The Shan Zhai Phenomenon

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The Shan Zhai Phenomenon


The Shan Zhai is wide spread phenomenon in China. In the first place it was thought to be a bandit stronghold where the government had no control of, now it’s referred to as a backyard of counterfeit, pirated and fake products. It provides a breeding ground for small and humble businesses to spring up and with time they are rising to become formidable market disrupters and in most cases they takeover full control of the market they are involved in. To some extent it is true that Shanzhai significantly helps stimulate local economic growth that has suffered for many generations in China. Low-level local enterprises have had inferior resources and lack of experience in comparison to those of major national and international industries.

Origin of the Shanzhai phenomena

History of Shan Nzai

There are many opinions about Shanzhai’s definitions and origins. Shanzhai is the product of many factors including history, market supply, culture, policy, and market demand. Some say the influence of the black market on the general economy traces back to ancient China during imperial rule, culture, geographic proximity to other countries, and purposeful exclusion of civilization outside the borders of China (Kissinger, 2011). China maintained an almost introverted culture that restricted foreign affairs, foreign influences, foreign invasion, etc. China is so immense and its culture is extremely dissimilar to the many smaller countries of Europe where they are more integrated. Some imply that Shanzhai, as we know it today, began when economic reform initiated approximately 30 years ago. The assortment of theories for the popularity of knockoff goods leads to a variety of complex controversial problems that persistently baffle world leaders, small entrepreneurs, big business, laypersons, artists, and technologists alike. The “black market” is found throughout the world but the majority of counterfeits are from China. All products, small (as in virtual) and large (as in aeronautical) are subject to counterfeit influence and some are more challenging than others in defining the fine line between legal and illegal; creational and cheating; law abidance and circumvention; resourcefulness and online piracy. Shanghai operations are in breach of China’s IP rights and in violation of Trademarks, Copyrights, and Patents. Enforcement of legislation continues to be an important problem, as does the failure of the Chinese court (with few exceptions) to comprehend and handle particularly complicated technological issues raised by counterfeiting. Furthermore, China’s lack of harsh penalties for infringement does little to prevent the advance of counterfeiting. As per the emerging technology China is a developing country. Nevertheless, China is able create or obtain tools that, for example, perform 3-D scans, images, and analyses of other countries’ innovations. The Shanzhai is also able to reverse-engineer emerging technologies others have ingeniously invented in order to mass produce similar merchandise at much lower costs because of lower labor costs, cheaper materials, non-existent health benefits, deficient labor laws, and other human resource benefits we expect in America. Shanzhai uses deceptive labels, for instance Shanzhai phones deceptively labeled as “Nukia” or “Sumsung”, close enough for impulsive shoppers to think they are buying the real thing, (The Economist, 2009).  To some extent it is true that Shanzhai significantly helps stimulate local economic growth that has suffered for many generations in China. Low-level local enterprises have had inferior resources and lack of experience in comparison to those of major national and international industries. Some believe the local enterprises were forced to adopt pragmatic, creative, alternative solutions in order to avoid their overpowering state-owned rivals whose over-bureaucratic policies have been known to impede change, obstruct progress, and oppress entrepreneurial spirit in China. By the same token, however, China has come to rely on Shanzhai profits. The elimination of it could mean a serious economic downfall for China. Shanzhai business is illegal according to Chinese law, international law, and the World Trade Organization of which China is a member Shanzhai businesses and sympathizers have a sense of entitlement and expectations of the international community and recommend solutions such as: 1) afford amnesty for the goods the Shanzhai already markets, 2) grant Shanzhai Intellectual Property Rights protection, and 3) employ tolerance rather than consider Shanzhai to be pirating. At the higher commercial level, Shanzhai is beyond simply trying to earn a living. They are competing with other big industries. They have profited from China’s weak property rights (The Economist, 2010). Shanzhai is a solution to oppression as it provides an income to a class of people who otherwise would be powerless without education and without money. Furthermore, the children of these illegal merchants are able to access education and are rising up into higher social classes; it helps explain counterfeiters’ motivation and why Shanzhai is thriving.

China is slowly turning the tide toward becoming a more open society, but there will be economic and political turbulence along the way and future challenges in achieving a more Western-like approach to business practices. As long as the communism of Beijing remains China’s powerful and dominant political epicenter, and as Shanzhai activity endures and China’s government perpetuates its reputation as an untrustworthy member of the World Trade Organization (WTO) and the international community, its businesses will remain extremely suspect as unregulated IPR violators.

