Intel announced plans to build a $2.5 billion chip factory in China. Several of the news reports claimed that Intel and other high tech manufacturers had been reluctant to invest of China because of its weak enforcement of intellectual property rules. It is difficult to understand the logic of this assertion. Intel has an interest in having its chips made as cheaply as possible. This is independent of whether the country in which it happens to locate its factory enforces intellectual property rules. The claim that enforcement would be a factor in location decisions seems to implicitly assume that people who gain expertise cannot travel. If a person who gains access to Intel's protected information can go to China and set up a factory with impunity, then it is every bit as bad for Intel as if the person didn't have to travel because they were already in China. I suppose that the need to travel raises the cost of making unauthorized copies of Intel's products, but no one planning a large-scale venture is going to be discouraged by the price of a plane ticket. There is a plausible story that companies like Intel use their investment decisions as a way to impose political pressure to tighten IP protections, but this is not directly an economic consideration. It would be helpful if reporting on this topic could clarify these issues.
--Dean Baker