How Chengdu is using IP to attract foreign investment

“When Fortune 500 companies choose the investment location, the environment for intellectual property right protections is always regarded as an important factor,” said Ding.

According to Ding, in 2005, when Intel planned to invest in China, the microchip maker decided to settle in Chengdu because of the good environment for IP protection.

GE also opened up an innovation centre in Chengdu last year. The centre is located in the Chengdu High-technology Industrial Development Zone (CDHT). The centre will focus on research and development and marketing, specifically in healthcare, shale gas drilling technology, automation solutions and green energy.

The State Intellectual Property Office (SIPO) announced in February last year that it would name 10 high-technology zones as IP demonstration parks. Beijing, Shanghai and some of China's more affluent and coastal cities were included, but so too was Chengdu.

The IP demonstration parks are part of SIPO's efforts to work with local cities to formulate IP measures. From this, the parks offer enhanced IP protection and have become more sophisticated in managing IP issues.

Role of IP in attracting foreign investment

Chengdu has realised that by putting IP protection at the forefront of its policy agenda, the city can obtain a competitive edge when it comes to attracting foreign investment.

“Competition from country to country, city to city and enterprise to enterprise is down to the competition of intellectual property rights. Intellectual property has become an important part of the core competiveness of cities,” said Ding.

Foreign investors once acknowledged that one of the costs of doing business in China was at the expense of decreased IP protection. However, in recent years this has changed as foreign investors are not focusing on the cheap labour offered, but on innovation and research and development.

By catering for these needs, Chengdu has become an attractive place for foreign investors who are more sophisticated and need strong IP protection to protect what they develop in China.

How Chengdu stands out

The city has its own Regulations on protecting and promoting patents and more than 50 local regulations and policy papers are related to IP protection. The city has also issues famous trademark legislation, which can offer brands increased protection.

“We have set up an IPR regime that meets the requirements of a socialist market economy and is in line with international practice,” said Ding.

Chengdu has its own IP court and four local courts that can handle IP cases. In 2012, the city reviewed 2,142 civil and commercial cases, with 1,947 decided.

Examples include a copyright infringement case involving Microsoft software, infringement of the Guizhou Maotai trademark and cases involving Louis Vuitton accessories.

“We operate a zero tolerance policy towards IP infringement,” said Ding.

The city has also set up an IP exchange with foreign investors, organising meetings to talk about IP on a regular basis. This allows investors to voice concerns and receive updates on the latest IP policies.

“We stress the contribution of IP in boosting economic development and enhancing the core competiveness and sustainability of the city,” said Ding.

It is not yet clear whether Chengdu's model can work for the rest of western China. But the Chengdu model shows that it is possible for a city outside of China's more prosperous cities to consider the issues that are affecting foreign investors and use those concerns to enhance competitiveness.

It is no secret that as costs rise in the coastal areas, investors have considered, but often been cautious about moving west. Chengdu is removing that hesitation and the model could transform the city and the region.

By David Tring

Further reading:

China question: Where to invest?

Directing growth

Will the 12th Five-year Plan live up to its goals?