China not only has had a huge rise in GDP but has gone through notable changes in all sectors of economy. When compared with the European and American markets, Chinese markets have some special characteristics: The mainstream industrial products in the market have the monopolistic merits while smallest and medium-sized enterprises (SMEs) lack the necessary resources either in power or in finance to promote and expand their subsequent development. Taking advantage of the decreased technical doorsill in several industries in recent years, many of the SMEs even family-run workshops manufacture different types of products to meet the market of people with the low-income. Most of these Chinese consumers don’t possess an adequate purchasing power for the big brands; the idea of evading authority and the pursuit of personality has become a negligible and new force as the growing up of the generally known as the 1980s and 1990s generation (Boeing and Philipp). Influenced by this argument, the Chinese consumers, mostly those who were born in  and rose in the years of 1980s and 1990s, stand in a strong opposition to the expensive mainstream products and the monopolistic products. Due to the changes in the Chinese consumers and market, Shan zhai products were welcomed and accepted as soon as they appear in the market.

The truth in the matter is that Shanzhai commodities have met antecedently overlooked and/or ignored demographic that had a bona fide demand.

In Chinese, Shanzhai originally means “fences” which are built for the defensive purposes in the military. Afterward, it has time went by it derived meaning “the forts occupied by the outlaws or bandits in Chinese history.” Shanzhai stand to represent the places that are not under the jurisdiction of the Chinese monarchy. In fact, the term “Shan zhai” was introduced from the Hong Kong to the mainland China. In Hong Kong, the small-scale factories or the small family-run workshops industries are called “Shanzhai industries,” and the products produced these workshops are accordingly ridiculed as “Shanzhai products.”

In Cantonese, “Shanzhai” contains the “irregular” or the “unorthodox” meanings. Since the “Shanzhai products” manufactured by the “Shanzhai industries” are mostly the imitations and counterfeits, “Shanzhai” has since then grew a connotative meaning like “imitation”, “piracy” and “counterfeit.” Shan zhai commodities have since the gone far beyond piracy and the counterfeits. Shan zhai strategic production, or  imitation-plus-innovation strategy, carried out by the Shanzhai products has contributed to the many Shanzhai brands consumers take delight in talking about them. These brands, in some sense, has competed against a wide range or mainstream brands (Leng and Mingyan Zhang).

Many businesses that have humble Shan Zhai origins are now becoming a very redoubtable market disrupters and, in many cases, the market leaders. The invention and innovative nature of the Chinese culture and the heavy potential in the Chinese market create wide opportunities for the Shan Zhai companies. The best of them are the fast, flexible, innovative, and willingness to take risks. As they achieve the specific scale, they quickly rise up the value chain and make core competencies to distinguish themselves from the also-rans

The Shan Zhai phenomenon is not about the low-cost fake or imitated products any longer; new generation of the counterfeits are frequently indistinguishable from the real products, and perform just as good as the original products. Most of the people in these Shan nzai industries think that it is about how one type of Chinese company attains success without following the conventional wisdom and then acquires the competitive deserved through innovation. By the reverse-engineering every other new device from the likes of the large companies such as the  Lenovo,  Samsung, Apple, Sony, the Shan zhai entrepreneurs are redevelop them in ways that delight the consumer. And in doing so, they’re contributing towards more and more creative and the innovative products. It’s an open platform for prime innovation

The term Shan nzai has been acknowledged and widely used within the culture. It is used in reference to any item that is used either at home or even outside the homes and is acquired through improvising (Booz & Company0

The term is so common among the Chinese as result of the usage of these products within the daily lives. Many of these products are fake or are imitated replicas of the original products within the Chinese community and therefore the popularity of the name Shan Zhai. These products range from phones, cars, wine, digital cameras and even medicine among many others. The impression of the Chinese people differs when it comes to the Shan Zhai commodities with the issue being discussed even in the highest levels of government where opinions are generally varied with some supporting the industry while still others calling for regulating.

They had worked out maneuver for approaching us well before we even knew of their being, analyzed our potential intentions in coming to this Shanzhai temple, so to speak, and fazed off the alluring and upscale features of every possible item laid out on their cubicle shelves we could likely desire. In case one pitch did not work, they were ready to fire off another in the hope of getting our care with some uniquely compelling toy or trinket that would have us buying their knockoff counterfeits rather of somebody else’s. The cubicle move was slightly less intimidating, nevertheless, than the in-your-face tactics of the Shanzhai street vendors.

The growth of Shan Zai business phenomenon can be assigned to invention of the DVD players. The DVD players were developed out of a need by businesses to avoid paying the government tax on the importation of DVD players that they believed to be relatively high. In addition the businesses did not wish to involve themselves with the costs of investing in promotion or advertising of the products that they were selling to the market. All this happened in Guangdong province that afterward at the same time saw the advent of the initial Shan Zhai mobile phones.

