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s Infrastructure INSTRUMENTATION The most obvious sign of the improvement in biotechnology funding in China is the tremendous increase in the number of modern, imported instruments. Of He 19 research institutes visited dunog Be evaluation trip, virtually every one had at least some of Be following items: DNA synthesizers, amino acid analyzers, protein sequencers, high-performance liquid cl~matographs, liquid scintillation counters, ul~en~rifuges, computerized fennentors, ultraviolet spectrophotometers, electron microscopes, tissue culture incubators, and laser densitometers. At certain centers, Ocularly close financed by World Bank education and equipment loans, Mere were more ins~nent~ Pan available space. In general, these ~nstnunents are well maintained. Most Chinese scientists are more familiar with how an ins~nent actually wows On are their American oounterpans, and He able to strip pans from an abandoned or outmoded instrument to repair a new one. F=hennore, the Chinese are paying close attention to the ability of foreign suppliers to provide prompt, reliable maintenance service. The clear impression was Hat American suppliers are quickly being replaced by Japanese and West Gennan competitors. Most ldborauxies are also well equipped with small insurgents such as water basso gel elect~phoresis devices, shakers, vex mixers, and bacterial incubators. 18

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rNFRASTRUCl7JRE 19 Many of these items ale produced in China by using Western designs. These locally manufactured ins~nents are inexpensive and easily refit. PROCUREMENT SYSTEM AND SUPPLIES In congest to He system for insurgent purchases, Me system for procuring chemicals, disposable laboratory supplies, and other supplies is poor. Many of Me items essential for biotechnology research sell must be purchased from foreign sources; this includes most restriction and DNA modification enzymes, radioisotopes, specials chemicals, and plastic ware. These items, which must be purchased win hard currency, can only be ordered once a year. This makes it extremely difficult ~ do experiments efficiently because researchers are often unable to follow up on interesting leads because of a lack of reagents. The stated rationale for this system is that all orders requiring foreign exchange should be consolidated in order ~ increase efficiency. Many of the scientists interviewed during Be evaluation Rip complained that the real reason was middle- level bureaucrats who see He control of hard currency as a way to gain power.) Recognizing the negative effect of this rationale on the advancement of research, a certain number of institutes have recently in~duced more efficient systems that allow perishable supplies, such as radioisotopes, to be ordered on a more regular basis. In contrast to the bureaucratic efficiencies being pursued, these changes will demons the real value of making the procurement system responsive to the research community's new and goals. China is gradually trying to improve its own production of biotechnology supplies. Most simple chemicals (e.g., sodium chloride and sodium phosphate) am produced in China and appear to be of }=son~ly high quality. A fairly wide s~trum of more Specialized biochemicals (e.g., adenosine tnphosphate and deoxynbonucleotides) are available from biochemical factories such as the one associated with the Shanghai Institute of Biochemistry; the quality of these reagents is more Able, and several scientists complained of poor quality control. A notable recent development is the formation of the Sino-American Bio~hnalogy Company, a joint venture between Promega Corporation, SSTC, and the Henan provincial government Under the supervision of an American director and with He assistance of several scientists who have trained in the United States, this new company's production facility produces several of the most widely used restriction enzymes. In addition, Hey import, store, and offer for sale a number of enzymes and other reagents from Be Promega catalog. Although these items are priced at American levels, an important advantage is that Hey can be purchased with yuan rather than hard currency. The headquarters

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20 BI07=HNOLOGY IN CHINA of He Sin>Amencan Biotechnology Company is inconveniently located in Luoyang in lIenan Province, but more convenient branch offices have recently opened in Beijing and Shanghai INTELLECTUAL PROPERTY RIGHTS China's newly instituted patent system provides for He granting of patents on inventions, utility models, and designs. Patents are granted for 15 years and may be licensed to third parties for a negotiated fee. Hinges, in principle, are subject to compensation for damages and criminal lidb~liW; such fines can be levied either by He P=nt Office or He People's Court Similar to He European system, patents must be filed prior ~ publication of research results. The Chinese patent system strongly emphasizes the application and pprP~tling of patents as well as He protection of Be patent right Accordingly, if a patentee has not worked on an invention within 3 years without any justified reason, Be Patent Office has the right ~ issue a compulsory license to a third party. Such compulsory licensing provisions are found in He patent systems of many developing counties. China has acceded to the Paris Convention for the Protection of ~dus~ial Property, Hereby allowing nationals Tom countnes that are ply to the convention (including the United States) to obtain patent rights in China Foreigners are required to use a patent agency designated by the State Council; these include agents in Beijing, Shanghai, and Hong Kong. A foreign party may use an invention through a subsidiary in China, a Chinese-foreign joint venture, or a licensee. lithe Chinese patent law includes specific restrictions against the government's expropriation of foreign-owned patents. However, if progress toward production is not demonstrated within 3 years, Be right to issue a compulsory license to a Chinese entity is in effect. The actual effectiveness of the new Chinese patent system is weakened by two difficulties. First, He law Specifically excludes inventions in Be following areas: food, beverages, and flavonngs; pharmaceutical products and substances obtained by means of a chemical process; and animal and plant varieties. In principle, these exceptions cover virtually every possible product of biotechnology. The situation is somewhat alleviated by the fact that it is possible to patent the processes, including microbiological processes, leading to such products. For example, a company could patent the process used to produce a new form of tissue plasminogen activator by a genetically engineered microbe but could not patent the drug orate microbe itself. In the United States, such process patents are generally considered inferior to product patents, especially in the pharmaceutical field A report from the Chinese Patent Office justifies the exception of chemicals and pharmaceuticals by stating that they are "important raw materials and . . . necessities for safe-guarding He heals of the people and He increase of livestock which relate to the national economy" and "should not be granted patent until we have had enough expenence."

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INFRASTRUCTURE 21 A second difficult is enforcement Given the short period Hat Be new patent system has been in effect, together with Me general disinclination of Chinese pardes to litigate, it is not surprising that foreign investors are dubious about the mal worth of a Chinese patent. As an anecdotal example, an American pharmaceutical Inn established a joint venture factory in China and obtained a parent on their method for antibiotic production. Within a year, a virtually identical factory, producing the same product by the same method, was opened ~ an adjacent counW. It is alleged to have taken at least half of the American company's marlcet share. When it was explained that the peoples need for antibiotics took p~ence over profit making, the American company decided not to press the case. China }las no copyright law. Foteign journals are routinely copied at a central facility in Beijing and Hen distributed to libraries at research institutes and un~versides. Computer software is also unprotected by law. In sum, China's new patent law provides an important first step in protecting He intellectual properq rights of Chinese scientists. However, substantial improvements in He content and enforcement of the law are required to afford the level of protection needed to assure potential foreign collaborators and investors.