This totalitarian system, along with its other more pernicious consequences, also discourages and depresses innovation, which in turn encourages IP theft. Jeremy Haft exhaustively catalogs the failures of most businesses in China to innovate. Most of what Americans think is made in China is merely assembled in China. For example, the Chinese do not make the iPhone; they assemble American, German, Taiwanese, South Korean and Japanese components for a Taiwanese company located in China. Per Haft, Chinese companies lack the skills to manufacture those components independently. Many of the smaller Chinese companies that do try to innovate at U.S. levels find their work appropriated by larger, better politically connected Chinese companies. This is not to say that the Chinese do not innovate. They clearly do. The point is that they innovate less than they could because of the negative incentives the Party-State imposes. Innovation is simply too risky, too expensive, and too time consuming compared to theft.
interesting