Frequent violation of intellectual property rights (IPR) is a growing problem for foreign investors and is a constant source of friction between United States, European and Japanese trade relations with China.

The Chinese government is reluctant to enforce IPR as it creates hundreds of thousand of jobs. For businessmen, the black market also offers a wide range of opportunities. With rising housing and food costs, Chinese citizens love the low prices- they are accustomed to buying newly released films for a dollar.

Pressure from foreign investors forces the Chinese government to implement policies to stop piracy, but these measures are temporary; also local officials are often in colludion with pirates. The judiciary department keeps piracy cases on file to make it appear they are actively investigating. But pirated factories are underground and even if the government is able to seize a pirating factory, victims are not compensated and the courts line their pockets with illicit money.

According to statistics, piracy causes foreign businesses losses of up to 250 million dollars every year in China. It is estimated that 95 percent of the CDs and computer software sold in China are illegal copies.

In a recent twist, Chinese government officials argued that they are victims of piracy because most pirated items are foreign-produced. The Chinese State Copyright Bureau speaker announced that since 1996 the 128 factories that were investigated for pirating CDs were all foreign producers. Following this logic, then if there is mine explosion or a bridge collapses, and all the material to build the bridge was imported, the fault for the collapse resides with the foreign importer. This thinking is as faulty as saying that since Marxism was imported, we can blame other foreign nations for China’s backward civilization. That is just plain ludicrous!

We all know that many pirated CDs are smuggled into China via Hong Kong. The question is why do pirated CDs not flood the United States, Japanese or European markets? Why is it easy for pirated CDs to enter Mainland China? The answer is, the former countries adhere to a strict legal system and people in these countries also oppose pirated versions. In China there is not a strict legal system and the people now want the inexpensive version. Many underground factories make huge profits around Pearl Delta because the legal system tolerates piracy. Pirating originates from the inside of China and not the outside.

Foreign investors doubt China’s sincerity about protecting intellectual property. Foreign experts indicated that to eliminate piracy in China, all levels of government must vigorously prohibit all piracy activity. Microsoft, Honda and other multi-national companies have experienced how the courts uphold piracy by rejecting these companies’ legitimate lawsuits.

On the surface, China makes huge profits from piracy. However, they will lose in the long run. Many foreign investors are afraid of transferring the production of core components to China for fear their products will be pirated. Without legal recourse through the court system, China will be outcast and will indeed be the biggest victim of piracy.