---
title: "40 Years of Counterfeits in China"
description: "A look at China's commercial history reveals that counterfeits emerged almost simultaneously with the reform and opening-up. During the planned economy era, factories were either collectively or state-owned, leaving little incentive for profit, so counterfeits were rare. As China transitioned to a market economy, individuals could establish companies for production, processing, and sales, leading to a surge in demand and shortages, which, combined with the pursuit of economic benefits, caused a proliferation of knockoffs and fakes. The article traces the evolution of counterfeits from low-end to high-end, from offline to online, and examines the underlying logic, including economic development, consumer demand, low manufacturing barriers, and price and cognitive factors."
author: "李青林"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-10-22"
categories: "Brand Marketing, Consumer & Categories, Management & Methods"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/q0xJk4SEYndk6Ed6gk_fKA"
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attribution: "New Distribution — https://xinjignxiao.com/en/articles/40-years-of-counterfeits-in-china-96bf9837/"
citation: "李青林. “40 Years of Counterfeits in China.” New Distribution, 2019-10-22. https://xinjignxiao.com/en/articles/40-years-of-counterfeits-in-china-96bf9837/"
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---

# 40 Years of Counterfeits in China

> A look at China's commercial history reveals that counterfeits emerged almost simultaneously with the reform and opening-up. During the planned economy era, factories were either collectively or state-owned, leaving little incentive for profit, so counterfeits were rare. As China transitioned to a market economy, individuals could establish companies for production, processing, and sales, leading to a surge in demand and shortages, which, combined with the pursuit of economic benefits, caused a proliferation of knockoffs and fakes. The article traces the evolution of counterfeits from low-end to high-end, from offline to online, and examines the underlying logic, including economic development, consumer demand, low manufacturing barriers, and price and cognitive factors.

A look at China's commercial history reveals that counterfeits emerged almost simultaneously with the reform and opening-up. During the planned economy era, factories were either collectively or state-owned, leaving little incentive for profit, so counterfeits were rare.

As China transitioned from a planned economy to a market economy, individuals could establish companies for production, processing, and sales. Social demand for various goods grew robustly, leading to shortages. Coupled with the pursuit of economic benefits, this caused a proliferation of knockoffs and fakes.

According to reports from the World Economic Development Organization, counterfeits span many categories, including watches, clothing, shoes, hats, cosmetics, toys, electronics, tobacco, hardware, and food.

**In short, counterfeits have permeated every aspect of our daily lives.**

After the reform and opening-up, the rise of Chinese brands brought a diverse range of products to the public. At that time, the Chinese market was in a period of rapid growth, with increasing domestic demand outstripping supply. In pursuit of economic benefits and to capture the incremental market, knockoff brands began to emerge.

From Maijie (脉劫), Kangshuai Fu (康帅傅), Yue Li Yue (粤利粤), Da Bai Mian (大白免) to Abidas and Xiaomi New Products, a large number of knockoff products appeared in urban and rural markets. These products deceived consumers through highly similar packaging and brand names that were almost indistinguishable from the originals. Some argue that knockoffs are not necessarily fakes.

**-01-**
**Real fakes never need to imitate**

In the FMCG industry, fakes are ubiquitous.

In the beverage industry, Red Bull, a favorite among Chinese consumers, is a prime target for counterfeiters. The packaging is identical to the genuine product, but the English label reads "RadBull." Additionally, the ingredients, manufacturer, and origin on the can differ from the genuine "Red Bull," and the can lacks the health food certification mark.

In the condiment industry, leading brands such as Totole, Lee Kum Kee, and Lotus MSG have all been prime targets for counterfeiters. Invariably, from the outer packaging to the product packaging, they are indistinguishable from the genuine products.

Furthermore, daily chemicals are also a hard-hit area for fakes, including counterfeit shampoo, toothpaste, facial cleanser, and soap. Compared to genuine products, the appearance of counterfeit products is almost identical, and the side of the packaging even has the same anti-counterfeiting code as the genuine product. However, when consumers actually use them, they find significant differences.

**Among the many fakes, the one that truly stings is the rampant counterfeit alcohol that once plagued China. Behind every counterfeit alcohol incident is a tale of blood and tears.**

During the Spring Festival of 1998, a major toxic alcohol incident occurred in Shuozhou, Shanxi Province. Criminals used industrial alcohol containing high levels of methanol, or even directly used methanol, to produce liquor for sale, resulting in over 20 deaths from poisoning and hundreds hospitalized.

On November 14, 2002, a suspected poisoning from illicit liquor occurred in Yilan, Taiwan, where 22 people suffered methanol poisoning from consuming fake rice wine. The death toll from methanol poisoning in Yilan County rose to 8.

On December 5, 2003, over 50 farmers in Yuanjiang Hani, Yi, and Dai Autonomous County, Yuxi City, Yunnan Province, showed signs of poisoning after drinking fake liquor on December 7. By December 7-8, over 30 people had been poisoned, with 4 dying.

