Commerce Secretary Urges China To Become an "Innovation Society"

By Susan Krause
Washington File Staff Writer

Washington - China has the capacity to foster the culture of innovation that is necessary for economic success, but only if it establishes an environment that allows those who take risks to reap rewards, according to U.S. Secretary of Commerce Carlos Gutierrez.

"This is a time period where the companies and the countries that innovate will be more successful than those that do not," Gutierrez said in a March 27 speech before students and business leaders at Chongqing University in southwestern China.  "So having a culture where people can be rewarded for taking risk is very important, because innovation is always, always high-risk."

Government is responsible for creating that environment, the secretary said, and can do so by establishing "fair, effective and transparent rules" for the judicial and regulatory systems.

Gutierrez said he was impressed that China's new five-year plan gave high priority to innovation.

"[T]he vision is to make China an innovation society," he said.  "That is the right objective for this time."


Protection of intellectual property rights (IPR) is particularly important in an innovation society, Gutierrez said. 

China's failure to protect intellectual property rights has become a "major source of concern" in bilateral economic relations between the United States and China, he said, noting that fully 90 percent of the software installed in Chinese computers in 2004 was pirated, and counterfeit American movies and music are readily available on Chinese streets. 

But IPR protection "is not just for U.S. companies," the secretary said, adding that “intellectual piracy takes a toll on China's economy.  "Ironically, it is China that is most affected by violations of intellectual property rights."

One study, Gutierrez said, found that reductions in software piracy would generate significant tax revenues and create more than 2.5 million new jobs in China.  Equally important, he added, is the fact that, without effective IPR protection, China's own inventions and intellectual property will fall victim to pirates and counterfeiters.

With 1 million new applications for patents and trademarks filed in China in 2005, Gutierrez said, Chinese companies are beginning to recognize that they have a major stake in protecting IPR.

"If China is to become an innovation society … and I believe that China can become one of the great innovation societies of the world," he said, "then China will have to deal with intellectual property rights violations." 

The visit to Chongqing was a first for Gutierrez, who said he had stopped there because of the city's economic potential as "the commercial, industrial and transportation hub of Southwest China."  He had encouraging words for the audience, telling them that - as future leaders - they would shape China's business environment and help it to become a "responsible stakeholder of the world community."

"Enterprising entrepreneurs and scholars like you are writing the next chapter in China's five-thousand year history," Gutierrez said.  "We hope that chapter will be one of open markets, rule of law, economic cooperation, and mutual prosperity for both of our countries."

The full text of Gutierrez's remarks, as prepared for delivery, is available on the Department of Commerce Web site.  

For more information on U.S. policy, see The United States and China and Trade and Economics.