Jul 20, 2011

How can American companies compete in China?

A great majority of computers and other relectronic devices are manufactured in China. But the Chinese have a very lax policy against software and hardware counterfeiting. Recently, an entire Apple store was faked in China - it looks just like an Apple store, but it is not run by Apple and none of the sales of any of the counterfeit goods sold there go to Apple.
How can American companies compete in China if any thing you make, or any service you sell, can be done for less money without any kind of government protection?

I think it's a very difficult problem to figure out. It may be that some companies simply won't ever be able to compete unless China changes its policies. That may happen over the long term if China wants to be more integrated with the global economy. They can't keep ripping people off forever and expect that other countries will continue to allow Chinese goods to flow in without any restrictions.

If they continue with the way they've been going, it may come back to haunt them in very negative ways once the rest of the world decides it has had enough.

It appears that Chinese officials are closing down the fake Apple stores, not because they were ripping off Apple's intellectual property, but because those businesses had failed to obtain proper Chinese business licenses.


This poses a perplexing problem for Apple. Apparently there are several fake Apple stores in China.



But this is not hurting Apple's sales too much, as Apple's official Chinese stores are their most profitable in the entire chain.



Since there are plenty of Chinese citizens buying real Apple products, the question is what would Apple risk by lowering their prices (and "Coolness") to meet the Chinese market and undercut the scam artists? Probably more than they're willing to do. I'm not sure how much sway Apple would have with the Chinese government; but this is probably an issue worth involving the State Department, since all of Apple's products are manufactured in China. There is little risk of Apple pulling their factories out of China in an attempt to reign in the counterfeit market.

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