The Chinese government was criticised last week by two US business groups which are urging China to crack down on its growing piracy market and focus on the protection of intellectual property rights.
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Despite laws and international agreements protecting intellectual property rights, an lack of political will within China to enforce those rules is allowing piracy to rapidly expand, according to a white paper published in Beijing by the American Chamber of Commerce People’s Republic of China (AmCham-China) and American Chamber of Commerce Shanghai (AmCham-Shanghai).
The lack of patent and copyright protection is also hurting high-tech investment in the vast Chinese market, the group said.
More than three-quarters of AmCham members surveyed for the group's sixth annual White Paper on American business in China said they were negatively affected by the infringement of intellectual property rights, with over 90% of respondents saying they see "virtually no enforcement" of intellectual property rights.
The group called for fines to be replaced by harsher criminal penalties for product piracy.
China has a growing reputation as a country which tolerateds some of the highest piracy rates in the world. In July, a report issued by the Business Software Alliance estimated that 92% of software used in China during 2003 was unlicensed and illegal.
AmCham-China, based in Beijing, says it currently has 1,800 individual members representing more than 800 US companies doing business in China. The white paper's results are based on anonymous survey responses from 238 companies, the group said.
The study also highlighted a belief within the American business community that China is actively restricting trade between the two countries through the use of its technology standards.
According to the white paper, 50% of high technology companies surveyed said that standards and certification procedures are being used as legal, non-tariff barriers.
Over the next year, the group plans to closely monitor the Chinese government's use of technology standards as it relates to US companies attempting to conduct business in the country, said AmCham-China Chairman and a Motorola executive Jim Gradoville.
In its report, the US business group praised China for its efforts over the past year to adhere to its World Trade Organisation commitments with regulation on trading rights, insurance, auto finance and agriculture.
But it warned that such efforts to improve the environment for American business in China could be overwhelmed by the lack of enforcement of intellectual property rights.
US lawmakers came in for criticism as well, with AmCham-China and AmCham-Shanghai pointing to a difficult and restrictive US visa application process that is costing US businesses billions of dollars a year.
Laura Rohde writes for IDG News Service