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Chinese Counterfeits Cost Corporate Korea $7.2 Billion a Year
Country of Counterfeit
Chinese Counterfeits Cost Corporate Korea $7.2 Billion a Year
  • By Michael Herh
  • August 19, 2017, 19:30
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The market for counterfeit products in Shenzhen, China.
The market for counterfeit products in Shenzhen, China.

 

As US President Donald Trump signed an executive order to investigate infringements on intellectual property rights by Chinese companies, Chinese counterfeit goods are emerging as global issues. The US government estimates that the United States loses US$225 billion to US$600 billion annually in damages due to Chinese counterfeits and China’s infringements on US patents.

Korea is also a major victim of Chinese counterfeit goods. The Office of Patent Administration found 64,526 Chinese counterfeits of Korean products on the website of Alibaba, China's largest e-commerce company last year. The World Customs Organization estimates that damage by counterfeit goods accounts for 5% to 7% of world trade volume. The European Union and the US government regard 86% of these as Chinese counterfeits. In the trade industry, taking into consideration Korea's exports to China amounting to 124.43 billion dollars last year, the damage to Korean companies’ sales adds up to eight trillion won (US$7.2 billion) a year.

Counterfeit items are expanding, ranging from consumer goods such as food and cosmetics to IT devices, broadcasting contents and games which took the lead in the Korean cultural wave and franchise trademarks. "If you find a counterfeit product on line, there is no proper way to resolve the problem except for asking the Chinese Internet shopping mall to delete it," said an official of a large Korean company. “There is a possibility that a Korean company will be given disadvantages when the company applies for permission for business in China, which makes for the Korean company to demand that Chinese authorities take strong actions."

If you enter 'Sulansoo' in the search box in Taobao Mall, the largest online shopping mall in China run by Alibaba, the results will show 10 recommended products. Seolyonsu is a counterfeit product of “Sulwhasoo,” a luxury cosmetics brand of Korea’s AmorePacific which represents K-Beauty. Its package is similar to that of the genuine product, and its brand name in Korean is similar to that of the genuine product. "Chinese counterfeiters cleverly change product names and selling them at online shopping malls, but it is difficult to respond to each of Chinese counterfeiters," said an official at AmorePacific China.

Tony Moly, a mid-sized cosmetics company that made a hit by putting hand cream in peach-shaped containers is also suffering from Chinese counterfeit products. "There are a lot of fakes that cannot be distinguished unless we take a close look at them," said an official of Tony Moly. “There were many cases in which Chinese consumers protesting against us after using such low quality counterfeit products.”

Chinese counterfeits are spreading to all sectors, ranging from cosmetics and food products to advanced information technology (IT) devices. Counterfeits of Nongshim’s Shin Ramen and Kimchi Ramen are selling with the same trademarks and packaging design through small and medium-sized stores. "Some fake products contain low-quality instant noodles or snacks in packages which look like that of Shin Ramen," said an official at Nongshim.

It is so common that it is difficult to enumerate the design and specification of high-tech IT products.

On May 10, the Galaxy S8 was displayed in various places in smartphone stores of Huachang Bei, an electronics shopping mall in Shenzhen, China. The smartphone was a counterfeit made in the Shenzhen area. Samsung Electronics launched the Galaxy S8 in the Chinese market on May 25. Counterfeits are already on the market before actual products were released to the Chinese market. "It is a perfect replica of all functions such as calls, internet connections and etc,” a clerk said. The Samsung Galaxy Note 8 that Samsung Electronics will unveil in New York on August 23 could be purchased at Chinese Internet shopping malls as of August 18. This product is a fake produced based on various specs and presumed photos in the media.

Tijump, a mid-sized Chinese home appliance maker, sold more than 500 units last year, after launching a clothing organizer which was copied from LG Electronics' Trom Styler. Another Chinese consumer electronics company, Galanz, stunned LG officials by exhibiting the same product as the Trom Styler as its new product at the Shanghai Consumer Electronics Show in January of this year. "We spent tens of billions of dollars in the development of the Trom Styler only," an LG Electronics representative said. "There are many companies that make products after copying our designs and features and sell them at a much cheaper price." Skyworld, a major Chinese TV maker drummed up, introducing products directly copied from products which LG Electronics unveiled as new products at the Consumer Electronics Show (CES) in the US in January. According to the Organization for Economic Cooperation and Development (OECD), one out of five smartphones on the planet is counterfeit and 86% of them are made in China.

Franchise trademark theft is also rampant. Famous Korean sherbet franchise “Sulbing” made a foray into China and got mired in unexpected quicksand by a similar fake franchise which copies not only its menu and store interior but its signboard. The Chinese franchise which stole the Sulbing brand is operating more than 300 stores in Shanghai alone. The Korean Office of Patent Administration estimates that 1125 Korean companies were damaged by stolen or preoccupied trademarks in China by last year. Among them were Goobne Chicken, Paris Baguette, Kimbap Heaven, and Shinpo Korean Dumpling.

China's counterfeiting industry is specialized by bases and plays a pivotal role in local economies. Putian City in China is a base of counterfeit shoes distributed worldwide such as Nike and Adidas, and Guangdong Province which produces 40% of the world's watches, is a hotbed of counterfeit watches. At the heart of cutting-edge IT product counterfeiting is Shenzhen, one of China's most innovative cities. Any product can be completely counterfeited in Huachang Bei, the largest electronic shopping mall in China. Over 100,000 stores sell both genuine and counterfeit goods. Stores are studded with the logos of Samsung, Apple, and Xiaomi among others but officially recognized stores are hard to find. In each store, sellers stack parts and assemble counterfeit goods of desired products such as a smartphone, a game machine, a digital camera, and a tablet PC on the spot. It is also possible to place an absurd order to make the back that of the iPhone and the front that of the Galaxy S series.

"In Shenzhen, China, Foxconn producing the iPhone and Huawei, the world's No. 1 telecom equipment maker and a spate of start-ups absorb talents and technologies from the world. They have an ecosystem that can replicate any products perfectly," professor Park Hee-jae of the Mechanical and Aerospace Engineering Department at Seoul National University.