While China still leads the world in the production of pirated goods and the theft of technology, it is now trying to appear legitimate by increasing its own production of patent applications. Last year, there were 310,000 such applications in China, which is part of a huge growth in Chinese patent applications since modern patent laws were introduced there in 1985. Currently, the U.S. has about 450,000 patent applications a year, Japan about 350,000 and Europe about 140,000.
Over the last decade, the Chinese government has ordered firms to be "more inventive", and more useful research has resulted. But most of the Chinese patents are low quality. Half of them are "utility patents", which get less protection, for a shorter period, than "inventive patents." Many of these lower quality patents are there to keep foreign firms out, and Chinese firms are known to file patent infringement lawsuits on foreign patents, safe in the knowledge that Chinese courts tend to favor Chinese firms, and even if the Chinese firms lose (usually under threat of international litigation), the punishment is generally light.
China is more concerned about possessing technology than in patenting or creating it. While more research is being done in China, and good stuff is getting patents, Chinese industry is still very dependent on stolen tech, or abusing licenses for foreign technology. Protection of foreign technology is very poor in China, and progress in dealing with that problems has been very slow. Moreover, there is a lot of fraud in the research area as well, because in universities and research organizations, rewards are based obtaining patents, or otherwise notable breakthroughs. It's more common for researchers to fake it in China, than in the West. This is largely because the culture of corruption is more entrenched in China. It's that corrupt atmosphere that sustains the piracy and patent system manipulation.