Sunday, April 24, 2011

Week 5 Reading Responses

This coming week we will be exploring two topics that are linked when it comes to relations between the U.S. and China -- Entrepreneurship and Intellectual Property. Many U.S. firms are looking to start new operations in China, expand existing ones, work with existing Chinese firms, or compete with them. And while there are some Chinese firms who are looking to expand into the U.S., among Chinese firms, one major trend that we're seeing is to develop within their home market. The Chinese government's push for innovation from its own citizens, or "indigenous innovation," plays a role in this trend. But some U.S. companies claim that this development of Chinese businesses and the indigenous innovation may be coming at the cost of American businesses. They claim that in China, their businesses are hurt because their intellectual property rights are not being protected and that they suffer a disadvantage in the market when the government shows preference to Chinese companies.

Go through the following readings and let us know what your take is. What are you finding most interesting? Do you see any major themes coming out? Can you pick up on any tensions between national development and international exchange? Is the Chinese government engaging in protectionism? Are American businesses applying a double standard?

McGregor, James. “China's Drive for 'Indigenous Innovation' - A Web of Industrial Policies,” (U.S. Chamber of Commerce).

Brookes, Peter. "China's Indigenous Innovation Trade and Investment Policies: How Great a Threat?" (Heritage), March 9, 2011.

Editorial Board. "China and Intellectual Property," (NYT), December 10, 2010.

Fannin, Rebecca. "China Startups Battle the BAT," (Forbes), October 18, 2010.

Lee, Kai-Fu. "Hard Choices: Betting on China's Startups," (Business Week), July 8, 2010.

Dolan, Kerry A. "The China Clean Tech Divide: Threat or Opportunity?" (Forbes), November 30, 2010.


  1. The indigenous innovation policy depends on the assimilation and recycling of foreign technologies. This seems like a form of protectionism, in that it damages any independent foreign companies while bolstering domestic production. One article mentioned that foreign companies could choose not to do business in China if they wanted to protect their intellectual property. However, this seems impractical since resources, markets, and ties have already been established in China, making it far more convenient for companies to share innovations, even trivial ones, than to abandon business in China. It is ironic that China seeks to adapt foreign innovations in order to surpass foreign powers in the international market. This pattern of behavior is similar to the self-strengthening movement of the 1860s. During that period, China also chose to incorporate Western technology (especially military) in order to further her own development and catch up to the West.

  2. The article on 'China's Drive for Indigenous Innovation' raises a number of good points, including the sentiment of victory and victimization that has very effectively been used as a tool to stir up Chinese nationalism. I was intrigued, if not disturbed, by the fact that the cultural extravaganza featured in the article ends with the words 'Long Live the Great Communist Party' rather than 'China' as a nation, a small - but perhaps telling - indication of the growing aggressiveness/confidence of the CCP in blurring the distinction between between the two.

    Separately, the article also makes a number of thinly veiled criticisms against China's IP policy which are for the most part fair, although it is worth pointing out the clearly discernible slant in the writing, and that the piece itself is written by a senior counselor at APCO, a firm providing communications and public relations expertise to its clients.

  3. I think the Chinese government is engaging in protectionism in some degrees. However this particular issue has to be viewed in the context of China’s current stage of economic development. As a developing country, China’s legal system is not as comprehensive and mature as that in the US. As it is a graduate process to improve the legal system over time, for American companies who want to enter the market and take advantages of the huge potential, they have to take into account the costs associated with the immature Intellectual Property rights protection legal system before they make decision to enter this market. Moreover, instead of using the Intellectual Property protection as a bargaining chip in the international trade negotiations, US and China should work together to help China to improve its legal system.

  4. In the end of the second article"China's Indigenous Innovation Trade and Investment Policies: How Great a Threat?",the speaker proposed that US "firms could choose not to do business in the Chinese market" in order to protect themselves from China's Indigenous Innovation policies which "threatens the American technology." Personally, I do not think that this suggestion is doable.Even though I do not have much background knowledge on this subject matter, I do think it is obvious that China is a booming market and also one of the biggest manufacturers for the US.(Almost everything I buy in the states is made in China) Not to do business in the Chinese market probably means a great loss for the US economy.

