That a company in Shenzhen was ordered to pay a total of 6 million yuan ($860,000) in compensation to MGM Holdings for infringement of the latter's trademark and unfair competition last week indicates that China means what it says about the protection of intellectual property rights.
MGM Holdings filed two lawsuits against Shenzhen MGM Films Company in South China's Guangdong province for unfair competition and trademark infringement, as the Chinese company was using the name MGM and its lion logo and had even authorized more than 30 theaters across the country to operate under the brand name and logo.
The Shenzhen company was ordered to pay 3 million yuan in compensation in each of the two cases, the maximum under Chinese law.
There have been similar cases recently in which Chinese enterprises were ordered to pay the maximum amount of compensation to foreign companies whose trademarks they were ruled to have infringed upon.
Foreign companies can be confident that China means what it says when it comes to the protection of intellectual property rights as it is earnestly striving to improve its business environment, as evidenced by the law on foreign investment which came into effect on Jan 1.
Rather than a matter of being in whose interest, an improved business environment is a matter of whether companies, both domestic and foreign, are able to compete on a fair and level playing field. That is not just important for foreign companies but also for their Chinese counterparts.
It was understandable for local governments to tilt their policies in favor of domestic companies in the 1980s and 1990s when Chinese businesses were not strong enough to compete with their foreign counterparts. But it is indeed necessary today for the law to create a business environment in which both foreign and domestic companies can compete in a fair manner.
Chinese companies are no longer toddlers and it is unfair to provide them with care they are not entitled to. Unnecessary protection will only spoil them.
For the upgrading of China's manufacturing industry, for the country's economy to shift from a quantitative one to a qualitative one and for its innovation to be lifted to a higher level, China needs to ensure that its business environment promotes fair and equal competition.
Only with such a business environment, will those companies with stronger competitiveness thrive, while those that do not have enough vision for long-term development or lack competitiveness are eliminated. Only with fair competition for all businesses both foreign and domestic, will the country's economy develop in a healthy and inclusive manner.