August 03, 2004

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They never fake it with me

China is continually being accused of knocking-off brand name goods and selling cheap imitations. The latest to bleat is the maker of Zippo lighters but the article itself points to clues the issue is not as cut-and-dried as first seems:

Zippo, which employs about 700 people, has refused to manufacture overseas. Its complaints will play a prominent role in the government's case that China needs to do a better job stopping counterfeiters...The vast majority of bogus Zippos are made in southern China at factories that can knock out 45,000 replicas a day, as many as the Zippo factory in Bradford..."The stronger our brand gets worldwide, the more problematic it becomes," Booth said. "It's just the number of plants interested in counterfeiting."

With Zippos going for $30 in China - a week's pay for some workers - the demand for cheap knockoffs is immense. Counterfeiters can make so much money on fake Zippos in a few days, it can be worth setting up shop for a week, said Peter Morici, professor of international business at the University of Maryland.

Even with rampant counterfeiting, Morici and other trade experts say Zippo won't leave China anytime soon. "This is a matter of leakage, but it's a pretty big pipe and there's going to be a lot of water running through it," he said. "It becomes a question of selling 1 million lighters when you think you could be selling 2 million."

They cannot bear to look but nor they cannot bear to stay away. The reality is China excels at copying and these companies that sell their goods at high prices are going to have to get used to it or deal with it in far more imaginative ways than bleating to politicians. For a start Zippo might consider selling their lighters for far less than US$30 each in China.

In a relate note The Standard reports the US Conference Board does not see any benefit in pressuring China to revalue the yuan. As they rightly point out, most companies already do business in foreign currencies if they are dealing with overseas counterparts, and usually that's US dollars. What they forget to mention is a revaluation of the yuan is also likely to bankrupt China's banks and cause the collapse of much of its financial system. I think even George W. would be happier with a China growing at 9% per annum, providing demand for his countries exports and keeping over a billion people in a rising standard of living, rather than the alternative a revaluation could bring.

Finally Hong Kong will be hosting the WTO meeting in December 2005, with an expected 10,000 junketeers expected to attend. I've already seen estimates that it will cost HK$200 million to stage this event. With the priceless images it will present of Hong Kong to the world, it will be money well spent. You could have a nice postcard of the rabble (in their Nikes and Levis) protesting the evils of globalisation, or a great photo of a long-haired lout in the arms of a caring police officer. The rest of the world can thank Hong Kong for drawing their rabble away from them for a week - no extra charge.

The greatest irony will be the Communist People's Liberation Army will no doubt play a prominent role in the security of the event. I will pay good money for a poster sized picture of a PLA officer with a Mao-ist anarchist Trostskite in a headlock as he gets lead to a tour of the brig of the PLA's barracks.

posted by Simon on 08.03.04 at 09:43 AM in the


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