear link between the Catalogue and government procurement preferences,
• The presence of Intellectual property (IP) as criteria for indigenous innovation,
• Vague, unworkable and problematic nature of requirements, and
• That the public comment period ends on the same date the application period starts for the revised program, which greatly reduces the value of any such comment.

This soon after the comment phase of the regulation which ended May 10th, it is unclear what the final form of the regulation will take or whether MOST will take on board any feedback such as by USITO above. Furthermore it is unclear whether or not these changes will foreshadow greater change within the indigenous innovation policy in general.