SUNDAY, AUGUST 8, 2010
‘Gray market’ is red hot in China
Counterfeit gadgets, sometimes better than the originals, fill malls
by Keith B. Richburg
beijing — Apple’s iPhone 4G is not officially for sale yet in China and may not be for several months. Neither is the popular iPad touch-screen tablet. But never mind. Both devices are readily available at a plethora of Chinese electronics malls in Beijing, Shanghai and all the ma- jor cities, in what constitutes Chi- na’s lucrative telecommunica- tions “gray market” that rivals — and in some cases, surpasses — the real thing. The phones are smuggled from
the United States and also from Hong Kong, where both devices are officially on sale. The smug- gled iPhone 4G sells in China for $800 to $1,700, depending on the storage size. An iPad with 64 gigabytes goes for about $1,000. If those prices are too high,
Chinese consumers need not fret — there are plenty of fakes on the market, almost indistinguishable from the real thing, from the touch screen to the apps to the iconic silver logo on the back. They are known here as “Shanz- haiji,” which loosely translates as “Mountain Bandit Phones.” China has long raised the ire of
U.S. trade officials for the coun- try’s copycat culture and often cavalier attitude toward intellec- tual property rights. It is known as the world’s producer of fake Rolexes, DVDs, luxury handbags, designer clothing and just about everything else. But the global explosion of
smartphones and personal devic- es has taken the fakery to a more sophisticated level, with the “Shanzhaiji” competing with le- gitimate manufacturers and claiming an increasing share of the telecommunications market. BDA China, a Beijing-based busi- ness advisory firm, said illicit phones made up 38 percent of the handset sales in China in 2009.
Care to buy an ‘iPhooe’? Some illicit cellphones offer
ever more advanced features that can outpace even the originals. “It even has some functions the real one doesn’t,” boasted one phone vendor showing off a Tai- wanese-made fake iPhone 4G at Beijing’s Fang Shi Communica- tions and Technology Plaza, a hot, crowed, sprawling edifice to the artificial, offering a dizzying ar- ray of fake cellphones spanning two stories. The fake iPhone’s special fea- tures include a removable battery and a place for two SIM cards, meaning the user can have two phone numbers ring for the same phone. “You almost can’t tell the dif- ference between this and the real thing,” said a vendor, nicknamed “Huzi,” explaining that he has sold more than 4,000 since the fakes came on the market a few months ago. It says “iPhone” on the back, with the Apple logo. It even uses real iPhone accessories, like the charger and the ear- phones. The only difference is the price — about $100, with a little bargaining. Huzi, the young vendor with
orange-tinted spiky hair, said he has never had a customer come back and complain. His shop does offer a full guarantee. There are plenty of other fakes
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PHILIPPE LOPEZ/AGENCE FRANCCE-PRESSE VIA GETTY IMAGES Fake iPhones in a Shanghai market known for counterfeit U.S. goods. They are known as “Shanzhaiji,” or “Mountain Bandit Phones.”
as well, some with almost no no- ticeable difference from the real product except, on closer inspec- tion, the name. Look at that Motorola cell- phone, and you’ll see the name is “Motolora.” Those Samsungs in the display case are “Samsunc” and “Samsnug.” That may look like a Nokia, but it’s a “Nckia.” And if you think that’s a real Sony Ericsson, look again — it says “Su- ny Erisscon.”
Some of the lower-end iPhone
fakes give themselves away by the name on the back. One is an “iPhooe.” The cheapest version made in Shenzhen simply says “Phone” on the back. The vendors seem unper- turbed about the possibility that they are breaking the law. “The police won’t crack down us — it’s not guns or drugs, why bother?” Huzi said. He added: “The cell- phones aren’t illegal. If it’s illegal,
why is such a big market still open here?”
