Archive for the ‘counterfeiting’ Category

China’s Counterfeiting Legacy

July 25, 2007

By Les Lothringer in ShangHai
Special to Peace and Freedom
July 25, 2007

Are you certain that the medicine you are taking is authentic? Are you sure your motor car brake repairer installed up-to-specification parts in your car? Western consumers now know otherwise, but when I penned an article a year ago on Chinese counterfeit consumables, Western consumers remained skeptical on something that mainland Chinese consumers have known for countless decades.

As domestic Chinese companies increase their exports worldwide, the supply of counterfeit products is expected to become a flood, posing alarming challenges to global brands. Western customs agencies have witnessed a rise in counterfeit goods, simultaneously with the sharp increase in the rate of seizures. Counterfeiting in China may even account for one fifth of GDP, although no-one can be certain.

Counterfeited products in China include books [President Bill Clinton’s biography in English and Chinese], batteries, apparel, machine parts, industrial consumables, electronics and software, drugs, recreational gear, cigarettes, money, personal care items, food, anti-counterfeiting holograms, software protection keys, motorcycles and more. Of course, counterfeiting spreads know-how, engenders capability, lifts economic performance and addresses historical imbalances between the East and the West. This is the other side to counterfeiting and the reason why it won’t be stamped out, a point I’ll address below.
Flag of the People's Republic of China

Counterfeit products are seductive. A seemingly identical set of American golf clubs, complete with golf bag, may cost one tenth of the genuine article and with the look and feel of the genuine product, more or less!

But the quality will not be the same! Not for that price. Materials and work quality will be inferior and the product will not deliver the same performance nor last as long as the original golf clubs. Even non-counterfeit Chinese products for their domestic market may well not be up to Western specification and are unsuitable for export to the West, where expectations and standards are much higher.

Functionally, there is little risk if it’s a Louis Vuitton handbag being copied. But it is a concern when that counterfeit item is a sub-specification machine part or a chemical product. Under cost pressure, could an airline purchasing manager in a third world country resist purchasing a critical hydraulic seal for $50 instead of the genuine sourced Western seal for $250 or more? Western supply managers are similarly challenged.

Not all counterfeit products are of lower quality. Some actually come from the licensed outsourced manufacturers of the brand owner. The factory may do an extra production run, possibly even at another factory, to sell that product at a higher markup. This undermines the efforts of some foreign outsourcing brand managers who naively believe that they have impressively reduced their own costs through cheap outsourcing arrangements, only to discover themselves competing against their own brand. The use of third party suppliers has always had hidden consequences.

Recent history, as it has been played out, has not been accurately taught in Western schools. The Chinese are more thoroughly instructed in the history of foreign imperial interventions. Visitors to Southern China’s GuangDong Province can take in the Chinese view at the several Opium War Museums of how Britain forced opium consumption upon the Chinese to correct its unfavorable trade balance and further extract economic concessions from China for the removal of resources and products. Other foreign powers did likewise. Now that industrialized Western countries have grown strong, Chinese strategists may well say that the regime of intellectual property rights [IPR] enforcement is intended to remove the ladder of support that Western countries used to elevate themselves. In historical terms, IPR is seen as a modern replay of Western economic imperialism, intended to slow the development of countries whose underdevelopment came about through foreign interventionists seeking to enrich their sovereign economies.

The strong connection that the Chinese exhibit towards their past versus the “here and now” mentality of Western business people is a significant and defining cultural difference that cannot be easily dismissed. In fact, IPR violations did indeed also spread technology and know-how throughout the West, as it is now doing in China and other third world countries.

The introduction into China of foreign products and know-how is enabling the Chinese to develop their applied domestic skills and abilities across the full spectrum of manufacturing, sourcing and supply. Through reverse engineering, advanced CAD software and technical collaboration, Chinese businesses are tearing down foreign products and re-engineering their own replicas. These are the field enabling experiences that the Chinese education system lacks, always with its strong emphasis on book learning.

