China has come down hard on its counterfeit industry. Bazaars lined with fake watches, shoes and bags have been demolished in recent years. A new law effective on Jan. 1 promises to slap online retailers with up to 2 million yuan (US$296,000) in fines for bogus goods sold on their platforms.
However, Chinese counterfeiters — still the most prolific in the world — have already reshaped their businesses by retreating to even more private spaces online.
Many of the country’s best fakers are now hawking their wares via social messaging networks like Tencent Holdings Ltd’s (騰訊) WeChat (微信). First they market their offerings at home and globally on platforms like Instagram or ByteDance Ltd’s (字節跳動) Tik Tok (抖音). Buyers then order and pay through private messaging apps. Such transactions are arguably “friend-to-friend” and not e-commerce as defined by the new regulations.
These days a knock-off black Dior saddle bag can go for about US$255 on a Chinese social media network. That is one-10th of the US$3,250 price-tag on the real thing, but still pricier than the average high-street bag. It looks and feels real — a smooth, buttery leather with the heft of a true luxury bag — and it arrives in just a day or two with what are purportedly Dior’s engraved box, red ribbon and certificate of authenticity.
The skill of the counterfeiters and their growing ability to leverage global social networks has left Beijing playing whack-a-mole as it attempts to stamp out fake luxury goods. Even as rich people in China become ever more important to marquee fashion houses, the bulk of its consumers remain on the outside: Bombarded by marketing for items they can never afford and hungry for more affordable knockoffs.
“The income disparity across China’s diverse population — coastal versus inland, urban elites versus migrant workers — means that lower-priced goods, including those accused of being fake, will unlikely lose their market in China any time soon,” said Fan Yang (楊帆), an assistant professor at the University of Maryland, who has written a book on Chinese counterfeits.
The difficulties in stamping out counterfeiting in luxury goods shows the challenges Beijing faces in ongoing trade negotiations as it attempts to assure the US that it can address intellectual property theft — a key grievance of foreign companies.
The global trade in counterfeits is expected to balloon to US$991 billion by 2022 from US$461 billion in 2013, according to research firm Frontier Economics, which includes luxury goods, consumer products and several other categories like pharmaceuticals.
In 2017, Alibaba (阿里巴巴) launched an Intellectual Property Protection platform where brands can file complaints and receive a response within 24 hours.
It has also put resources into identifying and proactively taking down listings, a company spokesperson said.
It is now rare to find sellers openly hawking counterfeits on Alibaba’s platforms, but some occasionally appear, listing unbranded bags and encouraging buyers to contact them privately to complete the transaction.
Alibaba’s Xianyu (閒魚) platform — a digital “flea market” where consumers can sell used goods — turns up scores of such listings.
Eugene Low (劉耀慈), a Hong Kong-based partner at law firm Hogan Lovells, expects the new rules to further motivate e-commerce firms to step up their efforts.
“They won’t want to be the first target of enforcement,” he said.
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