China Big in Counterfeit Goods

B E I J I N G, China, April 21, 2002 -- China seems not only to make everything, it fakes just about everything as well.

Charles Scholz is a genuine, fake buster. As the Asia director for the security consulting firm, Kroll Associates, he is hired by international corporations to root out and help shut down the counterfeiters.

When inspecting a pair of ski gloves with a North Face label emblazoned prominently, Scholz determined, "The tag is real, the product is not." Not only would these gloves not keep you dry, "If you buy this, you get soaked."

Chinese counterfeiting now costs foreign firms an estimated $20 billion a year in lost profits. "In the case of one consumer goods manufacturer, as much as 70 percent of the goods on the market are counterfeits," said Scholz.

Buying the Label, not Quality

Just across the border from Hong Kong, the town of Shenzhen has become a Mecca for cheap knockoffs.

With small cameras under wraps, ABCNEWS found an amazing variety and quantity of copies. Not only were there the latest DVDs, like Monsters, Inc. for $1 each, the latest software, like the newest version of PhotoShop and Windows, at one-tenth the cost, but just about every consumer product imaginable.

Most of the Yamaha motorbikes here are not made by Yamaha. One-fourth of the Duracell and Energizer batteries are bogus. American Standard toilets, Head & Shoulders shampoo, Gillette razors and even reliable Skippy peanut butter are almost all of dubious quality. They even sell fake Viagra.

"Anything from shampoo that might burn your head, batteries that only work for two days before they cut out, light bulbs that go out after two days," Scholz said.

Many of the auto parts made in China are unreliable, dangerous knockoffs of well-known international brands. The result is shoddy goods that often make their way around the globe.

A five-hour drive out of Shanghai is the city of Yimu, which calls itself the "Capital of Small Commodities." In the merchandise trade, it's better known by another name: "Counterfeit Central."

This is where international buyers come to purchase knockoffs in bulk. Some 40,000 wholesale shops sell about 100,000 products that are up to 90 percent fake.

Occasional Crackdown Affects Much-Needed Jobs

And every day, tons of phony goods are shipped out, mostly to the Middle East, Africa and South America — right under the noses of the Chinese police.

China does crack down occasionally. Pirated videos and music CDs are regularly crushed for the news cameras.

But counterfeiting is now so big, officials are reluctant to shut it down completely, since it provides millions of badly needed jobs.

"Actually, trying to put a stop to it is going to take some fundamental changes in the society and economy here," Scholz said.

In the meantime, counterfeiters remain so brazen that one of the most popular markets for fakes sits in the center of the Chinese capital, right across the street from the U.S. Embassy.