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Business and Finance

Fake it ’til you make it

Alice Sherwood
There's a complex and often comedic dance of imitation, improvement and innovation between East and West, spanning hundreds of years. Can counterfeit products ever be good for business?

Say the words ‘copy’ and ‘China’ to Westerners today and most will think of Silk Alley counterfeits, Shenzhen knock-off factories, Guangdong sweatshops, or Nanjing’s legendary fake mall with its frontage of entirely bogus outlets such as Haagon-Bozs, Pizza Huh, Buckstar Coffee, KFG and McDnoalds: the brainchild of a property developer who wanted to create buzz around his new development.

Not quite so amused by the knock-offs are the businesses, mostly in the West, who are losing money as a result of the estimated US$600 billion worth of fakes produced every year. Most are made in China, currently the world’s leading counterfeiting superpower. What manufacturers would prefer to keep a lid on, is that at least one in ten of the goods you buy – from luxury brands to smartphones – is a fake.

But is it a zero-sum game: are counterfeits as good news for the faker as they are bad news for the faked, or can copying actually be good for business?  Can imitation help to create industry and benefit the economy?

There’s a reason it’s called china

A glimpse into the past suggests it often does. A mere three hundred years ago the current roles were reversed: only China had the technology to be able to make that most desired of luxury goods – porcelain, and the West were desperate to develop, copy or hack the secret of its manufacture.

Known as ‘white gold’ by kings and nobles (incidentally the only ones who could afford its exorbitant price), porcelain is still called ‘china’, a direct result of the 1000-year hold the Middle Kingdom had over the secrets of this exquisite pure white ceramic.

Hugely prized, yet seemingly impossible for anyone, other than the Chinese to make, porcelain was translucent to the light, gave out a clear melodious ‘ting’ when tapped, was thin walled yet diamond-hard, and most of all was easy to distinguish from the rough, mud-coloured, earthenware pottery made for everyday use. It was perfect for conspicuous consumption.

Flaunting the family crest

Both nobles and the new rich (mostly moneyed merchants) in Europe began to send instructions and designs for customised porcelain to the Imperial Workshops at Jingdezhen. By the early 1700s, the really smart show-off thing was to have a made-to-order dinner service with your coat of arms hand-painted onto each piece. 21st century celebrities may flaunt other peoples’ logos but the ultimate in 18th century bling was to flaunt your own.

The services were vast collections, numbering up to two or three hundred pieces: plates, serving dishes, tureens, soup bowls, ewers, mustard jars, washing jugs – even chamber pots; the last word in matchy-matchy homeware.  The more important the family, the more bombastic the arms blazed across their tables and displayed in their rooms.

Around 1715, one Sir Edward Harrison, who had made a fortune during a spell in India, ordered a porcelain service from China. At the centre of each piece, on a single shield, was to be Harrison’s and his wife’s coats of arms side-by-side: a blue (‘azure’ in the old French used for heraldic colours) cross on a silver- white (‘argent’) background, next to three bird’s claws on a yellow gold (‘or’) ground with a black (‘sable’) chevron.

The instructions were on a pencil drawing of the family coats of arms complete with little arrows to indicate which bits should be filled in which colour. The service took around two years to make, and when the porcelain finally arrived back in England it was an occasion of great excitement.  The chests were broken open to reveal that the Chinese craftsmen had rendered the design faithfully.

Rather too faithfully, in fact: every piece had carefully painted onto it a perfect facsimile of the pencilled coat of arms from the instructions.  There were no colours, but each detail had been immaculately copied by the Jingdezhen artists, right down to the little arrows and scrawled directions indicating ‘sable here’ and ‘argent there’.

A blurred line between faker and maker 

Amusement aside, we don’t really like unauthorised imitation.  We call unofficial copies ‘fakes’ or ‘counterfeits’: our words for replicas we haven’t asked for. Once you commission the copies, they become legitimate.

