The 19th national congress of the Chinese Communist Party was an awesome sight. As the leaders of the world's most powerful developing nation gathered last week to define their strategy and announce their place in the world, should we admire or tremble?

Nobody could doubt the ambitions of Chinese people and the influence of its economy. But businesses sense a new era.

China wants to share – some even say steal – the intellectual property developed by overseas companies that operate there.

The US and EU are seriously worried about this, and the Trump administration is working on ways, above and beyond the powers of the World Trade Organization, to stop it happening.

Hearing the fears of the US Secretary of Commerce though struck me as ironic. After all, we might recall Andrew Hamilton's 'theft' of British weaving technology. He bribed a Briton in the northern textile trade and started the New England weaving business with Arkwright's English IP.

The founding research of the industrial revolution which began in Britain moved across the Atlantic within a few years of the technological breakthroughs which had driven our own mills. Surely, that can't have been right?

So why would China want to get into this skullduggery and spoil relationships with companies and countries, when they know that a fear of losing IP could stop some companies coming to China at all?

Many foreign companies have already said they will not work in China out of fear of losing their IP, relenting only if the amount they will earn in China is enormous.

This is leading China to try and build things from scratch, like whole aeroplanes. If they succeed, China could make all the planes in the world.

The conventions of Western research and development (R&D) suggest it would be better for us all if we did things together. Why are we in this tangle?

It starts with the widely held view in the People's Republic of China that many Western companies have moved final, end-of-the-innovation technologies to China for low cost production and kept the more profitable core technology back at home.

This was just about OK when the Chinese were paid significantly less than those in the West. But China is now paying its workers a decent wage and no longer has the advantage to western investors of dirt-cheap production.

President Xi reinforced this in his speech to the Communist Party Congress last week, saying: "We need to speed up building China into a strong country with advanced manufacturing, pushing for deep integration between the real economy and advanced technologies".

The truth is that ageing technologies in many Chinese plants cannot compete and foreign companies are building more modern factories in India or Cambodia, to serve Western interests.

As Chinese production costs more in wages, jobs move to Indonesia and even Taiwan. This is causing serious problems for China which naturally wants the best for its people – to chase the productivity dragon, not just be left in the dust.

So why don't the Chinese just make their own intellectual property using their own R&D capability?

China is able to make its own IP in many technical areas, such as fintech, which means some can keep trucking with the higher salaries. But that is not true of something like an aero-engine, the next-generation products which would both bring rewards to workers and change to the country.

Shanghai
Nobody could doubt the ambitions of Chinese people and the influence of its economy. Carlos Adampol Galindo / Flickr

Before we start to moralise, blame the Chinese and imitate Wilbur Ross' rhetoric about IP theft, let's think what IP regulations are for.

Protecting intellectual property is known to be a necessary evil, justified by the funding for innovation it ensures and the new products it brings to market – products for all of us.

Intellectual property law can hamper innovation as well as speed it up. Arguments about ownership can lead to red tape and legal costs, rather than supporting the next stage in development.

IP is also a type of legal monopoly, and monopolies are notoriously bad if you want to derive innovation and share its benefits.

We agree to grant monopolies – that is, patents – to drug companies, by investing in research on the condition that they generate the next drug we need. We recognise there must be a commercial reward, but we don't want to inhibit treatments going to those who need them.

The proper argument for restricting intellectual property globally is that if another nation can simply take an idea, we will be short of cash for the next stage of innovation.

So how could we ensure that new products are developed in partnership with Chinese commercial interests?

Take the kind of research collaboration which takes place when a university works with companies in a membership model, sharing costs across many companies in the expectation that everyone will benefit from breakthroughs in the use of new materials or changes in production.

Even companies who are fiercely protective when it comes to IP, such as Boeing, Rolls Royce and Jaguar Land Rover, have found ways to collaborate on future technologies – particularly the production line processes that define how workers' skills are applied – when they are provided with the cutting-edge factory space to do so.

Such a progressive partnership approach is not naïveté but enlightened self-interest – sharing risks, ideas and benefits.

So why not strike a similar deal with China, a nation keen to be a manufacturing innovator, to keep millions of workers from poverty, and even develop next-generation energy and vehicle technologies and save as many as one in six people from pollution-related death?

The citizens of Beijing want to breathe clean air and receive a fair wage every bit as much as the citizens of Sheffield and Seattle. This offers a way for both to realise their ambitions – building bridges, rather than walls.


Professor Sir Keith Burnett CBE is the Vice-Chancellor of the University of Sheffield and President of the UK Science Council.