Chinese leaders talk a lot about developing an innovation economy, but Tang Shanxin, an expert on intellectual property policy, believes that won't happen unless China develops and enforces stronger laws to protect innovation.
“We need this kind of culture [of innovation],” Tang said at the recent Pearl River Delta Forum on Innovation and Intellectual Property in Guangzhou. “If we do not upgrade our manufacturing, we will always be a step behind our competitors in the international arena,” said Tang, deputy director of the Guangdong Provincial Intellectual Property Office, a forum sponsor along with the U.S. Chamber of Commerce.
Often, profits behind “made in China” go to firms in wealthier economies that own the products and technology. Stronger IP laws would give Chinese companies incentive to profit from their own technology or products, Tang said.
China's focus on low-cost manufacturing has made it wealthier and raised its GDP remarkably over the last 30 years. But that strategy won't work to take the country forward, he said.
Tang's comments reflect a transformation under way in how China thinks about itself. The old model of relying on low-cost manufacturing isn't sustainable, for a lot of reasons, and some in China are pushing hard for an industrial upgrade. IP is part of that. But China has a long way to go, judging by stories I heard at the forum.
Consider this from U.S. software giant Microsoft: It projects China will become the world's largest market for personal computers in 2011. Sounds like a business bonanza — until you learn China ranks 49th in global spending on software for each new computer. That's partly because China doesn't have as much money to spend on software, but it's also because software counterfeiting remains widespread. India, with less than half the per-capita income of China but stronger IP laws, ranks 33rd in software spending. Clearly product piracy shrinks China's market for software. Of course that hurts Microsoft's profits, which is why the firm pushes for tougher laws. But weak laws also make it harder for China's businesses to develop their own products and do their own innovation.
Another example: David Hon, whose Los Angeles-based Dahon Inc. makes high-performance, folding bicycles in Shenzhen, said he's moving research and development out of China because of employees who leave and take IP with them, violating non-compete contracts. People walk out with “reams of paper, CDs and thousands of drawings,” without any effective way to stop it, he said.
Counterfeiting is strong, in part, because it means jobs, and those industries can have powerful connections in some Chinese cities. On the other side, there is a lot of innovation going on in China, and some speakers said IP laws are getting better.
Ultimately, I'm not sure it matters very much what foreign companies say. Changes will come if it's in China's interest to have stronger laws, if the jobs and economic benefits of innovation outweigh the jobs and benefits of product piracy.
Toloken is Plastics News Asia bureau chief, based in Guangzhou.