U.S. Formally Begins Probe of China Technology Transfer

By William Mauldin Features Dow Jones Newswires

President Donald Trump's trade chief on Friday formally launched an investigation into Chinese efforts to secure technology and Beijing's treatment of intellectual property.

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U.S. Trade Representative Robert Lighthizer said he notified Mr. Trump Friday that he would launch the probe, which could result in trade sanctions. He made the announcement just four days after Mr. Trump directed Mr. Lighthizer to look into the matter.

"After consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation," Mr. Lighthizer said in a statement.

In addition to probing Chinese efforts to obtain U.S. technology and intellectual property, the investigation under Section 301 of a 1974 trade law will also look into whether Beijing supports cyberintrusion to obtain trade secrets or technology in ways that harm American companies, the trade representative's office said.

The case is the first formal China trade action taken by a president who has long blasted the country for what he says are improper commercial practices. On Monday as he signed the directive, Mr. Trump said: "This is just the beginning."

White House aides said the probe could run for a year before any decisions are made on imposing trade sanctions.

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The move is part of a broader, complex diplomatic strategy of juggling Washington's competing policy goals with China, balancing the desire for more cooperation in controlling North Korea against a desire to curb the $347 billion U.S. trade deficit with China.

Mr. Trump set the process for the probe in motion on Monday, just three days after he spoke by phone with Chinese President Xi Jinping, and a few hours after China announced it would ban imports of North Korean coal, iron, and seafood, enforcing United Nations sanctions aimed at curbing Pyongyang's nuclear-weapons program.

China vowed to fight back and defend its interests if the U.S. takes any measures that harm the economic and trade relationship.

"China definitely won't sit back and watch," a Ministry of Commerce representative said in a statement posted on the ministry's website Tuesday. "China will absolutely take appropriate actions to defend its legitimate rights."

In targeting Chinese intellectual-property practices, the Trump administration is picking up an issue that has becoming increasingly alarming to U.S. companies in recent years. They are worried in particular about the combination of China's explicit industrial policy seeking self-sufficiency in a range of tech sectors like robotics and semiconductors -- articulated in its "Made in China 2025" initiative -- along with a range of formal and informal requirements for foreign companies to share proprietary material with Chinese partners.

Mr. Lighthizer's office said Friday it will accept written comments on the investigation through Sept. 28 and hold a hearing in October.

Jacob M. Schlesinger contributed to this article

Write to William Mauldin at william.mauldin@wsj.com

(END) Dow Jones Newswires

August 18, 2017 17:42 ET (21:42 GMT)