WHY DOES CHINA STEAL IP? In an article in Time, Anne-Stevenson Yang explains that pirating IP in China is not so much the function of greedy street-copiers, but is rather an official policy of the Chinese government, based on taxing regulated businesses:

China's trading partners tell themselves that this blatant disregard for the intellectual property of others is natural for a former command economy at an early stage of free-market development. The problem, they say, will ease over time as legal institutions and Chinese entrepreneurs mature and the country begins to attach the same importance to property rights as do Europe and the U.S.

No business should be foolish enough to believe this hypothesis. In a country where government-controlled companies comprise the industrial base, piracy is not derived from commercial callowness—it appears to be official policy. Authorities may be quite willing to mop up small, unregulated businesses to curtail street sales of counterfeit brands, but protecting core foreign technology is another matter. That is why Beijing declares victory when street sales of pirated DVDs move into licensed stores that present the same product in better packaging with money-back guarantees and, of course, taxes duly paid. That is why a decades-long campaign to clean up Beijing's "Silk Alley," a national showcase of pirated foreign sportswear and wristwatches, ends with fanfare when the new "Silk Street" shopping center opens, selling the same products under city regulation. And that is why China's leaders can promote a national campaign to protect intellectual property and at the same time declare that foreign patents useful to Chinese technologies may be legally expropriated, as Beijing's bureaucrats proposed in draft regulations released last year.