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June, 2017

When sports shoes aren't really from 'overseas'

With a reputation for entrepreneurialism, Fujian province is one of China's wealthiest areas regarding GDP per capita: No. 7 of 31 provinces and regions in 2015. Unfortunately, Fujian's entrepreneurial spirit has also made it a hub for the manufacture of counterfeit goods.

For brand owners, Fujian is back in the spotlight this month as investigative reports in Chinese-language media have revealed factories in the city of Putian are bilking consumers with elaborately packaged fake sports shoes. The shoes are sold in packaging that looks nearly identical what the brands use - with the inclusion of foreign mailing addresses to appear genuine. Brands affected include Nike, New Balance, and Adidas.

Some Chinese logistics firms use a remote online collection service that allows counterfeiters to manipulate their shipping addresses. The service allows merchants to put false shipping addresses on receipts, which are used by customers to verify product authenticity. Counterfeiters then set up bogus online tracking websites where unsuspecting customers can view the status of shipping from "overseas."

Unsurprisingly, faking an international shipping address is inexpensive. Shipping "from the United States" costs just RMB 35; to ship "from Hong Kong" is only RMB 22.

Analysis:

To understand why Putian is the counterfeit shoe capital of China, it is helpful to explore the city's recent history as a shoe manufacturing hub. Beginning in the late 1980s, global sports shoe brands including Nike, Adidas and Puma set up manufacturing facilities in Putian which received investment from Taiwan. The Taiwanese had expertise working as contract manufacturers for global shoemakers, ​and therefore it was a logical choice to operate the factories in neighboring Fujian Province.

From the Taiwanese, Putian people learned shoe-making technology. Over time, they set up factories of their own and began to work as contract manufacturers for global shoe brands. Given China's inconsistent enforcement of intellectual property laws, it is easy to see how counterfeit facilities sprang up and thrived.

Putian officials say they are aggressively fighting IP thieves. According to a Chinese-language report in the Beijing Youth Daily, since 2016, the city has dealt with 418 cases of IP infringement and fined offenders more than RMB 15 million.

Brand owners will be pleased to know that Chen Huiyuan, one of Putian's vice-mayors (and the city's sixth most senior government official) presided over a meeting in late May that addressed problems in the city's footwear sector. She emphasized the importance of the healthy development of Putian's footwear industry and urged relevant authorities to crack down on criminal offenders.

Having received those orders, authorities are more likely to take a hard line on counterfeit shoemakers - even though they are aware that the industry employs a large number of people. Indeed, recent media reports highlighting Putian's counterfeiting prolificity is an embarrassment for the city's leadership. In the lead-up to the November 2017 Party Congress and the political jockeying that comes with the territory, officials are particularly sensitive about anything that could suggest any dereliction of duty.

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