Intellectual property is one of the big economic issues between China and the United States. American business executives and government officials believe Chinese companies steal large amounts of intellectual property from foreign companies. China does have laws against such piracy, but they are often not enforced.  How can Americans and others be so sure intellectual property continues to be a problem in China? The most obvious examples are the pirated DVDs for sale in China. But computer software may be the most important example.  Here are the top 10 countries ranked by 2009 sales of computer hardware — mainframes, desktops, laptops and the like — in billions of dollars:  1. United States $158 2. China $64.4 3. Japan $54 4. Germany $24.4 5. Britain $23.5 6. France $19.3 7. Brazil $14.2 8. Italy $13.1 9. Australia $12.8 10. India $11.9  And here are the top 10 ranked by software sales, again for 2009 and in billions of dollars:  1. United States $137.9 2. Japan $23.4 3. Germany $20 4. Britain $16.8 5. France $12.6 6. Canada $7.3 7. Italy $6.3 8. China $5.4 9. Netherlands $5.4 10. Australia $4.8  As Charles Freeman of the Center for Strategic and International Studies says, “it doesn’t make a whole lot of sense” for China to be in such different places on the two lists. It strongly suggests that China is buying its computer hardware and copying much of its computer software.  This chart, comparing hardware sales and software sales for the biggest buyers of computer equipment, makes the point nicely:  Chinese leaders have pledged to crack down on piracy. Expect it to be a topic of conversation during today’s meetings in Washington. Update: Does free software explain the numbers?
Most large countries spend between one and four times as much on computer hardware as they do on computer on computer software. China spends 12 times as much. What's wrong with that picture?