China, Contracts, Intellectual Property, International Law

China Ain’t Denmark. Get Over It.

In an Atlantic Monthly article, The View from There: What living in England, Japan, and China has taught one American about the character of his own country, James Fallows discussed how easy it is to misunderstand other countries and how Americans misunderstand China:

When living in Japan, I heard accounts from many Japanese who had gone to the US for business or study in the 1950s, after the Allied occupation ended. They looked at the factories and the farms and the vastness of America and asked themselves: What were we thinking? How could tiny Japan have imagined challenging the United States? After the Soviet Union fell and the hollowness of its system was exposed, many Americans asked: What were we thinking about “two superpower” competition with the USSR? Its missiles were lethal and its ideology was brutal and dangerous. But a rival to America as an overall model? John F. Kennedy was only one of many to suggest as much, in his 1960 campaign references to the prestige gap as well as missile gap that had opened. Eventually, we all learned there was no comparison at all. I think if more Americans came to China right now and saw how hard so many of its people are struggling just to survive, they too might ask: What are we thinking, in considering China an overall threat? Yes, its factories are formidable, and its weight in the world is huge. But this is still a big, poor, developing nation trying to solve the emergency of the moment. Susan Shirk, of the University of California at San Diego, recently published a very insightful book that calls China a “fragile superpower.” “When I discuss it in America,” she told me, “people always ask, ‘What do you mean, fragile?’” When she discusses it here in China, “they always ask, ‘What do you mean, superpower?’”

I thought of Fallows’s article after speaking last week on China law before the county bar association. My talk had been mistakenly “advertised” as being about “doing business in Asia.” Wanting to disabuse anyone of the notion that I would be providing insights into doing business in all of Asia, I began by making clear what I would and would not be discussing…

I will be talking about the laws of China as they relate to American companies doing business there. I will not be talking about doing business generally in Asia both because I do not have the capability of doing so and because even if I did, such a speech would take hours.

I then briefly discussed how the legal system in China compares to the legal systems in other Asian countries, before focusing strictly on China.

After my talk, two lawyers told me that it had never occurred to them that China was coming “from such a different place than us,” and that my talking about how new China was to business law and how parts of its legal system and even the country itself were so undeveloped came as revelations to them. They said that the China I had described was different than the China they had imagined.

Too many Americans view China as being far wealthier and far more powerful than it really is. American realtors and high-end luxury retailers almost reflexively use the word “rich” when talking about the Chinese. College students at American universities see Chinese students driving Mercedes and BMWs and they too tend to believe that most Chinese are rich.

China’s reality, though, is very different. According to the World Bank, about 75% of all Chinese live on less than five dollars a day. And though I don’t doubt that most of you can extrapolate that out to a yearly wage, I will do it for you anyway just because that yearly number is so stunningly low: USD $1825 a year. A year. The CIA ranks China at 120th in terms of per capita GDP by country. This puts China’s per capita GDP at about half that of economic juggernauts Gabon and Timor-Leste. China has more than six hundred million peasants. To quote another Fallows Atlantic Monthly article (from 2008): “China is right now a big, poor, developing nation trying to solve the emergency of the moment.”

As old as China is, new China is, well, new, and still developing. In an interview on how foreign companies should approach their China legal matters, China lawyer Steve Dickinson stressed the need to be mindful of the newness of Chinese business law:

The first thing is that law is new to China. Law is a very old thing that people are pretty used to in the US. In China there was nothing that we would really call law, in the sense of rules that normal people, business people paid attention to in their daily conduct, until about six [now twelve] years ago. It’s that recent. The first thing about law in China is it’s a very recent phenomenon. It’s new to judges, to business people working with the law; it’s new to the lawyers who are doing the law.

In examining China’s business laws and its enforcement of those laws, we should give more credence to its history and current situation than to what we believe it might be someday. I am not saying that China or its legal system should be immune to criticisms, and I am not making excuses for its rule of law problems.

All I am asking is that we judge China fairly.

If we judge China’s legal system against that of Denmark or Japan, China clearly loses. But if we judge China against its socioeconomic peers, like Egypt or Russia or Algeria, China does just fine, even better if you also account for its history. Expecting China’s legal system to be on par with that of Russia or Egypt or Algeria is sensible and fair. Expecting China’s legal system to be on par with Denmark or the United States is unrealistic and unfair.

And let’s face it, the United States (like every single other country in the world) has had its own rule of law issues. In Piracy and Fraud Propelled the U.S. Industrial Revolution, Brown University Professor Peter Andreas essentially calls Americans hypocrites for preaching to China about IP matters:

Although typically glossed over in high-school textbooks, as a young and newly industrializing nation the U.S. aggressively engaged in the kind of intellectual-property theft it now insists other countries prohibit.

In other words, the U.S. government’s message to China and other nations today is “Do as I say, not as I did.”

In its adolescent years, the U.S. was a hotbed of intellectual piracy and technology smuggling, particularly in the textile industry, acquiring both machines and skilled machinists in violation of British export and emigration laws. Only after it had become a mature industrial power did the country vigorously campaign for intellectual-property protection.

Or to quote Seoul lawyer Brendon Carr, who left this strong comment on the China Law Blog:

I used to live in a US$ 6200 per-capita GDP state — the Republic of Korea where I’ve been since 1990. Human rights weren’t all that good here then either, and they’ve become much better since.

Americans ought to remember that it wasn’t all that long ago that we were pretty atrocious on human rights. We used to keep slaves, for Christ’s sake, and allow people to be murdered for not knowing their place.

Perspective on China. Let’s keep it.


Dan Harris is a founding member of Harris Moure, an international law firm with lawyers in Seattle, Chicago, Beijing, and Qingdao. He is also a co-editor of the China Law Blog. You can reach him by email at firm@harrismoure.com.

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