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China: We Employ 1,000,000 People to Fight Fakes

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SHANZHAI!!!!!!!!
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Wang Jinzhen, vice-chairman of the China Council for the Promotion of International Trade -- a ... council to promote international trade with China -- told an audience yesterday that the government employs nearly a million people in an attempt to eliminate the country’s venerable counterfeiting industry.

According to the Sydney Morning Herald, Wang announced to the Commonwealth Business Forum in Perth that “the industry would soon die out in China as technology, equipment and economic prosperity improved.”

"If you rely [on] export[ing] those lower quality products then there is no future for the company themselves and I know they know it right now - you'll see less and less tendency in this regard," Wang said. "If you really want to develop you have to rely on high technology products and [for] lower technology products, or even fake products, there will be no future. The Chinese government is very serious in this regard."

Wang & Co. have quite a history to erase, if they hope to make a dent in China’s knockoff sector.

The better part of ten years ago, an attorney named Harley Lewin told 60 Minutes that he believed the most profitable criminal venture on Earth to be counterfeiting.

Dan Chow, a law professor at Ohio State University with a focus on Chinese counterfeiting added, “We have never seen a problem of this size and magnitude in world history. There’s more counterfeiting going on in China now than we’ve ever seen anywhere.”

Today, some economists believe 8% percent of China’s GDP comes from the sales of counterfeit goods. An astoundingly realistic level of fakery is proudly displayed in everything from automobiles, to theme parks (there is an exact replica of Disneyland outside Beijing where management insists its “Minnie Mouse” is not a mouse at all, but a “cat with very large ears”), to Apple computers (they’ve even managed to produce a knock-off Steve Jobs). One can find fake Nike shoes and ersatz Duracell batteries, as well as imitation US silver dollars and even bogus fossils.

Take a look at the following description of -- amazingly enough -- bogus Chinese tea:

Of the Moyune district teas there are eight varieties; they are much prized in the American markets, but not so much so in England. Among the most important curiosities in the collection are the counterfeit teas of Canton. These are made of any refuse, such as moistened tea-leaves from the pot, beat up with gum and rice-water in a mortar, coloured with Prussian blue and gypsum, and curled, twisted, or granulated so ingeniously as to counterfeit the most costly varieties.

If you think counterfeiting in China is at all a recent phenomenon, consider that the above passage is excerpted from a debriefing report from the Juries to Her Majesty’s Commissioners after the Exhibition of the Works of Industry of All Nations, which took place in London -- in 1851.

The market is so lucrative that certain areas' economies rely almost exclusively on counterfeiting. A couple of years ago, Slate described the town of Yunxiao as “the center of China's counterfeit cigarette industry.”

Cigarette counterfeiting is immensely lucrative, with profits easily rivaling those of the narcotics trade,” wrote Te-Ping Chen. “While a pack of fake Marlboros costs 20 cents to make in China, it can fetch up to 20 times that amount in the United States. And though a drug trafficker might land a life sentence if caught, a cigarette counterfeiter usually receives a comparative slap on the wrist -- a handful of years in jail or possibly a fine.

One local police officer said, “For a long time now, a lot of Yunxiao's cigarettes have gone to Russia. The feedback from Russian customers is that they've gotten used to the fake flavor, and now they don't want the real ones anymore."

Of course, a million people may not even be enough to completely wipe out the shanzhai products -- which may be why Wang Jinzhen decided to hedge his bets when pressed on the issue of completely eliminating fakes.

"I don't think it will be completely corrected, but still it will be eased," he conceded.
POSITION:  No positions in stocks mentioned.

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