China has come a long way in improving intellectual property rights and it will improve further as the nation becomes a major innovator in its own right, according to the head of one of the world's largest chemical companies. Andrew Liveris, the chairman of United States-based Dow Chemical, which has extensive research and development facilities in Shanghai, said he believed China's intellectual property protection would be tightened for the sake of its own industries. This was because it was working on transforming its economic growth model from one that relied on exports and the adoption of foreign technology, to a more balanced one that also had a well-developed domestic consumption market and a mature manufacturing sector capable of generating indigenous know-how, Liveris said. 'Chinese innovation is an inevitability,' he said. 'China is filing more patents than ever, but enforcement is only as good as the follow-up at the local level which still has a lot of holes, and complaints are not just coming from foreign firms.' Liveris said innovation encompassed not only technology advancement but also the skills and creativity it took to scale up a new operation to achieve commercial success. In this regard, he sees Western management systems that foster scientific innovation, when 'married with Chinese entrepreneurial mercantilism', as in Hong Kong and Singapore, as a great driver for innovation in mainland China. 'Singapore is a microcosm of what China could be in innovation,' he said. Benjamin Bai, the head of greater China intellectual property practice at international law firm Allen & Overy, said Chinese courts processed more than 60,000 intellectual property lawsuits last year, making it the most litigious nation on intellectual property. The overall win rate for patent owners in 20 large mainland cities range between 60 and 90 per cent, compared with less than 60 per cent in the US and Europe. 'Contrary to die-hard misconceptions, China indeed protects intellectual property and has made it a national priority,' Bai said. 'While these statistics by no means suggest that intellectual property protection in China is better than that in the US and Europe, it does indicate that it is improving.' Still, he noted the average patent infringement damages awarded in China is less than US$30,000, which does not give patent owners a lot of protection, while local protectionism, undue influence and outright corruption may have contributed to some multinationals losing some intellectual property lawsuits. Dow has 500 scientists, about 14 per cent of its China workforce, at its research and development centre in Shanghai. Globally, the company is working on 600 research and development projects. Those expected to be commercialised within the next three years were worth US$12 billion based on the present values of their future cash flows, Liveris said. Greater China, consisting of the mainland, Hong Kong and Taiwan, is its second-largest market after the US, with sales of US$4.5 billion last year. Dow aims to double that figure by 2015. Liveris said Dow would keep investing in China, where it had spent almost US$1 billion in the past decade on 18 plants. In contrast to rivals that have oil production and refining operations, Dow is focusing its business in China on higher value-added downstream products, especially with applications in agriculture, energy conservation, alternative energy and transport. The biggest project in the pipeline is a joint venture in Yulin, Shaanxi province, with the country's largest coal producer, Shenhua Group. Initiated about five years ago as part of China's strategy to reduce reliance on foreign oil by mobilising its rich coal resources, it will use coal instead of oil and gas to make chemicals. The project's final feasibility study had been completed and was pending approval by the central government, which had to address the project's greenhouse gas emission and water shortage issues, Liveris said. Before construction can begin, two years of engineering design work is needed. Estimated by industry experts in 2007 to cost US$8 billion to US$10 billion to build, it will have the capacity to produce three million tonnes of methanol and one million tonnes of ethylene and propylene a year.