The man who was selling fake Rolex watches for $1 in the Forbidden City in Beijing the other day is hardly an endangered species, but China is quietly starting to win plaudits for its efforts to protect intellectual property.

Last month, the police detained the operator of a Web site, "Tomato Garden," from which millions of pirated versions of Microsoft software had been downloaded, according to media reports, while last spring, Chinese courts passed trademark judgments in favor of the Italian chocolate maker Ferrero and the luxury goods label Gucci.

"Obviously there's a ways to go, but I think there's been a vast improvement," said Lee Sands, a former chief US trade negotiator with China. "It's very clear that there was a change in the mentality of the government."

In the government's vision, "Made in China" should not stand for knock-off DVDs but for clean, creative, cutting-edge industries. After all, this is the country that dazzled the world with its Olympic stadiums and is preparing for its first space walk this month.

China may be the workshop of the world, but it creates little value itself. In 2006, the export value of a 30-gigabyte, video-model iPod assembled in China for Apple was about $150, but the value added by Chinese producers was just $4, according to the National Bureau of Economic Research, a private US research firm.

China, not surprisingly, wants to capture more of the revenue that comes from designing new products and building brands. So, among other things, it is pushing low-end, energy-guzzling factories out of business and encouraging innovation by getting tougher on copyrights and trademarks.

"Ultimately, it's all about self-interest," said Sands, now a managing director with Sierra Asia, a market advisory and investment firm specializing in China.

(China Daily via Agencies September 16, 2008)