At the time when the businesses were developing the DVD players, they additionally decided to develop the VCD player and these saw these items gain popularity among the people of China.

At the beginning the businesses hired small numbers of farm workers and rented small workshops in the province where they would assemble the imitated versions of the VCD players and the DVD. The shapes and functionality of these new imitated products closely resembled that of the original versions of the VCD players and the DVD and in addition, the names of these imitations closely resembled the original products (Ying).

Following the imitation of the DVD’s and the VCD’s the Chinese went ahead to imitate the MP3 players. The reason for taking to these was that the technological necessities of the products were quite low in comparison to the high demand within the market for them the MP3 players. These was to see not less than three hundred different brands of Shan Zhai products enter the market earlier while venders took to selling Shan Zhai MP3 players of famous brands within the market (Ying).

Nevertheless, the MP3 player was not very successful as compared to the mobile phone industry that took China by storm. This was because the development of the MP3 was unsure, as there was a likeliness of the music being incorporated as one of the features of the mobile phones.

The growth of the industry was nevertheless facilitated with the initiation of the mobile phone industry that saw China produce similar products of all the famous brands that existed in the market. Shan Zhai did not evolve lately as would be the perception among the world population but has been around for quite some time among the Chinese people. The history of Shan Zhai emerged principally as result of different factors that all range between culture, history as well as developed policies. Furthermore, the concept arose out of the market forces of demand and supply. A Monkey King, shows his creativity as he fights evil inside the context of the book. In the literature, the place of residence where the Monkey King resided was a literal Shan Zhai place in itself known as Liang Shan Bo. Through sayings amongst the Chinese culture, instances of Shan Zhai can also be identified through such sayings such as, “crossing the river by feeling the stones”.

Nevertheless, they seemed tentative to counter-offer less than the $140 price. Perhaps because at that time they noticed that I had become a bystander who also gazed with seeming interest at the gleaming counterfeit watch.

The concept of Shan Zhai was finally to be adopted within the business world as result of economic hardships that people and businesses experienced. For example, when economic reforms were assumed within the China mainland many enterprises had to start at the very bottom, which saw their levels of experience and resources not being adequate to place the businesses in positions where they could compete with the bigger companies as they did not have the adequate resources or experience. In addition, these businesses at the time did not enjoy much assistance from the state institutions or government other and companies, which added to their economic woes.

Shanzhai phenomenon’s impact on the Chinese culture

Shanzai’s impact on chinese culture.

The activities that are carried out in shanzai which are so called ‘counterfeiting’  can be put into categories as it has impact on industrial among the Chinese people. First of all is that it has a large impact such that copying many European and American products or even others all over the world are experienced and this mostly influence their culture. Zhu & Shi espouse that the Innovation milieu concept as its called identifies an integration of SME innovation coupled with both informal and formal collective bargaining elements which adds some effect on their culture.

Also through integration of localized external economies, the businesses of the citizens involved are able to gain from locative competition from other markets with like businesses while facilitating cooperation in the development of like products within the market. In this case they enhance sociality amongst themselves hence strengthening their culture mostly. In short terms this acts as enhances friendly competition of market commodities as all the producers incorporate and share like knowledge and their own ideas in their product development.

The rural urban migration due to the development of the industrial zones is experienced since as we see China’s developed into a extremely industrialized city which was as a result of development of the Special Economic Zones in 1979. This migration was as a result of development of Hong Kong as the main coordination area for exports, while Shenzhen commodities received immense popularity and distribution.

The industrial zones which are stated were created as avenues aimed at attracting more foreign investment from all over China which lead to an increase in population from 30,000 to 10 million by 2012 hence change in culture in that so many people bring new ideas overdoing the other peoples. The Shenzhen area which the activities were carried developed a reputation for quick production of money thus attracting more people in search for financial freedom through employment opportunities which were available and innovation by the citizens of that region. This gave a breakthrough to the growth of extremely strong business base culture as it helped propel and come up with a new culture that altered from the low-income earning population to a mid-income earning population and in this case the living standards of the people of that region changed much while in the other hand the country’s economy grew too.

Entrepreneurs incorporate like skills into their entrepreneurial avenues as they thrived on smart and risk taking initiatives amongst the business environment that enabled them to survive in extremely changing and turbulent business environment which altered greatly their culture in that they developed some very strong survival technics. This can be shown in the  story of Shui Hu that elaborates on 108 outlaws fondly termed as ‘the heroes of Lianshan’ within the Chinese culture and identify a group of outlaws who disputed the corrupt authorities in a mission to seek justice for the poor who are themselves. These entrepreneurs thrived on taking challenges and paying little attention to the autho.............

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