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China's technical transfer problems are growing, says the EU group

BEIJING (Reuters) – Cases of European companies forcing technology transfer in China are increasing even though Beijing says the problem does not exist, a European business lobby said, adding that its view of the country's legislation is "gloomy".

FILE PHOTO: An attendant walks past the EU and China flags before the EU's high economic dialogue at Diaoyutai State Guesthouse in Beijing, China, June 25, 2018. REUTERS / Jason Lee

China's trading partners have long complained that their business often are forced to hand over valuable technologies in exchange for access to the world's second largest economy.

Requires by the United States that China address the problem is central to the two countries' ongoing trade wars, which has seen both sides stack prices of billions of dollars of each other's goods.

On Monday, the European Union Chamber of Commerce in China said the results of its annual survey showed that 20% of members had to transfer market access technology, up from 10% two years ago.

Almost a quarter of those who reported such transfers said the exercise was currently underway, while another 39% said the transfers had occurred less than two years ago.

"Unfortunately, our members have reported that coercive transfers not only persist but that they happen twice as much as two years ago," European Rouge Vice President Charlotte Roule said at a press conference on the investigation.

"It may be due to a number of reasons … Anyway, it is unacceptable that this exercise continues in a mature and innovative market like China," Roule said.

In some "fair" industries, the incidence of reported transmissions was higher, for example, 30% in chemicals and petroleum, 28% in medical equipment and 27% in drugs, she added.

China's highest communist party newspaper, People's Daily, said Saturday that Washington's complaint about the issue was "made from thin air".

In the context of the escalating trade war between the United States and China, Beijing has put pressure on the EU to resist the trade policy of US President Donald Trump, despite the fact that the world's largest trading bloc has largely renounced these efforts.

The EU has also become increasingly frustrated by what it sees as the slow economic opening in China, even after years of giving China almost undue access to EU trade and investment markets. But European officials say publicly that they do not support the use of tariffs as a solution.

Trump earlier this month raised tariffs of $ 200 billion in Chinese imports to 25 percent from 10 percent and has said that the jobs cause companies to move production from China to Vietnam and other Asian countries.

The majority of European companies in the House's inquiry said their business strategies were not changed by the trade war, even though it was closed by 585 respondents in January and February, well before the latest US tariff increase.

At that time, 6% of respondents stated that they were moving or had moved production from China due to tariffs and 4% said they were considering or had already reduced investment in China. Ninety-five percent of respondents affected by US tariffs said their company had covered the cost themselves and kept the prices the same.

The Chamber added that members had a "gloomy view" on China's legislation, with 72% of members expecting obstacles to increase or remain the same over the next five years, just as the Chinese government has promised continued reform and opening .

Reporting by Michael Martina; Editing by Jacqueline Wong

Our Standards: Thomson Reuters Trust Principles.

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