No longer ‘fakes’, we say instead that we subcontracted the manufacture or franchised the outlets. A copy that has our blessing cannot be a fake. We also have a convention that you can’t fake yourself, so if a designer makes a cheaper version of their fashion brand, it’s not a knock-off but a ‘diffusion line’ or an ‘entry level range’.

It doesn’t excuse forgers to point out that ‘original’ and ‘fake’ are complex concepts, sometimes depending more on the intention or permission behind a product than the innovation and creativity of the maker, or to point out that originators sometimes copy, and imitators frequently innovate.

The ebb and flow of ideas is the lifeblood of business; designs are disseminated along with the ocean currents of trade. Often, imitation is simply the first step towards innovation.

Shanzai and “virtuous banditry”

China is currently in the grip of an epidemic of innovation, the result of the extraordinary rise of ‘Shanzai’ culture.  Although the word Shanzai is now used as shorthand for imitation or pirated goods, it comes from the word for a mountain village or stronghold that is far away from official control.

From there it crept into Cantonese slang where it was used metaphorically to describe bandits or outlaws: folk-hero Robin Hood types who broke the law to get around a system that was itself corrupt. Over the past ten years, as small family firms set up unregulated factories and workshops making cheap knockoffs and imitations of Western products, these too became known as Shanzai.

Western companies, such as Nokia and Apple, had set up factories in China, but their goods were too expensive for the local market. Shanzai products – seen as a kind of virtuous banditry – were lower quality and borderline illegal, but at least they were sold at prices Chinese consumers could afford.

By the mid to late noughties production, clustered around Shenzhen and the Pearl River Delta, was booming with tens of thousands of companies producing their own versions of desirable consumer goods. The market exploded with the rise of the cell phone. Shanzai handsets cost a similar amount to manufacture as the real thing, around $US20, but knock-off versions of the iPhone such as the HiPhone and the SciPhone, and the splendidly anagrammed iOrgane, (‘iOrange’) sold for just $US100-150.

When the original’s no longer best

By 2007, Shanzai phone sales were 1.5 million a year, a tenth of the world total. Within four years the percentage had risen to a quarter of global cell phone sales. The outlaws were on a roll, but something even more extraordinary was happening. Freed from the dead hand of Chinese government regulation, the near impossibility of being granted permission to become an official cell phone manufacturer and, it must be admitted, free from any concern about IPR and copyright law, the Shanzai phone makers began to innovate and improve on the original products.

They tried combinations Western manufacturers hadn’t thought of. Why have just one sim card when you can have two, and use the second to roam around and find the cheapest rates? Why not combine a phone with a UV detector light to spot counterfeit notes – a nice example of a fake being used to detect a fake? Or make phone chargers that run on solar power?

The manufacturers used humour and topicality to drive up sales. For the Kenyan market during the 2008 US presidential election, the Obomophone (sic) with a picture of the man on the back and sporting the motto “Yes We can” was a bestseller. Mainstream manufacturers began to copy Shanzai ideas, and by 2010 Samsung and LG had produced multi-sim card phones.

When BYD, a Shenzen electric car manufacturer with a suspiciously familiar logo and an inspiring name – BYD stands for ‘Build Your Dreams’ – joined forces with a company that had developed a longlife battery to produce eco-friendly Shanzai electric cars that sold for just US$2-3000 dollars each, no less than the Sage of Omaha himself, investor Warren Buffett, paid US$230million for a 10% stake in the company.

Counterfeit culture

By this time, the Chinese were also using the word Shanzai for cultural piracy. Establishment events, ones where ordinary people had no input, were being spoofed by grassroots versions. There was a Shanzai ‘Nobel Prize’ and a Shanzai ‘Olympic Torch Relay’. Cumbersome Chinese state TV spectaculars such as the National Spring Gala were Shanzai’d; even state TV channels such as China Central TV (CCTV) was aped on the internet by the super low cost ‘CCSTV’ (China Countryside TV).

