US president Donald Trump is reportedly planning to investigate China over intellectual property violations and crackdown on counterfeiting.
Several US media outlets have spoken to anonymous sources close to the matter who have said there have been discussions on how to tackle the perceived IP violation issue in China.
According to data from the Commission on the Theft of American Intellectual Property, global counterfeiting, IP violations, theft of trade secrets and piracy costs the US economy as much as $600 billion a year.
One proposal allegedly being floated is to have the US Trade Representative's office start an investigation under section 301 of the 1974 Trade Act.
According to a New York Times report, this would allow Trump to impose tariffs and import quotas on foreign products in response to unreasonable or discriminatory restrictions on American commerce, as well as rescind licenses for Chinese firms.
Speculation in the media suggests an initiation of a probe into Chinese trade policy and IP violations could be forthcoming within days and take place over several months.
In response to the rumours, the Chinese Embassy in Washington told *Reuters *that China "opposes unilateral actions and trade protectionism in any form", while a spokesman for China's Ministry of Commerce denied the accusations of IP violations.
China has been pushing its global economic presence recently and there has been concern in the US of its ambition to become a world leader in technologies such as electric cars to compete with the US and Europe.
From a US point of view, there is frustration with what politicians and economists see as China's unfair trade practices against US companies which, it is claimed, impact jobs, growth and the US economy, as well as potentially threatening national security.
New rules in China could remove protections on US tech secrets and IP, as foreign firms are pressurised to join joint ventures with local partners, which would involve the sharing of confidential company information, and new requirements see foreign companies having to store their local data on Chinese servers.
China already has a reputation for being a world leader in manufacturing counterfeits – coming out top in a recent Organisation for Economic Co-operation and Development (OECD) and EU Intellectual Property Office (EUIPO) report. The country is known to sell the knockoffs domestically, particularly on online marketplaces such as Alibaba, as well as exporting them to other countries through both legitimate and illegal supply chains. Big selling American brands have been a major counterfeit target.
The US Trade Representative estimates that more than 12 per cent of Chinese exports are counterfeits.
Last month, the USTR accused China of "widespread infringing activity, including trade secret theft, rampant online piracy and counterfeiting, and high levels of physical pirated and counterfeit exports to markets around the globe".
According to an OECD report earlier this year, China is top culprit in information and communication technology fraud with US ICT manufacturers taking the biggest hit in lost revenue and brand reputation as a result. The report noted that almost 43 per cent of seized fake ICT goods infringe the IP rights of US firms.
USA Today, citing industry officials, said: "Getting China to more aggressively address rampant intellectual property theft in the country would foster its trade relationship with the US, encourage US companies to invest in the country and preserve and create more jobs for Americans."
Although many industries have welcomed the move, including the Software & Information Industry Association, as well as several democratic senators, there is also concern Trump may start a trade war where China will retaliate and the US consumer could lose out as prices rise.
According to Quartz, China would have been forced to crackdown on counterfeits under the Trans-Pacific Partnership trade deal, which begun as negotiations under the Obama Administration with the intention of pulling China's growth more in line with other countries in the region. Trump, however, pulled out of the deal three days after becoming president.