The Thirst of the Dragon: An Introduction to the Growth of Popularity & Counterfeiting of Wine in the Middle Kingdom

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Pouring_a_glass_of_red_wine.tiff“Wine is one of the most civilized things in the world . . . it offers a greater range for enjoyment and appreciation than, possibly, any other purely sensory thing.” 

― Ernest Hemingway 

Wine. The Greeks honoured this sacred beverage with its own deity, the Christian faith honour it as part of the sacred rite of Eucharist, and today, the history and quality of less ancient vintages has created a thriving trade around the world. 

Making up the majority of what the wine industry now calls the “Old World”, Europe combines a rich history of viticulture and winemaking with modern technological innovation. In recent years, Europe’s love of wine has proved especially infectious to developing palettes in East Asia, and over the last few decades Chinese consumption has surged, overtaking France as the largest consumer of red wine worldwide. This being said, room for growth in China remains as the Chinese continue to lag behind other nations in terms of individual consumption; in 2014, France’s 51.9 litre per capita consumption dwarfed China’s mere 1.5 litres.  

Europe’s old guard wineries seem well-poised to capitalise on this growth. They have spent hundreds of years perfecting their craft, and European ‘old world’ wines are sought after around the world. As a result, Chinese consumers primarily turn to Europe to slake their thirst for foreign wines— with the Middle Kingdom relying on European imports for 65% of its foreign wine trade. French reds are in particular favour, with 48% of China’s imported wines starting life on French vines, although wine produced in Germany, Spain, and Italy also enjoys considerable popularity amongst Chinese consumers1. 

However, in spite of Europe’s advantages, Chinese consumers still show a preference for domestically produced wines and more than 80% of wine consumed within China is produced domestically. According to independent critic and wine expert Jancis Robinson (MW)2, quality alone does not account for this disparity. Robinson, widely held in high regard for her independent critique and support of new industry and independent wineries, has routinely visited China over the last decade to sample the country’s developing vintages. As such Jancis is uniquely qualified to comment on the development of Chinese wines, and tells us that though Chinese winemaking has improved greatly in recent years, most producers still lag behind the established vines and vintners of Europe in terms of quality. 

There is of course something to be said for the effect of price on consumption. However, whilst historically, European wines have been more expensive than their Chinese competitors due to import taxes and shipping costs, these prices are now falling in line with many Chinese brands. With this barrier removed, the simple truth is that European wine brands are suffering irreparable damage to the reputation of their products amongst the developing palates of Chinese consumers, inflicted by rampant acts of counterfeiting.  

In vino veritas? 

Silently, over the last few decades, the Chinese wine market has become awash with fakes. Counterfeit investigations specialist and attorney Nick Bartman has had over 25 years’ experience in investigating counterfeiting and shutting down infringers and has spent the last 6 years tracking down wine counterfeiting in China. His investigations have turned up an astonishing volume of counterfeit wines ranging from cheap knockoffs sporting absurd claims (such as a French Bordeaux purportedly produced by a chateau in Luxembourg) to far more sophisticated fakery which even the original wine’s producers have trouble detecting3.  

Bartman and other experts in the field estimate that as many as one in three bottles of purportedly ‘foreign’ wine in China is fake4. Inevitably, even the best fakes fall far below the standards of quality which would be expected of European wines, severely damaging the reputation of European producers amongst Chinese consumers.  

Due to a historical lack of understanding of Chinese IP rights, and resultant failure to act early to counter this tsunami of illicit labelling, the wine industry now faces the daunting task of tackling an established and sophisticated web of infringers, or risk losing valuable ground in a rapidly developing market. 

A framework for action 

Despite the seemingly grim state of counterfeiting in the Chinese wine market, European producers are not without recourse. Over the past few decades, Chinese legislators have built a comprehensive legal framework around IPR protection and enforcement. Despite the western media’s negative outlook on Chinese IP protection, the mechanisms for registration, protection and enforcement of intellectual property are more accessible to European wine makers than many believe. 