Meaning was beginning to shift. Shanzai was coming to mean less ‘bandit’ and more ‘by the people for the people’. Less ‘poor quality pirate goods’; rather goods made with a special sort of Chinese ingenuity and imbued with a peasant pride. The outlaw had become mainstream.

The West took note. Influential Wired editor, David Rowan, was an early enthusiast for Shanzai-style innovation, if not for their buccaneering ways with intellectual property rights. Earlier this year, observing the shift in meaning, The Economist wrote that Shanzai  “used to mean pirated electronic goods but now stands for open source manufacturing.” Imitation had morphed into innovation.

The imitation game

History frequently repeats itself but never in quite the same way: the patterns are familiar; the names change. If Country A has a proprietary technology and profitable captive markets, this encourages copyists in Countries B, C, D, E and possibly F.

At first, they can only manage cheap second rate imitations, but even these are good for trade as there are plenty of consumers in Country A who can’t or won’t buy the top class stuff, but are happy to buy the cut-price version.

On the back of this trade, the countries build new industries, learning about export markets as they do so. Eventually the proprietary technology secrets of Country A are bought, borrowed, stolen or reinvented by the most enterprising of Countries B to F, and the creative ferment begins, and genuinely new and innovative ideas are developed.

Three decades ago, the West was Country A, and the East in the form of the Japanese were mocked as industrial copycats much as the Chinese are today. But then Toyota revolutionised carmaking; SONY gave us miracles of miniaturisation including that grandfather of the iPod, the Walkman;  there were digital cameras and copiers; Nintendo machines and super-noodles; LCD screens and hybrid cars, and gradually the world began to acknowledge that although Japan hadn’t invented these industries, it had come to dominate them.

Three hundred years ago, the roles of East and West were reversed. China was the country with proprietary porcelain technology; the West the would-be imitators. Whilst the Chinese guarded the precious secret of their ‘white gold’ the West tried, with limited success, to mimic the distinctive mix of kaolin and minerals, the high temperature kiln-firing that vitrifies – quite literally turning into glass – the particles of clay in the mix to give the pure white luminously beautiful, nail-hard porcelain.

But the Europeans could never get the sheen quite right: their mixes were full of gritty impurities; their clay was too spongy and, with anything other than simplest shapes, the soft paste buckled and bulged out of shape in the kiln. At the peak of the fever to discover the secret of porcelain and break the Chinese hold on the trade, Emperor Augustus the Strong of Saxony employed an alchemist called Böttger to work on the formula, keeping both him and the workers at the Meissen factory as virtual prisoners.

Böttger is usually credited as being the first to have experimentally discovered how to make porcelain, but around the same time, Chinese manufacturing secrets were being stolen by a most unlikely hacker.

The mischievious missionary

In 1712 a French Jesuit priest, Francois Xavier d’Entrecolles, wrote a letter from Jaochow [Jao-chou] to a fellow priest in Paris. D’Entrecolles notes that while staying in Jingdezhen [Ching-tê-chên] “to administer to the spiritual necessities of my converts”, he became interested in the manufacture of porcelain. He then writes, somewhat disingenuously: ‘Nothing but my curiosity could ever have prompted me to such researches, but it appears to me that a minute description of all that concerns this kind of work might, somehow, be useful in Europe.’

Really? Nothing but ‘curiosity’?  Would just ‘curiosity’ warrant ‘a minute description of all that concerns this kind of work’? At what point does curiosity become spying? It seems that Father D’Entrecolles, in between ministering to his flock, took time to question closely those congregants who worked in one particular trade and even do a little reading himself. As he continues: ‘I believe I have obtained a pretty exact knowledge of all that concerns this beautiful art’.

In what today would be regarded as flagrant industrial espionage, D’Entrecolles published the details of Chinese porcelain manufacture in two letters in 1712 and 1722. In the decades following publication, transcripts turned up in places as far apart as Josiah Wedgewood’s Commonplace book and Diderot’s Encyclopedie; new potteries were set up in France and Britain. Chinese exports shrank markedly, much as Western trade suffers today from Chinese imitations.

