Is China messing with Global Supply Chains with deceptive counterfeits?

Chinese components and products are used all over the world, and there is an acute probability that they cannot be counterfeit. As per World Trade Organisation’s Trade profiles, China is one of the biggest producers and exporters in the world, accounting for 40% of exports to the EU and the U.S.

It is no surprise that Chinese manufacturers and exporters infiltrate global supply chains with deceptive counterfeits. Unfortunately, there have been occurrences of finding fake, substandard, or unregistered design patterns in electronic chipsets used in US military hardware and even the giant Apple Inc.?

In 2012, a key Senate Armed Services Committee uncovered about 1800 cases of fake parts in military hardware, primarily helicopters & craft.?

Yet again, in 2015, the experts of giants like Amazon and Apple found an unknown chipset — the size of a grain of rice — which was not a part of the original motherboard’s design.?

Later, with due diligence, the US authorities found out the chips were embedded by the Chinese motherboard manufacturing factories — as third-party vendor manufacturers meet the world’s major electronic components in China. The giants like Amazon and even Apple Inc. reported that they had found an unknown tiny chip on their motherboards which could have held the potential for a massive data breach or a planned infiltration into the information.?

This particular incident is considered the most vulnerable incident of the 21st century in terms of a data breach, popularly known as the “Big Hack”. It could have become a catastrophic event because hardware infiltrations are extremely difficult to identify and mitigate, unlike installing or targeting through malicious software. They are more challenging to pull off and are potentially devastating if implanted in a central system.?

To come to a round-off, a question still adheres to the incidents and the concerned subject.?

Why does China infiltrate supply chains with deceptive counterfeits?

Here are two reasons why China has become a hub for counterfeits and why is it infiltrating the supply chain with deceptive counterfeits.

1. The world’s largest counterfeit industry, China, was not an intentional action but a consequence and a symptom of the rapid economic growth. Reforming China’s economy in 1978 provided the world with low-cost labour and a high production rate, thus giving wings to Chinese manufacturers and marketplaces. The big giants like Nike and Adidas witnessed this as an opportunity to relocate their manufacturing units for cost-effective productions and high margins.?However, extensive industrialisation allowed local manufacturers to cheaply re-create branded products witnessing the rise in demand for these top-of-the-notch products. Moreover, since the trade operated around the province's coastal regions, towns like Guangdong became a hub for counterfeiters to produce and distribute counterfeits worldwide effortlessly.??This ease of manufacturing and relaxation from any legal actions created a money-vending machine and eventually a source of income for the town's locals.
2. Due to the increase in emerging fashion brands in the 1990s and the likeability of a customer to own their products, the brands moved their production units to China.?This shift allowed the Chinese markets and the corresponding labours with adequate resources and technology to imitate the original products. According to a Europol report in 2015, 86% of counterfeits produced worldwide originated from China. This accounted for a total value of almost 400 billion USD in counterfeit goods. The facilitation of resources and the skills required to manufacture imitation products was a driving factor in producing such large quantities of counterfeits.?In addition, as much as counterfeiters operate and manufacture products at low costs, their sale value is in direct competition with genuine products. Therefore, it generates good revenue for them to manage a sustainable business under the cloak.?

How is China able to produce counterfeit goods on such a massive scale?

There are widely three reasons China can produce and account for 63.2% of the counterfeit seizures worldwide. Below, we have thrown some light on ‘How China does it?’

1. The workers are skilled enough to produce lofty imitations in less than a month because these are usually not made under one roof but many. So, for example, any recently launched sneaker is fetched from the original store, brought inside these factories, and then examined, dissecting the product's dynamics to send it to the workers.?The counterfeit sneakers produced by different factories are picked up by couriers, packed and shipped to the intersections through stealthy routes and back alleys. Thereafter, at any given time, these are shipped to their destinations as per the regional demand of the product.?
2. Another significant reason Why the People’s Republic of China is one of the world's greatest producers of counterfeits is the partial implementation of enforcement and laws inside the mainland. Though willing to take action, the governments and authorities often fail against the sneaky production centres and less stringent mechanisms.?One example of such a case is – In the city of fakes “Putian”, the police officials and the potential lawyers only raided and compelled to shut down the counterfeit sneakers factories in the morning hours, allowing them to do the business as soon as the sun sets. It depicts that the production of counterfeits in eastern countries is considered a viable option for earning, as far as the demand permits.?
3. In addition to that, the public of China is entirely aware of the abundant supply of counterfeits available just about everywhere.?Even though people tend to buy genuine products from official stores and supermarkets — they are accessible to the infringing versions of the same products being sold at nearby closed or open-air wholesale markets, small retail stores, side street kiosks, and by unlicensed street vendors and hawkers.?This open accessibility allows consumers or buyers to make bulk purchases of any infringed product and transport them through less stringent networks of transit points.?

To conclude and answer the significant question, “Is China messing Global Supply Chains with deceptive Counterfeits?” is – Undoubtedly, Yes, China is creating problems in the global supply chain with deceptive counterfeits. Chinese counterfeiters have constantly pushed their counterfeits through unconventional means and methods as they have evolved with anti-counterfeiting mechanisms.?

Unfortunately, the problem continues to grow and requires an on-ground effective solution rather than outdated online brand protection strategies, which have less to no effect on disrupting counterfeits.?

The world of supply chain management now needs innovative technologies, such as Countercheck, that will identify the counterfeited parcels on the supply chain and stop them from reaching the customers. Thus, helping both brands and logistics companies fight against the problem of counterfeiting.?