Tony Blair, prime minister, recently spoke to the European parliament of the competition from China - low-cost, high-quality manufacturing. The US berates China for inadequate intellectual property protection for patents, trademarks and copyright. Both underestimate the seismic shift in IP that has been taking place in China. A creative tidal wave will generate patents likely to wash over the US and Europe's shores in the next decade, enabling China to dominate significant technology areas.

Most foreign observers look at the still imperfect state of patent enforcement and miss the profound changes. There are three components in an effective IP regime: the underpinning law, the cost and quality of the patent "right" acquired, and the effectiveness and cost of enforcing that right.