Introduction
The mushrooming of Chinese products in India increased manifold before we even realized. In the present scenario, whether it be consumer durables such as electronic products, mobile phones, plastic items, industrial goods, vehicles, solar cells or pharmaceuticals, Indian economy has found itself to be highly dependent on Chinese investment; so much so that we have to consider the practicalities of whether in the wake of the current border tiff with China, we will be able to boycott Chinese products in toto.
Devising something like the Make in India initiative took a whopping 68 years post-independence; whereas in contrast to this, China has been self-sufficient since forever.While there is no dearth of Chinese products in India, we will find very few Indian products in China.
The objective of this article is to delve into the answers to the above questions in the light of some lesser-known, but interesting facts instrumental to the topic.
Tactical planning of the Chinese Government
The credit for the success of the Chinese industry should be attributed to the properly planned and precisely executed policies of its Government. The Chinese Government initiated thoughtful strategies when they decided to open the doors of their economy to foreign businesses and investors some three decades back and have diligently supported the manufacturing ecosystem at their end ever since. They have made massive investments in creating necessary infrastructure like electricity generation, highways, and ports to boost productivity and connectivity, swiftly modified their procedures for starting a business at Special Economic Zones which attracted huge Foreign Direct Investment in China and the most important of all- their policies are centered on promoting global exports for goods manufactured in China.
Leveraging currency exchange rates in the global market
Recently, CNBC conducted a study according to which 1 out of every 5 companies has claimed that China has stolen its IP.[1] Apple Inc., IBM, and a few other big companies have sued Chinese employees and some Chinese companies in the American courts.
IP theft occurs when the creative ideas, inventions, or creative expressions of any company or a person are stolen and along with it the trade secret (which means the whole process to make any product) is also stolen.
China not only allegedly steals IP but also product pricing. Unfortunately, the major problem for India is that 18 out of the 30 biggest startups in India with a business turnover of more than 1 billion are funded by Chinese investment.[2] This is facilitated by China’s specialization in low-end manufacturing fueled by cheap and abundant labor.
How China allegedly steals IP rights from companies
The Chinese Government is not short of both legal and illegal methods to acquire technology.The legal way is a part of what we call China’s indigenization campaign.The Cyberspace Administration of China (CAC) had issued a policy on November 30, 2018, which requires internet platforms to furnish assessment reports. A part of these assessments also comprises on-site inspections and companies must show they are logging information including real names, usernames, account names, network addresses, times of use, chats and call logs, and the device being used. However, there is little to no transparency on the exact process. Companies, on the other hand, are compelled to share such information to avoid fines, suspensions, and in some cases permanent closure. For example-the Chinese multinational technology company-Alibaba Group, has heavily invested in Indian e-commerce company Paytm. Thus, Paytm is obligated to share the above information with the company. Alibaba has now secured the information of Indian users of the company which has now become India’s biggest money transfer platform. China now ranks second globally in annual spending on acquisition of foreign IP.[3]
One of the unscrupulous methods has been evolved by the Chinese employees who are at peak positions in their respective companies. Since they have easy access to and know about the trade secrets and research work of their companies, they abuse their position, they purloin the same from their companies and sell it to the Chinese companies.
Recently, You Xiarong, a Chinese-born US scientist who was working at a high post at Coca-Cola, stole and tried to sell the BPA-free technology (worth 120 million)Coca-Cola was working onto a few Chinese companies he was acquainted with.[4] Apple has also sued many of its employees on being found guilty of similar activities. It is pertinent to mention here that one of the major reasons for Apple’s booming business is its innovation. Employees stealing their intellectual property or creations to be preciseare causing tremendous loss to the company and facilitating Chinese companies to sell the same technology to the world at a cheaper price. This malpractice has become a big headache for the US and the entire world.[5]
Can India do what China is doing?
Many Indians are holding high posts in top multinational companies-whether it is Satya Narayan Nadella who is the CEO of Microsoft, Arvind Krishna, the CEO of IBM, or Sundar Pichai, the CEO of Alphabet.What if they come back to India and start a similar company in India?
There are two reasons why they cannot do this. Firstly, Indians will never do this morally. Secondly, if anyone in India tries to imitate the concept and technology, then the aggrieved company can appeal in the Indian courts. For example- if someone tries to start a company similar to Google in India, then it can seek redressal in the Indian courts but this system is not followed in China. However, ideas stolen from companies can be manufactured into products by Chinese companies without the need to pay research and development costs.
