Cracking down on counterfeit leads to unemployment and shutting down of legitimate businesses against local authorities – hurt trade

Overcoming local protectionism cannot be done simply through the drafting of new laws on intellectual property protection or the periodic “strike hard” campaigns initiated by central authorities against counterfeiting and piracy. While most of China’s top leaders acknowledge that counterfeiting is a serious problem, China has a long list of problems of varying degrees of urgency. Any decision by central authorities to suppress local protectionism will involve significant political and social costs at a time when the PRC faces many difficult problems competing for the limited resources of the central government. Where local authorities are unwilling to shut down an economic activity that is perceived to be beneficial to their local economies, PRC central authorities will need to expend significant political resources to overcome the resistance of local authorities. Cracking down on counterfeiting may also result in serious social turmoil caused by the loss of employment, the shutting down of legitimate businesses, and other painful consequences. Faced with the significant costs involved in any serious nationwide campaign against counterfeiting, China’s central authorities will naturally avoid incurring such costs, if possible. To date, it appears that China’s central authorities lack the political resolve or commitment to launch a serious nationwide crackdown on counterfeiting.