Faked in China

Shanzhaiji both fulfill and threaten China’s brand ambitions on the world stage

In the growing genre of Euro-American news stories about China, the threat of unlicensed reproduction is a recurring theme. In July, for instance, the BBC reported that Chinese authorities raided a factory just outside of Beijing that re-assembled used phone parts purchased from abroad before turning them into “new” ones for export. Since January, its assembly lines had churned out 41,000 fake iPhones with an estimated worth of $19 million. Even before Donald Trump, invoking China’s record of “faking” had also become a routine practice among U.S. politicians. Carly Fiorina told a political blog in May that “the Chinese can take a test, but what they can’t do is innovate,” and “that’s why they’re stealing our intellectual property.” This was a line that echoed a charge earlier made by Mitt Romney, though he had the juicy anecdote of a fake Apple Store in Kunming to tell during his televised presidential debate in 2012.

Stories of this kind either frame goods “faked in China” as an economic issue, where unscrupulous business practices sully the intellectual property of hardworking Euro-American brand owners, or attempt to offer a “cultural” explanation—that is, a racist one, holding Chinese culture as incapable of generating meaning on its own. These stories satisfy a Euro-American desire to see a “rising” China itself as somehow fake. But in casting Chinese production as a pretender to Western authenticity, these stories obscure the entanglement of the homegrown shanzhai, or “fake,” industry, and Euro-American dependencies on Chinese industry that gave rise to its complex role in the global capitalist economy.

According to the Chinese-language press, the fake iPhone factory near Beijing was set up by a couple from the Pearl River Delta city of Shenzhen, the first Special Economics Zone established in China and now the world’s major electronics manufacturing hub. Shenzhen is also known as the birthplace of “shanzhai phones”—the local name for fake- or no-brand phones, ranging from “Nokla” to “hiPhone.” The story of the shanzhai phone (or shanzhaiji, ???), like numerous cultural artifacts “faked in China,” is as much about China as it is about contemporary globalization. And while “shanzhai” is not a brand name per se, the way it operates is through analogy with corporate brands. It would not be much of an exaggeration to call the clustered industry of shanzhaiji a conglomerate operating without a unified bureaucratic structure.

Local media coverage of shanzhai phones in the early 2000s seldom neglected to mention that the word—made up of the characters “sh?n” (?, i.e. “mountain”) and “zhài” (?, i.e. “fortress”)—connotes a Robin Hood-esque story of bandits defying powerful entities. In the people’s memory, peasants rose up in arms against despotic rules by occupying a mountain to become kings themselves. Today, this pre-modern sensibility complements the idea that shanzhai adopts the “villages surrounding the city” strategy, recalling the key role of the peasantry during the Maoist revolution.  But the shanzhai defiance of despotic powers may also be understood as operating against the Chinese state or the globalizing intellectual property rights regime to which the state is so ready to conform. The People’s Republic often responds to shanzhai’s market success by cracking down on fake goods in spectacular raids, as a way to declare its will to strengthen the nation’s intellectual property law enforcement.

This piece is adapted from the author’s forthcoming book, Faked in China: Nation Branding, Counterfeit Culture, and Globalization, out next year from Indiana Press.
From an economic standpoint, perhaps the most striking character of shanzhaiji is its low price, attributable to its defiance of legal doctrines, both the globalized intellectual property laws and state regulations and tax codes. But shanzhaiji production is also more intricately tied to Shenzhen’s unique position as a locale that absorbed many multinational corporations’ subcontracting chains that had originally been set up in Hong Kong in the 1960s. Not only did the large factories built around Shenzhen benefit from state policies favoring foreign direct investment, they also brought large numbers of (predominantly women) peasant migrants from inland Chinese provinces to Shenzhen in search of jobs in the export processing sector. Veteran technicians previously hired by global brand subcontractors often enter the shanzhai sector as contributors of operational knowledge.

