China is actively strengthening its domestic intellectual property rights (IPR) regime while simultaneously sidelining international law, as its companies continue to face widespread accusations of patent violations and counterfeiting abroad, according to a new report. The findings paint a picture of a calculated 'domestic-first' IP strategy that critics argue is fundamentally incompatible with global trade norms.

A Parallel IP Ecosystem Built on Selective Enforcement

Critics have highlighted that China's model is less about aligning with international standards and more about consolidating domestic control. By framing IPR as a 'strategic resource with Chinese characteristics,' Beijing has signalled, according to the report, that global treaties — including the WTO's TRIPS agreement (Trade-Related Aspects of Intellectual Property Rights) and WIPO conventions (World Intellectual Property Organization Conventions) — are secondary to national priorities.

The report argues that this approach allows China to shield domestic firms from foreign lawsuits while simultaneously deploying IP as leverage in trade disputes. Such selective enforcement, critics contend, distorts global markets by enabling Chinese companies to undercut competitors even when accused of IP theft.

Frankfurt Auto Parts Show: Seizures Expose the Gap

The report points to a concrete example of the disparity in practice. At the 2026 Frankfurt Auto Parts Show, German customs officials seized 1,274 suspected infringing items, the majority traced to Chinese exhibitors. Booths were sealed and fines were imposed — an incident the report describes as exposing the gap between China's domestic IP rhetoric and its companies' conduct abroad.

This comes amid a broader pattern: despite Beijing's stated commitment to overseas IP protection, Chinese firms continue to accumulate accusations of counterfeiting and patent violations in foreign markets, undermining trust among international buyers.

BYD and Shing Yu: Corporate Governance Failures Deepen Concerns

The report highlights a corporate scandal involving BYD, China's largest electric vehicle manufacturer, in which employees allegedly claimed that stainless steel parts were secretly replaced with cheaper carbon steel, quality control departments were dissolved, and auditors were pressured to falsify reports. These practices, reportedly driven by extreme cost-cutting, raised serious safety concerns and eroded confidence among European buyers.

A separate case cited involves Shing Yu, a publicly listed automotive lighting company, which allegedly forced newly recruited graduates to accept half salaries or resign. The affected employees reportedly appealed directly to European customers and the European Union. These incidents, the report argues, reflect systemic flaws in Chinese corporate governance and labour protections — further weakening the credibility of China's IPR reform narrative.

Western Pushback: ESG Barriers Raise the Stakes

As part of a growing backlash, Europe and the United States are reportedly erecting ESG-linked trade barriers, demanding compliance not only on IP but also on carbon footprints, labour rights, and environmental standards. According to the report, this makes China's domestic-first IP model increasingly incompatible with global supply chains.

Notably, buyers are already shifting orders to Southeast Asia, neighbouring countries, and Taiwan, citing a preference for transparent compliance over what the report characterises as opaque Chinese practices. The report warns that unless Beijing harmonises its IP regime with international law, its strategy risks a damaging paradox: strengthening domestic control while steadily eroding global trust.