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Since China joined the World Trade Organization (WTO), Chinese Goverment has strengthened its legal framework to comply with the WTO Agreement on Intellectual Property Rights (IPR). Enforcement of these strengthened IPR laws continues to be a challenge for China’s central and local governments.

If you are planning on selling your products into the Chinese market, you should file your patents with China’s State Intellectual Property Office (SIPO), promptly register any trademarks, logos, and internet domains, and register copyrights with China’s National Copyright Administration (NCA). For further information on IPR in China, click here.

Another way of protecting your product IP is to develop any system software and source code outside of China and download the software into a secure microprocessor or other programmable device. Provide these secure devices to your China manufacturing partner for integration into the final product.

If having your product manufactured in China, a few obvious things to consider are:

Choose a manufacturing partner that does not directly or indirectly compete with your products with its own branded products.
Ensure that the China manufacturer has a robust document control system and procedures that are audited by an independent, certified party on a periodic basis. Having a registered and up-to-date ISO9001 quality system should be a must.
Sign a Non-Disclosure Agreement (NDA) that legally protects your IP.
Speak with current or past customers of the manufacturer to discuss how their IP has been protected by the manufacturer.
Can “Western” companies doing business with China get a fair hearing in PRC’s legal system?
China’s commercial laws are changing rapidly to correspond to Western commercial laws, especially since joining the WTO, but the process is not yet complete. Companies need to understand the impact of both their own country’s laws and China’s laws on their business dealings with China.

One recommendation is to work with China companies that have a “parent” company that is headquartered in Hong Kong which abides by a legal system based on English common law. Business contracts can be made with the “parent” company on behalf of the China partner and administered according to Hong Kong law.

Don’t the cultural, language, time and distance differences make doing business with China more cumbersome and inefficient?
It depends….

First and foremost, doing business in China is a long term commitment and company strategy. Leveraging China’s vast resources and growing consumer economy requires patience and the selection of the “right” China partner(s) to work with.

Secondly, China businesses that are focused on serving Western customers have offices in North America and Europe to act as the primary communication link and perform the much needed project management function on a day-to-day basis. Additionally, these businesses have several English speaking Chinese employees not only at the executive/senior management level, but in such key roles as quality assurance, engineering, project management, manufacturing and customer service.

Thirdly, with today’s technology (Skype video calling, the internet, file sharing, etc.), and offices in local geographies (e.g., U.S. and Europe), around the clock communications and work are a “given” so that precious time isn’t lost on critical projects.

Last but not least, getting most products into and out of China is becoming less cumbersome every day. The logistical infrastructure within China such as shipping ports, international airports, highways, etc. continues to grow and expand from the “Gold Coast” in the east to more and more of the central and western rural cities.

Isn’t doing business with China becoming more costly as wages are increasing, fuel costs to export goods is rising, government VAT taxes on imported goods, etc..?
The economics of doing business with China is changing that’s for sure. History shows us time and again that as developing countries grow, the cost of doing business in these economies also tends to grow. Some factors to consider are:

Can a large percentage of your product’s parts/materials be sourced within China vs. having to be imported (avoid import duties, freight costs and higher material costs)?
Does your product have a fair amount of manual assembly associated with it so as to leverage China’s relatively low labor costs?
Are the physical attributes of your product(s) well suited for cost effective logistics? This is especially important if a significant % of your product is going to be sold into markets outside of China and needs to be shipped to North America, Europe, etc.
Are you looking at growing your business by selling your product(s) inside of China? If so, having your product(s) manufactured in China is a big plus in not only keeping your costs down, but in being looked upon more “favorably” by China businesses and consumers of your products and services.
What about Vietnam and India as alternatives to China for low cost manufacturing?
There are pros and cons with any country that you select to manufacture your products. Below are a few points to consider when comparing China to India and Vietnam:

India and Vietnam have underdeveloped logistics infrastructure which causes delays and problems with reliability.
India businesses have a higher incidence of theft amongst its workforce.
India’s total cost of labor is higher than China when you consider productivity, benefits costs and management oversight required (overhead).
Vietnam has lower labor, land and housing costs than China.
India and Vietnam have underdeveloped supply bases when compared to China – especially in electronics, electro-mechanical, sheet metal, plastics, etc.
India has less of a cultural and language barrier with western companies.
Vietnam has a greater language barrier with western companies.
India has less intellectual property challenges than China.
India and Vietnam workers are less skilled than China lending themselves to simpler, less complex product manufacturing.
Vietnam is offering attractive government incentives for new business development.
The size of China’s economy as measured by GDP is 2.5X greater than India’s and over 35X greater than Vietnam – important if you are considering selling your products in any of these countries.
Recent cases of product safety have me concerned about China manufacturers not maintaining the high standards of compliance of the United States and Western Europe. Is my business and my customers at risk if I have my products manufactured in China?
The majority of the product safety and quality problems with China exports occurred in 2007 and early 2008. Products categories that were affected included: pet food, animal feed, toothpaste, food products, drugs, tires, drywall, and toys. Since then, the China government and responsible agencies have enacted comprehensive inspections of exported products as well as stricter enforcement of penalties to both individuals and businesses for violations of the legal safety and health standards.

As for electro-mechanical and electronic based products (e.g., industrial, medical, energy, computing, data/telecom, etc.), selecting a reputable, trustworthy China manufacturing partner is essential. A good starting point is to get referrals and testimonials from business colleagues that you trust and that have a long history of doing business with China manufacturers. Secondly, it is recommended that the manufacturer you select has a documented and registered quality system (e.g., ISO9000). Third, evidence of a comprehensive supplier quality management program to closely monitor the supply base is essential. Fourth, a quality control system that includes incoming inspection, production inspection and test, and final product inspection is a must to ensure your product is being manufactured to your specifications. And last but not least, conduct an initial audit of the manufacturer to validate conformance of its processes against documented procedures.