China’s emerging affluent class ‘is rejecting counterfeiting’

While China remains the primary source of counterfeit products around the world, there is evidence that wealthier Chinese people increasingly see the trade as detrimental to the country’s economy.

That is the finding of a study published in the Journal of Retailing and Consumer Services, based on interviews with members of the Chinese upper-middle class in Beijing, which concludes that on the whole they believe counterfeiting “not only causes grave welfare related consequences and loss of trust in the legal system, but also seriously interferes with the order of the market.”

As well as being the main producer of counterfeits worldwide, China is also the largest consumer. With the upper-middle class predicted to be the “principal engine of consumer spending over the next years”, according to the authors, the findings have a bearing on the domestic market for fake goods.

One study – albeit from 2007 – has estimated that 20 per cent of goods sold in the Chinese market are counterfeit, which would be equivalent to a market of $16bn a year.

There are different interpretations of the driver for this high consumption. Some argue that rising incomes has created a race to attain a higher societal status, with counterfeits of high-value brands providing one route – presumably if the fake is good enough to be undetected.

On the other hand, there is also the traditional Chinese value of thrift, viewed as a desirable characteristic, and that can also be used to justify the purchase of lower-cost copycat products.

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The interviews were carried out on mainly middle-aged, degree-educated men and women earning up to 500,000 yuan (around $75,000) who were attending an executive MBA programme at Beijing University.

Among the findings were that almost all of those interviewed reported that they felt counterfeiting is fraud, damages society, reduce product quality and has negative impacts “R&D, intellectual property rights, social integrity, industrial development, the tax system and so on,” according to the authors.

They also expressed concerns about the risks to health, property and the environment, and at least one respondent pointed to national and local government’s ineffectuality in tackling the issue. Most said they believed that consumer education and more effective law enforcement could help to reduce the trade.

They would also like to see more severe penalties for those who take part in the activity.

“Our empirical evidence clearly shows that consumers in our sample have overwhelmingly negative views regarding the behaviour of counterfeit consumption,” write the researchers.

“By emphasising embarrassment or humiliation, that is, a loss of face, as the consequence of purchasing counterfeit luxury goods, more economic and social benefits can be gained, should the legal enforcement or policy-regime be weak,” they conclude.

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