China, a land of risks and opportunities Go back »

2011-02-11 | All chapters

China, a land of risks and opportunities

Known for its strong economic growth, China also stands out as a champion in counterfeiting. Western investors take offence at the country’s lax policies and little-known operational rules, making the business environment trying. 

Paul Ranjard is a lawyer specialising in intellectual property issues. After ten years of practice defending Western companies against Chinese counterfeiters, today he presides over the Intellectual Property Working Group of the European Union Chamber of Commerce in China. He discussses the growing mistrust towards the Asian giant.

Commerce International: In spite of sectorial opportunities, certain European companies set up in China do not necessarily seem confident about their long-term growth on Asian soil. How can this be explained?
Paul Ranjard: “China is still a strongly growing market. Foreign investments are continuing to flow in and there is a multitude of good reasons for turning towards this country’s incredible potential. Amongst the Chamber’s members, a majority of companies announce that they will continue to invest on the soil of the Asian giant. But the context in which companies are evolving is not necessarily that which those in Europe may imagine. Transparency is often missing and not everyone comes under the same brand. It is difficult for Westerners to find good contacts, to join interesting networks. We can perceive a growing feeling of fear amongst company heads, namely with regard to economic crime and counterfeiting.”

In September 2010, the European Union asked China to commit more concretely to the protection of intellectual property. Does the current policy lack willpower?
P.R.: “China is permanently evolving in balance along a line separating, on the one hand, the necessity to keep its commitments to the WTO and to protect its domestic products, and on the other hand, the necessity to maintain a certain social harmony and to reach out to foreign partners. When it is under pressure, as was recently the case, it declares the implementation of an anti-counterfeiting campaign, destined to last a few months. During periods such as that one, the government brandishes flattering statistics designed to reassure and calm international opinion, then neglects the adopted measures. The response, in its principle, is not satisfying, but cannot be rejected either. It is necessary to set up new combat methods, from a qualitative point of view, and not to content oneself with gathering figures on an occasional basis. In particular, there is a lack of adapted legal measures, such as the option of engaging procedures in the case of disputes.”

Only 3% of foreign direct investment in China comes from European businesses. Can counterfeiting and a poor image of the business environment account for this weak percentage?
P. R.: “If the multiple surveys and studies on this topic are to be believed, it does seem that counterfeiting and the general business context are behind this figure. We can notice that more and more company heads are wondering about the disastrous consequences of these obstacles on the profitability of their business, which is of course worrying.”

What actions for fighting counterfeiting are promising?
P.R.: “Solutions to develop are procedural in nature. Today, China offers a purely administrative method for action, and not a legal one, in making available whole branches of its administration to intellectual property rights holders, to carry out seizures and to act against counterfeiters. This system has a sizeable defect: the rights holder is, in this case, uniquely considered as a provider of information relating to acts of counterfeiting. The contestation procedure is instigated without him, thus leading to an obvious lack of transparency. An initial measure that would be interesting would be to clearly consider the holder of intellectual property rights, who calls upon the Chinese administration to carry out action against a counterfeiter, as one of the parties of the procedure underway, with all ensuing rights (complete access to the file, possibility of recourse…). This is not currently in place. The result is a lesser degree of effectiveness of actions which, in a certain way, remain at the discretion of the competent authorities.”

Do you manage to sustain a satisfying dialogue with Chinese authorities and to raise their awareness on measures to put in place?
P.R.: “The Chamber is continuing to seek a permanent and increasingly better dialogue with the Chinese government. For close to a year, we have seen a certain improvement in the country’s commitments towards foreign businesses. This renewal of dialogue is welcome, and encourages us in our procedures. Let’s hope it will last.”

Is awareness-raising by the diffusion of information in Europe on counterfeiting risks and precautions an important point?
P.R.: “Yes. It is essential to inform European companies on the specificities of Chinese intellectual property law. This is furthermore the role of the IPR Help Desk, a service providing practical tailor-made opinions for European companies active on the Chinese market. Company heads can find information on the management of intellectual property rights (licences, research and development, sales and distribution) and the means to get them respected. It is still too frequently observed that a company sets up on the Chinese market without taking elementary precautions.”

What actions are carried out by the European Chamber in China in this domain?
P.R.: “Every year, we carry out, through working groups, considerable work in collecting all observations, analyses and recommendations of our members. These are grouped together and transmitted to the European Commission, and given to the Chinese authorities in question. This helps reflection and steers lobbying efforts.”

How can the business environment be improved? Should a system clean-up policy be demanded?
P.R.: “Counterfeiting is not the only issue and we cannot blame Chinese authorities for the existence of counterfeiters. But in this struggle, transparency is a key notion. It is a matter of method. We must begin by giving rights holders the means for acting directly, by being present and legally involved in all procedures being carried out by the administration.”

Is the image of China as a land of opportunities in peril?
P.R.: “This country is a land of opportunities, but also of risks. All strategic decisions for trade are made in terms of risk/benefit calculations. A great deal of the Chamber’s work consists in collaborating with Chinese authorities to bring about equal opportunity/risk balance for all companies set up in China, whatever the origins of investors.”