Why piracy in China isn't going away

Over the past few months, some of China's top PC manufacturers have pledged to purchase genuine Windows XP and other Microsoft products, in an effort to combat piracy in one of the areas where it is most prevalent.

Yeah, so?

Piracy was a major issue at this week's U.S.-China Joint Commission on Commerce and Trade (JCCT), the event that most likely sparked the flurry of announcements and agreements signed with Redmond. It seems that China, so routinely associated with copyright and intellectual property theft, is finally feeling the pinch in its national pride.

The Chinese government must be putting some serious pressure on domestic computer makers. A box builder like China's Founder, which makes PCs primarily for domestic consumption, doesn't agree to fork over a quarter of a billion dollars in the next three years because it suddenly had an attack of conscience. More royalties mean higher computer prices. In China, more so than other places, higher prices mean fewer sales. For that to happen, somebody must be leaning on it and the other PC makers pretty heavily.

Rather than its occasional, irate statements against software piracy in China (which remains above 90 percent), U.S. policy makers have this year offered a more sustained call for China to finally stop paying lip service to the idea of copyright protection, and take genuine steps to reduce the use of unlicensed software. Steamrolling a pile of bogus Windows discs at a photo op is no longer sufficient to pacify those involved.

Piracy is exceptionally simple: it's cheaper to reproduce and sell software in which you didn't invest, market, or frankly do anything else except slap a disc into a replication machine. That's one part of the equation.

However, piracy as an issue is far more complex than, say, the Business Software Association (BSA) makes it out to be. Certainly companies that invest in and develop new software deserve a fair return on investment. But that must take into account local market conditions.

There is a false impression that China is now a rich country. Certain sectors of the society have done very well for themselves. They've made real money. But the average monthly salary in the nation's major cities -- the wealthiest areas -- remains around $250 to $400 per month.

Compare that to average salaries in the U.S. If someone makes $2,000 to $2,500 per month, then a $250 operating system upgrade doesn't seem too terrible. But when that price is approximately the same in dollar terms in a lower-income country, as it is in China, then suddenly a potentially buggy, definitely pirated edition of the same software for about $5 to $10 sounds much more attractive.

If software companies want better results out of China, then pricing needs to be commensurate with local market conditions. Software developers and their policy representatives have attempted, futilely, to make piracy a moral issue. It isn't. It's an economic issue. Piracy doesn't flourish in developed countries where the cost of legitimate software doesn't outweigh its benefits. But it flourishes in developing countries, where the cost-benefit ratio is different. Authentic software will never be as an inexpensive as pirated goods. But when its value helps to close the gap between price and usability, more people will pay the appropriate price.