Shanzhai Saturday: Inside a Putian Shoe Factory

Shanzhai (山寨): Chinese imitation and pirated brands and goods, particularly electronics.

This week’s column will be slightly less fun and entertaining and a bit more on the serious side of IP infringement and enforcement. For anyone interested in the world of China IP, instead of reading about the latest outrageous fake product, your time will be better spent simply reading “Inside the Knockoff-Tennis-Shoe Factory” by Nicholas Schmidle in the New York Times Magazine. The article does not particularly break any new ground or anything; it is not news, but a lengthy summary of the China IP situation. It’s one of those things that people tell you to read if you don’t have the time or inclination to read anything else on the topic, and I mean that as a compliment.

Schmidle takes a shoe factory in Putian as his concrete example and then uses that as a platform to discuss the IP problem in China generally, using quotes from several of the heavy hitters on the China IP scene, including Mark Cohen (used to be head of IP with the U.S. embassy in Beijing, now with the U.S. law firm Jones Day) and Joe Simon (Baker & Mackenzie law firm). Again, nothing startling in what Mark or Joe have to say, but the fact that Schmidle found his way to them tells me that he talked to the right (foreign) people while he was doing his research.

One thing you will not find in the article is advice on how to fix the problem. This is actually a point in its favor, since the only people that have a quick “solution” to the IP problem are charlatans and hucksters (i.e. lawyers, investigators and consultants) looking to drum up business. Schmidle instead explains what some of the problems are, letting his readers understand that solutions will be difficult and long-term.

For example, Schmidle uses a quote from the Putian factory owner, named Lin, who explains that years ago, it was relatively easy to get prototypes and new product information from legitimate factories, allowing shanzhai manufacturers to produce even more quickly sometimes than the IP owners. These days, security measures have put an end to that sort of thing:

“There’s no way to get inside anymore,” Lin told me, describing the enhanced security measures at the licensed factories: guards, cameras and secondary outer walls. “Now we just go to a shop that sells the real shoes, buy a pair from the store and duplicate them.”

Good news/bad news, though. Maybe they’re not as fast as before, but reverse engineering a shoe purchased legally is not only easy, but the practice is impossible to stop. The point here is that even with pretty good IP laws (seriously) and a lot of enforcement activities, it is still extremely difficult for China to put an end to this sort of thing.

In his description of the business model of the Putian factory, Schmidle also educates his reader on just how difficult it can be to catch some of these producers. Consider that many of them now manufacture fakes on a per order basis, shipping product out immediately as opposed to leaving counterfeits sitting around in their warehouse and subject to raids by the Administration of Industry and Commerce. Moreover, even when sting operations result in catching them with shanzhai product, lots of other factories are waiting in the wings to pick up the slack on the supply side.

I have a feeling that Schmidle’s article will be widely read and perhaps even used by the usual industry folks in their perpetual mau-mau lobbying campaign in places like Washington, D.C. for more vigorous bilateral negotiations with China. I know it’s asking too much of them, but it would be nice for those folks to pick up on a couple of subtle points:

1. The NYT article is to some extent limited in scope and should not be used to generalize about all kinds of IP infringement and enforcement in China. Consider these statistics:

In the last fiscal year, U.S. Customs and Border Protection seized more than $260 million worth of counterfeit goods. The goods included counterfeit Snuggies, DVDs, brake pads, computer parts and baby formula. But for four years, counterfeit footwear has topped the seizure list of the customs service; in the last fiscal year it accounted for nearly 40 percent of total seizures. (Electronics made up the second-largest share in that year, with about 12 percent of the total.)

Yes, you can find a dizzying variety of fake stuff here, but the big numbers are from big brand consumer items like shoes as well as electronics (add those together, and you have over 50% share of fakes seized by the U.S.). I wonder what those numbers would look like if you also added in digital media piracy?

The point is that you have a few industries that are being hit the hardest, and while almost everyone has IP issues with China these days, not everyone is having their market share savaged by Chinese pirates. There’s a reason why Schmidle went to a shoe factory.

2. This is really a story about global counterfeiting, not about China IP problems. It’s easy to look at China as the source of the IP infringement epidemic. After all, the products are being made here. Consider, though, that everything is produced in China these days; why should fakes be any different?

In other words, if I’m an international distributor of counterfeit products, where am I going to go to find experienced factories capable of making quality fakes? Of course the answer is China. These transactions involve China producers, and distributors and purchasers from all over the world – they all use the Net of course to handle purchase and sale details.

This explains why the FBI, and others, have stepped up international cooperation strategies in recent years. It also suggests that in ten years, after a lot of the low-end manufacturers have completed their moves from China to Vietnam, Bangladesh, and Alabama, we will start to see ramped up counterfeiting from those areas.

