This year, China announced its goal of combating Internet piracy and designated a task force, code named “Sword Net Action,” to battle cyber pirates through October 2010. Sword Net Action targets the source of piracy to reduce Internet infringement activities.  Internet and digital copyright industries are expected to provide solid copyright protection and development environments.

China’s National Copyright Administration, Ministry of Public Security, and Ministry of Industry and Information Technology announced today that “Sword Net Action” will be divided into four stages. Sword Net Action targets the types of works,( i.e, audio and video, literature, games, animation, software, etc.), types of sites (i.e, online sales platform) and provides search, online storage, and other technical services. Phone media networks will also be focused upon.

Mainland officials state that “Sword Net Action” will achieve five goals, including the establishment of (1) “first authorized after the dissemination of” spread the work order, (2) creation of a network industry (an important foundation for sustainable development and copyright newspapers), (3) termination of piracy websites relating to the rapid spread of Internet infringement and piracy activities, (4) promotion of human rights, and (5) use of balanced development and healthy activities.

Mainland officials also seek to establish a copyright enforcement system which promotes the drafting of “network copyright enforcement guidance” and raises the standard for Internet copyright enforcement, science, and effectiveness.

Is China serious about cutting down internet piracy? I will update you all as results come in!

Here is another bit of news that shows that intellectual property and non-tangible rights are getting more and more protection in China.

While infringement liability has always been the focus of the Civil Code of the West, it has always been lacking in China. Many people have had to rummage from a wide range of different laws and regulations to deal with infringement claim compensation. However, beginning July 1 2010, this situation has changed.

The “Tort Liability Act” is the official introduction of the new law tort liability legal system in China.

People can now resolve infringement disputes under this act.

Specifically, “Tort Liability Act” in Article 2 includes the right to life, health, name, reputation, honor, image rights, privacy, marriage and ownership, custody, ownership, usufruct, security interest, copyright, patent, trademark, rights of discovery, ownership, inheritance and other personal and property rights. In summary, the new law not only includes the traditional scope of property rights, but also includes advanced intellectual property rights, including reputation and privacy. In addition to the non-property damage, one can also request compensation for emotional distress and other protected individual rights.

Speaking of redistribution of global economic power,  look at this next piece of news about recent investigation into wire mesh dumping in China.  In Dalian, EastFound Material Handling Products co. Ltd’s general manager, Song Binbing, said that China has won its first iron and steel products exports dumping case against the US. The company spent a total of RMB 3 million (about US $500,000) and the victory will save the company 300 million yuan (about $5 million  US).

U.S. International Trade Commission (ITC) has announced the final results of an investigation into industrial wire mesh tray countervailing and anti-dumping, determining that the products of Chinese origin have not caused the U.S. industry material injury or threat of material injury. ITC has said that the U.S. Department of Commerce (DOC) may not impose anti-dumping and countervailing duties against the Chinese companies.

Song Binbing stated that the hard-earned win is a victory for the whole industry.

This wire mesh case mainly involves three companies in China, including Dalian EastFound Material Handling Products co. Ltd’s and its subsidiary, EastFound Material Handling Storage Products Co., Ltd. The two companies make up 2/3 of the  total export volume of wire mesh products from China to the U.S. Since the United States initiated an investigation last year in May, EastFound Material Handling Products co. Ltd has spent about RMB 3 million on legal fees. According to U.S. law, if the dumping margin is below 2%, it will implicate an anti-dumping tax rate of 0%. This means that DOC (department of commerce) has no right to impose any anti dumping duties against EastFound Material Handling Products co. Ltd.

It seems that the Chinese have won this round.  Maybe they will win the next time, as well. But one thing is certain: redistribution of global economic power is already taking place right underneath our noses.

Shifting gears from news of China’s domestic growth, I would like to comment about another trend in the Greater China region: The rise of IP in the land of piracy.

Ownership of patents demonstrates the might of corporations and symbolizes the extension of national power. Yesterday, Chi Mei Innolux launched simultaneous lawsuits against Sony in China and the U.S.

Chi Mei Innolux and Sony’s patent lawsuits against each started when Sony first launched their attack against Chi Mei earlier this year. Chi Mei was unwilling to take a passive stance and counterattacked Sony. Anyone knowledgeable about patent infringement knows that Chi Mei’s tactic forces Sony to settle for a cross-licensing result.

The lawsuit signifies the OEM LCD panel industry’s evolution from simple assemblers to establishments of IP.  Recently, LG Display (LGD) of Korea sued AUO of Taiwan for patent infringement. AUO counter sued LGD and prevailed against LGD.  This precedential victory vindicates Taiwan’s OEM LCD panel industry from its historically lax attitude towards IP.

I have been in the IP business long enough to warn those who still believe IP is meaningless in Asia or that Asian corporations do not care about IP that things are rapidly changing.  The rise of IP in Asia, as I have personal experienced, and increasing numbers of Asian companies seeking IP protection will play a huge part in the redistribution of global economic power.

According to recent news, there was a rise in domestic consumer demand and a rise in salaries that led to a rise of 18.7% in China’s retail sales. Due to recent sports activities getting more attention in China, it is estimated that this year’s sports shoe market in China may break 69 billion yuan.

In recent years, mainland China has increased the purchasing power of domestic consumers; especially of young adults. Well-known domestic sports goods maker  Li Ning and Anta in China posted a fourth quarter orders growth of 25% and 20%, respectively.

