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Finally, China mandates that foreign companies bring in large amounts of convertible currency when setting up there, but severely restricts taking profits out of China.

Electric power shortages

China’s economy has been booming for so long that power shortages have become a problem. In 2004, electric power outages, blackouts, shortfalls, and rationing hit manufacturers in the Pearl River Delta and Shanghai. Power was cut 1-3 days a week in many factories in Guangdong. “Demand nationwide is exceeding capacity for a third year, causing shortages in at least 24 of 31 provinces, the State Electricity Council said. It has been fueled by industrial output that surged 17 per cent nationwide last year and 22 per cent in Guangdong.” 190

Raw material shortages

China’s rapidly growing and possibly overheated economy is causing domestic and, in some cases, global shortages of certain raw materials and construction materials needed for manufacturing production or expansion. For example, China’s sharp increase in exports of textiles and clothing in 2004 drove up domestic prices of cotton and other fibers. 191

Lack of patent, trademark, and copyright protection

China has serious deficiencies in enforcing the protection of intellectual property.192 Patents and copyright, both domestic and foreign, are ignored with impunity in China’s

193 194 manufacturing sector. to attempt to correct. Trademark/brand theft is epidemic and very expensive and slow Production processes, brand names, and innovations are stolen by

domestic Chinese producers and churned out at a cheap price for the home and global markets. China’s government has made occasional attempts to stop this intellectual piracy under intense international pressure, but only with temporary success: “China’s thriving industry in product piracy routinely violates copyrights, trademarks and patents on movies, designer clothes and other goods, despite promises by Beijing to crack down.”195 Many multinational companies have entered joint ventures with Chinese partners, often because Chinese government controls prevent them from entering China any other way, only to discover that the “partner” has stolen all the foreign company’s proprietary information and set up a competing production center illegally producing the product patented by the multinational. Globally, based on Security Management’s Intellectual Property Security Survey conducted in April 1998, Chinese entities carried out 41 percent of the theft of American-owned technology; China treats such technology piracy as merely a minor civil or administrative matter rather than the crime that it is.196 Because of this problem of systematic theft of intellectual property in China, many foreign companies avoid entering China and choose to continue producing in developed countries

or move to countries that protect intellectual property.


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