Another vendor named Xu agreed. “If selling this violates the law, how come so many people are selling cellphones here ille- gally? If it violates the law, how can such a big market still exist?” No fake iPads were available in
Beijing during a recent trip to the markets. But they were readily available in Shanghai, at the Everbright Telecom Trading Cen- ter, a multistory electronics mall. The fake iPad costs about $150 in Shanghai — but vendors warn the download speed is slower than the real thing, and the colors are not as bright.
Emerging markets Colombia swears in new president
Juan Manuel Santos talks of social agenda, relations with neighbors
by Juan Forero
bogota, colombia — Eight years ago, homemade rockets fired by Marxist rebels rained down on the presidential palace as Álvaro Uribe took office, fore- warning the all-out war that would come in his efforts to take back much of the country from potent guerrilla groups. On Saturday, Uribe stepped down and Juan Manuel Santos took his place, with the inaugura- tion staged outdoors and the new president speaking of job crea- tion, democratic checks and bal- ances and rural development. It was not until the 34th minute of an hour-long speech that Santos mentioned his commitment to fight the rebels. The tenor of the day’s cer-
emony reflected the sharp differ- ences in style and substance that seem to be emerging between Uribe, whose government severe- ly weakened the rebels, and San- tos, a U.S.-educated technocrat and scion of one of Colombia’s most politically influential fami- lies.
Since winning the presidency
in a June 20 landslide, Santos has marked distance between him- self and Uribe, signaling the ar- rival of a leader who, unlike his predecessor, intends to focus on a social agenda and the country’s frayed relations with its neigh- bors.
“I will preside over a govern- ment of national unity that will bring social prosperity for all Co- lombians,” said Santos, 58, deliv- ering his remarks before Latin American leaders and a large del- egation of U.S. congressmen. “If we want to have economic and social development, we need to build unity among us.” A former defense minister in
the Uribe government, Santos is expected to maintain the same tough approach toward the Revo- lutionary Armed Forces of Co- lombia, a waning, hermetic guer- rilla group that has bedeviled Co- lombia since 1964. But Santos is emphasizing the need to address issues that were not priorities during the Uribe era, such as im- proving Colombia’s track record on human rights and seizing tens of thousands of square miles of farmland now in the hands of drug traffickers and corrupt poli- ticians. The shift could prove benefi- cial to Colombia by addressing the roots of political violence and helping Colombia gain standing internationally. For the Obama administration, Colombia’s clos- est ally, a less ideological Colom-
Many of the counterfeit cell- phones are exported to the Mid- dle East and Africa, a lucrative market for cheap fakes. Some vendors at two Beijing electron- ics malls said African customers often buy phones in bulk, to take back to their home countries — possibly to sell as the real thing. “When they export it to some emerging market countries, they sell the product as the real one,” said Kevin Wang, director of Chi- na research for the form iSuppli, an electronics industry consult- ing and research firm.
BDA, the advisory group, said in an analyst’s report last year that the illicit phone-makers as a group were China’s biggest hand- set exporter and were poised to become even larger overseas, thanks to their cheap prices, well- established distribution net- works, and their ability to cus- tomize the clone phones for local users — like a phone marketed in Kenya with President Obama’s likeness and a “yes we can” ring- tone.” The report said foreign countries would soon replace China as the main market for the Chinese-made fake phones. The greater risk for legitimate manufacturers like Apple is from the smuggled devices coming over the border from Hong Kong, or flown in the from the United States. The buyer of a smuggled phone can avoid paying China’s high import duty or value-added tax. “The smuggled iPhone will be a real threat to the real iPhone sold in China,” Wang said. “If you buy Apple products at Apple’s stores in China, it is much more expen- sive than in Hong Kong or the U.S.”
Flora Wu, principal analyst with BDA in Beijing, said in an e- mail that legitimate iPhone hand- set sales in China in the first half
of this year were 800,000, com- pared with 2.5 million smuggled handsets sold. “It’s kind of a bit of the Wild
West in that respect,” said Murray King, the managing director for Greater China for APCO World- wide. He also said China was “getting better” about intellectual property protection in some areas.
