European businesses lose billions of euros in China every year because of lax intellectual property rights protection, according to a European Commission report published Tuesday.

The report said around 95% of audiovisual materials sold in China are pirate copies, the highest in the entire Asia-Pacific region.

It urged the Chinese authorities to clamp down on piracy by: boosting deterrence actions, including the criminal sanctions for pirates; simplifying bureaucracy so that administrative and judicial authorities can co-operate rather than compete on dealing with piracy; scrap burdensome and discriminatory procedures for foreign right holders to enforce their rights; boost resources available to those involved in registering and enforcing IPR, and raise public awareness.

As for the EU, the report said the Commission should offer as much policy advice as possible, and technical assistance in dealing with piracy. But the EU should also strengthen its message to the Chinese authorities, reminding them of the danger and risks piracy poses.

If Beijing fails to act, the report said the Commission should consider a law suit at the World Trade Organization.

The report says the rampant piracy of movies and music is partly due to lack of ability to buy the genuine product, which is caused by market access restrictions -- for example, there are only 20 foreign films per year shown officially in Chinese cinemas. While these restrictions target foreign film and music suppliers and investors, they adversely affect legitimate domestic and foreign players alike, the report said.

The fast growing rate of Internet access also plays a huge role in the worsening of the problem, the report said, citing the alarming development of Web sites like the Baidu portal, offering illegal downloads.

"Given the global reach of these sites, some of which are operated by publicly listed companies, content owners can no longer feign ignorance," it said. But while legal action is technically possible, China currently lacks the legal facilities to pursue such high-tech crimes.