China's Olympic Turnabout on Knockoffs

Counterfeit mascots are displayed at Beijing's commerce administration.
Counterfeit mascots are displayed at Beijing's commerce administration. (By Teh Eng Koon -- Agence France-presse Via Getty Images)
By Maureen Fan
Washington Post Foreign Service
Friday, June 13, 2008

YIWU, China -- At a city-size bazaar here in an eastern Chinese province, illegal replicas of the official Olympic mascots are being kept in broom closets and backrooms. Authorities seeking counterfeits, vendors say, could pounce at any time.

"We don't know when they're coming," said a ponytailed woman, clutching a key chain bearing the likeness of Huanhuan the Olympic Flame, which she had pulled out of a locked drawer. "But I'm sure they won't come today."

The furtive trade in the five official, adorable Olympics figures -- including Huanhuan, Jingjing the Panda and others -- is part of an Olympic-size battle that has erupted between the keepers of the Games' lucrative symbols and an army of Chinese citizens who traffic in counterfeit versions of the world's most coveted brands.

For years, China has been known as the leading exporter of fake goods, from Louis Vuitton handbags and Patek Philippe watches to auto and jet engine parts. The underground economy, which according to U.S. trade officials costs American companies $3 billion to $4 billion annually, has been allowed to flourish by a Chinese government that seldom prosecutes intellectual property violations.

But the Olympics have mobilized China's piracy police like never before. Beijing, the host city, stands to receive up to 15 percent of all revenue from Olympic merchandise, a figure expected to easily top the $62 million raised in Athens four years ago. Aside from the mascots, China is also reportedly collecting up to $120 million each from Coca-Cola, McDonald's, Adidas and other companies that have qualified as the highest-level Olympic sponsors.

With the world's gaze on China in the run-up to the Aug. 8-24 Games, officials have moved to make sure counterfeit goods don't reflect poorly on the festivities. Fake Adidas clothing that was widely available at popular Beijing markets a year ago is now hard to find.

"It's a political mission, and the government doesn't want anything to ruin the quality of the Games," said Wang Hai, a Beijing-based advocate who has campaigned against fakes and worked with government officials to crack down on counterfeiters. "The Olympics are about the country's image, so it has a priority."

Through stepped-up market raids and better interagency coordination, officials have demonstrated that they can reduce counterfeiting. But in doing so, they have forced the sale of fake Olympics mascots and other souvenirs onto the black market.

"They have moved some of the market more underground than they have before, but that hasn't stopped the activity," said Marc S. Ganis, chief executive of Chicago-based Sportscorp Ltd., a sports marketing firm. "It proves that China can do something about the problem when its own interests are aligned with the crackdown. . . . The reality is, just like in the U.S., people are going to do what they're going to do, which is make money."

More police have joined the fight against counterfeiting, which used to be primarily the domain of commerce and quality-inspection officials, Wang said. Companies are beginning to successfully sue markets for selling fake merchandise. And thresholds for the amount of illicit proceeds that constitute a crime have been cut in half, to about $7,000 for individual suspects and about $21,000 for companies.

The counterfeiting of Olympic products has cost other host cities, including Atlanta and Salt Lake City, millions of dollars. But the scope of the problem in China is particularly vast. At Yiwu market, for example, a major destination for Chinese wholesalers and tourists, there are tens of thousands of shops and more than 200,000 vendors.

"This has been a big problem for many years, and this will be a big problem for many years in the future," Wang said. "It's an issue of income rather than education. Most people who buy counterfeits don't care whether they're real or not, they just want very good quality and have very little income. This is all they can afford."

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