In Industry

China's Trademark Economy: A Lesson for Africa

As African countries activate the AfCFTA, it is important to emulate profitable Intellectual Property economic strategies from global giants like China, in order to grow industrial activity in all sectors of the continent's economy.

According to the World Trademark Review, China’s rapid expansion has made a lasting impact on the trademark landscape, with more to come. 

Trademarks, known to consumers are Brands, are what represent goods and services sold in African economies, and the rest of the world. Branding is a central element of modern market economies and an important feature of everyday life. Firms invest large sums of money in advertising their goods and services and building a reputation in the marketplace. In turn, these activities influence consumer choice and determine commercial success. Ultimately, branding shapes how firms compete, with important implications for economic welfare. Understanding firms’ branding strategies and how they affect market outcomes is therefore important.

In order to appreciate the role of trademarks, it is helpful to start by asking why consumers value brands in the marketplace. One can broadly distinguish between two different sources of value. First, brands have reputational value. Consumers may prefer one product over another for a variety of reasons – how functional or effective the product is; how reliable it is; how long it lasts; how easy it is to use; how it tastes, sounds or smells; what side effects it may have. Often, these characteristics cannot be easily observed at the time of purchase. Consumers may only be able to evaluate them as they experience the product.

In order for consumers to select the products that best suit their needs and preferences, they must rely either on their past consumption experience or on information about the product provided by the producer or a third party. In short, they need to rely on a product’s reputation. But this only works when consumers can reliably identify the goods of different producers in the marketplace – the precise function performed by brands. Indeed, if many producers could independently market their products using the same brand, consumer intelligence would have little value, and producers could not build a reputation.

Trademarks give economic potential and are used by market economy to generate more income, value and surplus in the economy. The legal protection of trademarks and brands encourage and support the innovation and creativity in manufacturing and service industries.

Realise that most economies are shaping into Market Economies, as the model creates value based on demand and supply of goods and services, even though impact from Government Policies affects the same. 

The top ten most valuable brands in the world are Apple, Amazon, Microsoft, Google, Samsung, Coca-Cola, Toyota, Mercedes, McDonald's, and Disney all valued at no less than $50 Billion in 2019.

Back to China. 

Trademark applications filed in China over the last decade have soared from 766,319 in 2006 to 2,876,048 in 2015. Managing IP reported that in 2010 China became the first register to receive one million trademark applications in a single year; four years later, in 2014, the two million mark was passed; and it took only two more years to reach three million applications. After 2016, volume was increased at an ever-faster rate, with 5.6 million applications filed in 2017, and over 7 million in 2018. This accelerated growth was spurred by CNIPA’s decision, effective April 2017, to cut the official filing fee in half, which saw filing volume double in the second half of the year on the Chinese register. 

This development has not gone without opposition from the United States of America. In 2011, the United States International Trade Commission reported, that China’s rapid economic transformation over the past three decades has presented both opportunities and challenges to many U.S. businesses. Despite broad success in the China market, many U.S. companies have reported that two major factors—the infringement of their intellectual property rights (IPR) in China and China’s indigenous innovation policies—have undermined their competitive positions.

In 2016, the World Intellectual Property Organisation (WIPO), attributed five factors accounting for this rapid growth in China's Trademark Economy. First, the Chinese Government’s drive to boost “mass entrepreneurship and innovation”. This has helped maintain strong economic growth, promoted market development and lowered market entry barriers. It has also resulted in the formation of many new companies which are boosting entrepreneurship, innovation and trademark activity.

Second, the implementation of the 2014 Trademark Law has helped create a sound legal environment for trademarks to thrive. Intellectual property (IP) laws and regulations are constantly improving.

Third, the industry and commerce authorities and market regulators at all levels are working to create a level playing field for the protection and use of trademark rights.

Fourth, the State Administration for Industry & Commerce (SAIC) is actively improving its trademark registration procedures to ensure applicants have access to efficient, high-quality services. At present about 70 percent of all trademark applications are filed online and that number is growing every month.

Fifth, extensive IP outreach efforts have boosted public and business awareness of the value of trademarks.

Trademarks play a crucial role, particularly when it comes to bringing new products to market and supporting business growth. Trademarks enable customers to identify the products and services a company offers and help the company distinguish its goods and services from those of its competitors.

Trademarks are one of a number of IP rights companies can use to protect their innovative assets, strengthen their competitive position, expand their market share and improve their bottom line. Steadily increasing awareness of the value of trademarks and brands among Chinese entrepreneurs is enabling them to boost demand for and realize the market value of their innovative products.

The Government’s drive to reform China’s business landscape took off in 2014 with the implementation of a series of measures, including lowering barriers to market access and boosting investment in startups. The aim was to inject new dynamism into the Chinese market and promote business growth.

Since then, unprecedented numbers of new businesses have sprung up, further boosting the uptake and use of the trademark system by Chinese firms.

Brands underpin the competitiveness of an enterprise and a country. Recognizing their economic importance, the State Council is implementing its trademark and brand strategy within the period of the 13th Five-year Market Supervision Plan (2016-2020). In this context, as of 2017 “Chinese Brand Day” will be celebrated annually on May 10. The aim here is to further deepen understanding of the importance of registering trademarks and building brands, and to support of the Government’s continued reform of the country’s business landscape. It will also enable us to take advantage of every opportunity to raise awareness of the importance of trademarks and brands, for example through the implementation of the country’s national IP and innovation-driven development strategies and the “Belt and Road Initiative”. Guided by this market-oriented reform, SAIC will continue to improve its trademark registration services in support of business growth and the emergence of a broad range of Chinese trademarks that are recognized by consumers around the world. 

Sources: World Trademark Review, WIPO, Managing IP, Visual Capitalist

Cabanga Media Group publishes of thoughtful economic and business commentary magazines and online media, in several African markets, that include South Africa, Botswana, East Africa Community, Ethiopia, Egypt, Nigeria, and Zambia.