Frankfurt/Main, Germany During
recent inquiries overseas, I gained the impression that Europeans are
even more concerned than Americans about China’s economic
expansion and the often reckless methods government and business employ
to achieve their goals. China’s high rate of economic growth,
its huge currency reserves, and its fast rising proportion of global
production of a great variety of consumer goods are increasingly affecting
other economies worldwide.
Last year, China exported goods worth at least $600 billion, 35 percent
more than in 2003. The World Trade Organization (WTO) estimates that
by 2010 half of all textile exports will come from China. By now, China
produces half of the world’s shoes, 75 percent of all toys, and
80 percent of all DVD drives.
It is, however, not so much the growth of China’s industrial
capacity and export volume that concerns the industrially developed
countries most,
but rather the massive and blatant copying of foreign products and the officially
ignored violation of foreign patents and copyrights. Ironically, drug traders
in China are known to turn to pirating of products because the risk is much
lower.
According to a German expert, China’s industry and commerce today operate
under conditions resembling the lawlessness of the gold rush at Klondike in
mid-19th century California. He estimates that it will take at least a generation
before China will adopt the kind of business law that democratic societies
routinely practice and enforce today.
A German agency tracing the worldwide trade with pirated products estimates
that it amounts to roughly $400 billion annually, most of it in Chinese exports.
Yet, the agency concedes that only a fraction of the sale of plagiarized products
is being discovered. In 2003, European customs agents confiscated 1.4 million
items of pirated food products, 1 million cosmetic items, and 12 million toys.
For the latter, the increase over the previous years amounted to 996 percent.
A spokesman for a German company producing machines for the production of compact
discs noted that “at trade shows we have seen machines that looked exactly
like ours all the way to the identical colors.”
The German sports article manufacturer Adidas-Salomon saw 5 million pirated
copies of its own products confiscated in Germany alone. Customers, moreover,
who did not recognize the fake merchandise, complained that their “Adidas” shoes
had defective soles, and the material of their “Adidas” pullovers
caused allergic reactions.
There is plenty of evidence demonstrating China’s aggressive pursuit
of its economic development by all means, honestly or dishonestly, by persuasion
or intimidation. To produce a maximum amount of coal at the lowest cost, the
government has skimped so much on expenses for mining safety that China today
suffers 80 percent of the world’s mining accidents.
As soon as Chinese business leaders notice an upswing or a new opportunity
in a particular industry, they likely take advantage of the opening in a hurry,
as, for example, in automobile and cell phone production. When steel prices
rose, China was quickly building a few steel mills.
Nevertheless, sometimes China’s business leaders miscalculated. Demand
and prices for cell phones, for example, have recently been dropping. Last
year, China produced 4.9 million cars to satisfy domestic demand. But only
2.5 million were sold. The rest had to be dumped on foreign markets.
In the long run, China’s rulers who tolerate, if not promote, the country’s
product-pirating and fraudulently profiteering industries will probably learn
soon that they cannot indefinitely build their economy on clever deception
and theft. At present, China has hardly any brand name that is known and respected
beyond its borders. How long, one wonders, will investors sink huge sums into
businesses that are not only basically dishonest but also fail to engender
research and innovations of their own?