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 ten per cent. Accompanying this unprecedented economic development and growth was the maturation of the modern Chinese intellectual property system. In the 1980s, China introduced its first modern copyright, patent, and trademark laws. A decade later, China revamped its intellectual property system in response to U.S. pressure and did so again in preparation for its accession to the World Trade Organization. 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 will be converted from a pirating nation to a country that respects intellectual property rights. This Paper 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. It then examines why China expanded its intellectual property protection even though such expansion was unnecessary for attracting foreign direct investment. The Paper concludes by highlighting 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 Paper takes the view that a better understanding of the role of intellectual property protection in promoting economic development will help provide a more accurate forecast of when China will * Copyright © 2007 Peter K. Yu.