Sometimes the same factory facilities and the subcontracted workers are also employed at night on a “third shift” to produce shanzhaiji. One of their key cost-cutting features is the use of a multifunctional motherboard-software combo sold by a Taiwanese company, MediaTek (MTK). Tsai Ming-Kai, the inventor of the technology who founded the company in 1997, is nicknamed “the father of shanzhaiji.” Not only did his technology significantly lower the industry’s entry barrier, it also sharply reduced its research and development timeline. Before long, MTK started selling the chips in bulk to small-scale manufacturers in Shenzhen. With investments from local entrepreneurs of the Pearl River Delta, these makers soon established a flexibly organized network of software engineers, designers, and suppliers, whose “modularized” model of production is able to churn out a large quantity of phones at as little as one-third of the cost for more legit brands. If these aspects point to the intimate connection between the shanzhaiji sector and the multinational corporations that produce global brands, other features of the former also work to contest the latter’s global operation.

What makes shanzhaiji a more intriguing phenomenon, however, is the local and provincial media attention it receives. Reports on shanzhaiji, both in print and online, have played no small role in the cultural production of the “brand.” The multinationals who contract Shenzhen factories deploy international mass media for the transmission of meanings and lifestyles associated with their brands, but shanzhaiji has seized the attention of local media, further establishing shanzhai’s status as the logo of bandits. The operation of the sector is seen as akin to guerrilla warfare—it responds quickly to market shifts and flexibly ducks official crackdowns, which have been frequent and pervasive in Shenzhen from 2006 onward. Its composition of thousands of small enterprises is also distinguished from the “foreign” Fordist-style mass production. The law-defiant ethos of shanzhaiji’s production is further seen as cutting into the profits sought by global brands, which depend on the global regime of intellectual property laws to lay claim to their intangible values.

Of course, these narratives have romanticized shanzhaiji production to an extent; its real working conditions are often no better than those facilities subcontracted by global brands, especially for the underpaid migrants who produce the surplus value that profits a handful of local or regional entrepreneurs. However, the enthusiasm for the shanzhai brand is worth pondering, considering that much of it stems from shanzhaiji’s market success vis-à-vis the state-sponsored “national brands.”

Back in 1987, when the analog cell phone sector first emerged, a domestic cell phone industry did not exist in China. Motorola had enjoyed a market monopoly in the nation until the first Chinese digital cellular communication network was established in 1994. After that, Nokia and Ericsson joined in the competition, splitting the Chinese handset market in three. Four years later, in 1998, the government issued a set of policies to promote the development of a domestic manufacturing sector for mobile phones. One of the follow-up measures stipulated that 60 percent of the phones produced in foreign-owned factories must be exported. The goal, of course, was to leave room for national brands in the domestic market. When these state policies took effect, the market share of national brands showed a visible increase, exceeding that of the global brands for the first time in 2003. However, the victory was short-lived, as the share dropped from 60 percent to 37 percent within a year, a decline attributed to the questionable quality of national brands and their pace of innovation, which lagged behind the global brand manufacturers.

It was in this context that shanzhaiji unexpectedly rose to compete with both national and global brands. While it beat national brands in its speed of R&D, thanks to the MTK combo and the flexible industrial network, its low cost and daring design also appealed to what Jack Qiu, the author of Working-class Network Society, calls the “information have-less”—“migrants, laid-off workers, retirees and students from low-income families” who have integrated mobile phones into their “modes of communication and ways of life,” transforming a former “elite privilege” into “basic instruments necessary to human existence itself.”

Migrant workers constitute no small part of these groups, numbering 274 million in 2014 according to China’s official statistics. Adding to the mix are “second-generation” migrants (the descendants of the first-wave migrants in the 1980s), who are increasingly visible in the media as a social group that straddles a lost connection to the countryside and a sense of rejection by city folks. Prior to the advent of mobile technologies, migrants had to rely on limited public phones or dormitory landlines to stay in touch with their friends and families. The convenience of a handset was surely welcomed, even if the phone might cost more than their monthly salary (around the equivalent of $100). According to a 2007 report, 90 percent of China’s migrant workers were in possession of a handset. Many of these phones were noted to be of the cheaper shanzhai “brand.”

Shanzhaiji is not just attractive to the “information have-less” for its low cost. Features like extra-strong signals and extra-long batteries are particularly important, because they allow continuous use in factories and rural areas where signals are weak and battery charging is difficult. The additional functions of radio, television, MP3, and games also provide entertainment for those who have limited social resources at their disposal. While some migrants claim they do not know much about brands and only follow friends in buying what is cheap, others say they do so because they cannot afford real brands but still want to look trendy. These are factors of what Qiu calls a prototypical “working-class information communication technology.” And so, not surprisingly, by 2008, the market share of shanzhaiji was nearly 30 percent, surpassing several leading national brands that are more directly supported by the state.