King said many buyers of cloned products were often for- eigners, who come to China to sop up the fake Rolexes and DVDs. “Far too much has been made about the Chinese market, and not enough about the foreign appetite” for fake goods. One major push for change, business analysts said, comes from the Chinese people them- selves. More affluent consumers are increasingly rejecting fakes and looking for the genuine arti- cles — as evidenced by the in- creasing prominence of luxury goods stores in China, from Gucci and LVMH to Mercedes-Benz and BMW. “Consumers are much more in demand for authenticity,” King said.
richburgk@washpost.com
Researchers Zhang Jie in Beijing and Wang Juan in Shanghai contributed to this report.
JORGE SILVA/REUTERS
Colombian President Juan Manuel Santos takes office with a strong mandate to fight left-wing guerrillas and spur economic growth.
bian government more focused on social issues could help Wash- ington improve relations with left-leaning Latin American gov- ernments, some of which view the Obama administration with the same suspicion they held for George W. Bush’s presidency. The signals from Santos have stirred hope among lawmakers such as Rep. Jim McGovern (D- Mass.), who has frequently trav- eled to Colombia and been a stal- wart critic of Uribe’s governing style. In an interview, he called Santos a “bright, and articulate and capable man.” “For those who’ve written him
off as simply an Uribe clone, they are now pleasantly surprised that he’s at least talking about things in a fresh way,” McGovern said. “I want to give this guy the benefit of the doubt. He’s saying some in- teresting things.” The new direction, at least on some issues, is particularly ap- parent in Santos’s cabinet. His foreign minister, Maria An-
gela Holguin, had resigned as Uribe’s ambassador to the United Nations to protest politically mo- tivated diplomatic appointments. Santos’s agriculture minister, Juan Camilo Restrepo, mean- while, had strongly criticized Uribe’s agriculture policies, which included programs that handed wealthy farmers millions of dollars’ worth of subsidies. “These are themes that were not high on the agenda during the Uribe years, and they will now be treated by very compe- tent people who are leading the ministries,” said Michael Shifter, president of the Inter-American Dialogue in Washington, who at- tended the inauguration. “That’s a striking contrast with Uribe.” After his election, Santos met with Supreme Court judges, sym- bolic because Uribe frequently lashed out at those jurists for rul- ings that his government op- posed. Indeed, the attorney gen- eral’s office is investigating some of Uribe’s closest associates for al-
legedly wiretapping judges. Perhaps most significantly, Santos has held out an olive branch to Venezuelan President Hugo Chávez, who had been ac- cused by Uribe’s government of aiding Colombian rebels. “We want to live in peace with our neighbors,” Santos said. He explained that he wanted a “frank and direct” dialogue with Chávez. “Hopefully, it will be as soon as possible,” he added. Cynthia Arnson, director of the
Latin America program at the Woodrow Wilson International Center for Scholars, said Santos will probably veer from Uribe’s more combative style while try- ing to fight corruption, which tarnished Uribe’s two terms. In addition to the wiretapping of opponents, dozens of lawmakers close to Uribe are in jail or under investigation for ties to death squads.
“Santos is not the same kind of polarzing figure that Uribe has been these last few years,” Arnson said.
Still, observers said Santos un- derstands that he is succeeding a leader who leaves office with a 75 percent approval rate. Uribe de- livered on his main pledge, tak- ing back huge swaths of territory from the guerrillas, who in 2002 attacked the army at will and kid- napped hundreds of civilians. “Santos was supported by
Uribe and vowed to generally continue the same policies,” said Rep. Eliot L. Engel (D-N.Y.), who led the U.S. delegation of law- makers. “In many ways, it’s a thumbs up on Uribe from the Co- lombian people.” In his speech, Santos heaped
praise on Uribe, saying, “Thank you, thank you, a thousand times thank you.” Uribe’s security pol- icies, he said, had set the stage for a stronger economy. “It’s now possible to talk of progress, to talk of a future,” San- tos said. “It is possible to talk of peace.”
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