• This is a partial transcript from "The Journal Editorial Report," April 22, 2006, that was edited for clarity.

    PAUL GIGOT, HOST: With trade topping the agenda, Chinese President Hu Jintao made Seattle the first stop this week in a four-day visit to the United States, who met with Microsoft Chairman Bill Gates, who's company, like Google and Yahoo, has been criticized for complying with the Chinese government's efforts to censor its citizen's Internet use.

    Former Wall Street Journal China Bureau Chief James McGregor is the author of "One Billion Customers: Lessons of from the Frontlines of doing Business in China." He joins me now in the studio.

    Jim, welcome.

    JAMES MCGREGOR, AUTHOR AND FORMER WSJ CHINA BUREAU CHIEF: Thank you.

    GIGOT: Interesting to see the Chinese president stop, not in Washington, D.C. first, but in Washington state, visiting Boeing and Microsoft. What message was he trying to send?

    MCGREGOR: Well, I think he gets along with business people better than he does other politicians. He doesn't have any real strife with the business community other than various trade issues.

    And Boeing is always a stop for the Chinese leaders. They all like to do what the other leaders did. And everybody stops at Boeing.

    Microsoft is a new edition because they want to say we're going to do something about IPR, intellectual property rights.

    GIGOT: Intellectual property rights.

    MCGREGOR: Yes.

    GIGOT: And this was a message that China is going to try to get something done. Because that is one of biggest complaints that American businesses have in China.

    MCGREGOR: It's terrible. Intellectual property rights enforcement and copied products and theft are terrible in China. The business community's fed up and Congress is getting very unhappy about this.

    So what China did is they made a concession, this time, that they are requiring computer makers to install software at the factory.

    What they've been doing is, the computers, including Lenovo, the IBM merger, puts their computers out with no software, and mysteriously software ends up on them. And they say, "Geez, we have nothing to do with that." But now, they're going to require it to come out of the factories. The U.S. should hold their feet to the fire and make sure they do this.

    GIGOT: One line in your book that's really interesting, you said, in China, a contract is no guarantee of anything. Is it getting at all better or...

    (CROSSTALK)

    MCGREGOR: Well, yes, contracts have gotten better in China. If there's a part of the contract that helps the Chinese partner, they will enforce it. But if it's the foreign partner side on the contract, it doesn't matter.

    GIGOT: What American companies have succeeded in China and what's the secret of success there?

    MCGREGOR: Well, in fact, most of them are doing pretty well right now. Because they went in '90s with way too much money and ambition and desire to get that market overnight. And they lost a lot of money.