MGT 4027 Global management South University Week 3 Assignment 2 - 18828

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Case Study—Beneath the Surface

On December 11, 2001, China officially became a member of the World Trade Organization (WTO).  As a member, under the terms of an intellectual-property rights agreement reached in February 1995.  China was to crack down on pirates who counterfeited.  The Chinese themselves joke that in China, “everything is fake but your mother.”  Although China made progress in eliminating retailers of the pirated goods, before 2001 it did little to stem the production from the factories of the counterfeiters.

The counterfeiters were not fly-by-night operations run by individuals hiding in dimly lit buildings as one might suspect.  Rather, the majority of factories were run or backed by provincial governments, the People’s Liberation Army, or the Public Security Bureau.  In other words, the counterfeiters were government sponsored and financed. The government entities in turn received the benefits from the “cash cow.”

China has passed laws to make counterfeiting illegal, but admits there is a problem. Li Mingde of the intellectual Property Center at the Chinese Academy of Social Science says, “There is a very alarming phenomenon that, although the legislation is always being improved . . . {intellectual property right] infringement still runs rampant in the country.”

Punishing China for violating copyright and trademark agreements would especially help the U.S. entertainment industry.  For example, a DVD copy of a Beautiful Mind or Fellowship of th Ring sell for $1.20 outside Chinese banks, coffee shops, and department stores.  Yet, U.S. companies who have invested billions in China don’t want to fall out of favor with the Chinese Ministry of Foreign Trade and Economic Cooperation.  It is believed that these companies would suffer immense losses if the United States retaliated against China.

Source: Marquand, R. (2002, January 9). China’s pirate industry thriving, The Christian Science Monitor, Retrieved from

Consider all of this as you respond to the following questions. Use scholarly sources from the South University Online Library and the Internet to support your responses, and cite your sources using APA format.

  • What role does personal benefit of individuals, companies, and governments play in this situation?
  • What ethical conflict of interest exists between the Chinese government's role as a treaty signee/enforcer and its role as a financial beneficiary of the counterfeiting? Justify your reasoning.
  • What ethical conflict of interest might exist between the government officials' political treaty signee/enforcer? Justify your reasoning.
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