Full Question
What is the situation regarding intellectual property theft these days in China?

Answer
I would say the IP situation is getting better but it still has a long way to go.

I have made a living in China for past decade providing services to foreign buyers who are worried about protecting their IP. Basically, I set up my own warehouse and assembly center in Shenzhen and my clients use this facility as a "black box" to do the final packaging/QC/assembly in a way that keeps the IP out of the hands of the sub suppliers and thus limits the local suppliers' ability to knock off the product. You would be amazed at how often the source of the knock off is actually the buyer's approved vendor. The supplier gets up to speed on the production with the help of the buyer, then moves the technology to a mirror factory at a location unknown to the buyer. Nasty stuff. PassageMaker's black box can help. IP is my passion and China is my home, so if you are interested in IP in China, you may enjoy some of the Videos and Articles I have authored on the subject at psschina.com.