The US has three big trade wars running and demanding the intellectual property ( IP ) protection, market access and ending subsidies. Leo Austin, the UK based businessman who has decades of experience in China gave us this comparison, between cultural attitudes to intellectual property protection. China is having the best interests to get it right when one of these wars happen, Leo predicts that it will be the war of IP.
The middle income trap is the most feared by the Chinese. The risk of becoming just a production house or little more is what keeps them cautious. The Chinese gave the example of Thailand, which is called as the “Detroit of Asia”, which is the 12th largest auto-manufacturing hub in the world. But majority of the brands and technology are foreign-owned and Thailand ranks the lowest of being 81st in GDP per capita.
In 2017, the Chinese filed for almost 1.3m patents, 6.4m trademark applications and 860,000 industrial designs. Which concluded that they do believe in IP. They intend to raise domestic content in fields like IT, robotics, Aerospace, maritime equipment, rail, alternative-energy vehicles, power, pharmaceuticals, and agriculture too. The ‘Made in China’ plan for 2025, their industrial strategy caused such an alarm and was also viewed as a global threat. But China’s investment in core science has not worked that well for them. The conference board analysis showed some intangible investment in China tripled as a share of gross value was added from 1995 to 2016. But the same level of investment would have got triple the returns out in the United States. The Chinese country has been plagued by an inefficient state sector and politically directed lending. State-owned enterprises still captured 82 per cent of all bank loans in 2018. That Is said to improve, but let’s see.
More than 5 million Chinese citizens have studied abroad, and only some 3 million of them have returned home. According to the Chinese job site Liepin, 75 per cent of all employees in the Chinese internet industry in 2017 were educated abroad. This implies that the total breadth and weight of the learning system has already passed the tipping point, this also means that the localities now can come together to join forces and start innovating without the need of foreign help.
The e-commerce revolution, where the Chinese found that the highest returns came through new business models, and not through this protectable IP. As it was difficult to effectively defend these models through legal systems, China came up China-speed competition as their defensive tool. Now China wants to invest at the top of the exploration chain. Once Huawei was left out from the Android ecosystem, it boosted the investment in a huge project to develop its own operating system. It was expected to license, wherever it can, as a direct competitor straight to Google. Many other Chinese companies are trying to “own” IP across their Industry chains, but none of that will be worth anything if it can just be stolen and subjugated by others. In the years of 1970s and 80s, Taiwan was known to be the ‘pirate kingdome’ by the Us, as they huge rates of IP infringements. It was an ongoing economy, famous for light industry and leather manufacturing. By 1989, the US Special Trade Representative put it on the Special 301 Priority Watch List for failure to protect US intellectual property rights, and prevented its entry into GATT, the predecessor to the World Trade Organization.
The Chinese court system can work for IP security, but it’s still not easy. Detection is too hard, damages have been too low. Yet there are now 18 IP tribunals round the country, and the Chinese are suing each other in record numbers. The Shanghai IP court had completed almost 6,000 cases by mid-2018. It awarded France’s Dassault Systemes $2.2m in damages last year in a case against a Chinese rival. But, there is still hope.
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