April 2008 Archives

Unless you are one of the few who are somehow more concerned with storing up treasures in heaven (it is after all a narrow road that leads there), you know that there will always be someone looking to break in and steal your treasures and ancient relics. Like Cain and Able, the bond between property and theft is set in stone. It is for this very reason that farmers in a few villages in Shaanxi have taken to 'sleeping with their pigs' after repeated thefts in the wake of rising pork prices. By means of the Shanghai Daily's purple prose we read of brazen thieves in Lantian County who drugged the 'pigs or dogs' that guarded the enclosures, dyed seven white pigs black and even got the unwitting owner to help them load the stolen pigs onto their truck.

As a lab for monitoring China's eastern coast for 'red tides' (outbreaks of algae in organic matter) was dedicated in Shanghai this month, recent media reports have hinted at another red tide of recurring economic espionage involving Chinese nationals and foreign military technology, and an even bigger tide of sophisticated cyber attacks on the most sensitive computer networks in the U.S. After the severe sentence handed out this month to Chinese engineer Chi Mak, who had supposedly been placed in the U.S. for more than 20 years to gradually burrow into the defense-industrial establishment, one senior U.S. official likened China's sophisticated intelligence-gathering operation to an intellectual vacuum cleaner with a diverse network of individuals systematically collecting U.S. know-how

Courts in China, however, cannot quite deliver the same hammer blow like that dealt to Chi Mak (despite the Economist's hopeful assessment for China's 'new' intellectual property courts). In the Foundation for Law, Justice and Society at Oxford's report Regulating Enterprise in China, Andrew Mertha examined the complex nexus underlying enforcement of a given law, regulation or judicial decision in China. As courts in China fall under the jurisdiction of local governments as just another civil branch, confidence in the judicial system is not very high and courts are institutionally weak and largely unable to enforce their own decisions. Enforcement is also complicated by the intricate levels of administrative ranks and complex hierarchical structures that characterize power relations in China, and as courts are constantly afflicted by a scarcity of resources, political directives from above and powerful individuals or unscrupulous commercial concerns could all inordinately affect enforcement.

In the context of the relative novelty in China of the concept of private property embedded in IPR and the conflicting traditional awareness of knowledge as a public good (see Fraunhofer Institute discussion paper), the copying of technologies without paying royalties, unauthorized trademarks and publication infringements are a real challenge for judicial enforcement that is costly and complicated and for administrative enforcement (i.e. the Intellectual Property Office) that lacks independent power and authority. Catching a determined thief (someone like the prisoner who escaped jail when he managed to use a crane to smash through three iron gates in a Hebei prison last month) is just a little harder in China.

And as put by Maarten Roos at China Success Stories, the ineffectiveness of China's IPR protection mechanism is evident in the
high standards for criminal liability of counterfeiters, the high burden of evidence to prove bad faith registrations, and the difficulty to prove damages in civil proceedings.
While these issues will improve with time, owners of intellectual property can
ensure that they have the exclusive rights to their IP in China under Chinese law, and the best decision can be made quickly on whether to take action against a perceived infringement. Such protection, usually inexpensive and rarely time-consuming, is the most basic element to an organization's IP strategy.
Yet if a foreign company fails to be the first to patent their product in China, the best legal advice is (see China Law Blog) 'better luck next time' - somebody made off with your stuff.
If there was ever someone who lived up to their name, Hero of Alexandria can take a bow. Among the inventions credited to this freak, who lived in the first century A.D., are the aelophile, a working steam engine used to open temple doors, and a coin-operated vending machine for holy water in the temple (Hero's local temple must have been an otherworldly experience).

Yet while individuals may be creative at any time and place, it is much harder for nations to be systematically innovative, to foster the appropriate institutions and have the ability to consistently produce creative individuals.  And in this, the never-ending global chariot race to be in the vanguard of innovation, nations in history have succeeded each other at the front as the transfer of knowledge and technology enabled the chasing pack to catch up with the leaders. Far from repeating the errors of its isolationist imperial heritage, today's China is fully intent on getting what it needs to be next in line for leading the global torch of creativity. For China it is the fulfillment of a long sojourn from incessant imitation and burgeoning low-value production, to being a truly innovative society on the road to maturing as a world power. Yet in this momentous Olympic year for China, it has found that getting the Olympic torch all the way to Beijing is a bit more challenging than expected.

And depending on whom you ask, China's rise to the top is either just a question of time or a case of wishful thinking, because while there are clear signs of progress, naysayers always have a bone to pick with China's institutional obstacles. Richard Brubaker at All Roads Lead to China is a big proponent of the fact that the Chinese are very innovative, although it is just the system in which the talent is incubated that actually has been the barrier. Yet working its way up through the low cost manufacturing market, through improved knowledge bases China's moving up the value chain is only a matter of time. And while it may take some time, China will get there in the end. For Bill Dodson at the This is China! blog, however, the Chinese people are amongst the most backward-looking in the world:
They'll take a concept or process from beyond their borders, and then send it back in time to the Chinese countryside and fit it in with the way things have always been done in their civilization... [China] will have to reform much of its narcissistic thinking about itself as a civilization that believes it has little to learn from the world.

From humble origins with the famous Class of '77 when China's higher education system re-emerged from the Cultural Revolution, universities in China have experienced major transformation, especially since 1999. As this study on China's higher educational transformation released by NBER last month outlines, as a reflection of China's specific focus on tertiary education with major resource commitments to universities embodying significant changes in organizational form, the number of undergraduate and graduate students in China has grown by approximately 30% annually since 1999. And this transformation has brought in its wake a major and increasing focus on patenting in China, with much of the increased spending focused on elite universities with new academic contracts differing sharply from earlier ones with no tenure and annual publication quotas often used. All of these changes, the study concluded, have already largely impacted China's higher educational system and are beginning to be felt by the wider global educational structure.

Yet in an assessment that dampens a lot of the fanfare, 'fraud-buster' Fang Zhouzi recently confided to a Danish newspaper that scientific fraud in China is so widely spread that its a unique phenomenon, larger than elsewhere or any other periods of China, and it results from

interactions between totalitarianism (the lack of freedoms of speech, press and academic research), extreme capitalism (try to commercialize everything, including science and education) and traditional culture (the lack of scientific spirit, the culture of saving-face, etc.).

Although the situation is somehow improving, he added, with greater awareness of the problem and a Chinese media more willing to report misconduct.

Despite China's extensive state-led innovation, history has overwhelmingly favored innovation from the private sector (see Danwei's businesscast with Maya Alexandri discussing China's drive for indigenous innovation), and China's push to the front may ultimately depend on the competitiveness of its private firms. Author Rebecca Fannin (Silicon Dragon: How China is Winning the Tech Race) last month told Forbes.com how the success of 'copycat' firms like Baidu and Alibaba has inspired a new generation of real innovation, making China the next emerging Silicon Valley. And as the CScout China blog documented, the presence of Chinese companies at the annual Consumer Electronics Show has been steadily growing over the years, and new Chinese entries at this year's exhibition included wearable solar panels, Android handsets and Lenovo Ideapad laptops. In a study from the University of Toronto released last month investigating whether Chinese firms are making the transition from imitation to innovation, the authors emphasized the increasing competitive pressure on Chinese firms that is encouraging learning:

Intense product competition and demanding customers encourage rising R&D spending and the development of new products and processes, imitation of competitors, linkages with foreigners and local research institutions, and increased emphasis on incentives and development of human resources in their own organizations.    

All of this can be interpreted with skepticism or with optimism, yet even if you doubt whether China is ready to take the torch of innovation all the way to the top, its obvious China is definitely going somewhere, and fast.

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