The rapid development of China in the past two decades proves that the foreign investment access and intellectual property (IP) sharing system established in the early stage of the country’s reform and opening-up is in line with its development needs at that time. However, as the Chinese economy stands at a higher position than it did before in the global economy, some past policies may require modifications to a certain degree. Be it from diplomacy or an internal development perspective, taking the protection of IP rights a step further is an urgency.
Firstly, looking at this from an international perspective, an improved IP rights protection mechanism in China can differentiate the United States and Europe as well as alleviating international pressures and encouraging the formation of the “1+3” pattern. In the unilateral presidency of Trump, the cracks between America, Europe and Japan have become increasingly obvious as well. Even though within the U.S., a negative perception towards China has already been enforced, similar viewpoints are not shared by European countries or Japan for that matter. On the contrary, there is a huge potential for China to cooperate on both fronts with Europe and Japan due to the lack of structural geopolitical conflict of respective interests. However, Western countries still maintain a high consensus on the issue of IP rights protection. This provides the U.S. with a verbal and strategic edge to restrict China. Therefore, improving the framework for IP rights protection will derail the U.S.’ efforts to fan negative sentiments against China and allow China to win more multilateral support in its trade negotiations with the U.S. Practically speaking, other than the benefit in negotiations and in the face of a consensus on the issue of IP rights in the Western nations, a good IP rights protection policy will allow the Chinese economy to thrive.
Secondly, the improvement of such IP protection mechanism will help to dissipate the hard stance found in the U.S. towards China. In recent years, the attitude of Americans towards Chinese has undergone huge changes. In the past, because of China’s huge market and considering the fact that there is a huge gap between the capabilities of Chinese and foreign enterprises, foreign companies have been willing to overlook the issue of IP sharing in the Chinese foreign investment system. However, because of the rising labor costs in China and the rapid development of Chinese science and technology, Western enterprises are beginning to feel threatened. For example, the dissatisfaction of affected groups was propagated into U.S. foreign policy through the Congress. Presently, the U.S. is already in the midst of formulating a series of laws regarding the technology transfer affecting China. This has spread to the extent of affecting Chinese student and other groups, which is akin to the revival of McCarthyism. Fundamentally, if China is able to take the effort to amend the existing rules, it will undoubtedly help to mold more friendly perceptions towards China in the U.S., as well as help to change the hostile mentality of Americans towards China. Among it, the U.S. is particularly concerned about the issue of IP protections in the cyber domain.
Thirdly, and most importantly, improving the IP rights protection mechanism is a much-needed requirement for the sustained development of the Chinese economy, propelling the shift from “Made in China” to “Created in China”. IP rights actually cover a broad range of factors, which includes technology, labor results and new business models. Taking the example of new business models, it is not easy to innovate in this domain, but once a relative degree of success is achieved in implementing new business models, the possibility to create new economic growth points exist. E-commerce is one of the more obvious examples of this. How rights in these new business models are protected therefore becomes an important issue. Presently, China has the domestic economy with obvious capital capabilities and overcapacity to match, but what is lacking is the innovative capability. Therefore, how to turn these excess and old-fashioned natured productivity into new forms of innovative capability is one of the more crucial issues China needs to address in the sustained development of their economy. In the current market environment, some early-stage ideas with good developmental potential have entered the market prematurely in an immature state. Coupled with capital constraints, these companies’ business models were completely ruined. To cite the industry of shared mobility as an example, the sharing of bicycles and their underlying “sharing economy” is a new business model with massive developmental prospects under the right management. However, due to the lack of sufficient protection for this innovation model, a large number of companies emerged with a similar business model, thereby flooding the market. The large capital inflows fueled the oversupply of shared bicycles and caused them to quickly exceed market demand, leading to numerous problems such as chaotic management of resources and utilizing resources initially intended for public transportation. Just five years later, ofo - a company famous for their “little yellow bicycles” has declared bankruptcy, while another company by the name of Mobike is experiencing numerous negative issues in their operations. The “shared economy” model that comes in tandem with the potential of bicycle-sharing has also fallen victim to the impacts brought about by excess capital, and have since lost the opportunity to continue developing itself. As such, having a thoroughly formed IP rights protection mechanism does not only allow for the stimulation of R&D within Chinese enterprises and research institutions, but also help to protect new business models, ideas and technologies from excessive capital influx, and therefore ensuring that they are able to develop in a healthy and sustainable path.
In summary, making sure IP is protected carries huge importance both domestically and internationally. More importantly, China is in a vital window where increasing the protection of IP is already on the brim of taking place. Currently, the reform of China’s economy is at a very crucial step, and its continuous development requires the relevant law to steer the direction and offer protection. In the effects of the U.S. and China’s conflict with one another, China is also facing increasing pressures by the day. It is also important to note that these two could be linked to each other and deepen any potential effects. Therefore, there is a need for China to start changing its strategy in the relevant domains.
But the thing that needs to be pointed out at the same time is that the improvement of the protection mechanism must be done in stages. In the initial steps, China should focus its attention on the legislative level. It is especially important for China to protect IP rights by breaking away from the older methods of thinking, improving core technologies and introducing new business models. By doing this, China should strive to create an environment of law and regulation, where the market can be regulated. Fundamentally, whether the principles of IP sharing that comes along with the permission of foreign capital to enter China’s borders will be successful depends on the progress of China’s negotiations with foreign nations.
Final analysis conclusion:
To sum up, strengthening the compliance and protection towards IP rights is a major trend. It will not only ease international pressures on China, but also carry important value for the upgrade and transformation of Chinese industries.
