KIRF, Shanzhai, & Chinese Mentality, Is fake and cheap electronics hurting China? Have they no respect for copyright?
China, source of cheap labor and cloners?
China, with the recent Foxconn suicides, has garnered international attention and highlights it as a source of cheap labor to feed the world economy. However, China is also famous for being the clone factory of the world. People in China has no respect for "copyright", and this had lead to a ton of commercial friction between it and other companies and countries.
Microsoft recently is basically refusing to expand its operation in China, citing lack of intellectual property protection. Microsoft CEO Steve Ballmer stated recently that even though China has about 10-15% of global PC market, only 1% of Microsoft's revenue is coming from sales in China, when theoretically it should be proportional. Furthermore, Chinese government has recently announced a procurement policy that supposedly rewards "native innovation", which is interpreted as favoring "domestic clones" of foreign products. it was so alarming even US Secretary of Treasury Tim Geitner had to make a statement that he had talked to his counterpart in China and the policy will be modified and clarified.
Has China been turned into a country of cheap labor and clones? Let us check into the the phenomenon of KIRF, shanzhai, and the problem's roots.
KIRF -- short for "keeping it real fake", a term coined by engadget.com editorial staff to describe the clones appearing in China of popular cell phones, such as the Nokia N97, the Apple iPhone, the Motorola Droid, the HTC Hero, and so on, but also clones of other gadgets, such as handheld camcorders, GPS devices, netbooks and notebook computers, and more.
Shanzhai -- Chinese pinyin for 山寨, or "mountain fort" (of bandits), can also be spelled "shanzai", it has came to mean unauthorized clones of official items or events. (As in made by bandits to defy authority) For example, a shanzhai phone would be a Chinese "clone" of an existing famous model phone, such as iPhone in the illustration. A shanzhai celebration would be a crowd-sourced version of an official state-run celebration.
Root of the Problem: no reward for creativity
China is at the stage where there is little if any creativity left in the country.
China's biggest claim to fame recently is their lunar probe, which basically orbited the moon, something the US did 40-odd years ago. It is hardly worth mentioning.
China's economy has few if any innovations, and they don't exactly reward innovations with their massive corruption problem and reliance on "connections". You need money and connections to bring truly innovative products to market, and lack of copyright enforcement and protection lead to popular products being cloned almost from day one, or even before that.
In Shenzhen, which is just over the border from Hong Kong, you can find KIRF clones of all sorts of electronics, but mostly cellphones, netbooks and notebooks. They are also sometimes called "shanzhai editions". Why are there so much clones? Because China don't bother making really innovative stuff any more. Why do research when one can just clone? Yet with no research, there will be no true innovation. They can emulate the form, and some of the function, but they can't get the "real thing", but that is simply not important to the Chinese.
"Copyright" is a uniquely WESTERN capitalist concept. In a communist country, there is no such thing as copyright, everything belongs to the state, which is passed onto the people. As a result, people has no respect for copyright, because officially, it doesn't exist, and it had not existed for many decades. There was, and still is heavy resistance when the government tries to introduce the idea of copyright.
No end in sight
China has, in recently years, stepped up efforts to acquire advanced technology from the outside, with either explicit or implicit approval of the government, through legal, quasi-legal, and illegal means. The fact that it actually manufactures and assembles much of the technology can only help in that regard.
In one such case, Shanghai Motors, i.e. SAIC, one of the largest in China, currently a partner with GM and Ford, had actually taken over a smaller Korean manufacturer called Ssangyong Motors, stole most of their technology, fired those who complained, then sold off most of the stock and kicked it aside like a limp doll. This lead to a huge labor unrest in Korea and investigation by local prosecutors, which concluded that the Chinese company had conducted unauthorized transfer of trade secrets and technology, which includes hybrid cars, to China. However, nothing is being done, as the Korean government do not want to anger China, and Chinese government is an investor in Shanghai Motors.
There are also plenty of industrial espionage cases where alleged spies are stealing tech for China. Some were caught at the airport with briefcases full of documents pilfered from the offices they had just left.
You also cannot manufacture technology in a country without that country learning some things. By attracting all the various countries to assemble and manufacture things in China, China is also absorbing a lot of the technology.
GM's latest Buick is allegedly designed by their studio in China. But what did GM give up to get those designs, one wonders?
The Price of Non-Innovation
China has always been seen as "land of too many people". It used human wave attacks in Korean War, as it had plenty of soldiers to spare. Now, it has plenty of labor to spare. The people are the capital the government is trying to spend in order to enrich China (and some of it will end up in some official's pocketbooks).
Decades of living under authoritarian regime has killed any spirit of innovation in China. Innovation means creative thinking, revolutionary thinking, and unconventional thinking, all of which are frowned upon in China, where the motto had always been "fit in, don't make waves, do as you're told". The best China can do in terms of creativity are the shanzhai 'remix' of existing tech products, which are at best, minor improvements and tribute to the original, or at worst, outright sloppy clones for posers and fakers.
And the condition has NOT improved. While the economy has turned capitalistic, the educational system is still communistic. The innovators and the people making money in China are 1) party officials and their relatives 2) foreign investors who saw the opportunities, and 3) foreign-trained Chinese who saw the opportunities. This only serves to make the rich richer and the poor... stay poor. Those shanzhai makers are barely innovating, and they seem to be the smartest of the bunch in China.
What does that say about the overall situation in China? Not that good, if you are looking for innovators. Great if you are looking for cheap labor. However, that is not good for long-term prosperity and stability, and that is something to bear in mind, as the Chinese government continue to navigate the course between its people on one end, and the need for foreign investments on the other. The people won't continue to stand for being exploited for labor, and recent Chinese labor unrest at Honda factories demonstrated. Foreign investors also won't continue to allow their intellectual property be pilfered by Chinese makers in shanzhai clones. Neither of which are good for the government. Without foreign investment, the Chinese economy is doomed, but foreign investment are all for exploiting Chinese labor. That's why there's this delicate balance act. How long can the Chinese government handle the "tightrope" act?
More Thoughts on China
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