Intellectual Property, Economic Development, and the China Puzzle

“Since the late 1980s, the Chinese economy has been growing at an enviable average annual rate of about 10 per cent. Accompanying this unprecedented economic development and growth was the maturation of the modern Chinese intellectual property system. Since the reopening of its market to foreign trade in the late 1970s, China introduced its first modern copyright, patent, and trademark laws. A decade later, China revamped its intellectual property system in response to US pressure and did so again in preparation for its accession to the WTO. At present, China is a proud member of many multilateral intellectual property agreements. Notwithstanding these developments, the enforcement of intellectual property rights in China remains inadequate.
Although commentators often link intellectual property protection with economic development, China thus far has presented a puzzle to those who study this link. While some commentators consider China a paradigmatic case for showing that rapid economic development can take place despite limited intellectual property protection, others have noted gradual improvements in the Chinese intellectual property system as the country became more economically developed. In fact, history suggests that China is now simply following the economic development paths of Hong Kong, Japan, Singapore, South Korea, Taiwan–or even Germany and the United States. It is only a matter of time before China is converted from a pirating nation to a country that respects intellectual property rights.
This book chapter examines the relationship between intellectual property protection and economic development. It begins by exploring the conventional linkage between intellectual property protection and foreign direct investment. The chapter then examines why China expanded its intellectual property protection even though such expansion was unnecessary for attracting FDI. The final section highlights the country’s regional and sectoral disparities, its inadequate development of an enabling environment for effective intellectual property protection, and its improvements in intellectual property protection at both the microscopic and qualitative levels. The chapter takes the view that a better understanding of the role of intellectual property protection in promoting economic development will provide a more accurate forecast of when China will reach a crossover point at which it will find stronger intellectual property protection in its self-interests.”

Peter K. Yu

Michigan State Law School

August 2008

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