Published by ChinaMNC · Changjianglizu

US Defense Department Review Targets Chinese Research Entities: What Foreign Founders in China Need to Know

The US Department of Defense recently published findings from a research security review of certain US universities, noting that these institutions have ended partnerships with entities on the 1286 list, including many Chinese research organizations. China's Ministry of Commerce responded, opposing the politicization of research cooperation and urging the US to stop discriminatory measures. For foreign founders operating in China, this development underscores the importance of understanding the broader policy environment and maintaining compliance while navigating international collaborations.

US Defense Department Review and Its Implications for Research Partnerships

On October 19 (US Eastern Time), the US Department of Defense released the results of a research security review concerning select US universities. According to the announcement, these universities have fully terminated their cooperative relationships with entities on the so-called 1286 list. This list includes numerous Chinese research institutions. The Chinese Ministry of Commerce (MOFCOM) addressed the matter in a recent press briefing, with a spokesperson responding to a reporter's question.

For foreign founders registering or operating a company in China, especially those involved in technology, research, or innovation sectors, this development highlights the evolving landscape of international research collaboration and the need to stay informed about policy shifts that could affect cross-border partnerships.

China's Official Response: Opposition to Politicization of Research

In the press briefing, the MOFCOM spokesperson expressed that China has taken note of the situation. The Chinese side consistently opposes the US practice of overgeneralizing the concept of national security and turning research exchanges and cooperation into political, weaponized, or instrumental issues. The spokesperson also criticized what China views as unreasonable "stigmatization" of Chinese research institutions.

The MOFCOM statement emphasized that the US actions essentially coerce American research institutions to "pick sides" and deliberately undermine normal Sino-US research cooperation. Such measures, according to the spokesperson, will only weaken the US's own scientific and technological progress and innovative development—described as "shooting oneself in the foot." The response further noted that strengthening research cooperation between China and the US serves the common interests of both sides, and that restrictions and "decoupling" will only harm others and oneself.

Urging Respect for Facts and Global Trends

China urges the US to respect facts, conform to the universal laws and trends of global scientific and technological exchange and cooperation, and immediately stop the erroneous practice of taking discriminatory and restrictive measures against Chinese research institutions. The MOFCOM spokesperson stated that China will take necessary measures to safeguard the legitimate rights and interests of Chinese research institutions.

While this response is directed at the US government, it signals China's commitment to protecting its research entities and maintaining an open environment for international collaboration—a factor that foreign founders should consider when planning research-related activities in China.

Practical Takeaways for Foreign Founders in China

For foreign entrepreneurs establishing or running a company in China, particularly in sectors that involve research and development, the US review and China's response underscore several key considerations:

• Stay informed on policy developments: Both US and Chinese policies can impact the ability to collaborate with certain entities. Founders should monitor official announcements from both sides to avoid unintended compliance issues.
• Understand the 1286 list: Although the source does not detail the criteria for the 1286 list, it is referenced as including many Chinese research institutions. Foreign founders should be aware that partnerships with listed entities may carry risks under US measures. Conducting due diligence on potential partners is advisable.
• Leverage China's support for research cooperation: China's statement reaffirms its openness to international research collaboration and its willingness to protect the rights of Chinese institutions. This suggests that foreign-founded companies in China may continue to find opportunities for joint research projects, provided they navigate the regulatory environment carefully.
• Maintain compliance with both jurisdictions: If your company has ties to the US or US entities, ensure that any collaboration with Chinese research bodies does not inadvertently violate US restrictions. Conversely, Chinese regulations may also apply. Seeking local legal counsel is prudent.

While the MOFCOM response does not introduce new regulations for foreign companies, it reflects the ongoing geopolitical tensions that can affect business operations. Foreign founders should build flexibility into their research and development strategies to adapt to potential changes in international cooperation frameworks.

China's Commitment to Global Science and Technology Exchange

The MOFCOM spokesperson's emphasis on the "universal laws and trends of global scientific and technological exchange and cooperation" highlights China's stated position that international collaboration is essential for innovation. For foreign founders, this can be seen as a signal that China remains open to foreign participation in its research ecosystem, despite the challenges posed by external restrictions.

However, the spokesperson's warning that China will take "necessary measures" to protect its research institutions indicates that the Chinese government may respond to perceived unfair treatment. Foreign companies should be prepared for potential policy adjustments that could affect their operations, particularly if they are involved in sensitive technologies.

Conclusion

The US Defense Department's review and China's response are part of a broader debate over research security and international collaboration. For foreign founders in China, the key is to stay informed, conduct thorough due diligence, and remain compliant with all applicable regulations. By understanding the official positions of both governments, entrepreneurs can better navigate the complexities of operating in China's research and innovation landscape.

This summary is based on information published by the relevant Chinese government website and is general information, not legal or tax advice.

For assistance with company registration and operations in China, foreign founders can contact ChinaMNC on WhatsApp / WeChat at +86 153 1898 8535.