The appeal of shanzhaiji does not stop with the migrants within China, either. The demand for shanzhaiji also extends beyond the national borders. In fact, the “bandit” phones are widely popular in the developing world, from Southeast Asia and India to the Middle East, Russia, and Africa. In Dubai, an entire street is reportedly set up as part of the shanzhaiji sales network. It is only understandable that malls specializing in shanzhaiji located in Shenzhen’s Huaqiangbei District are provided with multi-lingual signs to welcome its “global marketing team.”

The embrace of shanzhaiji by the transnational “information have-less” is the mark of a sort of globalization from below. This success in the global market, ironically, is precisely what the state had hoped to achieve. Jiang Zemin, Deng Xiaoping’s successor, introduced the notion of “going out” in 1992 as a key strategy for China’s long-term economic growth. Central to the plan is the idea of “utilizing foreign resources through the opening of the global market” in order to “compensate the limitation in the domestic market.” Formally presented in 1997, the policy clearly indicates the state’s intent to shore up the global expansion of “the enterprises with strengths.” Supporting a handful of domestic mobile phone manufacturers as part of the globally burgeoning IT sector is in line with this strategic vision. China Bird (Bo Dao) was one of the leading handset producers that fell into this category. In 2004, as the No. 1-selling national brand, Bird was boasting about its success in following the call of “going global.”

But despite its robust promotional campaign as “the fighter jet of handsets,” it was unable to sustain its market position for long. China Bird began experiencing significant revenue losses in 2005. The reason it cited for its failure, aside from the aggressive tactics of global brands like Nokia, was largely the competition from shanzhaiji.

Perhaps more unsettling to the state is the idea that shanzhaiji has come to manifest an “alternative national identity.” “Buy shanzhai to show your love of our country” was a tagline that appeared in a late-night television ad for one of the leading knockoff brands, iOrgane (an intentional misspelling of “orange”). Some consumers report having chosen shanzhaiji over state-supported brands for patriotic reasons. When a former shanzhaiji producer, K-Touch (Tianyu Langtong), joined the rank of legit companies in 2007 (thanks to the government’s termination of the handset licensing regulation) it went on to achieve great market success and began unabashedly advertising on official channels like CCTV. Rather than being chastised as a bandit, however, it was described by China Enterprise News as offering a lesson to other (state-supported) domestic enterprises in their combat with foreign brands.

It may be tempting to cast the rise of shanzhaiji as a grassroots movement against, or at least away from, the state. However, it is also undeniable that shanzhaiji’s success has benefited from state policies that brought the flow of foreign direct investment into the Pearl River Delta, which provided the informal sector with technical support, operational capacity, and migrant workers-turned-consumers. What is unique about its popular support is in the celebration of shanzhaiji as an embodiment of the masses that did not emanate directly from the state’s efforts. Indeed, the state’s attempt to counter global competition by way of promoting a few national brands has failed to achieve its intended outcome. What has emerged is a contestation between a consumer subject position for national brands, interpellated by the state, and a working-class subject position that shanzhaiji has made visible. This contestation points to a fissure between the state’s long-standing claim to represent the interests of “the people”—by aligning them with the interests of “the nation”—and “the people” of the “information have-less,” who have first made shanzhaiji and then made shanzhaiji a market success.

The story of shanzhaiji, among other artifacts “faked in China,” demands our attention beyond the headlines. This is a story not just about economics, but also about culture and power, which are so often associated with nation and state. But the transnationally produced, circulated, and consumed shanzhaiji reveals China to inhabit a position where the links between nation and culture, as well as those between state and power, are increasingly destabilized. China’s struggles within the global intellectual property regime therefore offer a valuable opportunity to complicate the dominant media narratives of a “rising” China. Rather than an ascending global hegemon en route to replace the United States as the next superpower, it might be better seen as a nation-state whose struggles for its own modernity come in conflict with a global order committed to eradicating alternatives. The homegrown modernity China seeks is, like shanzhai, inextricably global and locally specific all at once.