Joint venture: Beijing Chiyi Unmanned Digital Perception Technology

At Datenna, our China experts continuously track and conduct detailed investigations into joint ventures established between European and Chinese entities located in China. Through a series of articles in our resource library, we highlight striking EU-China joint venture case studies, analysed based on Datenna's in-depth, unique data on China's techno-economic landscape. This article elaborates on the joint venture Beijing Chiyi Unmanned Digital Perception Technology, set up by the German Robowatch Robotics Group and North Navigation Control Technology.

Short Read

The Joint Venture: Beijing Chiyi Unmanned Digital Perception Technology Co., Ltd.

Beijing Chiyi Unmanned Digital Perception Technology Co., Ltd. is a joint venture whose core business is the research and development of intelligent robot technology and the production of intelligent robot products. Established in 2007, it is a cooperation between the Chinese North Navigation Control Technology Co., Ltd. and the German Robowatch Robotics Group. Robowatch Robotics' activities revolve around the development of software solutions facilitating automated production for small and medium manufacturers. The German company holds 27% of the shares — an absolute minority stake within the entity. The registered capital of the joint venture is €1.0 million.

Links with the Chinese Military Sector

The Chinese main partner, with 45% of the shares, is North Navigation Control Technology Co., Ltd. — a state-owned enterprise with a registered capital of €193.6 million and a strong focus on military scientific research systems. North Navigation Control Technology is controlled by two main shareholders. The first is North Navigation Technology Group Co., Ltd., directly owned by China North Industries Group Co., Ltd. — a significant actor in the army's mechanisation, informatisation, and intelligent equipment development. The second shareholder is Zhongbing Investment Management Co., Ltd. — literally "China Soldier Investment Management" — an investment vehicle for China North Industries Group. North Navigation Technology Group is ultimately controlled by the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council.

A second significant Chinese partner in the joint venture is the Chinese General Department for Ordnance Industry Systems — a research institute for Chinese military technology founded in 1982. Together, North Navigation Control Technology Co., Ltd. and the Chinese General Department for Ordnance Industry Systems account for 65% of the shares, leaving the German parties with a clear minority. Given that the ultimate beneficial owner of North Navigation Control Technology is the SASAC of the State Council, the risk of state influence within this joint venture is classified as high.

The Threat of Technology Transfer

Despite the relatively small registered capital of €1 million, the critical technology managed within the entity is an element that could easily give rise to technology transfer concerns. Intellectual Property Rights developed within a joint venture generally belong to the jointly funded entity — meaning the minority partner retains only limited control over the know-how and IPR resulting from the cooperation.

When a state-owned company is heavily involved in a joint venture, there are strong reasons to believe the Chinese government has a strategic interest in the foreign company's IPR. In this case — where military actors are directly involved and the foreign partner holds only a minority stake — serious concerns arise over whether the foreign company's IPR could be transferred to the Chinese military.

Increased Foreign Investment Protection

China's new Foreign Investment Law, issued in January 2020, introduced improvements in the protection of foreign investment. The main breakthrough on IP rights is the facilitation of IP dispute settlement and broader protection of foreign investors' IP rights under Article 23, which prevents forced technology transfer practices and requires authorities to protect trade secrets disclosed by foreign partners within a joint venture.

At the same time, technology transfer is difficult to determine or prevent in practice, and is often part of a tacit agreement between parties as the price for the foreign company gaining access to the Chinese market. Robowatch Robotics Group's technology is likely to be leveraged for North Navigation Technology Group's activities in the Chinese military sector. Holding a minority share means occupying a structurally weaker position within the cooperation — one that could potentially expose the foreign firm to know-how extraction.