A Western retelling

But there was also a flourishing exchange of ideas between China and the West that led to the 18th century mania for Chinoiserie in art, architecture, interiors and gardens. The master ceramicists of China developed new styles, shapes and decoration in order to appeal to changing western tastes.

The dazzling late Ming-inspired famille verte combined a luminous palette of translucent enamels, dominated by shades of green, with accents of yellow blue and red that coincided with the early 18th century appetite for baroque. The exquisite famille rose, with its rococo emphasis on flowers painted with a gold-based rose enamel, and the later monochrome pieces known as encre de chine: delicate fine-line painting in black ink to resemble engravings or book illustrations.

Ideas travelled in both directions. Chinese-style Willow pattern china first became popular in England in the late 18th century and 200 years later is still in use. When I was at school we ate our lunch off a rather chunky earthenware version, and I was entranced by the legend of the star-crossed lovers told by the pattern on the plate: the beautiful Koong-se falls in love with her father’s servant and defies her parent’s plans to marry her off to a Duke by running away with him; the pair are captured and killed but subsequently turned into doves by Gods moved by their plight.

What I didn’t know was that the story was invented by the 18th century English porcelain manufacturer, Thomas Minton, in order to promote sales of his blue and white chinaware. Some components of the legend do turn up in genuine Chinese folklore, but Thomas Minton’s version is a Shanzai’d story that makes Chinese who hear about it smile at its comical misinterpretation, much as Westerners smile at ‘Dolce & Banana’.

Faking things up

Luxury markets evolve. Today’s novelty item is tomorrow’s ‘must have’. If the West hadn’t craved and copied the Chinese ‘White Gold’, there would be no Sevres or Spode, no Wedgewood or Meissen. If China hadn’t been adept at incorporating – or faking as it would be called centuries later – foreign influences into its products, the fissile exchange of East-West design would have been much the poorer.

Without Shanzai manufacture, millions of people in the developing world would not be able to afford mobile phones, laptops and other modern essentials. To imitate is to begin to climb the slopes of invention; copies are just the baby-steps of creativity. By standing on the shoulders of others, new ideas can reach the light.

The phrase ‘intellectual property’ was only coined a hundred years ago, the concept of copyright is barely three centuries old, but the succession pattern of imitation, creation and innovation goes back to the dawn of time. You don’t invent out of thin air, you build on and make something new out of what went before or, as business jargon has it, you ‘add value’.

Adding value is what China is busy doing now. The first wave, the boom years, were export driven fuelled by cheap manufacturing, cheap money, open foreign markets – and yes, ‘borrowed’ ideas and technology. But times move on. There are newer, cheaper manufacturers on the block, such as Vietnam and India.

China is becoming a creator: it’s the country that files more intellectual property applications than any other. As with the porcelain wars, a turning point has been reached and soon the West will be looking at China with different eyes. Perhaps they should be a little less worried about knock-offs from the East and more worried about being left behind on key technologies, markets, insights and designs.

And what of Sir Edward Harrison and his consignment of unusable porcelain? Pieces with the pencilled instructions for the coat of arms are still in existence and in good condition, possibly because they were hidden away in a cupboard and never used. But we do know that Sir Edward put the unfortunate episode down to experience, and that the Chinese learned from their mistake, for Sir Edward ordered no fewer than six more sets of ‘armorial’ porcelain – and this time he got them all in the right colours.

Alice Sherwood is a Visiting Senior Research Fellow at King’s Policy Institute, King’s College London, and is currently researching a book about fakes and how to spot them. She is keen to separate the useful role of copying and faking in the early stages of idea diffusion and industry creation from the appalling conditions in which some fakes – and a great many of the ‘real thing’ – are produced. Image credit: CC Aidan

It doesn’t excuse forgers to point out that ‘original’ and ‘fake’ are complex concepts, or that originators sometimes copy, and imitators frequently innovate.



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