Furthermore, Chinese authorities themselves are especially keen to crack down on counterfeiting of wine, motivated by both IP as well as health concerns. Much of the liquid found within counterfeit bottles is of substandard quality or has been found to be “Frankenwine” produced entirely by chemical and laboratory methods, never seeing a grape, let alone a French vineyard5.  

Despite the ready ally present in the Chinese government and Chinese wineries6, the European winemaking industry must band together and act promptly on this issue. Our sources in the European wine trade have all reported a reluctant acceptance of Chinese piracy in the European wine industry. With Chinese counterfeit wines now leaking to the West however, it is crucial that producers act to stem the flow. The IP framework is established in China, and protection and enforcement of rights are not only available, but also more accessible than ever before. All that remains is for European producers to take the fight to the infringers and work with the local authorities to assert their rights on Chinese soil. 

© AleBayntun-Lees
China IPR SME Helpdesk 

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The China IPR SME Helpdesk supports small and medium sized enterprises (SMEs) from European Union (EU) member states to protect and enforce their Intellectual Property Rights (IPR) in or relating to China, Hong Kong, Macao and Taiwan, through the provision of free information and services. The Helpdesk provides jargon-free, first-line, confidential advice on intellectual property and related issues, along with training events, materials and online resources. Individual SMEs and SME intermediaries can submit their IPR queries via email (question@china-iprhelpdesk.eu) and gain access to a panel of experts, in order to receive free and confidential first-line advice within 3 working days. 

The China IPR SME Helpdesk is co-funded by the European Union.  

To learn more about the China IPR SME Helpdesk and any aspect of intellectual property rights in China, please visit our online portal at http://www.ipr-hub.eu/. 

China’s New Ecommerce Law: What this will mean for Consumers, Operators and Providers

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shutterstock_167099189Today’s blog post has been kindly drafted for us by our China IPR SME Helpdesk expert Mr. Daniel Albrecht from Starke Beijing. In this article, Mr. Albrecht gives a comprehensive overview on the latest changes in China’s new e-commerce law that will inevitably effect the activities of consumers, operators as well as providers. 

China’s Ecommerce Market 

In accordance to analysis by digital marketing researcher eMarketer, cross-border Ecommerce in China was due to hit USD 85.76 billion in 2016, up from USD 57.13 billion in 2015. Furthermore the China Internet Network Information Center (CNNIC) reported 710 million Internet users in June 2016. Notably, 40 per cent of China’s online consumers are buying foreign goods and eMarketer estimated the amount of money that each of them would have spent an average of USD 473.26 in 2016. 

If the projection that cross-border Ecommerce will have a compound annual growth rate of 18 percent through to the end of the decade — reaching an estimated USD 222.3 billion — will come true, the consequence would be that China’s Ecommerce market will catch up with those of the US, Britain, Japan, Germany and France combined by 2020. 

China’s New Ecommerce Law 

As the Ecommerce market is constantly changing and undoubtedly its major impact on social life and the current economy cannot be denied, it seems to be necessary to provide a legal framework to give answers to upcoming questions within the scope of Ecommerce. 

Hence a new Ecommerce law is in progress and drafts are waiting to be adopted. The new law shall remedy the current situation by promoting the Ecommerce market’s development, putting things straight and satisfying all the parties’ interests. These central ideas are laid out in Article 1 of the recent draft law and shall summarize simultaneously the political objectives pursued by this law. 

Continue reading “China’s New Ecommerce Law: What this will mean for Consumers, Operators and Providers” »

IP Protection Strategies for App Developers in China

8585049088_9d1dbcdf1f_kDue to the size of the market, increasing disposable income and smartphone addiction China is an attractive market for European app developers who are wishing to expand to new markets. European app developers should, however, pay attention to protecting their IP rights in the country, because IP infringements are still commonplace in China.In today’s blog post we’re taking a closer look at how European app developers could best protect their business against IP violations in China. 

