Why is Counterfeiting so Pervasive in China?

Why is counterfeiting so pervasive in China?

— Asked by a Quora user.

Hersh Reddy, Programmer and Lawyer:

There is a much more complex and complete answer to this question, but here is the simple answer:

When China joined the global market and was admitted to the World Trade Organization (WTO), they signed on to a multi-lateral trade agreement called TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights).  TRIPS calls for all signatory countries to implement a minimum level of protection for patents, copyrights and trademarks.

China complied with the TRIPS agreement by making changes to its national law to implement the mandated Intellectual Property (IP) protection; however, it did not provide the resources or training to its law enforcement and judicial branches to enforce these new national standards.  As a result, IP protection in China is often selectively enforced, and requires significant efforts on the part of the rights-holders.

Although it is possible for countries to complain to the WTO about China’s lax enforcement, and the US has certainly done so, the reality is that there is not much that the WTO can do to force China to comply.

When the WTO appellate body passes a ruling stating that a country is in violation of a treaty, all they can do to remedy the situation is to give the complaining countries a right to levy punitive tariffs on the goods of the country in violation.

The US, the EU and Japan, are all themselves in violation of WTO provisions (illegal agricultural subsidies, steel subsidies, etc.).  So if they were to levy punitive tariffs against China, China would probably exercise its rights to levy its own tariffs.

Tariffs tend to reduce the efficiency of trade and so reduce global productivity.  In times of recession retaliatory tariffs can severely impact global growth by touching off a tit-for-tat proliferation of tariffs between countries.

As a result, the West and Japan have concluded that trying to enforce IP protections through retaliatory tariffs is counterproductive.  They have more to gain from trading with China, even under the current lax IP regime, than they do from a trade war.  Remember that in a trade war China would likely pirate even more goods, and would have even less incentive to comply with TRIPS.

Justin Ward, Worked in the media in China for more than 5 years:

This is really just a supplemental to Mr. Reddy’s excellent and much more authoritative answer on the international aspect of intellectual property as it relates to China. Reddy said that “did not provide the resources or training to its law enforcement and judicial branches to enforce these new national standards.”

Well for one, there are 1.3 billion people, and it is a miracle that any laws get enforced, much less something that seems insignificant as a priority to the government in relativity to public safety or order. The Beijing municipal government has allegedly banned smoking indoors in public places, but you would never know. It’s also incredible that China is becoming a successful developing country and a world power, given the challenges of trying to keep such a mass of people organized and functioning together in a society.

It’s the organized chaos of China that allows copyright violations to thrive. Much in the same way that the specialized force of chengguan, or city managers, remove beggars and sellers from the entrances of subways only to have them return a day or even hours later.

Well, the police could arrest them and fine them, you say, but then you would have to process and house all the sellers in jail and then try them in court, which would place a great financial burden on the state. It all comes down to a cost-benefit analysis on the part of the state.

What does the state get out of enforcing the IP of other countries? Well, you could argue that by creating an environment in which IP is more respected, China would spur innovation. True, but the Chinese government can selectively enforce and protect domestic brands and domestic IP to that same end and do it with fewer resources. For instance, there were crackdowns on the pirating of China’s uber-patriotic major motion picture “The Founding of a Nation.”

On the other hand, it does provide a source of income for a lot of people and it provides a direct benefit to the economy because companies face lower start-up costs if they pirate their software. So I can see a lot of reasons why the government would see it beneficial to take a cavalier attitude toward piracy.

Joseph Wang, Chief Scientist, Bitquant Research:

Because China is a manufacturing hub, and everything gets manufactured including knockoffs.

I went to a talk by an IP consultant that mentioned two somewhat surprising things:

1) For non-media products, the courts are customs are very efficient at stopping IP violations when someone complains.  If someone is violating your trademarks or patents, it is rather simple to get a court to issue an injunction and to get the police or customs to enforce that injunction.

2) The problem is as much a demand problem as a supply one.  Chinese manufacturers make knock-offs because there are people mostly in the West that are willing to buy.  One of the more effective ways of preventing IP violations is to get the customer lists of the violators and then call them up.

The other thing is that suing someone is useless.  The trouble is that you don’t want damages; you want them to stop making the product.

Sarah Weaver:

“Why is counterfeiting so pervasive in China? Not referring to copyright infringements in China, which western media often talks about. I am referring to a much broader counterfeiting that affects Chinese citizens in many aspects of their lives – fake education degrees, adulterated food items and fake milk, fake electronics in China and so on. What is the origin and nature of such widespread counterfeiting?”

The answer is disturbingly simple: they do it because they can get away with it; I will not say it is because of corruption, but there is a culture of “China First” that results in the idea that if it makes money for China, it is ok.

Some years ago, a major European car maker sued a Chinese car maker for making what was essentially a copy of their best-selling SUV; the case was seen in a Chinese court, which found in favor of the Chinese car maker because: “If you take away all the similarities, they are completely different cars.”


Quoted from https://www.quora.com/Why-is-counterfeiting-so-pervasive-in-China

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