SHANGHAI - China has issued the draft of a new auto-industry policy that appears to curtail sharply the ability of foreign automakers and suppliers operating here to safeguard their proprietary technology and intellectual property.
The draft, which began circulating among industry executives late last month, specifies that 50 percent of all sales in China by 2010 must come from domestic companies that own 100 percent of the vehicle's technology.
If enacted, executives said here last week, the provision could force foreign manufacturers to turn their technology and patents over to their local partners as a condition for remaining in business.
"If you're a joint venture, then you pretty much have to transfer your technology to your Chinese partner," said one foreign executive who declined to be named.
The transferred technology then could be used against the foreign partner, as the draft policy also states that China intends for its local carmakers to be capable of competing in world markets.
By effectively limiting import penetration to a maximum of 50 percent of the market, executives said, the policy also appears to violate the spirit, if not the law, of China's entry last year into the World Trade Organization.