The Chinese government launched the Outline of the National Intellectual Property Strategy in 2008 when the Olympic Games were held in Beijing. The outline indicated that IPR was to become a ‘national strategy’. Counterfeiters and pirates are now confronting new government measures that protect IPR. They aim to safeguard China’s economic interests because innovation and creativity are set to play a dominant role in China’s future economy.

There are three reasons why China needs to pay attention to IPR. First, China needs to make use of IPR to boost its transformation from a ‘factory of the world’ to a ‘factory of knowledge and ideas’. Second, with a more robust IPR system China can remain a large recipient of foreign direct investment. Third, stronger IPR protection can restore the confidence of China’s trading partners.

According to a 2016 IP Industry Report published by Tsinghua University, 61 of the 100 most successful intellectual property media products in China in that year were internet novels. A new IPR ‘production line’ has developed, which allows authors of internet novels and video-sharing websites to gain immensely from new developments in the IPR space.

For instance, the very popular internet novel Journey of Flower was purchased by Ci Wen Media in China. The profit from selling the broadcasting rights to Wunan Cable and the streaming rights to iQiyi was about 168 million RMB (US$24.5 million). The income generated from gaming was estimated to be an additional 300 million RMB (US$43.8 million).

Given China’s slowing growth rate, people are relying more on ‘light luxury’ products such as movies, TV series and internet games. Maintaining the ability to purchase the rights to leading movies and TV programs is one of the easiest ways to satisfy IPR protection for the time being. The next step is to produce and develop TV programs and films with Chinese technology and talent. It looks like China is moving in that direction — Hengdian World Studios is already producing blockbuster films and Wanda Studios is expected to become a global hub for movie making.

China has seen an exponential increase of copyright lawsuits filed over the past decade. In the 10 years to 2016, nearly 87,000 copyright-related cases were filed. In order to protect IPR, 3908 websites have been shut down to combat copyright infringement in the past five years.

China is determined to create its own global brands and so IPR protection has become imperative. As Chinese IPR develops, foreign companies have to act fast to keep up with the new processes.

Increasingly, IPR protection has been integrated into China’s long-term economic reform strategy. The past 40 years of breakneck growth has given way to a new normal requiring more qualitative and tech-sensitive policy. The national technology innovation priority of the 13th Five-Year Plan highlights the significance of high-tech development as a main focus for China. In addition, Made in China 2025 — launched by the State Council in May 2015 — is a technological blueprint designed to transform the Chinese economy. China is increasingly less reliant on manufacturing. Instead, innovation and technology will drive its economy over the next 10 years.

One of the key messages of Trump’s China trade war is that IPR infringements matter. China is still on the Priority Watch List of the 2018 Special 301 Report. The United States is the most out-spoken country on this issue, probably because it is still the most innovative country in the world and so has the largest stake in intellectual property protection. But the United States needs to understand that the mentality of the Chinese government has changed. Beijing is serious about IPR protection. It knows that if it fails to protect IPR, the next phase of its own economic development may prove shaky.

Gordon C K Cheung is Director of the Centre for Contemporary Chinese Studies at Durham University.

Some parts of this article are based on the author’s recent book China in the Global Political Economy: From Developmental to Entrepreneurial.