On May 11, 2004, two incidents of poisoning from drinking bulk liquor with excessive methanol occurred in Zhongluotan, Baiyun District, Guangzhou, resulting in 14 deaths, 10 severe injuries, 15 moderate injuries, and 16 minor injuries—a particularly severe outcome.

With China's rapid economic development, consumers' living standards have improved, but they also face more counterfeit crises lurking around them, ready to strike.

Starting in 2000, with the acceleration of urbanization, counterfeits gradually shifted from cities to townships and rural areas, while urban consumers faced a greater danger—food safety.

**-02-**
**Unsafe food makes Chinese people "invulnerable to all poisons"**

The 2005 malachite green seafood scandal made us wary of seafood, but to this day, the use of "malachite green" in aquaculture remains rampant, with smaller farming units more likely to use it.

The 2006 Sudan Red duck eggs incident taught consumers that brightly colored things can indeed be toxic.

The 2008 melamine milk powder incident plunged China's dairy industry into a deep freeze. In total, six infants died from drinking tainted milk, and over 300,000 children fell ill.

Between 2005 and 2011, the "leather milk" incident saw unscrupulous merchants hydrolyze leather waste or animal hair to extract "hydrolyzed leather protein," which was then mixed into milk, throwing China's liquid milk industry into crisis.

These two incidents took nearly a decade for China's dairy industry to rebuild consumer confidence.

The 2010 gutter oil scandal once again shattered consumer perceptions. According to surveys, at that time, China returned 2 to 3 million tons of gutter oil to dining tables annually, with a large portion sold to oil companies in Anhui, Shanghai, Jiangsu, Chongqing, and other regions, eventually entering the food sector. This gutter oil was mainly sold to food oil processing enterprises to make products like cooking oil and hotpot base.

The 2011 clenbuterol incident exposed another new term to consumers, following the earlier water-injected meat scandal.

The 2013 cadmium rice incident made us feel life's hardships once more.

The 2015 "zombie meat" incident revealed that consumers could eat meat products older than themselves. A batch of "zombie meat," including "post-70s" pig trotters and "post-80s" chicken wings, appeared on dining tables through smuggling.

**Every new term born is an exposure of China's food safety hazards. Some even joke that Chinese people have become invulnerable to all poisons.**

Knockoffs, fakes, and food safety issues have accompanied several generations. A life without experiencing fakes is incomplete.

**-03-**
**The Upgrading of Chinese Fakes**

Some hate fakes because they cause real harm. Others enjoy fakes because they can satisfy vanity at a low cost. Amid this mix of pain and pleasure, Chinese fakes have evolved from prosperity to decline, from low-end to high-end, and from offline to online.

**As China's legal system has improved and crackdowns on counterfeiting have intensified, simple counterfeit goods have gradually disappeared, but this does not mean they have vanished entirely; rather, they have moved to more hidden corners.**

At the same time, some counterfeit products have evolved into high-quality imitations, becoming sought after by young consumers, such as branded clothing, luxury bags, and high-end shoes. These attract many buyers with their highly similar appearance and ultra-low prices.

In the forty years of reform and opening-up, if the first twenty years saw fakes born from human greed and malice, the latter twenty years have seen them sustained by market demand.

The counterfeit trend on online platforms mirrors the early Chinese market: traffic outweighs merchants, regulation is imperfect, but market demand exists.

This demand comes from consumers with less favorable economic conditions.

Online, there was a question: a young person on an assembly line earning 4,000 yuan a month searches for Nike shoes online with a price limit of 100-200 yuan. What do they really want to buy—fakes or genuine products?

With the development of mobile internet, new media, WeChat Moments, Weibo, and Douyin influence shopping desires. People like to show off luxury brands and high-end cosmetics, viewing these expenditures as symbols of affluence.

For low- and middle-income groups, this influence drives higher spending impulses. For example, when a female worker earning 3,000 yuan a month searches for high-end cosmetics, what she wants may not be genuine products. In this sense, we often knowingly buy fakes.

Now, with Taobao and Pinduoduo continuously improving their anti-counterfeit systems, it is hard to see fakes on mainstream e-commerce platforms.

But human malice takes root online like spring seeds.

With the popularity of WeChat, WeChat business (Weishang) has become a preferred freelance occupation for many young people. However, many products sold by WeChat businesses are fakes, especially cosmetics, masks, and lipstick. They use Moments and the "acquaintance economy" to distribute low-quality products nationwide.

**-04-**
**The Logic Behind Chinese Fakes**

**1. An inevitable result of economic development**

The prevalence of fakes is a result of socio-economic development. Both Germany and Japan experienced periods of rampant fakes and knockoffs. Germany copied Britain; Japan imitated the US. In China, apart from the black workshops scattered across the country, we find that regions with established counterfeit production and sales chains are always economically developed areas.

According to statistics from 2001 to 2015, the provinces with the highest average GDP—Guangdong, Jiangsu, and Shandong—also had higher exposure of counterfeiting news. Guangdong, the top manufacturing province by GDP, had the most counterfeiting news exposure.

