From DVDs to Fighter Jets; Caveat Venditor in China

Many visitors to major US cities will be familiar with the knock-off purses, watches and DVDs which are so ubiquitous as to have seemingly become part of the very fabric of the big city landscape. Indeed, they are almost cliche. For example what 1980's movie boasting a scene with a first-time visitor to New York would be complete without a shifty trench coat-adorned street walker hawking Rol'a'xes? However, cliches often exist for a a reason, and as a recent resident of the city, your author can assure you that this particular and particularly apt cliche is not any less relevant for the passage of a few decades worth of time.

Many of these goods are produced abroad, often in China. It is also not unusual to find them, in addition to the subways and street corners, in Chinatowns. The not-so-subtle inference here is completely intentional. The Chinese have a very permissive attitude toward copy-cat behavior, and have seemingly accepted it, if only by assent, as a perfectly legitimate contributor to its current economic boom. Of course counterfeits are not a new, nor in fairness, a purely Chinese, problem. In addition, despite the otherwise notable profit and intellectual property problems fakes create for producers of everything from purses to electronics, it is not too often that their problems are deemed threats to national security.

What, however, should be made of a nation with a culture which has adopted the idea of 'imitation as flattery' as a form of economic development when it has started to take on bigger fish? What if a permissive government which looks the other way when postiche purses are produced starts to pilfer patents itself? This is the conundrum currently facing many countries doing business in both high-tech and military goods with China. It seems that a government which has long looked the other way as the world's retailers fight against counterfeit goods has adopted a few knock-off strategies of its own.


Today's Wall Street Journal has a informative, but alarming example of China's proclivity to simply buy foreign goods it likes, reverse engineer them, and produce them for itself, typically under a new name. In this particular case, it is the fighter jets of the old Soviet Union which were sold by a desperate Russia that are in focus. Specifically, the Chinese took advantage of Russia's willingness to part with some of its Cold War arms when national survival suddenly became a matter of economics rather than military deterrence. The Chinese have since studied the designs and have begun to mass-produce weapons and jets without a nod to the intellectual property rights of the original Russian designers.

More in common with a bootlegged copy of

Wedding Crashers than meets the eye?

At first glance, this might appear to be no more than a patent issue between two foreign powers. However, upon inspection, there are security implications for other interested nations as well. Among other things, though the Russians had some control over the arms that it sold to the Chinese originally, and therefore safeguards over their weapons and designs falling into the hands of third countries, there are no such restrictions on the Chinese-produced goods. As a practical matter this means that Russian technology, still among the world's best, has the potential to end up in the hands of states that are less than friendly to Russian interests. This is concerning for the West as the interests of Russia increasingly align with those of the US and the EU.

China is a rising political and economic power. Because of the clout this affords it and as a practical matter, the Russians are not likely to take strong action in this case. Indeed there is not likely much the Russians will do aside from politely mentioning to the Chinese officials a situation they are clearly already familiar with during future diplomatic and trade talks. However, despite, or perhaps owing to, the absence of firm action, this is a development that requires considerate observation. States dealing in arms with the Chinese should be especially wary of selling advanced technologies to the nation. And, interested states such as the US should carefully track deals which see the Chinese selling on advanced technologies to unfriendly states. Maybe purse and watch producers can't always get the attention of US trade officials, but this developing situation clearly should.