China’s regard for intellectual property protection is an urgent issue!

It was at the end of January 2010 that foreign firms operating in China got their shock in the form of the China government’s new condition for those bidding for government contracts. The new condition is that those who want to bid for government tenders must not only have their intellectual property registered in China, but will also have to them registered with a Chinese as one of the inventors. As if it is not already a hassle to register their IPs in China (it has to be translated into Mandarin), foreign firms will have to part with their IP to an ‘indigenous’ citizen of the Republic of China. In short, China is telling all those interested in getting a part of the 50 billion dollars annual tender to get real.

Since then, there has been a hue a cry especially from US firms having business set-ups in China. They had brought up the case, seemingly serious to President Obama. But what can the president do? It is after all the host country’s right to change its rules when it deems fit. Apparently the ruling was put into place during a time of weakness in the US. With run away debts, and a weakening dollar, Washington was in a weak position to pressure for China to return to status quo, as far as trade practices are concerned. Bearing in mind that Washington was trying to force China to revalue upwards its Yuan, China must have waited for such an opportune time to strike back.

Of late, officials from Washington have been flying in to China with accelerated frequency. And the main issue is always China must revalue upwards its Yuan so that Washington could continue to sell goods back to China. But we all know that China need not accede to any giveaway now since it has a large amount of its reserve parked in Washington. Just with a mere mention of transferring away of its reserve holdings will shake the dollar to tumble out of control! Then again, China could revalue its Yuan but counter work with other subsidies just like Washington subsidizing its cotton growers at the expense of others. Trade issues are always dynamic, and the Chinese have learn a lesson or two from the west, so no matter how much Washington use arm twisting techniques, it won’t work with the Chinese. Perhaps buying less for a longer duration might work!

Even China has to respect intellectual property rights, but only because of the World Trade Expo

It is indeed considered a rare event that China had to secretly negotiate with Japanese singer-songwriter Mayo Okamoto to get permission for using her song as the theme song for the Shanghai World Trade Expo which opens in May 1, 2010. It was not meant to be that way. The song was among many submitted by the public to be used as the theme song for the expo. Unknowingly, the organizing committee selected the song, without realizing that the person who submitted it had copied from Ms. Okamoto. Perhaps, even that was not intentionally done. But when the accusation of copying was posted on the internet, the expo committee realized that they had to do something, like seeking permission for the use of the song (even though it only faintly resembles Okamoto’s work), which in itself was rarely heard of in China. Fortunately, Ms Okamotor had agreed to allow the use of the theme, otherwise it would have been a big embarrassment for the organizer.


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This goes to show that even big bad giants, when faced with an embarrassing moment, would choose to eat humble pie when there are putting out their best act in front of a wide audience! Were it not because of the world trade expo, would China have acceded to such an act? Obviously not, if we were to look at those recent events like the tussle with Google and Yahoo! This would be a very good lesson for all of us. How to deal with the big bad wolf? Use trade sanctions or weapons of mass destruction? Certainly it will not work as shown by the intransigence of North Korea and Burma. The only way would be like the Shanghai case. Draw them out, let them face the world. Put them in a position where their face would be their destiny. When you are the showman, and the spot light is on you, no one will be allowed to make you leave the scene in disgrace. You just have to stay put and the show has to go on, whatever happens! Maybe all the shouting about China not respecting intellectual property rights is of no avail. Perhaps, relocating WIPO to Beijing might be a better option!

Is China observing intellectual property rights?

It is true. China is gearing up its machinery to practice intellectual property rights. But it is only protecting IPs that has an indigenous origin! It is protecting patents belonging to its own citizens, not those of foreigners. They have now informed foreign countries that they will only buy if there is a Chinese owned patent on the products and services. In other words, they have turn one hundred and eighty degrees and will only respect intellectual properties owned by Chinese. If foreigners wish to win state procurement tenders, they will have to dish out half of the inventor ship to Chinese citizens. That precisely is throwing up a wall to contain foreign imports. From court records, there is very little prosecution of its citizens for intellectual property infringements. But it does bring to prosecution where foreigners are caught ripping off Chinese video games!

We must understand that China is run by an authoritarian regime. What the authority says goes. No objection what so ever. And they know they are wining the intellectual property game. If required, China can close its doors now and still be able to make it to the next cycle. The west would have to look somewhere else for their markets, and in these bad climate, they and not China will be the first to go under. Such is the scenario: the new game is protectionism, and its survival for only the fittest. Obviously the fittest is the one with the most cash around. No matter what pressure the US is putting up, China will normally play the delaying game. One thing that comes to mind is the controversy over the Iranian nuclear embargo which Washington spearheaded. China has a lot of interest in Iran, and will not agree to any sanction, but instead see to it that its money is not getting burn.

China is now sailing to its near neighbors. For the moment, it is more interested in striking a working relationship with ASEAN, Japan, Korea, India, Australia, Brazil, Russia and Africa. It has already struck a free trade deal with ASEAN and will be signing more deals with Japan and Korea. It has used its large pool of funds to acquire companies around the world. It has bought iron mines, oil concessions, and other world brands. Whilst the west is struggling to overcome the recession, China is diligently building up its asset base. Its maxim is buying when it is cheap and when others can only look and not act. In the meanwhile, it is dragging its feet as far as revaluing its currency is concerned, much to the consternation of the US and the rest of the world.