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China Finally Has A Reason To Reform Its Copycat Economy

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China Finally Has A Reason To Reform Its Copycat Economy

The Chinese are voracious copycats. It's not a new observation. In the late 17th century a Spanish missionary called Domingo Navarrete noted the tendency in his memoirs.

"The Chinese are very ingenious at imitation," he wrote. "They have imitated to perfection whatsoever they have seen brought out of Europe. In the province of Canton they have counterfeited several things so exactly that they sell them in inland."
Some things, it seems, never change. Over the past two decades Chinese knock-off merchants have replicated everything from Western clothing brands, to DVDs of Hollywood movies to luxury handbags.

And ambitions are expanding. Fake Ikea and Apple stores have sprouted across the country. A Chinese man last year managed to put together a Ferrari. The vehicle was a perfect replica except that it had no engine. The Chinese government itself estimates counterfeits constitute between 15 and 20 per cent of all products made in China.

Imitation might be a form of flattery, but when it comes to business there's nothing pleasant about the experience. If someone rips off your design and makes money from it, that's a direct hit to your own bottom line. The British inventor James Dyson complained recently that he has spent $1.5m (£955,000) battling Chinese rip-offs of his bladeless fan.

China might be the market that every Western firm wants to be part of, but the copycat tendency is putting some off. Many technology and engineering businesses looking to operate in China fear their intellectual property (IP) will be purloined. And it is holding them back from investing.

Small and medium-size technology firms that lack the massive legal resources of frequent knock-off targets such as Apple or Disney are especially wary. If you're a Western firm which has, say, a new technology for laying tarmac, you don't want to introduce it to China if there's a possibility a local firm is going to replicate the technique and start using it all over the country.

But could change be on the way? The Beijing government is waking up to the Western counterfeit concerns. An international technology fair in Shanghai in May jointly organised by three ministries and the Shanghai government – hopes to allay some of those fears. Western technology businesses exhibiting at the fair will be put in touch with Chinese customers. And both parties will be linked with expert legal advisers. There will also be assurances that any intellectual property transferred in the deals will be protected in Chinese courts.

Will it work? Can Western businesses do deals safe in the knowledge that their intellectual property rights will be protected? It is difficult to say. Doubts remain about whether Beijing can deliver on its promises. When the US made a complaint to the World Trade Organisation in 2007 about copyright breaches, China took it as a national affront and accused America of making a "mistake". A string of bogus "Apple stores" in China were closed down in 2011 not because of the illegal use of the US company's name but because they lacked a proper business licence.

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