China today: Counterfeits "R" Us

Counterfeit Apple store photographed in Kunming, China
Bird Abroad

In 2006 Hasbro released the Marvel Super Hero Squad line of action figures. The figures are little?--?only about two inches tall, on average?--?and made of plastic. They are rendered in what is known as the "super deformed" style: small, stumpy arms and legs, oversized heads, and hands with four, instead of five, fingers. This aesthetic appeals primarily to very small children, and the Super Hero Squad--classic Marvel comic book characters like Spider-Man, Iron Man, and Thor--was designed, as you may have guessed, as a gateway drug for 2- and 3-year-old boys.

Yet something odd happened. The Super Hero Squad caught fire in the world of toy hobbyists. Older?--?one hesitates to say grownup?--?buyers devoured the figures, and today there is a brisk collectors' market for them on eBay. Originally sold in packs of two for about $6, individual figures now sometimes sell for $25. Or even $45.

But if you hunt around the Super Hero Squad listings on eBay (there are a few thousand of them at any given time), you'll notice something strange: There are often two versions of a figure selling at radically different prices. For instance, a Spider-Woman that costs $10 next to a Spider-Woman that costs $0.99. The cut-price Spider-Woman is a fake. Of the several thousand Super Hero Squad sellers, about half are located in China, Hong Kong, and Singapore. And all of these merchants sell their figures at bargain prices.

This raises the interesting question of what "counterfeit" really means these days. Once, we knew what a knockoff was. A real pair of designer shoes was made in Italy out of leather and steel tacks. The knockoffs were slapped together in Vietnam or Korea using glue and pleather to barely approximate the look of the Italian originals. Nothing else about them?--?the weight, the feel, the durability?--?was at all similar.

Today, the "real" Super Hero Squad figures are tiny hunks of colored plastic spit out by slave-wage laborers in Chinese factories. And so are the fakes. There might be tiny cosmetic differences?--?say, the shade of Spider-Woman's lipstick, or a minor detail of the character's costume. But if I put the two Spider-Women in front of you, you'd be hard-pressed to tell which was which, even if you were intimately familiar with the Super Hero Squad toy line.

And it's not even clear that all of the fakes are, literally, fakes. It's not impossible to imagine that some of the figures being sold in China metaphorically fell off the back of the truck: Perhaps a factory that was supposed to shut down after reaching its quota kept going for an extra 20 minutes, minting an extra thousand Spider-Women, which were diverted to eBay and then sold to line someone's pocket. Nobody?--?not you, not the eBay buyers and sellers, and certainly not Hasbro, whose corporate headquarters is in Pawtucket, Rhode Island?--?can say for sure.

Problem goes beyond action figures

It's not just action figures. The Chinese counterfeiting regime mocks up everything from software to clothing to stationery to cigarettes. Last month an American woman living in Kunming, the capital of China's Yunnan Province, wrote about her experience in a fake Apple Store. An entire store selling Apple products?--?iPads, iPods, laptops, and software?--?was replicated. It looked like a real Apple Store. It had the same stainless-steel-and-natural-wood style you see in upper-middle-class suburbs across America. It had the same posters on the walls and product displays on the floor. The employees were wearing Apple Store uniforms. The only tip-offs were shoddy construction on the store's spiral staircase and the fact that the words "Apple Store" incongruously appeared beneath the Apple corporate logo. (Real Apple Stores only signify their presence with the white Apple silhouette. Another giveaway was that the plucky expat found two more fake Apple Stores within a ten-minute walk of the first. One of them had the same storefront logo, but had added "Apple Stoer.")

The fakery was so complete that even the employees thought that they actually worked for Apple. Once the story of the faux Apple Store got out, the manager assured customers and the press that even though the store was "unauthorized," all of the gadgets they sell are genuine. And maybe they are--because most of the silicon goodies Apple sells are made in China, too.

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One of Apple's main manufacturing subcontractors is Foxconn. It's the biggest company you've never heard of. They make electronic components and, in some cases, full pieces of assembled equipment. For example, Foxconn makes all of Apple's iPhones and iPads. The company has just over a million?--?you read that right?--?employees. Its biggest factory is a facility in Szechuan that houses, literally, 420,000 workers. Employees eat, sleep, work, and play on the premises, a gated complex that sprawls for 1.16 square miles. Foxconn City, as it's known, would be the 44th-largest city in America.

Could a place the size of a Foxconn City make enough ghost products to stock fake Apple Stores with real Apple products? Could someone on the inside help someone on the outside make working counterfeits? Is it possible that counterfeit stuff being made in one Chinese sweatshop is barely distinguishable from the real stuff being made in another Chinese sweatshop? Is the only meaningful difference who gets fat off the markup?

And what do you call counterfeiting when it's corporatized? In 2006 a legitimate Chinese automaker, Huanghai Automobile, unveiled an SUV that was a near-copy of the Hyundai Santa Fe. The following year, Huanghai released a model that took the front end of a Pontiac Torrent and spliced it to the rear end of a Lexus RX. By which I don't mean that Huanghai was inspired by these vehicles the way the Nissan Murano has lines reminiscent of the Porsche Cayenne. I mean that when you look at the Huanghais, it's clear they actually copied the other cars, piece for piece. Are the Chinese cars real? Fake? Or something else altogether?

That's not the only way corporations use fakes. Last year the Pentagon discovered that counterfeit electronics from China had worked their way into Missile Defense Agency hardware, weapons systems, and even onboard some F-15s. How? The Department of Defense contracts with suppliers, most of whom subcontract out components they use in final assembly. These primary suppliers might work with a "legitimate" Chinese business to order, say, 50,000 microprocessors. But when they take delivery of the shipment, some small percentage of the microprocessors often turn out to be of substandard quality from a fourth-party source. Or what we would have once called fake. Except that it's being sold and delivered by the "genuine" company.

Once, it was hard to tell a good fake from the real thing. Today, it's hard to know what makes the real thing real in the first place.

Bio: Jonathan V. Last is a senior writer at The Weekly Standard. The opinions expressed in this commentary are solely those of the author