Currently, this approach bypasses the brand development work and the serious research and development [R&D] that attends Western brand creation. But it is now only a matter of time before the copycat factories progress from their wholly applied industrial approach to the development of their talents in the softer skills of marketing and the subtler skills of R&D, already happening to an extent. It is precisely because of the strategic threat that this poses that the Japanese limit the transfer of their R&D and manufacturing know-how to China, retaining high technology and advanced manufacturing skills at home and, unlike the United States, seeking ways to keep it at home.
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About the Author
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Les is a veteran business consultant with over 30 years of commercial experience including Business Renovation, Management Consulting, Interim Management and Workshop based Training in diverse industries throughout the Asia Pacific Region.

Les may be contacted at director@strategywestasia.com. Website: http://www.strategywestasia.com/

We at Peace and Freedom sincerely thank Les for all his wisdom, advice and this article.

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China Planning a Surreal Facade for Summer Olympic Games: Beijing 2008

July 7, 2007

By John E. Carey
Peace and Freedom
July 9, 2007

Few could have anticipated the run of bad publicity, crises and scandals that China has weathered since about last winter or spring.

First, pets in America became sick and many died. The illness was traced to Chinese-made pet food laced with a fertilizer component named melamine. Companies in China had illegally added melamine to wheat gluten and rice protein in a bid to meet the contractual demand for the amount of protein in the pet food products.

After that, the Food and Drug Administration in the United States began to take a harder look at a host of Chinese products imported into the U.S.

The FDA ended up barring most seafood from China (where we in the U.S. get about 1/3 of our shrimp, much of our catfish and other “farm raised” seafood products) because much of it contained drugs, bacteria or other suspicious or obviously harmful products.

Not only was imported seafood tainted, but the FDA began turning away tons of other food products – some of it contaminated, some filled with toxins and other products full of bacteria.

Products like toothpaste, chewing gum and even soy sauce were found to be made with toxic ingredients. Roughly 900,000 tubes of Chinese made toothpaste containing a poison used in some antifreeze products turned up in U.S. hospitals for the mentally ill, prisons, juvenile detention centers and even some hospitals serving the general population.

Then the Colgate-Palmolive Company announced that it had found counterfeit “Colgate” toothpaste containing the anti-freeze diethylene glycol, a syrupy poison.

Although tainted or poorly made and tested food from China was first noticed in the United States and other western nations, once China checked its own store shelves it found problems. 

Inspectors in southwest China’s Guangxi region found excessive additives and preservatives in nearly 40 percent of 100 children’s snacks sampled during the second quarter of 2007, according to a report on China’s central government Web site.

The snacks — including soft drinks, candied fruits, gelatin desserts and some types of crackers — were taken from 70 supermarkets, department stores and wholesale markets in seven cities in the region, it said.

Only 35 percent of gelatin desserts sampled met food standards, the report said, while two types of candied fruit contained 63 times the permitted amount of artificial sweetener.

And if substandard children’s snacks weren’t bad enough, China and the U.S. FDA uncovered a huge racket in substandard medicines. One manufacturer of medicines was implicated in 11 deaths.  Five manufactures lost the ability to continue in the business.  And 128 drug makers lost their Chinese government Good Manufacturing Practice certificates, a symbol of favorable performance, the China Daily newspaper reported on its Web site.

We also saw, thanks to an aroused international media, child laborers illegally producing Beijing Olympics 2008 memorabilia. Just when you thought it couldn’t get any worse for China, a slavery scandal erupted. Slaves were found mining materials and making bricks inside China.

The United Nations condemned China for the worst pollution in the world. China also produces more greenhouse gases than any other nation by far.

Despite China’s long history for managing its media and controlling what the world learned about the People’s Republic, stories surfaced and were verified that showed an illegal trade in “harvested” human organs from inside China. Unscrupulous doctors and businessmen teamed up to create a thriving business in human organs. The problem was that the organs came from prisoners and the mentally ill, who had no say in the matter and died before they could become witnesses to this atrocity.

