This article is from the public number: Fudan financial review (ID: FFReview) , author: Shang-Jin Wei (Fudan University academic visit Asia Standard international Institute of Finance, Columbia University Lifelong Professor), Yu Xinwei (Associate Professor of Economics, School of International Economics and Trade, University of International Business and Economics, Beijing), title map: Visual China
The US tariff on Chinese goods has recently reached its highest level since the Great Depression of 1930. U.S. President Donald Trump and his trade officials often accuse China of not respecting intellectual property rights and stealing US inventions, designs, and other forms of intellectual property, and many US media have naturally repeated these allegations. This article will use data as a basis and cross-country comparison as a framework to assess China’s protection of international intellectual property rights.
Once upon a time, you can easily find pirated DVDs of foreign movies and music on the streets of Vietnam, India or Mexico. And CD. Everything is now digitized, and even if piracy may not converge, it is no longer so easy for visitors to see pirated business. But in general, intellectual property protection in developing countries is weaker than in rich countries. The question to be explored is not whether China has improved its intellectual property protection, but whether China is doing better or worse than expected, compared with income levels?
To obtain systematic evidence, we studied each country’s patents, copyrights, and other intellectual property rights to foreign countries. The royalties and license fees paid by the owner. These data are included in the balance of payments statistics compiled by the International Monetary Fund (IMF). The data shows that there is a close correlation between the income level of a country and the amount of foreign intellectual property payments in the country. The logarithm of these two variables has a clear positive linear relationship. As shown in the chart below, on average, for every 1% increase in per capita income, the per capita external intellectual property payment will increase by 1.85%. This means that, in general, as a country becomes more affluent – as its economy moves toward technological advancement and capital intensive – its intellectual property protection system tends to strengthen.
If Chinese companies always misappropriate foreign intellectual property without compensation, then China’s foreign intellectual property payments should be significantly lower than their income levels. However, we examined the data of Chinese per capita external intellectual property payments from 1997 to 2017 (red line in the picture) and found that the situation is not So. Before China joined the World Trade Organization in December 2001, its intellectual property payments were lower than the international average of countries with comparable income levels. After joining the WTO, China’s annual knowledgeProperty rights payments have exceeded this average.
The payment of China’s foreign intellectual property royalties has been followed or even exceeded its overall economic growth rate. In 2000, the last year before China’s accession to the WTO, China’s total intellectual property fees paid to foreign holders were only $1.3 billion; by 2017, this figure had increased to $28.7 billion. , means an average annual growth rate of 20%. In comparison, the median annual growth rate of foreign intellectual property payments in all countries during the same period was only 9.5%. The average annual growth rate of intellectual property payments in China is higher than that of France (7.9%), South Korea (6.5%) and Mexico (-1.9%) are much higher. India, whose population size is comparable to that of China, has an intellectual property payment growth rate comparable to that of China; however, its total payment in 2017 was US$6.5 billion, only 22% of China.
Another way to judge the effectiveness of intellectual property protection in China is to see where multinational companies do business. Multinational companies are not stupid, they are reluctant to enter a market that will encroach on their intellectual property on a large scale. Even in the 2018 years of trade wars, China is still the preferred destination for foreign direct investment (FDI) in developing countries (both in the previous decade). In fact, in all countries, only the United States attracts more FDI than China. Of course, different people may draw different conclusions from this same set of facts. On the one hand, you can say that compared with the United States and other high-income countries, China has not done enough in intellectual property protection, so its intellectual property protection system still has room and necessity for further strengthening. On the other hand, you can also point out that China’s actions and its development stage and incomeThe level is not bad or does not require special attention. In fact, China’s payment of foreign intellectual property fees has long exceeded the international average. As China becomes more affluent, its intellectual property protection system will also become more powerful with greater probability.
There is a related question: Can China and other countries agree on strengthening intellectual property protection? One key to understanding this issue is to look at the pace of innovation in China. In recent years, Chinese companies have invested heavily in research and development, and the number of patents registered by Chinese companies has grown exponentially. A similar trend can be confirmed by the increase in the number of patents granted to Chinese companies by the US Patent Office even without the use of official Chinese data. (Wei Shangjin, Xie Zhuo, Zhang Xiaobo. From “Made in China” to “China Innovation”: Necessity, Prospects and Challenges [J]. Economic Outlook Magazine, 2017, 31(01):49-70.)
The accelerating pace of innovation in China provides an optimistic outlook for international cooperation in intellectual property protection. In the past, the main result of enhanced intellectual property protection was the higher licensing fees charged by foreign companies. Today, enhanced protection will also help encourage innovation in Chinese companies.
All in all, there are still many areas for improvement in China’s intellectual property protection system, but the data and facts do not support the “serious violation of foreign intellectual property rights”. The accusation of being very embarrassing in China. If the United States can correctly view this issue, it will be more promising for China and the United States to strengthen constructive cooperation in this regard. In the end, the benefits for both sides will far outweigh the tit-for-tat tariff escalation.
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This article is from the public number: Fudan financial review (ID: FFReview) , author: Shang-Jin Wei (visiting professor at Fudan University academic Asia Standard international Institute of Finance, Columbia University Lecturer for life Professor), Yu Xinwei (Associate Professor of Economics, School of International Economics and Trade, University of International Business and Economics, Beijing)