BEIJING Between the lines of China's growing list of joint ventures with foreign high-tech partners is a growing unease about how the inevitable intellectual-property issues will be sorted out. Many foreign executives here and in Japan said few, if any, IP issues have been resolved with their Chinese partners. At the same time, most of the joint ventures are proving expensive, and many are unprofitable.
The situation has been complicated by China's reluctance to sign on as a member of the World Trade Organization (WTO). The United States and other Western members are pressing China to join the WTO as a "developed" country. Chinese officials said they intend to join the WTO, but only as a "developing" country.
"There is still some time before we open the door to the entire world," said Zhang Qing Zhong, president and senior engineer of the state-owned China National Posts and Telecommunications Industry Corp., here. "China is still trying to catch up with the rest of the world's [telecommunications] technology."
Yet "the government has sent a very clear message to all of the state-owned industries, as they prepare for WTO and tariff reductions: they are facing increasing worldwide competition and they have to find ways to compete," said Andrew Chen, managing director of Shanghai Nortel Semiconductor.
U.S. officials in Washington downplayed China's developing-vs.-developed distinction, saying they want China to accede to the market-opening agreement in a "commercially meaningful" way. "There are some indications that they are serious about joining the WTO soon," a U.S. official said. "Everything is on the table."
Even if China joins the WTO on terms its international partners can live with, China's strict terms for market access might hamstring its high-tech joint ventures, industry observers said.
Japanese electronics companies with extensive experience in China say they have made scant headway with their Chinese partners on intellectual-property issues. They want China to join the WTO so that, in the words of one senior Japanese executive, "we can all be on the same page when we negotiate IP matters."
Even as China seeks to build up its IP portfolio, it is attempting to drive international standards to benefit domestic producers. The country's first major foray into the world of international specs is its submission of its Super Video CD standard to the International Electrotechnical Commission (IEC; Geneva).
The Chinese government worked on the proposal with consumer-electronics giants Philips, Sony, Matsushita and JVC, which developed the original Video CD spec. The partners agreed that the Netherlands Philips' home base would officially propose Super Video CD as an IEC standard during a commission meeting in Houston in mid-October.
The four consumer-electronics giants went along with China with two objectives in mind. First, they wanted to satisfy the Chinese government's desire to become "an internationally recognized, key developer of an IEC standard," said a senior manager at one of the companies. Further, they hoped that the IEC standardization process would help China understand the IP responsibilities that come with an international standard.
But "China appears to believe that as soon as the Super Video CD becomes an IEC standard, China can automatically become an IP holder of the Super Video CD standard," the manager said. "They are not interested in settling with us on any basic IP issues associated with the development of Super Video CD."