In 2016, Alibaba's platform governance department released data showing that offline suspicious counterfeit gangs were mainly concentrated in developed southeastern coastal regions such as Guangdong, Jiangsu, Zhejiang, Fujian, Shanghai, and Shandong. Beijing, an economically developed inland city, was the only one with over 200 gangs.

**Thus, regions with thriving counterfeit industries share the following characteristics:**

> 1. Mostly located in developed coastal economic zones.
>
> 2. Areas with active commodity trade and developed manufacturing see proportional increases in counterfeiting and selling.
>
> 3. Regions with sluggish trade and backward manufacturing have fewer counterfeiting activities due to market, technology, logistics, and other factors.

Over the past four decades, China's GDP has grown at an average annual rate of 8.5% or higher. In that era, whoever seized the market first won. This was the scale advantage companies faced, as the Chinese market was an incremental market under the dividend of economic growth.

**2. A reflection of consumer demand**

We hate fakes, yet we rely on them. It can be said that there is significant demand for fakes in the Chinese market. For food and cosmetics fakes, everyone condemns them because they cause real harm. For branded clothing and high-quality imitation electronics, they do not cause direct harm but satisfy our vanity, so many consumers knowingly buy fakes.

We often view consumers as victims of counterfeit products, but we overlook that they are also the instigators. Behind China's booming counterfeit industry is strong consumer demand for fakes.

We can summarize the fakes consumers need:

> 1. Fakes with similar effectiveness to genuine products but at a significantly lower price.
>
> 2. Fakes with lower usage risks.
>
> 3. Fakes for products where genuine goods are not accessible.

**3. Low barriers at the manufacturing end**

After analysis, we find that counterfeiters prefer to produce fakes that:

> 1. Have low technical barriers and high profits.
>
> 2. Are labor-intensive.
>
> 3. Are small in size and easy to transport.

This explains why electronics, clothing, and cosmetics have many fakes.

**4. Price and cognition drive fakes**

With rising living standards, consumers are more willing to enjoy quality products and services. In cities, as brands repeatedly educate consumers, they have a clear understanding of brands—they know which are good and which are bad. What truly troubles them is price.

Economic foundation determines purchasing power, so urban consumers are more willing to buy high-quality imitations and knockoff brands because their prices are genuinely low.

In remote rural areas, although purchasing power has significantly improved, the virtue of thrift remains deeply ingrained. Additionally, rural consumers have low brand awareness and lack the ability to distinguish genuine from fake, so fakes appear frequently in these areas.

Forty years of reform and opening-up is forty years of China's economic takeoff and also forty years of the growth of Chinese fakes. Chinese consumers are both victims and beneficiaries of fakes.

The spicy strips we love to eat—many unbranded products come from black workshops. They are composed of more than a dozen additives, including mono- and diglycerides, sucralose, sweeteners, flavor enhancers, preservatives, colorants, and preservatives, and most end up in small shops near primary and secondary schools.

It is hard to imagine that discarded needles, infusion bottles, and disposable lunch boxes from hospitals are processed into plastic pellets, then reprocessed into disposable cups, basins, and even baby toys we use daily.

Unscrupulous merchants use canthaxanthin as an additive to deepen the color of egg yolks, turning them into the "free-range eggs" we love.

Seemingly clean and tidy baby diapers may be made from recycled used diapers by unscrupulous domestic manufacturers, reprocessed into new ones.

Forty years of reform and opening-up have brought consumption upgrades and new retail, but fakes still accompany us.

Fakes not only cause physical harm and economic loss but also make us lose confidence in "Made in China." At the same time, we should thank fakes for their existence, because their repeated appearance has made our regulation stricter, our legal system more robust, and our market more standardized.

**The forty years of Chinese fakes are a true reflection of China's economic takeoff!**

However, today, especially in rural markets, the once-thriving haven for small brands and "Kangshuai Fu" is disappearing.

Roads have reached villages, and famous brands have expanded their distribution channels. Farmers' incomes have risen significantly, making them able to afford "big brands." Additionally, the普及 of mobile internet has given consumers some ability to discern.

The once-regular appearances of FMCG companies on the "315 Gala" are now fewer. Looking again, are there fewer FMCG issues, and is China's food safety improving?

**More and more well-known brands are conquering village shops, wiping out "small brands." The heyday of fakes is fading...**

If you provide a tip, you will be paid 400-2000 yuan. **China FMCG + Internet Professional New Media** **Committed to FMCG manufacturer and distributor transformation and channel digital solutions** **Copyright | Business Cooperation | Project Consulting | Reader Submissions**


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## Citation metadata

- Publisher: New Distribution
- Author: 李青林
- Published: 2019-10-22
- Canonical: https://xinjignxiao.com/en/articles/40-years-of-counterfeits-in-china-96bf9837/
- Original source: https://mp.weixin.qq.com/s/q0xJk4SEYndk6Ed6gk_fKA

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