Innovation and intellectual property rights

Comments on Justin Li “China scores silver ahead of Japan in GDP Olympiad”, 5/09/2010, http://www.eastasiaforum.org/2010/09/05/china-scores-silver-ahead-of-japan-in-gdp-olympiad/
Innovation is obviously important for advancing the economy to catch up with international frontiers and China needs to adopt international best practices in economic and intellectual property rights policies.

To start with, intellectual property rights, both international and domestic, have to be protected according to international practices and balanced with economies of scale to promote innovation and remove unnecessary barriers to adopt new products, methods, technologies and techniques. Without proper protection of intellectual property rights, it is difficult to have indigenous innovations.

Secondly, China should use market mechanism and price to promote efficient resource allocations and correct most market failures such as externalities, as opposed to resorting to administrative orders to do so.

Thirdly it is important to balance symbolism with real benefits in meaningful way. For example, it is reported that many local governments in China ordered some factories to stop or limit production and stopped power supply in order to achieve the symbolic indicator of emission intensity for the end of this year (2010) set earlier, apparently to show China’s resolve to achieve its announced target for 2020 to the international community.

That kind of practice probably can only be adopted by China and a handful of countries in the world now. But that is silly and harmful.