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EU Group Pressures China To Delay Tech Rule

Business group urged China to delay new government procurement plan that gives priority to Chinese 'indigenous innovation,' which links government purchases with local patents.

BEIJING (AP) -- A European business group urged China on Tuesday to delay a new government procurement plan that gives priority to Chinese "indigenous innovation," a practice that links government purchases with local patents.

The rule, in place for six weeks but only widely-known last week, requires sellers of high-tech products to have them accredited based on "indigenous innovation" -- or local intellectual property -- before they can be listed in a government procurement catalog. Approved products will get preference over those without accreditation.

Billions of dollars of business are potentially at stake. China's Finance Ministry announced in August that government purchasing, including nontechnical goods, in 2008 rose 28.5 percent year-on-year to 599.1 billion yuan ($81.9 billion).

The European Union Chamber of Commerce, which represents more than 1,000 companies, said it was concerned that there was a lack of transparency in the ruling and that the application period was too short to get in the procurement catalog.

"Such an accreditation system would also call into question China's recent commitments to resist protectionist pressures," Chamber President Joerg Wuttke said in a letter to the government ministries and agency that issued the notice.

The notice, jointly issued by the Ministry of Science and Technology, Ministry of Finance, and the National Development and Reform Commission, said the accreditation process would help develop an "innovative" country.

Foreign Affairs Ministry Spokeswoman Jiang Yu said in a statement Monday that "the accreditation work treats both domestic-and foreign-invested enterprises equally, without discrimination."

The chamber said European companies were worried that they will be forced to transfer their intellectual properties developed at home to China in order to qualify for the government procurement list.

Last week, more than 30 business groups from the United States and other countries send a joint protest letter "to strongly urge the Chinese government not to proceed" with the new rule.

The six categories requiring accreditation are computers and appliances, telecom products, modern office equipment, software, renewable energy and equipment, and energy-saving products.

Some European companies said the ruling creates a large gray area, because no government agencies will need renewable energy equipment but state-owned companies do.

Wutteke said the ruling would make it difficult for some European companies to continue partnerships with Chinese companies, thereby "undermining, rather than promoting China's goals of advancing its technical innovation capabilities."

The chamber said it has not received a response yet.