The Politics of Piracy in China

While some may see Chinese President Hu Jintao's upcoming visit to the U.S. as an opportunity to push Chinese authorities to crack down on rampant violations of international copyright, trademark and patent protections, a new book suggests that such external pressure will have little or no impact on the crux of the problem: the central government's inability to enforce intellectual property norms across the vast reaches of China's 31 provinces.

"Recent rhetoric of those who champion direct confrontation of China over intellectual property protection reflects an astonishing degree of ignorance about the bureaucratic nature of the Chinese legal, economic and political systems," says Dr. Andrew C. Mertha, author of The Politics of Piracy: Intellectual Property in Contemporary China (September 2005, Cornell University Press). "Increases in U.S. pressure will only result in Beijing digging in its heels and being far less receptive to U.S. concerns."


Mertha, an assistant professor of political science and international studies in Arts & Sciences at Washington University in St. Louis, has researched Chinese intellectual property issues since he moved to that country in 1998. His latest conclusions are drawn from personal interviews with hundreds of people, including local government officials and businesspeople throughout China, national political leaders, scholars, lawyers, trade representatives and veterans of private investigative agencies specializing in Chinese business disputes, as well as some of the pirates themselves.

Mertha suggests that the success of our efforts to deal with street-level piracy ultimately hinges on an intimate understanding of power politics in China's local bureaucracies and government-business relations. Leaders of local government bureaucracies are often intimately involved with companies that profit from pirated goods, so that when a community depends heavily on piracy for jobs and income, local powerbrokers have little incentive to crack down on violators. Local governments and agencies have limited resources and seldom make anti-piracy efforts a real priority. Violators also have developed increasingly sophisticated methods to manufacture and sell pirated and counterfeited goods, in some cases even copying the factories that produce them.

Mertha's book traces the history, cultural context and ongoing economic implications of intellectual property in China, and offers the following summaries of three areas that he considers to be the most important and least understood.

First, many people argue that China should utilize its IPR provisions within the revised criminal law to go after the pirates and counterfeiters. However, China's legal infrastructure does not have the capacity, nor the authority, to effectively handle the sheer volume of potential IPR violations. The courts are under the jurisdiction of local governments, which sometimes have a direct interest in looking the other way when it comes to IPR violations. In fact, the violating factories might even be owned by the local governments in question. More often, however, local governments simply want to ensure social stability and this means employing as many people as possible, even if it means employing them in IPR-violating enterprises.

Second, China's extensive administrative enforcement bureaucracies can offer only limited help for aggreived intellectual property owners. In order to use these institutions effectively, it is necessary to find creative ways to compensate their shortcomings. For example, many Chinese copyright holders have recognized that the copyright enforcement apparatus is extremely weak in terms of its personnel, operating budget, and bureaucratic reach. Consequently, they usually choose to take shift their claims to the more-powerful anti-counterfeiting bureaucracies by invoking laws on trademark, anti-unfair competition, and product quality.

Third, we need to recognize that intellectual property violations are based, first and foremost, on economic, not legal or "cultural," calculations. Most Chinese (and expatriates in China) buy pirated software, motion pictures, and music CDs because they are cheaper by several orders of magnitude than their legitimate counterparts. Microsoft Office costs more in China than it does in the United States, about the monthly income of most middle-class Chinese. It is no wonder, therefore, that the Chinese prefer to buy it for a dollar. By bringing the price closer to the black market price, at least temporarily, US companies can use their comparative advantage of virus-free software, product upgrades, and support services. This may mean losing money in the short run, but in the long run these losses pale in comparison to the continuation of the status quo.

"Intellectual property in China is a highly sensitive and often misunderstood policy issue," Mertha concludes. "It is embedded in a complicated institutional context, one in which change is often swift and dramatic — and uneven — and its future trajectory remains largely uncertain. If we want to curtail piracy and counterfeiting in China, we must learn the lessons of past engagement with China over the issue, as well as take into account some of the basic factors of IPR violations in China that never seem to make it onto the public discourse over the issue. Ultimately, to be effective, we must find some way to work with national-level Chinese authorities, to help them implement laws already on the books and enforce them at the local level."