  5. The intension of Indigenous Innovation Policy, I would say, is aiming for the development of ownership of high technology since most of high-tech companies located in China are owned by foreign capital. However, the problem that foreign investors is worrying about is not really about the nature of this policy, for every government would wish to own the technology for sure, but is about the loosen legal system in China in protecting the patent and copyrights. The dilemma here is, the advanced education and research ability in China now is not strong enough to support the local startups with indigenous technology; at the same time, the person who can get financial support from the government according to the IIP is usually educated oversea and armed with foreign resource. So this group of entrepreneurs become the major force in the Chinese innovating progress. Though as discussed in one of the reading that Chinese entrepreneurs claim to stop looking into silicon valley for clues, this only happens after they have already developed their own business, which is basically a perfect copy of foreign ideas with slightly changes. (It is very easy to tell Joe Chen's idea of Chinese Social Network "RenRen" is apparently a translated version of "Facebook" plus extra applications from the "Blogger". It is just so ironic he is now trying to set himself away.) The identity of people like Chen actually set up the beginning situation of Chinese entrepreneurship, which is equipped with foreign technology or ideas, and now trying to find their own paths.

    Surely there is a trend here for Chinese entrepreneurship to grow according to the opportunities provided by the government. But from what I understand, startups in China will not happen without the support of importing technology, and the government should figure out a win-win solution for foreign investors to stay in China in order to provide the technical support in starting the local business, and without risking losing their patents due to the flaws of Chinese law in copyrights protection. Only in a country with the completed legal system to protect both sides of the business, the international market can be built between China and the world. As a rapidly growing country taking part in the international business, I do not think the government would want to risk its morality to gain quick profit.

  6. The two themes in china's intellectual property development, technology startups for the internet market, and big corporations related to aerospace, transport and telecommunications are treated very differently by american businesses and for good reason. Silicon valley investors are excited about start-ups in China, and many welcome the entrepreneurs growing in China. These are companies that do not import technology but rather depend on the internet to bring benefits. Big corporations like telecommunications companies or solar panel companies, on the other hand, see China as an unfair competitor.

  7. First, I think we should realize that fostering China's long-term innovative capacity has the potential to offer enormous benefits for the U.S. and the world. Technological innovation is arguably the single most important factor in driving productivity gains (and thus economic development and higher standards of living) in the later stages of economic development, and it's critical for solving some of the world's greatest 21st century challenges, from climate change to poverty alleviation. We absolutely need the Chinese people as innovation partners in those efforts.

    With that said, the evidence suggests the Chinese government is currently engaged in one of the largest organized efforts in history to import and reverse engineer foreign technology, in large part through manipulative trade deals, direct theft, or other forms of protectionism. Not only are many of these practices ethically wrong and directly confrontational to liberal economic values, they end up damaging global innovation because they reduce the incentives for firms (and foreign governments) to invest in science and R&D. Moreover, while these practices certainly can benefit China's economy in the short-term, it won't allow the nation to develop real long-term innovative capacity.

    I was therefore pleased to see the New York Times editorial board issue this strong statement: "The United States has made some progress at the World Trade Organization against the theft of intellectual property in China. But it must be much more vigilant and aggressive." I think that's right, and it's a problem we need to take very seriously.

  8. I think the major problem in this area is that China can produce almost any product more cheaply than in America. Our advantage comes in our technologies and other intellectual property. If China can steal or gain access to that information and those processes, we're in serious trouble. I find the solar panle article interesting, because it showed that the Chinese people produced the panels much more efficiently, and made an American company switch to selling a coating only. But imagine what would happen if the Chinese figured out how to make the coating also. That would be serious trouble for the American company. Problem is, there's no good solution. China wont play nice (with what we consider nice) and we can't very easily embargo Chinese imports that we rely on, nor can we ignore China's emerging role in the world. Clearly this is a problem we need to continue to try to fix, but doing so will not be easy.