FEATURESTORY
Apple’s iPhone is not yet officially available in China,
due to drawn-out negotiations between the U.S. company
and domestic cellular carriers China Mobile and China Uni-
com. But Illegal ‘cracked’ models have been available for
several months, with ads for “original unlocked iPhones”
found on the Internet. It is perhaps the highest profile cur-
rent example of counterfeit product supply, with bona fide
handsets smuggled effortlessly into China and sold on
street corners and at electronics markets nationwide.
The issue of legitimate products being illegally supplied
in China stands beside the more fabled problem of coun-
terfeit goods – which affects virtually every industry sec-
tor in China, from antiques to air conditioners, car parts to
cleaning fluids, pharmaceuticals to foodstuffs and luxury
brands to the latest Hollywood movies. One investigations
team even unearthed a consignment of 750,000 replica
Polish hacksaw blades, the brand holder of which had
never previously manufactured nor even sourced its legiti-
mate products in China.
Even cash is counterfeit king. In January, a Shanghai
court jailed a man for using RMB5,500 in fake 100-yuan
bank notes. The defendant reportedly paid RMB10 yuan
for each note from a vendor near Shanghai Railway Sta-
tion. A Chinese television station also reported that a
bundle of fake 100-yuan notes worth RMB 10,000 can be
purchased online for just RMB1,500.
Combating this all-encompassing supply of illegal goods – and
Canadian singer Celine Dion,
their easy availability through online and offline sources – has be-
the Middle East and escorted by her bodyguard,
come a global priority. China leads the field in fake goods shipped
Eastern Europe. But
visits a lane in Shanghai April
China’s status as a
2008.
into the United States – accounting for 81 percent of the total
value of IPR seizures – and in 2008, U.S. Customs reported a
global production cen-
40 per cent year-on-year rise in confiscated Chinese counterfeit
tre makes it a central player. Take, for example, a bottle of fake
products. India ranks second with just six percent.
branded perfume. As Misha Glenny writes in his book, McMafia, a
discernible chain linked the production of the counterfeit bottle in
The evolution of the fake
China, with the perfume factory in Russia and the label production
Experts concur that domestic and international distribution net-
plant in Turkey. The completed product then returned to China for
works of fake goods have become more sophisticated and inte-
packaging, before being shipped and sold in the UK.
grated since China entered the WTO in 2001. The constant flow
The blame for this seemingly unchecked level of counterfeit
of new products into China
supply is often placed at the door of China’s immature legal sys-
and the diversification of
tem, although the increased speed, flexibility and ingenuity of fake
product sourcing by foreign
Clever goods suppliers is undeniable. Counterfeit manufacturers have
companies have provided
counterfeiters
fine-tuned their ability to quickly transport illegal goods, often pro-
Chinese manufacturers with
ducing bulk orders at several different factories, storing inventory
significant opportunities to
have trading
in a network of warehouses, labeling and packaging at other off-
develop advanced produc- companies
site locations and shipping immediately after the production order
tion and ‘reverse engineer-
that outsource
is completed.
ing’ capacities, and estab-
Sophisticated illegal traders rarely even come into contact with
lish procurement and supply
all aspects of the products they are supplying, says Douglas Clark, Partner at
chains at home and abroad.
production.
Lovells law firm in Shanghai. “Clever counterfeiters have trading
As one analyst notes, “Chi-
companies that outsource all aspects of production, and these
nese counterfeiting is now a
outsourced suppliers then transfer the goods to freight forward-
recognised part of globalisation.”
ers for shipping. The only thing the trading company touches is
Widespread counterfeiting is not solely a Chinese problem,
the money.” Consequently, targeting the cash trail can be the only
brand holders face escalating problems worldwide, notably in
way of bringing an infringement case to trial.
34 MAY/JUNE 2009 www.chainaonline.com
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