Recent changes in China’s innovation environment make a big impact on business in Asia.
Recent changes in China’s innovation regime have pushed ASEAN’s IP environment to become an essential component in the global innovation ecosystem. We share three trends in this article: global supply chain relocation, the scramble to transfer IP overseas, and blockchain-powered innovations.
Global Supply Chain Relocation
Why is the global supply chain moving from China into ASEAN (Southeast Asia)? The US-China trade war is an obvious reason, but China is also currently taking initiatives to upgrade its industry. The shortage of labor and electricity in China are speeding up the relocation process.
A survey by Deloitte in 2020 indicated that one third of manufacturing enterprises plan on leaving China, which includes the “big-five” Taiwanese electronic manufacturing service (EMS) enterprises. These EMS enterprises were previously among the top ten enterprises which make the greatest contributions to China’s annual foreign exchange reserve.
This relocation has important implications for the IP involved in such businesses. EMS enterprises are making innovations in R&D prototyping and in improving the yield rate for mass production. These enterprises have many trade secrets in production. Whether they can continue to play effective roles in the global supply chain will hinge upon support from the IP systems in their new host countries in SE Asia.
The Scramble to Transfer IP Abroad
In Mandarin, transferring IP overseas is called "IP 出海" which literally translates to "IP Goes Overseas". This transfer of IP highlights the importance of ASEAN’s IP environment -- more and more Chinese enterprises are developing their IP in China but commercializing their IP in global markets.
Enterprises adopt this strategy because they are facing increased regulatory challenges within China, which has pushed them to find new opportunities for growth overseas. In addition, some businesses hold and use sensitive information which becomes complicated when this IP belongs to entities outside of China.
Some examples of this include gaming, education, and cloud service providers. Companies like Ali, Tencent, and many others are now headquartered in Singapore, using the city as a gateway into the global market.
This trend is expanding to more businesses that demand IP protection such as in the protection of intangible cultural heritage and traditional handicrafts.
IP protection is geographically bounded. Different sovereign bodies have their own legal framework for IP. Companies that implement their IP globally need to account for these cross-border differences and potential contradictions. Companies that relocate to SE Asia or transfer IP to SE Asia must attend to the IP regulations in their new host countries to ensure their success in the global market.
Emerging Business Models and Blockchain-Powered Innovations
Blockchain applications like the Metaverse, NFT artwork, and the Defi lending platform are currently gaining traction and will continue to do so in the coming years. Legal risks faced by such innovative platforms are felt unevenly in different jurisdictions.
Authorities are taking different positions toward cryptocurrency: China has banned all cryptocurrency transactions, Taiwan takes a more neutral stance, and Singapore is relatively welcoming to the industry.
The differing attitudes towards blockchain and cryptocurrency provide a great opportunity for cross-border collaboration to handle IP, monetization, and risk management in the exploration of new business models.
The international platform for music securitization is an excellent example of cross-border collaboration in this initiative.
The recent changes in China’s innovation environment have spurred a long ripple effect. From the perspective of the global innovation ecosystem, ASEAN’s IP environment is increasingly becoming more essential. This is because of the supply chain relocation for many EMS enterprises, IP moving globally from China, the increase in blockchain-powered innovations, and the differing attitudes towards such innovations.
Multilateral collaboration will yield great opportunities in commercializing IP. In order to benefit from such collaborations, businesses need to become more well-acquainted with the IP regulations in their new host countries and with whom they collaborate with.
Great potential lies in such cross-border collaborations -- we welcome you to explore more in the linked articles below.
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