China

China

At a Glance:

  • China is the world's second largest market for personal computers (PCs) but only the tenth largest market for PC software, reflecting its significant market potential.
  • PC software piracy in China has been falling in recent years but remains excessively high, and the government continues to pursue policies that put at risk market access for non-Chinese software firms.
  • BSA members are committed to the Chinese market and to working with the Chinese government to build a vibrant and legal software market that delivers benefits for both Chinese and global software firms and consumers.


BSA Position

BSA members are committed to the Chinese market and to working with the Chinese government to build a vibrant and legal software market in China that realizes its potential for both Chinese and global software firms and consumers. This can be achieved by substantially reducing software piracy rates and ensuring that the Chinese government develops software procurement and standards policies that do not unfairly discriminate against the products of non-Chinese firms.

BSA's policy objectives in China include the following:

  • Enterprise and government software legalization
  • Fair market access for all software firms, including government procurement
  • Enhanced administrative enforcement against software piracy
  • Strengthened criminal enforcement against software piracy

Issue

China is a top market for software and IT companies, offering immense opportunities that can be realized if significant software piracy and market access challenges are addressed.

Background

China is the world's second largest market for personal computers (PCs) but only the tenth largest market for PC software. The gap between these numbers reflects the vast market potential in China, as well as the dual challenge of extensive software piracy and policies which limit market access for non-Chinese products.

The estimated software piracy rate in China remains excessively high despite some progress in recent years. According to the Sixth Annual BSA-IDC Global Software Piracy Study, the software piracy rate in China dropped from 90 percent in 2004 to 80 percent in 2008. Yet estimated financial losses due to PC software piracy reached a high of $6.7 billion in 2008 due to the rapid growth of the country's PC market.

As in other markets around the world, BSA focuses its anti-piracy activities in China on curbing the use of unlicensed software by corporate enterprises and government agencies.

In recent years, China has made important commitments on software industry issues in bilateral negotiations with the United States, particularly through the Joint Commission on Commerce and Trade (JCCT). These have included commitments to ensure the use of legal software in government agencies and state-owned and other enterprises, to require pre-loading of legal operating system software on computers produced or imported into China, and to delay indefinitely the implementation of certain discriminatory government procurement regulations. While China has yet to fully follow through on some of these commitments, its efforts to date have likely contributed to the recent drop in the piracy rate, though more needs to be done.

At the same time, China has made the development of an indigenous software industry a strategic priority. This has led to policies that often favor domestic firms in government procurement and other areas, and limit market access for non-Chinese products.

Actions Needed

BSA urges the US government to engage with China — through the JCCT and other appropriate fora — on the following priorities:

  • Enterprise Software Legalization. China has committed in the JCCT to ensure that enterprises — both state-owned and private – use only legal software. China needs to fulfill this commitment in a transparent manner that does not unfairly favor domestic software firms. BSA stands ready to assist China's enterprises in this endeavor through training programs on software asset management (SAM).
  • Government Software Legalization. China asserts that it fulfilled its JCCT commitment to legalize the software used by government entities (at the central and local government level) by the end of 2005. China must put in place policies and procedures — including SAM programs — to ensure that government software use remains legal. Adequate funds must be allocated for software purchases, and Chinese government ministries should undertake periodic self-inspections to assess their compliance.
  • Market Access/Government Procurement and Standards. As China moves toward accession to the World Trade Organization's Government Procurement Agreement (GPA), it should strive to make its government procurement regime as transparent, open, technology-neutral, and nondiscriminatory as possible so that it presents a free and fair market opportunity for both foreign and domestic software companies.  It is also critical that China refrain from implementing technology standards and other policies that unfairly limit market access for foreign products.
  • Administrative Enforcement. The National Copyright Administration of China (NCAC) must instruct local copyright authorities (and they must be provided sufficient resources) to engage in robust enforcement activities against corporate end-user piracy, to impose deterrent fines, and to publicize the results of completed cases.
  • Criminal Enforcement. China needs to amend its copyright law and criminal code to make end-user piracy a criminal offense, and eliminate or significantly reduce monetary thresholds limiting the effective use of criminal penalties.

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