UBS data indicates that China’s sports shoe market is expected to reach 69 billion yuan this year, while the brand sports shoes market in 2020 could reach nearly 3,000 billion yuan.

Read more information about China’s domestic consumption.

One of the largest office appliance stores in Taiwan, AURORA GROUP, announced today that it plans to accelerate its transition to the “China concept” in the mainland.

Aurora Group owns 264 direct sales offices in China and expects to expand to 300 offices this year. Aiming to establish itself as a premier brand (B2B) in office furniture (copiers, business machines and other OA), it  has a long-term goal of opening up to 1,000 offices and to become the largest direct seller of OA (office appliance) and office furniture in China.
AURORA CEO Lin Leping pointed out that Taiwan’s office furniture market is already quite mature and Aurora is optimistic about the speed of the rise of its mainland enterprises.  He believes that  the first step is to build brand awareness.  This includes the construction of  an independent corporate pavilion wherein the overall cost of construction is approximately 100 million yuan.  Aurora Museum has attracted more than 520,000 visitors. Second, in July, the Aurora will be cooperating with CCTV to organize the Miss China event, which further expands Aurora’s mainland brand awareness.
Lin Leping said that the mainland has an office furniture market worth RMB 1,000 billion annually, of which the high-end section of the market where Aurora plans to focus on is worth 10 billion yuan.

Aurora’s business in Mainland China is divided into two parts: office furniture and OA (office appliance).

Aurora first established an electronics factory in 1995 in Shanghai, where it produced paper shredders, computer products, office furniture. Aurora now has a considerable reputation in the mainland. It has  51 branches on China’s southeastern coast. Since its entry into the OA business in China, it now has 264 branches.

I heard Best Buy is doing really well in China as well.

China’s domestic market is definitely the new wild western frontier for anyone who deals in consumer products or services.

One of the largest U.S. food manufacturers, Heinz Ketchup Group, announced that it would pay $165 million U.S. dollars to acquire production market share of soy sauce and fermented bean curd from China Foodstar to expand its presence in China’s condiment market.

It is reported that Heinz Group acquired the company from private equity firm Transpac in Singapore.  When completed, Heinz’s annual sales in China will increase by $300 million.

In 1984, Heinz set up joint venture enterprises in Guangdong with the Yantang company to enter the Chinese market and produce rice and other nutritional products.

Foodstar  currently has 2,500 employees and four production plants and mainly produces soy sauce, fermented bean curd and other food processing products.
This is Heinz’s first venture into the Chinese soy sauce market. Last year, the annual output value of China’s soy sauce market was  as high as $2 billion U.S. dollars (approximately NTD 64.0 billion).

Will we soon see Heinz labeled soy-sauce here is the States?

Read more about China’s domestic consumption.

What will happen now that the Chinese Yuan is no longer pegged against the American Dollar at a fixed rate?

Besides the fact that manufacturing jobs will begin to return to America, this fact will ultimately result in greatly heightened consumption for the domestic Chinese market.

China receives a boost to its domestic consumer-oriented industry now that the Chinese Yuan is no longer tethered to the American Dollar.  Chinese currency should rise in value over time and increase the purchasing power of domestic consumers.

Global investors will undoubtedly want to follow the trend of domestic consumption in China. Despite China’s past dependency on investment and exports to drive its economy, the government is now pushing hard to promote domestic consumption as a new engine of growth.

It is expected that the Chinese government will continue to boost spending through incentives, such as rebates, in its bid to improve the country’s social safety net.

Some predict that the Chinese government’s increasing investment in health care and consumers’ focus on upgrading property rather than purchasing new real estate will alter China’s economic outlook over the next decade.

China now has a population of 1.324 billion people, which is four times greater than that of United States population of 300 million. Thus, China’s massively increasing consumption capability makes it an economic hot spot in the next decade.

So here is a piece of the latest report I got from Guangdong, China.

It is reported that China is increasingly facing the issues of lack of workers and salary increases. Many labor-intensive industries have been under great pressure and in recent years began to think about the feasibility of moving the production plants to Southeast Asia.

However, Yang Jizheng, a general manager of shoe maker IMC has said that the Chinese labor force’s productivity is higher than the labor force of Southeast Asia.

Yang Jizheng said that China’s cheap labor resulted in all the companies being “inevitable short-sighted.” But now, faced rising wages and lack of work, most manufacturers are talking about automation.  “Automation is going to be the trend.”

In search of cheaper labor, Yang Jizheng also reflected that: “Now that we have gone to India, the next stop left is Africa. But then what is after that?”

Yang Jizheng thought that the value of moving to India or Africa cannot replace the high labor output value of China.

He pointed out that Chinese labor is relatively hard working, especially when compared to Southeast Asian labor. They are more willing to work hard in pursuit of a better life.  Thus, the labor efficiency of the Chinese people exceeds that of other Southeast Asian countries.

Yang Jizheng further said that, for example, labor efficiency output in India is only about 70% to that of China’s labor efficiency.

In addition, he believes that the large number of Chinese talent pool, both in production and management will not be replaced by other countries in the short term.

In my opinion, some plants will eventually move to India and Southeast Asia. But more likely than not, most plants will continue to stay in China due to the rising internal market demand. For that matter, automation in production plants will increasingly take place in the next few years to come.