China has increased the per person spending on games and other apps 10 times since 2014. This rapid growth, stimulated by the release of the iPhone 6 and 7 and heavy investment in Apple’s retail presence in the country, has pushed China to the top spot for App downloads worldwide[1].

Asia is leading a mobile revolution, replacing older, less transportable technologies with a ‘mobile-first’ tech culture. Smartphone penetration in China is far deeper than anywhere in the West, many new users skipping desktop computing entirely in their adoption of smartphones and tablets[2]. In China alone it is estimated that there are more than 700 million active smartphones and there is still potential for further growth as lower cost alternatives increasingly cater for the lower end of the market.

These statistics, coupled with recent developments in Chinese mobile user payment structures makes China a very attractive market for existing and potential app developers, with content creators flocking to take advantage of the newly minted market. Continue reading “IP Protection Strategies for App Developers in China” »

Managing your Intellectual Property as a Business Asset in China

shutterstock_237576058Intellectual property rights are important, as they protect the company against counterfeiting and other types of infringements. At the same time, intellectual property rights can also be financial assets that provide security for financing. Thus IP rights could also be managed as financial assets. In today’s blog post we are taking a look at how to manage your IP rights as financial assets in China.

Introduction  

For most businesses, intangible assets represent more than 50% of the value of the enterprise. The most significant group of intangible assets are those protected by intellectual property such as inventions, designs and brands. Since they form such a large part of the overall value, their management as financial assets is important to the success of the business.

Businesses that actively manage their IP as a financial asset outperform their peers by up to 30%. They do so by maximising the effectiveness of investment in the business, driving performance in areas that produce the best return and managing operational risk. They may also use their IP assets as security to obtain various forms of funding. Moreover, there are opportunities to gain strategic advantage in relation to the sale or purchase of a business.

Understanding the financial value to the business of specific IP assets is of particular importance when moving into a new market – product or geographic – because there will be new risks as well as opportunities. China presents some special challenges, and practical steps to protect the value of IP assets are often as important as legal ones. This article discusses how IP assets matter from a financial perspective and assesses how to manage them to the greatest business advantage. Continue reading “Managing your Intellectual Property as a Business Asset in China” »

IPR Protection in China for the GNSS Technologies

technology-2082642_1280Driven by consumers’ obsession with smartphones, China’s market for GNSS technologies offers promising business opportunities for European SMEs whose top-notch technology is highly sought after in China. European SMEs wishing to do business in China should however be aware of the fact that IP infringements are still relatively common in China and thus a comprehensive IP strategy is needed in order to succeed in China’s market. Today’s blog post, thus, offers an overview of IP protection tools in China, focusing especially on the GNSS technologies.  

GNSS and China

In an increasingly technologically advanced and interconnected world, technology utilising GNSS has risen year on year, with both entirely new applications being developed along with improvements and adaptations to existing technologies.

At present there are two globally operating GNSS systems; the United States’ Global Positioning System (GPS), and the Russian Global’naya Navigatsionnaya Sputnikovaya Sistema or (GLONASS) system. There are also two GNSS systems currently under development; Galileo, a European Union-led initiative and the expansion of the Chinese BeiDou system to the global Compass Navigation System. Both of these systems currently provide incomplete or regional coverage and are scheduled to be fully operational globally by 2020.

GNSS technology has a wide range of applications including LBS, maritime transport, public regulated services, road transport, agriculture, surveying, aviation, civil protection and timing and synchronisation.

These technologies depend on a number of factors, including ‘availability’ i.e. the percentage of time the minimum number of satellites are in view, ‘indoor penetration’ i.e. the ability of signal to penetrate inside buildings, location accuracy, continuity of service and signal reliability. Success in the GNSS market depends on the successful exploitation of technology to maximise the success of devices abilities to transmit and receive in line with these dependant factors. This makes protection of IPR crucial to maintaining market advantage and adequate returns on research investment. Continue reading “IPR Protection in China for the GNSS Technologies” »