Global Entrepreneurs

Four years ago I predicted in one of the columns of this journal (see Product Survey October 2002) that China would become a significant player as a manufacturer of High-end Total Stations. ‘Competition may come from an unexpected part of the world,’ I wrote, ‘and that is China.’ Back then, in 2002, the total-station industry in China was mainly focused on construction-site instruments. However, as a result of the rapid adoption of modern technology, today no less than five Chinese firms have entered the top segment of the total-station market, including South, from Guangzhou, FOIF from Suzhou, Phenix from Shanghai City, LHL from Tianjin, and Geotech, based in Xiamin. The recently held Intergeo congress and trade-fair confirmed the challenge posed to established firms within their main markets by manu-facturers from China.

Made in China

On several occasions I have readily admitted to being struck, upon examining products from the above debutantes, by two observations. The first concerns the remarkable resemblance in appearance between products from Chinese manufacturers and those of US and European counterparts. A second major observation is that the road to success for Chinese manufacturers will have to pass three signs, on each written ‘quality’, ‘quality’ and once again ‘quality’. And this is true not just for survey products but also much more generally, for many other goods made in China. I would now like to add a third observation, one probably irrelevant to the above named firms. Politicians, authorities and executive officers in Europe and North America are expressing continual concern about an abundance of products made in China, produced and distributed without proper consideration for intellectual property rights and now flooding the global market at more than competitive prices.

Counterfeiting

Such anxious murmuring is probably not groundless. You name it: textbooks, films, consumer electronics, complex operating systems for machines - China is by far the world’s leading producer of counterfeit goods, and all together plagiarism constitutes a black market that costs legitimate companies in Europe, the North Americas and elsewhere billions of euros annually in lost sales. For example, the German Chamber of Commerce estimates a national loss of turnover accounting for 25 billion euros per year. More than half the counterfeit goods intercepted at European borders in 2005 originated in one of China’s 31 provinces. Plagiarism is defined as unauthorised use of patented or copyrighted materials. Basically, two varieties exist. The first is the manufacture of a good as look-alike, using patented production procedures and bringing it onto the market under an own brand name. The second variety involves not only copying a commodity in all its details so that distinguishing it from the source is difficult if not impossible for the layman, it is also brought onto domestic and international markets under the brand name of the original producer. This frequently happens with luxury consumer goods such as trendy sports shoes, status-improving watches and designer clothes; the producer advertises in glossy magazines and the customer is willing to pay premium prices. Unfortunately, resemblance to the original is confined to superficial appearance and the substandard materials used to make these goods may severally harm the reputation of well-established firms.

Childish

The problem is so vast that recently a book was even published (in German) covering the subject of pirates, counterfeiters and copycats in China and the effects on the economy in Germany. The list of China’s longstanding and widespread violation of intellectual property rights is long, and in addition to luxury goods also includes fake medicines, including birth-control pills and HIV drugs, many of which end up in the developing world. The main message of editor and China expert Hans Joachim Fuchs is that the leaders of German industry have been too naïve. ‘One operated within China in a somewhat childish way, but that is changing rapidly’. Firms are not helpless against counterfeiters because products can be protected at the design stage.

Instigator, Innovator

Plagiarism belongs to all times and will probably never be eradicated, but today its scale may severely harm economies all over the world, including the economy of China itself; 80% of violation of intellectual property rights occurs among Chinese firms. And that is because their sheer abandonment in producing copyrighted goods hinders Chinese firms from innovating and producing their own high-value-added goods. For the past fifteen years the dominant attitude in western countries has been one of fuelling the global economy by European and North American workers keeping their hands clean as instigators of new developments and innovators. The hands that produced the actual goods could be dirtied in other parts of the world. Terms have even been invented for this: ‘the knowledge economy’.

The reluctance of other parts of the world to match this paradigm is a sign of the shadow side of models underpinning world rule from a western perspective, models which sometimes expose our own childlike dreams. Such a misconception as that quoted above throws a dark shadow over globalisation; one unfortunately reinforced by the reluctance of western countries to admit that their standards and values are not evenly shared throughout the world.