“Assess the extent to which institutional drawbacks, for example, news/Internet censorship and lack of the rule of law, may inhibit Beijing’s attempts to enhance the innovativeness and global competitiveness of Chinese industry.”

Abstract
This paper discusses the current innovative environment in China and in what ways institutional drawbacks inhibit progress in this area. China’s rapidly expanding economy and recent transition to quasi-capitalism along with its long-standing cultural aversion to globalization all present some impediments to the innovative process. It is impossible to describe each one in this paper. Therefore, this paper will focus on how the lack of rule of law, specifically with regard to intellectual property rights, affects innovation and the global competitiveness of China. In addition, it discusses some cultural factors which are interwoven throughout this issue. Finally, it will describe how China can be successful as an innovator in the global economy.
1.0 Introduction

According to McKinsey and Company, the answer to the question of whether or not China can innovate is that “it can, it already is, and it will continue to do so.” However, China’s environment for innovation is currently held back because it lacks some of the basic legal foundations that are required for a truly innovative economy. But spurring innovation is a major goal in the CCP’s newest five-year plan; the Chinese government intends to reverse what it sees as several hundred years of Western domination in this area.
Currently, few major breakthrough ideas are emerging from China, but indigenous innovation is underway and gaining more traction every year. For instance, the number of scholarly papers in recognized international journals by Chinese scientists has quadrupled in the last decade from .5% of the total share internationally to over 2%. The number of patents awarded to Chinese inventors has doubled since 2005. Also, the amount of money that the rest of the world is investing in China to use Chinese intellectual property has grown to over $400 million per year. While it is obvious that China is becoming more innovative, it needs to focus on becoming more of a team player in the global economy and on “innovating a system for innovation”. Without doing so, China risks never moving its economy beyond where its brute force as a manufacturer can take it. One systemic drawback which has hindered China’s ability to innovate has been and still is a lax attitude towards intellectual property laws and regulations. This mindset has angered the international community and dampened China’s own ability to be inventive and original. The issue is the result of bureaucratic resistance and misguided ambitions, but it also has strong cultural roots. The following sections explain how China’s lack of intellectual property protections is detrimental to fostering a truly innovative society and why it has been traditionally resistant to fix this problem. 2.0 Intellectual Property Protections It is not fair to say that China does not have laws pertaining to the protection of intellectual property - it does. But it is fair to say that the laws are weak and are not properly enforced. China has become synonymous in the Western world with the words “bootleg” and “copycat.” It is well known throughout the world that copyright infringement and downright copying of protected materials is widespread in China. The country is inundated with fake merchandise such as knock off designer handbags, sunglasses, golf clubs, and all other manner of goods. These counterfeit materials are even shipped around the world, much to the consternation of the international community. This type of copying is not atypical of many developing nations in their infancy. But this is been going on in China for decades and, in fact, many believe that the situation is getting worse. This issue is a major point of contention between China and the rest of the