Add to this a long and unresolved dispute about the way China controls its currency and a thriving business inside China in counterfeit goods: everything from U.S. music and motion pictures to Rolex watches, books and, well, you name it.

China tried to market a new Chinese made automobile to the upscale European buyer but the vehicle disintegrated in a 40 MPH crash test. Now Europeans wouldn’t be, well, caught dead in the thing.

So from May until July 2007, despite the Chinese News Spin Machine going full tilt the bad news about China seemed to be spinning out of control.

Just today, July 7, 2007, the Central Committee of the Communist Party seemed to be threatening local leaders who allow social unrest.  “Officials who perform poorly in maintaining social stability in rural areas will not be qualified for promotion,” Ouyang Song, a senior party official in charge of personnel matters said, according to China’s Official Communist News media.

All these problems don’t even trump China’s most horrible foreign policy disaster: Suport for Sudan without taking action on Darfur.  The U.N. and others have referred to Sudan’s conduct in Darfur as genocide.  And Hollywood big shots are already calling next summer’s Olympics in Beijing the “genocide games.” 

Not to worry, though. China’s communist leadership still plans a masterful and error free Beijing Olympics 2008.

The communist government of China is taking action to streamline what the western media sees next summer. Smokey, coal-fired factories are even being moved out of Beijing and into the countryside because their effluent looks so disgusting there was fear these factories alone could cause a major embarrassment.

Beijing’s population had a practice “No Spiting Day” in an effort to reduce this disgusting habit common in the city. The test was a disastrous failure and a new training approach is planned. Beijing also had a day devoted to polite lining up for buses and trains. This worked out a little better with the obedient and terrified city workers not taking any chances.

During the Olympics, communist leaders in Beijing plan to remove from the city the hordes of vagrants, homeless people and orphaned children who live on Beijing’s streets. Some estimate that as many as 2 million orphaned or homeless children live in Beijing alone.

In order to assess what can be done about Beijing’s choked streets overwhelmed by traffic; and to see if a dent can be made in the choking air pollution, one million Beijing automobile drivers will have to stay at home or use mass transit on a day scheduled to test the impact of all of this. Beijing only has 3 million registered automobiles so inconveniencing one-third of them for one day should hardly impact the economy, right? But if the test is a success, one would have to remind China that the Olympics is not a one day event.

When all this is assessed together, one might ask, when we get to Beijing next summer for the Olympic Games, how much of what we see will be real? And how much is a product of the smoke and mirrors China often employs to produce the desired result.

Related:

Pollution Dangers Cast Shadow over 2008 Olympics

Chinese Government Staff: “Happy News President Hu Jintao; We Ready For Happy Time Olympics!”

Some National Cultures More Tolerant of Death?

Tricky Vietnamese Truth About Catfish
The Chinese are just as smart as the Vietnamese on how to work the American system….

China says food safety scares threaten stability

China’s “Drug Abuse” Problem: Below Standard Pharmaceuticals Have Been Deadly

China may need a fresh approach to regulating its often unruly economy

China tells local authorities to address social instability

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From John Carey: A friend sent us this:

Friend:

I was in a Beijing hotel last year… A very upscale American style one near the Olympic area.Inside the hotel, it seemed identical to any nice hotel you’d see in New York, Dallas or LA… except for the big sign next to the faucet in the bathroom.

From John Carey: I had the same experience in Moscow.  Superior 4-star hotel  Water out of the tap was brown.

China Steps Up Its Safety Efforts

July 7, 2007

From The New York Times
Saturday, July 7, 2007

China made new public displays on Friday of its efforts to crack down on defective products, sentencing a former top drug safety official to death and disclosing an investigation into cellphone batteries after one reportedly exploded, killing a man when it pierced his heart.

Read the rest at:
http://www.nytimes.com/2007/07/07/business/worldbusiness/07china.html?_r=1&oref=slogin