China's pirate industry thriving

"Treasure Street" used to be a makeshift outdoor market in Beijing - a place where Russian and East European buyers would come to spend $50,000 a pop for planeloads of fake Nike shoes, Gucci bags, and North Face jackets.

Today, Ya Bao Lu, as it is known in Chinese, is a seven-story modern building. Inside, some 300 private showrooms sport the latest fashions behind blue curtains that say "Don't Enter Unless Invited" (although no one ever stops you). Each room represents a factory in China, and each owner offers to duplicate and deliver whatever products you want, in any quantity. If you want the popular new Allen Iverson Reeboks - they will cost $8 a pair in lots of 24. For big orders, allow a week.

Technically, under China's Dec. 11 WTO accession, and under new Chinese laws, such counterfeiting is both illegal and easier to prosecute. The copyright and patent laws range from films and software to acrobatic acts and architectural designs.

But in recent years, the culture of counterfeiting in China has expanded. Nearly everything is available - from college diplomas, to shampoo, batteries, and car-inspection stickers. The Chinese themselves joke that in China, "everything is fake but your mother." If you want Windows XP software, the cost is $3.50. Textbooks at prestigious Beijing University are mostly Xeroxed, as are many Western titles in the library at the China Academy of Social Sciences. If you want a DVD copy of "A Beautiful Mind" or "Fellowship of the Ring," no problem. They are on sale for $1.20 by locals outside banks, coffee shops, and department stores.

"WTO? I don't care about the WTO. Winter is here and sales are good," says the owner of a coat shop at Treasure Street who fronts for a factory outside Shanghai. "As far as you want to do business with me, I can make whatever you want." That includes, he says, adding name-brand labels.

Some Western analysts feel the new laws will allow Beijing to slowly crackdown, python-like, on the practice. Seminars on legal antipiracy measures are regularly sponsored in five-star hotels. Police hold frequent bonfires outside factories that are caught duplicating tapes, CDs, DVDs, and software. Some 33 million pirated items went up in flames last year, according to Xinhua, the official Chinese news service.

Yet no real curb on piracy is expected in the short term, for two main reasons.

First, the scale, capability, and techniques of the counterfeiting industry have outstripped any official punitive action. They are better made and harder to detect. Sometimes they are "off the books" production overruns of authentic products that go out the back door for cheaper sale. Some factories now manufacture real goods in one part of the site and fakes in another.

Second, the piracy industry in China has grown into a vital shadow economy. By some estimates, piracy directly or indirectly employs 3 million to 5 million people, and brings in between $40 and $80 billion. At a time when unemployment is on the rise, experts say it is simply impossible to put a quick end to the piracy industry for reasons of social stability. And this is to say nothing of kickbacks to police or officials who allow the practice to continue, or threaten "raids" or "busts."

As a Western source in the overseas branch of the security agency Pinkerton Services Corp. says, "Counterfeiting is now epic. It isn't understood yet how epic. We help run regular busts, but we catch only a fraction of what's out there."

The government itself admits the problem. "There is a very alarming phenomenon that, although the legislation is always being improved ... [intellectual property right] infringement still runs rampant in the country," says Li Mingde of the Intellectual Property Center at the Chinese Academy of Social Science.

Along with paying agencies like Pinkerton to work with local police, some corporations are starting media campaigns against piracy. Burberry, the British fashion company whose traditional plaid patterns have been the rage in Asia for the past year, has felt enough of a loss in sales, that this week it took out a large page 3 ad in the Hong Kong-based South China Morning Post. The ad shows a small girl wearing a Burberry dress standing in front of a sign reading "COUNTERFEITING" - with a red line crossing through it.

"We blow the whistle on counterfeiters," reads the headline. "Anyone who uses our name, our equestrian knight insignia, or checks identical or confusingly similar to our Burberry check without our permission is counterfeiting our trademarks and will hear from our lawyers."

At Treasure Street, mainly Russian-speaking men wander in and out of the showrooms. Many rooms have polished wooden floors, ambient lighting, Art Deco sculptures, and salespersons with designer eyeglasses and gracious manners. All have a sign that reads "No Domestic Sales" - and ethnic Chinese are often encouraged to leave. Some shops have name brands, others offer to add name brands like Dior or K-Swiss later.

One owner says he will pack the goods for shipping. But he will not take responsibility for how the package leaves the country. Instead, he sets up buyers with a company that will "guarantee" delivery with no customs problems - at least on the Chinese side.

In the ocean of fake consumer goods, China may run the biggest pirate fleet. But other Asian states, like Taiwan, are also mega-offenders. In November, federal officials in Los Angeles intercepted some $100 million in pirated Microsoft software - the largest seizure ever, according to news reports. Authorities said the syndicate was based in Taiwan.

Rarely analyzed is the way cheap Western-style goods, styles, and intellectual materials perpetuates a "globalized" standard of middle-class tastes and habits in China.

One implication is a continued interchange between what is "foreign" and what is traditionally Chinese, in a country that has long been isolated. The appetite among younger Chinese for Hollywood movies, for example, "is endless," says Min Chun, a graduate student. Her friends take pride in collecting and swapping hundreds of films, and CDs of Western music (the Beatles are a recent favorite at some Beijing campuses). Yet, at Western prices, no students could afford them, she says.