Chinese fake goods proving real hard to stamp out

Counterfeit underwear sold in Beijing. Bazaars that hawk fake watches, shoes and bags may have been demolished in recent years, but Chinese counterfeiters are now selling their wares via social messaging networks like Tencent Holdings' WeChat.
Counterfeit underwear sold in Beijing. Bazaars that hawk fake watches, shoes and bags may have been demolished in recent years, but Chinese counterfeiters are now selling their wares via social messaging networks like Tencent Holdings' WeChat.PHOTO: AGENCE FRANCE-PRESSE

SHANGHAI • China has come down hard on its world-renowned counterfeit industry.

Bazaars lined with fake watches, shoes and bags have been demolished in recent years.

A new law effective from Jan 1 promises to punish online retailers with up to 2 million yuan (S$400,000) in fines for bogus goods sold on their platforms.

But Chinese counterfeiters - still the most prolific in the world - have already reshaped their businesses by retreating to even more private spaces online. Many are hawking their wares via social messaging networks such as Tencent Holdings' WeChat.

They also market their offerings at home and globally on platforms including Instagram and ByteDance's TikTok. 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 law.

A fake black Dior saddle bag can go for about US$255 (S$346) on a Chinese social media network - less than one-tenth of the price of 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 catch-up as it tries to stamp out fake luxury goods.

 
 
 

"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 Assistant Professor Fan Yang of the University of Maryland, who has written a book on Chinese counterfeits.

Instagram said it has systems in place to catch counterfeit content before a purchase is made, and that it has tools where buyers can report purchases they are unhappy with.

The difficulties in stamping out counterfeiting in luxury goods shows the challenges Beijing faces in ongoing trade war negotiations as it attempts to assure the United States that it can address intellectual property theft - a key grievance of foreign companies.

The global trade in counterfeit products will balloon to US$991 billion by 2022 from US$461 billion in 2013, according to the research company Frontier Economics.

China and Hong Kong are by far the biggest source of exported counterfeits, according to the Organisation for Economic Cooperation and Development.

On Instagram, counterfeiters often put up a picture of the bag they are hawking without specifying if it is fake or real. They include contact details for Chinese or international messaging services.

Mr Eugene Low, a Hong Kong-based partner at law firm Hogan Lovells, expects China's new legislation will further motivate e-commerce firms to step up their efforts to fight fake goods.

"They won't want to be the first target of enforcement," he said.

Even so, the grey areas in the new legislation could leave counterfeiters continuing to exploit the loopholes. Mr Pedro Yip, a partner at Oliver Wyman consultancy, said: "How the law would be enforced would be unclear at this time."

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A version of this article appeared in the print edition of The Straits Times on January 18, 2019, with the headline 'Chinese fake goods proving real hard to stamp out'. Print Edition | Subscribe