As far as the judicial redressal in China is concerned, the Standing Committee of China’s National People’s Congress on January 1st, 2019 decided to establish a new IP Court of Appeals within the Supreme People’s Court. While it can be generally lauded as a positive move on part of China in respecting IP rights, the motives behind the decision are ambiguous. Examining the background of the timeline with regards to IP provides a greater context for this development. In 2008, China announced the outline of its National IP Strategy which seeks to promote and protect IP creations and centralize patent litigations. Then in 2014, specialized IP Courts were established in Beijing, Shanghai, and Guangzhou and consequently four more followed in Nanjing, Suzhou, Chengdu, and Wuhan. These locations are claimed to be among “the most innovative provinces of China.”[6] While IP theft by China is well established, by now, China’s interest to ensure that this innovation is promoted through a more extensive and consistent legal framework seems to be the ulterior and more primary motive for the establishment of the courts.
How china converts stolen IP to their name
China has several good science universities, all the stolen IP which China receives is given to these universities, which are further modified a bit and then applied for a patent. Once the Chinese Government gets the patent registered, it provides the technology to the Chinese companies for free.
For example- Huawei has come up with the 1st 5G technology in the world. Many American companies were working on 5G technology for many years. They have invested hugely in research and development work. Huawei without investing much has acquired the stolen AI and 5G patent from 56,000 other Chinese companies and has developed 5G technology in a short period.Now if any company wants to take 5G technology, it has to acquire the patent rights from Huawei.
How countries are stepping up
India passed a new law on 17th April 2020[7] according to which if any country which shares a border with India wants to invest in any Indian company, it has to take prior authorization from the Indian Government. Similarly, if any foreign company wants to invest in any of the top 500 Japanese companies,it can only be done after permission is granted by the Japanese Government. Japan is providing a government subsidy of 2 billion to Chinese companies having its operations in Japan to shift productions out of China.[8] Besides, the US is considering imposing an additional tariff of 500 billion on Chinese companies.[9]
Conclusion
Amidst various conspiracy theories surrounding China’s role in the deadly coronavirus pandemic and its strained relations with India and the US, more than a thousand American companies are considering boycotting Chinese products and India’s approach is no different. India is seeking to attract businesses to relocate from China.[10]This changed approach towards China is expected to worsen global trade ties with China. Whether it will lead to something fruitful in curbing IP theft is a matter of time.
By-
Amit Agarwal
Priya Chaudhary
[1]https://www.cnbc.com/2019/02/28/1-in-5-companies-say-china-stole-their-ip-within-the-last-year-cnbc.html
[2]https://www.cnbctv18.com/startup/new-fdi-rules-to-hit-indian-unicorns-other-startups-running-on-chinese-capital-5730851.htm#:~:text=to%20affect%20deals.-,According%20to%20a%20February%202020%20report%20by%20think%20tank%20Gateway,30%20unicorns%20are%20Chinese%2Dfunded.
[3]https://www.piie.com/blogs/china-economic-watch/china-forced-technology-transfer-and-theft
[4]https://www.wsj.com/articles/chinese-born-u-s-citizen-charged-with-stealing-trade-secrets-11550177074
[5]https://www.cnbc.com/2019/12/09/apple-has-deep-concerns-that-ex-employees-accused-of-theft-will-flee-to-china.html#:~:text=Apple%20on%20Monday%20told%20a,their%20locations%20are%20not%20monitored.&text=Harris%20read%20Apple’s%20statement%20to%20U.S.%20District%20Judge%20Edward%20J.
[6]https://journal.businesstoday.org/bt-online/2018/a-look-at-chinas-new-ip-court-of-appeals
[7]https://techcrunch.com/2020/04/18/to-avoid-hostile-takeovers-amid-covid-19-india-mandates-approvals-on-chinese-investments/
[8]https://asia.nikkei.com/Spotlight/Coronavirus/Japan-preps-first-subsidy-to-company-moving-production-out-of-China
[9]https://www.cnbc.com/2018/07/05/trump-says-us-will-impose-16-billion-in-additional-tariffs-on-china-i.html
[10]https://www.business-standard.com/article/economy-policy/india-to-woo-1k-american-firms-out-of-china-as-us-beijing-fight-over-covid-120050701574_1.html
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