Stan Abrams over at China Hearsay just did a great post entitled, When Not To File A Trademark (yes, you heard me). It is based on Duncan Bucknell’s post, (Five reasons not to file a trademark). They both list the following five reasons not to bother registering a trademark:

1 – your business is only ever going to be confined to a subset of a country (and not extend to the whole country);
2 – you can’t afford it just yet;
3 – you don’t actually care if people use your brand without your permission (there are business models where this makes sense);
4 – you have no real brand, you rely on a descriptive moniker which attracts volume based sales, not brand loyalty;
5 – the product or service is still confidential and you don’t want competitors to be able to get an insight into it by monitoring the trade mark databases.

I am going to analyze these five reasons with respect to China only and I am going to set out a few additional reasons why it does not always make sense to register your trademark in China. Lastly, I am going to talk briefly about two incredibly poor and dangerous reasons often given for not filing a China trademark.
I do not like reason number one for China. The reality is that if you want to protect your trademark anywhere in China, you need to register it. The fact that your business is going to remain confined to a particular region is irrelevant. If you do not register “your” trademark and someone else does, you will no longer be able to use the mark legally.
The second reason makes tremendous sense and it also does not. Yes, if you truly cannot afford to register the trademark, I guess you cannot do so. In some instances, if you are unable to protect what could very well be the most important thing your business has, well then you likely have business problems that extend well beyond trademarking. But if you are a small company that sells your product in forty countries, it may very well be impossible for you to register your trademark in all forty countries. Smaller companies do need to determine which countries really matter to their business and focus on those.
Reason three also has its problems with respect to China. Even if you do not care about other people using “your brand” without your permission, if you do care about someone else registering “your brand” and then preventing you from using it, you had better register it first. Remember, China is a first to register (not a first to use) country. What this means is that if someone has trademarked what you consider to be “your brand,” that someone now owns the right to “your brand” and they can stop you from using it at all in China, including on goods for export.
Reason four makes sense. If you do not have a trademark to protect, you really do not have one to register either.
Reason five also makes sense, so long as you are not worried about someone else registering the trademark before you do so.
A couple additional instances where it does not make sense to register a trademark in China:
If you manufacture a product in China, but do not put your name on it until it has arrived back in the United States and you only sell your product in the United States, you do not need to worry about registering a trademark in China. If you are not using a trademark in China, you cannot be using someone else’s trademark. For example, my firm is working on establishing a software R&D facility for a client right now and that client has no need for any trademarks because no product is going to be developed there, just code.
If your trademark will not be accepted for registration. We had a client whose product was named after a city in China. China’s trademark office does not generally allow for registration of a geographic location as a trademark and so our client was faced with the decision of not having a trademark or having to change its “name.” It chose no trademark.
The two bad reasons I most often hear for not registering a trademark in China (usually heard AFTER a problem has arisen) are that “we were not selling any product in China” or that we have a “famous” name and so we thought we did not have to file.
The fact that you are manufacturing your product in China just for export does not in any way minimize the need for you to protect your trademark. Once someone has “your” trademark in China, they have the power to stop your goods at the border and prevent them from leaving China.
Hardly any foreign company is so famous in China so as not to need to register its trademark there. And if you are so famous, does it still not make sense to spend the minimal amount necessary to register your trademark, as opposed to spending the huge amount necessary to defend the “famousness” of your trademark in litigation later on?
Stan ends his post with this sage advice for lawyers who help their China clients with these issues:

I would certainly advise China practitioners that, when in doubt, file the damn trademark — the cost/benefit analysis is a no brainer. However, if you can devote even a couple of minutes of time to thinking this through, you may find that the albeit small cost of registration may be needless spending. And if you can advise a client how to save some money, even if it’s only a few hundred dollars, they’re going to love you and give you more work in the future (i.e. if you are really trying to gouge your client for the cost of a trademark, not only are you being unethical, you are also extremely short-sighted when it comes to client management).

For more on China trademarks, check out “China Trademark Law: Simple And Effective.
Update: A client today asked me about using the Madrid System for their China trademark filings. My response was that in our experience, using the Madrid System usually ends up being just as expensive as filing in individual countries but in many countries, including China, is not as effective. Even though China is a member of the Madrid Protocol, China filed trademarks seem to get more respect than those filed under the Madrid System.