On May 29, Fox Business Network host Trish Regan and China Global Television Network host Liu Xin (劉欣) engaged in a televised debate about trade disputes and intellectual property (IP) rights. On June 2, the Chinese State Council published a white paper titled China’s Position on the China-US Economic and Trade Consultations.
The paper starts by talking about commercial secrets and IP rights. It emphasizes how much money China has devoted to research and development, and how many patents have been applied for in China, but that does not change the fact that IP rights infringements by China are commonplace.
Liu could not completely deny this, so she dodged the key accusations and focused on minor ones instead.
The world has entered the age of the knowledge economy. Hardware manufacturing and software services are based on IP and rights purchases are increasing as a proportion of overall production costs.
However, China is an exception to this rule. Despite being the world’s biggest industrial exporter, it spends relatively little on buying IP rights from abroad.
According to figures published by the Organisation for Economic Co-operation and Development in 2016, 39.8 percent of the US’ IP rights revenue came from the EU, 8.8 percent from Switzerland, 6 percent from Japan and 4.2 percent from Taiwan, but only 4.8 percent from China.
These figures reflect the experience of many businesspeople who operate in China — they often lose out in a big way in terms of IP. This is why US President Donald Trump has seized on the issue of Chinese infringements and does not plan to let go.
According to figures published by the IMF for the first three quarters of last year, Ireland spent US$62.1 billion — more than any other country in the world — on IP rights, followed by the US (US$40.2 billion), the Netherlands (US$31 billion) and China (US$27.7 billion).
Given China’s position as the “factory of the world” and its huge annual trade surplus, its spending on IP rights is too low relative to its exports.
China is a big exporting nation, but it is not at all strong with regard to technology and patents. According to figures published by the Chinese State Administration of Foreign Exchange, its revenue from intellectual property in the first three quarters of last year was just US$4.1 billion, or 11th in the world.
This figure shows how weak China is with respect to IP and further demonstrates that its IP rights expenditure is not proportional to its huge export surplus.
In 2012, NBA great Michael Jordan sued Chinese shanzhai (山寨, “copycat”) sportswear maker Qiaodan Sports over the use of his name and Nike Air Jordan trademarks.
Chinese courts initially ruled in favor of Qiaodan and it was not until 2016 that the Chinese Supreme People’s Court reversed the verdict in Jordan’s favor.
However, that did not stop Qiaodan from countersuing in 2017.
This and similar cases give the world a strong impression that China does not respect IP rights, so it needs to work harder to prove that it takes them seriously.
Publishing a white paper saying “economic and trade friction provoked by the US damages the interests of both countries and of the wider world” and that “the US has backtracked on its commitments in the China-US economic and trade consultations” is unlikely to convince other countries.
It merely highlights China’s lack of understanding and respect for the rules of global trade.
Honda Chen is an associate research fellow at the Taiwan Academy of Banking and Finance.
Translated by Julian Clegg
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