Just a guess. Maybe 20 years from now, you will have investigative reporters from China Daily writing stories about corrupt government officials from towns in Mississippi who protect the local shanzhai shoe factories. I imagine the quotes will include “But the factory is the town’s largest employer and taxpayer. And besides, the fakes are just being exported to China anyway. No harm, no foul.”

http://www.chinahearsay.com/

Shanzhai Saturday: Going Full Pirate

Shanzhai refers to Chinese imitation and pirated brands and goods, particularly electronics. Literally “mountain village” or “mountain stronghold”, the term refers to the mountain stockades of warlords or thieves, far away from official control.

Over the past few weeks, I’ve told you about some “image projects” in different parts of China, buildings constructed for no reason other than prestige/tourism. A big waste of money and, in many cases, a local eyesore. You’ve seen pics of the fake Big Ben, the copycat China Pavilion, and the shanzhai Great Wall.

If I was a local official considering one of these image projects, I’d immediately dismiss something like a fake Big Ben or China Pavilion. Too provincial. Why think small when you can build something like the Great Wall? Not only do you get the benefits of copying a world-famous Chinese cultural icon, but all your local cronies know that when it comes to piracy, you don’t screw around. That’s some serious pirate street cred.

So, in addition to the Great Wall knockoff guys, who else has been going full pirate? Or to put it another way, what could compare to the sheer brazenness of constructing a shanzhai Great Wall?

There really is only one possibility, a landmark so infamous in China that I don’t even need to name it. I refer, of course, to this:

 

You just have to take your hats off to the good copycats of Yinchuan. They did indeed go full pirate — wall, building, flags, even the portrait. Congratulations!

This is a great idea, and so by the rules of the shanzhai community, we would not expect that this Yinchuan masterpiece is the only one of its kind. A quick online search and, lo and behold, a proliferation of unmentionable landmarks (courtesy of JSChina and Shanzhaiba):

 

I could go on, but I think you’ve grasped the concept here. These shanzhai heroes are not content to rip off some cheap software, a movie, or a running shoe. No, these folks are thinking big, and only the best will do.

Unfortunately, some fantasies are never meant for reality, and I say that if you can’t copy well, you shouldn’t bother copying at all. The brave officials that commissioned those shanzhai masterpieces above shouldn’t have their proud pirate tradition sullied by poseurs like this:

I’m thinking that China needs some sort of shanzhai quality standard. We can’t have our cultural and historical icons muddied by inferior fakes. Only the best knockoffs, approved by folks going full pirate, will be acceptable.

http://www.chinahearsay.com/

Introducing the aPad – cheap shanzhai iPad hits Chinese marketplace

Dying for an iPad, but feeling a bit guilty that you’d be supporting a company that drives their employees to suicide? Maybe you just don’t have the better part of a grand to drop on a new toy? Whatever your reasoning, there’s a new shanzhai iPad to the rescue. A Japanese news report announced the other day that a company down in Shenzhen has brought China’s first iPad clone to the market — called, what else, the iPed (aka aPad).

Priced at around 1/5th the cost of its genuine Apple cousin, it’s surely going to raise more than a few iBrows around the offices in Cupertino. Making that price even sweeter is that it’s not even running some craptastic domestic Chinese OS — rather, it’s loaded with none other than Google’s iPhone-killing Android OS.
With curiosity piqued, I had a quick hunt around Taobao for “iPed”, but didn’t come up with anything. On a hunch, I threw in the term “aPad” which is shown on the device’s manual in the Japanese news video (linked above) and sure enough — a number of sellers came up. Prices range from around 900-1400 RMB depending on how much “extra” memory you want. Unlike the “real” iPad, the aPad only features 1GB of built-in storage, but is expandable with its miniSD slot.

The Specifications:

 

Initial reports of the product have it as running a bit slow, with video playback being mediocre. Still, $150 for a full-featured, expandable, wi-fi enabled tablet ain’t half bad. By comparison, the unit is significantly lighter than the iPad (332g vs. about 700g) likely the result of the smaller 7″ display (the iPad’s is 9.7″).

A-B’ing the two devices is bound to bring up a lot more disparity, but what really makes this so kickass is that it is running on Android and so offering access to the 20K+ apps in the Android market. The hope with Apple’s iPad was that it would revolutionize our relationship with computers, taking them off our desks and laps, and putting them into some unique situations (classrooms, kitchens, travel, etc.). Love ‘em or hate ‘em, these shanzhai versions are helping that process along.

If anyone’s been to a local electronic market, or happens to have purchased one, please let us know how it runs. I’ve got my finger on the trigger to pick one up and give it a try myself. At this price, questionable performance or not, it’s hard to say no.

http://www.lostlaowai.com/