is low IP protection driving foreign businesses away from China?

IDG News ServiceMicrosoft sees better opportunities in Indonesia and India than it does in China due to “very, very low” protection for intellectual property in China, Microsoft’s chief executive said Wednesday.

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China is set to surpass the U.S. this year as the largest PC market by units shipped, but Microsoft earns a fraction of the revenue in China that it does elsewhere, said Steve Ballmer, chief executive of Microsoft, who spoke to reporters in Singapore on Wednesday as part of a trip through Southeast Asia.

“Something like 15 to 20 percent of the world’s computers will get bought in China. China will represent for Microsoft probably about 1 percent or something of our revenue,” he said.

Lack of protections for intellectual property in China is one reason why the U.S. continually runs a trade deficit — US$16.9 billion in March 2010 alone — with China, Ballmer said.

“It’s not surprising that we run trade deficits when the most important industries in the U.S. have a hard time getting paid for their work,” he said, noting that movie studios and pharmaceutical companies are also hurt by low protections for intellectual property.

The low level of protection for intellectual property in China — where software piracy remains rampant despite nearly two decades of lobbying by foreign software companies — means the country is losing some of its attractiveness relative to other markets.

“We see better opportunities oftentimes in countries like India and Indonesia than we do in China, because the intellectual property protection in India and Indonesia is actually quite a bit better than it is in China,” Ballmer said.

That’s not to say that software piracy isn’t an issue in India or Indonesia. According to the Business Software Alliance’s latest study of global piracy, which was released earlier this month, India and Indonesia had estimated piracy rates of 65 percent and 86 percent, respectively, in 2009. China’s 2009 piracy rate was estimated to be 79 percent.

While there’s no sign that intellectual property concerns in China will be resolved soon, Microsoft isn’t giving up on the country.

“It’s a long haul. We’re trying to do our best to collaborate with industry, to collaborate with Chinese companies, collaborate with the government, so that people understand and appreciate the value of proper protection of intellectual property,” he said.

Copyright 2010 IDG News Service, International Data Group Inc. All rights reserved.

Re-printed from CIO online.

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