US pundits and policy makers argue that China flagrantly violates intellectual property (IP) rights and steals US technology to outcompete the United States in the global economy. European rights holders echo these claims. Although there is some truth to these claims, Zhenqing Zhang’s book offers a far more nuanced and well-informed picture of the state of contemporary Chinese IP protection and enforcement. Intellectual Property Rights in China is an important and valuable contribution to the literature on Chinese political economy and comparative and international relations.
Zhang’s analysis builds on prior work in this field and, in particular, on Andrew Mertha’s ground-breaking The Politics of Piracy: Intellectual Property Rights in Contemporary China (2005). Mertha provided a detailed analysis of the Chinese bureaucracy charged with overseeing IP policies. Zhang adds to this focus on the workings of the Chinese state in three main ways: first, Zhang casts a wider net to capture the perspectives of foreign investors, state-owned enterprises (SOEs), small- and medium-sized enterprises, and Chinese consumers; second, Zhang explicitly embeds the analysis in the broader context of Chinese economic opening over time and its changing aspirations, as reflected in the evolution of patent, copyright, and trademark policies; and third, Zhang’s book analyzes the implementation of IP protections. The book is based on newly declassified documents, multiple interviews with a variety of important stakeholders, field research (including participant observation of a counterfeit goods raid), Chinese-language publications, and the extensive and effective use of secondary survey research conducted in China.
The heart of the book consists of two chapters (the political economy behind legislation and then its implementation) on each of three types of intellectual property: patents, copyright, and trademarks. It concludes with policy recommendations and a sense that further economic liberalization, though necessary, could prove to be destabilizing for party rule.
Zhang makes a compelling case demonstrating the variation in commitments to IP protection and enforcement in China across stakeholders and over time. The book carefully documents internal deliberations on intellectual property and its suitability in a socialist market economy. China has dramatically increased its IP protection capacity and has developed extensive human capital for protection and enforcement. External pressure, particularly from the United States on patents and copyrights, has played a key role in China’s policy evolution. Zhang offers insights into how economic opening and Chinese entry into the World Trade Organization (WTO) sparked some domestic support for stronger IP protection and enforcement. Thus, economic coercion is only one part of the story; interest group competition is another crucial driver of Chinese policies.
Whereas foreigners mainly focus on protection and enforcement, Chinese policy makers see IP policies as embedded in the country’s broader quest for economic development and the transition to a truly innovation-based economy. For example, Chinese patent professionals refer to “patent work” (p. 54), of which patent protection is only one part. More important for Chinese patent practitioners is “how patent protection can boost foreign trade and promote local economic development” (p. 55). The Chinese government is eager to build its own IP rights industry to promote policies that support the creation of high-quality patents, “apply those patents to benefit the market” (p. 57), and transform science and technology into the economy’s primary growth engine (p. 67).
Achieving these goals is a challenge because of uneven support for patent protection across stakeholders. Foreign investors and competitive Chinese firms, such as telecommunications powerhouse Huawei, are strong supporters of protection and enforcement, because their intellectual property bolsters their competitive advantages. Small- and medium-sized Chinese enterprises are ambivalent because they are unable to afford expensive R&D (p. 70). Weak support from China’s domestic business community is a substantial barrier to thoroughgoing patent enforcement (p. 82). SOEs are indifferent insofar as their market profits are guaranteed and they do not have to face a fully competitive business environment (p. 70).
Zhang’s discussion of Chinese foot-dragging in copyright reform includes insights into how China’s censorship policies, ideology, and cultural affairs complicate the economic rationale for copyright protection. The government tries to maintain ideological order, pursue commercial benefits, and protect copyright (p. 113). Its propaganda initiatives constrain cultural production in various ways (pp. 129–130). Zhang quotes a Chinese movie producer: “’the copyright infringers hurt my wallet; the government hurts my mind’” (p. 134). Again, in the case of copyright, China finds itself sandwiched between foreign pressure and domestic pressure. Domestic actors bristle at the fact that initially foreign copyright holders enjoyed greater protection than Chinese cultural creators (p. 103). China’s quest to join the WTO has impelled Chinese copyright reform. Chinese copyright law looks strong on paper, but implementation is quite uneven.
Foreign rights holders and domestic creators of cultural goods prefer strong protection and enforcement, but for the most part Chinese consumers do not. The Chinese public includes sellers and consumers of pirated copyright products, and the underground markets thrive. As Joe Karaganis demonstrated in Media Piracy in Emerging Economies (2011), copyright piracy is really a pricing problem, not a property rights problem. Media piracy is rampant in poorly served markets in which authorized goods are either unaffordable or unavailable. Zhang underscores both pricing and distribution issues, as well as employment and local tax revenue opportunities that militate against a uniformly strong crackdown response from the Chinese government.
Chinese trademark reform has been noteworthy in its domestic roots; trademark issues have not been subject to the intense foreign pressure concerning patents and copyright (p. 172). Yet here, too, Zhang finds uneven domestic support by analyzing the preferences of various societal actors. The government has emphasized that affected businesses should be at the forefront of brand management and trademark enforcement, and Zhang walks the reader through the evolution of China’s commitment to product quality control and standards. Domestic scandals involving counterfeit goods that have posed health and safety risks have shocked the public (p. 197), but the quest for short-term profits has compromised a commitment to quality and long-term investments in brand management. Just as in the case of patents, Zhang’s research finds that SOEs are indifferent to the implementation of trademark policy. China’s laws protect SOEs from antitrust enforcement, and Zhang points to their market-distorting effects as a key reason for uneven trademark enforcement.
Overall, Zhang’s book offers important insights into the “many Chinas” that exist and the sometimes clumsy incentive structures that are legacies of its political and economic evolution. Zhang is rather uncritical of strong IP protection and advocates free markets and democracy as the answer to the bottlenecks and obstacles that he highlights throughout the book. Yet the United States’ IP regime has been criticized as being overly protective of rights holders at the expense of public welfare; the outcry over the cost of pharmaceuticals is one case in point. Strong IP rights are no guarantee of innovation. Furthermore, given the Chinese Communist Party’s wish to keep a strong grip on power, it seems unlikely that Zhang’s preferred outcomes will come to pass anytime soon. Yet the book is an excellent contribution to scholarly debate and offers a valuable and nuanced picture of the Chinese political economy.
