Sino-US dialogue

Huo Jianguo

IPR protection vital for both nations

About two weeks before the third Sino-US Strategic and Economic Dialogue (S&ED), the American Chamber of Commerce in China (AmCham-China) published the "2011 American Business in China White Paper". The report is objective on a whole, but questions can be raised on the comprehensiveness of the samples it has used and the impartiality of its conclusion.

The business climate survey part of the report says the top challenge for US companies in China is the bureaucracy. Other administration and legal issues such as "unclear" laws and regulations, and inconsistent regulatory interpretation are the "third and fourth most difficult problem" US companies face. Some parts of the report can cause serious misunderstandings. As a country undergoing economic and industrial transition, China has its own problems to deal with such as limited development of some industries and over-dependence on some heavily polluted industries. The measures taken by the government to fix these problems apply to domestic and foreign companies both. It is thus wrong to say "unclear" laws and regulations are targeted specifically at foreign companies.

Similar misunderstandings can be created in regard to the unified tax policy, especially because local governments have their own preferential policies to attract foreign capital. If one local government grants preferential policies to a foreign company to start or continue business, it does not mean other foreign firms will get the same treatment from that or any other local administration.

Besides, corruption has become more rampant in multinational corporations operating in China. The Rio Tinto and Avon cases are examples of how menacing this cancerous disease has become. Hence, the central government is now determined to root out corruption from every walk of life. If some foreign companies misread the measures to fight corruption, there is little the government can do.

Intellectual property rights (IPR) have always been a very important aspect of Sino-US trade relations. China has made great progress in building a sound legal system for IPR protection. In the past five years, it has implemented the IPR Protect Action Plan in 10 different fields. Besides, it has established a mechanism to discuss IPR issues with other countries at regular intervals. True, there are some shortcomings in IPR protection in a few areas. But the central government is committed to strengthening IPR laws and regulations and implementing them in letter and spirit.

On the government's independent innovation policy, the report quotes 68 percent of respondents having said that they were not harmed by the independent innovation policy, while 40 percent said they had, especially by segments of the purchase market controlled by State-owned enterprises.

But the innovation policy cannot succeed without multinational companies' participation. The Ministry of Science and Technology revised the notice in 2010 to include products of foreign companies as independent innovations in China. And Premier Wen Jiabao emphasized at the Davos forum that all companies registered in China are Chinese companies, what they make are "made in China" products, what they innovate are "creations in China", and that all foreign companies registered in China will get the same treatment that domestic enterprises do. Of the 500 top world companies, about 470 have set up shops in China, with more than 1,200 research and development (R&D) centers and about 1 million foreign patent applications. China has one of fastest growing R&D wings in the world, which accounts for 1.6 percent of its GDP.

Multinational corporations can play an important role by participating in China's economic transition, because in contrast to their worries they still have a huge market to capture in the country and grow to their full potential.

The author is president of the Chinese Academy of International Trade and Economic Cooperation.

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