Did China Steal IP to Become Successful?

The “China will soon collapse” people quickly switch to “China stole everything” slogan when they are faced with China’s success. Trapped in their own echo chamber, they can’t believe that Chinese people can innovate. So, here’s the real scoop:

There have been some cases of outright corporate espionage and theft of research work by China, especially in the military sector. This is bad and this is life. Everybody does it, including American corporations and the US government. Throughout the history of the US, there have been espionage, spying, and patent thefts. From water-powered textile mills, to mechanical looms, much of the machinery that powered America’s early industrial success was stolen from Europe. Yes, America was once a technology pirate. Furthermore, after WW2, the US stole technology and scientists from Japan and Germany. To the victor belongs the spoil.

BTW, China is now a technology and innovation powerhouse. China now accounts for almost half of all patents in the world. China also became #1 in international patents in 2019 — America had held the #1 spot since WIPO was established in 1978.

Back to the original story. Almost all of the “China stealing” stories come from one of five areas:

  1. Joint ventures
  2. Unlicensed uses of software and entertainment
  3. Copycats
  4. Reverse Engineering, and
  5. US intelligence talking about hackers without evidence.

(1) Joint Ventures: This is a framework that was championed by the US and the UN for developing nations to catch up. This was sort of saying “sorry” for colonialism. Nobody forced the multinational companies to set up a JV in China or elsewhere. They did it because they were confident that China could never make products that can compete with western brands. The “forced technology transfer” in China was nothing at all like what Trump is doing to ByteDance and TikTok.

(2) Unlicensed software (like say Microsoft Windows) and pirated entertainment (songs, movies) were big in the 1990s, but not really anymore. This is a “problem” in all developing nations. Western corporations pay $1 for workers who make $500 handbags and then expect the worker to NOT watch a free movie online. Give me a break!

(3) Copycats are only stealing ideas and designs, not the actual product. Just like Zuckerberg could copy MySpace or TikTok. Stop whining!

There are some copycats — counterfeit goods — that are definitely illegal. Think of a fake Gucci or fake Rolex. An OECD report says that a majority of fake goods come from China and Hong Kong. So, the Chinese government should crack down on it. But then I think of a poor American or a European woman for whom a fake Gucci bag means so much …

(4) Reverse engineering can be illegal or legal, depending on the situation, product, and the country. If the patent laws are too strict, they stifle innovation and create monopolies.

(5) As for the “Chinese hackers” claims by US intelligence, take that with a pound of salt. Just accusations without evidence — like the ridiculous story about “Russia hacking the 2016 election.” The irony is that the US is the biggest spy of all. Re-read the revelations of Edward Snowden and also the fascinating story about a CIA-controlled Swiss company that let the US spy on 120 countries during the Cold War.

In general, countries copy and steal technology during their early growth stage. Later, when they are rich and innovative, they complain about others. Such is the reality of geopolitics and human nature.