Dow Jones Industrial Average (DJIA) futures point to a strong stock market open Monday as China backs down on intelectual property rules.
Dow Jones Industrial Average (DJIA) futures climbed 75 points in premarket trading Monday, pointing to a strong stock market open. Traders are off to an optimistic start this week as China appeared to back down over a crucial trade deal sticking point: intellectual property (IP) violations.
They’ve said they’re going to lower the threshold in terms of who they punish and what is punishable in terms of intellectual property theft. The other part of it is making it easier for victims of intellectual property theft to pursue claims of compensation. And more broadly what we’re hearing from Chinese sources is they want, by 2020, to significantly reduce the numbers and instances of intellectual property theft.
It marks huge progress in the ongoing trade war and a win for the Trump administration. Even Morgan Stanley warned that Trump may never make progress on intellectual property.
Dow futures contracts rose 75 points overnight as traders gear up for a shorter Thanksgiving trading week.
The issue of intellectual property has emerged as a key sticking point during the US-China trade war. China routinely forces US companies to relinquish some of their IP in order to operate in the country. It’s known as a ‘forced technology transfer’ (FTT). A US company must form a joint venture with a Chinese counterpart to enter the market, which means sharing its tech secrets.
Trump has demanded that China loosen this practice and open up the Chinese market. But China has so far been reluctant.
“The context is that over the last few years China has been trying to strengthen its intellectual property regime and its mechanisms and it has been a key concern for the Trump administration as they continue their trade talks with the Chinese side” – Mackenzie.
The news brings some welcome relief to the stock market. It signals that China is willing to concede on some of the hard lines and that real process is being made behind the scenes.
Whether or not it means a phase one trade deal can be inked on or before the unofficial deadline of December 15th remains unknown. As CCN reported, the equities market appears to be pricing in hopes of a deal, while Trump hints that ‘phase two’ will begin immediately.
This article was edited by Samburaj Das.