Intellectual Property, Foreign Direct Investment and the China Exception

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Since the 1980s, policy makers in the less developed world have undertaken considerable intellectual property law reforms to attract foreign direct investment (FDI) (Yu, 2007, pp. 892–901). Economists have defined FDI as ‘the act of establishing or acquiring a foreign subsidiary over which the investing firm has substantial management control’ (Maskus, 1998, p. 119). Stronger intellectual property protection, however, is not always needed for attracting such investment. In the case of China, foreign investors are usually not attracted by the strength of the country’s intellectual property protection. Rather, they entered the Chinese market because of the drastically lower production costs, the country’s enormous market, its inefficient economic system and the preferential treatment of foreign investors. Thus, some commentators have considered China a paradigmatic case for showing how rapid economic development can take place despite limited intellectual property protection (Abbott, 2005, p. 81; Chow, 2007, p. 199). Although the piracy and counterfeiting problems in China have been widely reported by the media in the past decade, the protection of intellectual property rights was a rather recent development in the country. Modern copyright, patent and trademark laws were not introduced until after China reopened its market to foreign trade in the late 1970s (Yu, 2000, pp. 136–41). Since then, the country revamped its intellectual property system in response to US pressure in the late 1980s and early 1990s and did so again in preparation for its accession to the World Trade Organization (WTO)...

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Edward Elgar Publishing, Inc.


Robert Bird

Book Title

The Global Challenge of Intellectual Property Rights