With the Games now in full swing, Olympic tourists would be unaware of the concentrated efforts on the streets of Beijing that preceded their visit to the Chinese capital. Foreigners residing in Beijing before the Games would know, however, that cheap DVDs are no longer freely available on the street corners, while Beijing's Silk Street has been put through what Chinese Vice Premier Wang Qishan described as rectification. If there are visible outcomes of the Chinese government's claims of taking Intellectual Property Rights (IPR) seriously, these are part of it.

Crackdowns in China are no small feat: China's scrap with the counterfeit industry has historically been of epic proportions. The tide of Western companies setting up production in China has provided numerous opportunities to copy designs and production techniques, and China's rising middle class (according to Supply Chain Digest) has been eager to snap up realistic looking knock-offs at low-ball prices. 80% of all items confiscated in 2007 by U.S. Customs authorities as counterfeit items, moreover, were produced in China, pointing to an advanced global distribution network for fake goods.

The latest crackdown in China was preceded by warnings in June of harsher punishments about to be meted out to piracy offenders. Copyright Management Bureau Director Xu Chao admitted to a grave piracy situation in China, yet as part of China's new Intellectual Property Rights Strategy, Xu promised better administrative protection of copyrights and harsher judicial penalties. Yet while a sign of changes on the ground, crackdowns in China still occur in a general context of lax enforcement of IPR, a description preferred by the Economist's Intelligence Unit, based on their analysis of China's still fragmented regulatory environment with various toothless agencies and biased courts.

Nevertheless, yesterday's edition of the China Daily newspaper reports of a crackdown planned for the local cultural market in the city of Anshan, Liaoning province. During the crackdown,

law enforcement officials will inflict a stiff punishment on offenders. If the amount of pirated [goods] sold in one time do not exceed 100 items, all illegal goods and income will be confiscated, and the law breaker will be punished a minimum of 10,000 yuan (sic).

Yet if the amount of pirated goods exceeds 500 items, the article concludes with the terse yet ominous proclamation: the law-breaking unit or individual will bear criminal liability.

So despite China's infamous status as the counterfeit capital of the world, with the current crackdown in force, copyright offenders in China have been put on notice: surpass the magic number of 500 and you will face the full might of the law. Yet like with all crackdowns, the real test will be to see what happens after the crackdown, or more to the point, after the Olympics.

Image: China Daily.

Does the Peri minicar (left), built by China's Great
Wall Motor, look remarkably similar to the Fiat Panda (right)?


A Turin court was in no doubt last month when it barred the Peri from being sold in the E.U., after an appeal by Fiat. Yet unsurprisingly, Great Wall Motor was able to shrug off the Italian court's decision, because a few days later a Chinese court dismissed the claim filed by Fiat in China alleging the GWPeri model was an infringement of its patent.

The Peri/Panda case is by no means the first claim of imitation against Chinese auto makers. In 2006 The Times described at length how the likes of General Motors, Rolls-Royce, BMW, DaimlerChrysler, Honda, Audi, Nissan, Toyota and Mercedes-Benz have all had to fend off a so-called attack of the clones from Chinese manufacturers like Chery, Shuanghuan, Hongqi, Geely and JiangLing. Some analysts have even concluded that Western manufacturers have to accept copying as part of the price of doing business in China, like Honda concluded when it lost half of its motorcycle manufacturing market share in China to cheaper Chinese immitations. Staying in China, Honda decided, required entering into partnership with some of the very companies copying its bikes. 

Yet with the steady growth of the Chinese car market, China is no longer producing just lower-value clones. Chinese brands have grown to the point that 57% of all vehicles sold in China in 2006 were from local manufacturers, and in March 2006 Chery Automobile became the first Chinese auto maker to top the domestic car sales list. To actually break in to markets overseas, however, and to overcome their disadvantages in product and business model innovation and manufacturing quality, Chinese car makers have to make a quantum leap across the automotive value chain, enhance quality standards while developing unique models. While positioning itself for exports, Chery has been co-operating with global design and engineering experts and is now boosting exports to markets such as Egypt, Italy and Russia.

For many years regarded as low-end, unreliable brands, Chinese auto manufacturing is experiencing a gradual coming of age with the global emergence of Chery, and with the growth of the market in China and government encouragement of R&D, China will gradually lose its knack for manufacturing cheap clones.

Additional sources:
China. An Automotive Industry on the Verge (Accenture)
Shaping the Future of China's Auto Industry (McKinsey)
Foreign Technology in China's Automobile Industry (China Environment Series)

Images:
http://blogs.automobilemag.com (Panda)
http://www.cnnauto.com (Peri)