Intellectual property concerns do not inhibit Chinese partnerships, business leaders say

Christine Ayala

Although American businesses benefit from partnerships with Chinese companies, Chinese regulations make it difficult for partnerships to begin in the first place, panelists said at the Executive Education and Conference Center on Thursday.

The McCombs’ Energy Management and Innovation Center hosted the panel “Pensions, China and Shale Gas: CFOs Reveal.” CFOs from Apache Corp., Boeing, BP and Celanise Corp. discussed all three title topics, but their work in China was the focus of the night.

Steven Sterin, Celanese Corp. senior vice president and CFO, said the risk of losing intellectual property in China is a reality companies face. He said Celanese, a fuel technologies business that manufactures ethanol, has partnered with Chinese companies for the past 35 years without running into the problem because of company safeguards.

“You can’t protect all of your technology there, although China’s beginning to protect intellectual property,” Sterin said. “I still think we’re a long ways away from having enforcement that’s meaningful. You’ve got to be careful who you partner with in a joint venture.”

Niloy Shah, CFO of BP’s Gulf of Mexico region, said its business in China is profitable, although Chinese policies can limit access to international companies. He said one limiting policy requires a Chinese company to hold 51 percent equity in international business ventures, which gives it control of operation and partnership in intellectual property.

“They want to get the knowledge from intellectual property, but from a business-sharing standpoint, you basically get full cost recovery,” Shah said. “There’s this misconception that you can’t make money in China, but you do have to bring the technology.”

Shah said BP is watching carefully as its partners in China start deep-water drilling in an effort to avoid any incidents like the 2010 Gulf of Mexico spill.

“BP brought in an exploration program, discovered a field and at the point where you recover cost, the assets were turned over to the Chinese,” Shah said. “They are just beginning to do deep-water rigs, and obviously we’re monitoring that closely, because deep-water is not any easy business to be in.”

History senior Mansal Denton said it was important the panelists discussed business as well as the politics involved when companies work in China.

“It was interesting to hear them say a lot of these big American companies can’t afford not to be in China, but their hands are kind of tied by the intellectual property restrictions and lack of enforcement of intellectual property law,” Denton said.

Printed on Friday, November 9, 2012 as: Rules do not inhibit business in China