Protecting Your Valuable Brand in China

In recent years, the People’s Republic of China (PRC) has taken steps toward combatting counterfeiting, largely in response to grievances by foreign companies. In 2019, the Trademark Law was amended, with particular focus on prohibiting bad-faith trademark filings—malicious registration of well-known trademarks for profiteering—a persistent complaint by foreign brand owners.^[1] One indication of Beijing’s growing attention to intellectual property (IP) infringement is that punitive damages awarded by Chinese courts reportedly increased by 153 percent from 2018 to 2022.^[2]

Nonetheless, China remains the main source of counterfeit goods worldwide. According to the Organization for Economic Cooperation and Development and the Intellectual Property Office of the European Union, China was the world’s leading source for seized counterfeit goods in 2020 and 2021, accounting for 47 percent of the total value of seized goods worldwide.^[3] Hong Kong came in second at 27 percent. Together, mainland China and Hong Kong accounted for nearly 75 percent of the total value of seized counterfeit goods worldwide.

Globalization contributed significantly to this situation. Beginning in the 1980s, well-known international brands–often through Taiwanese suppliers–established manufacturing bases in China to take advantage of the abundant cheap labor. Years of double-digit economic growth gave rise to Chinese consumers–particularly urbanites–with increasing spending power. Meanwhile, Western companies established stores in China to take advantage of the emerging consumerism, which contributed to the rise of a brand culture that equates ownership of brand products with social status.

Although China’s economic growth has increased the disposable income of the average Chinese consumer, many still do not have the resources to purchase brand products at full price. This situation creates a void that Chinese suppliers—armed with extensive brand awareness and production capabilities—can fill, by producing items that resemble brand products at a significant discount.

However, this dynamic of producing and selling cheap goods to appeal to cash-strapped, status-conscious Chinese consumers is changing. Some fake goods produced in China have achieved brand status of their own. The most recent case is the Lafufu, a knockoff of the famous Chinese toy Labubu.^[4] Today, consumers worldwide are buying Lafufus not simply because they are cheaper than Labubus, but because Lafufu has become a brand name itself.

Integration of Counterfeit Products in Local Chinese Economies

The Lafufu phenomenon has led the Chinese government to crack down on knockoff Labubus in the name of protecting Chinese IP. Chinese media reported that PRC authorities have launched raids against fake Labubus at the Yiwu International Trade City in the southeastern province of Zhejiang.^[5] Yiwu is widely known as the world’s largest wholesale market for small commodities like kitchenware, toys, small electronics, and Christmas tree ornaments. Yiwu’s success epitomizes China’s development—both the good and the bad—over the past four decades.  

In 1982, just four years after former Chinese paramount leader Deng Xiaoping launched the era of reform and opening up, Yiwu established a small commodities market. By 1990, Yiwu was already China’s largest wholesale market for small commodities. After the PRC’s accession to the World Trade Organization in 2001, Yiwu became a major platform for the export of small commodities produced in China. Since the advent of China’s Belt and Road Initiative (BRI) in 2013, Yiwu has become a key BRI hub with the capacity to ship goods sourced from over 2 million Chinese manufacturers to over 230 countries and regions.^[6]

Yiwu’s commodities market has also enriched the city of Yiwu. In 2023, Yiwu’s GDP exceeded CNY 2 trillion (approximately USD 280 billion), ranking Yiwu among the top ten cities in Zhejiang in terms of GDP. Meanwhile, the average disposable income of Yiwu’s residents achieved CNY 93,108 (approximately USD 13,000)–ranking first among all 408 Chinese county-level cities. To put this number in context, the average disposable income of all residents of China in 2023 was CNY 39,218 (approximately USD 5,500).^[7] Yiwu’s accomplishments have not gone unnoticed. In September 2023, Chinese leader Xi Jinping visited Yiwu and lauded the city’s economic contributions.^[8]

Unfortunately, there is a darker side to Yiwu’s economic power, as it is notorious for being a global center of fake goods.^[9] Although it is difficult to obtain statistics on the size of Yiwu’s counterfeit market, anecdotal evidence suggests that it is significant. Yiwu illustrates the key reasons for the persistent counterfeiting problem in China: fake goods are integrated into local Chinese economies, and local officials are incentivized to protect local economies for political reasons.  

Economic performance has been the key pillar of the Chinese Communist Party-state’s political legitimacy over the past four decades. By extension, it has been a key benchmark for measuring the performance of local PRC officials. In this context, Yiwu’s economic accomplishments are politically significant for the officials of Zhejiang Province and Yiwu City. They are thus incentivized to protect Yiwu and avoid actions—including cracking down on counterfeit goods—that could jeopardize the Yiwu commodities market’s ability to generate revenue and harm the political aspirations of local officials. 

The sale of Chinese counterfeit products is not limited to physical locations like Yiwu. Chinese e-commerce platforms are also notorious for acting as conduits of fake goods.^[10] China is home to the world’s largest e-commerce market, with valuation as high as USD 3.45 trillion.^[11] Just like physical commercial spaces, Chinese e-commerce platforms are deeply integrated into the Chinese economy, creating the same political incentives mentioned earlier.

Combatting Counterfeiting in 2025

Although local officials often act as impediments to IP enforcement, they also know that major Chinese companies and foreign investment are important engines for local economies. If companies investing in local production facilities have significant brand recognition, counterfeiting greatly undermines the performance of these commercial entities and harm the local economies, which can negatively impact the careers of local government officials. Local officials also possess both the authority and power to enforce IP-related laws and regulations. Therefore, international brands should still seek the support of local authorities when combatting fake goods. Some localities, notably Shanghai, have demonstrated willingness to combat counterfeit production and distribution.

From the perspective of the central government, IP infringement harms China’s reputation as a trusted supplier. This may negatively impact the country’s economic development in the long term, despite the economic gains from sales of counterfeit goods, particularly as technological innovations—which are heavily dependent on IP protection—become China’s key economic driver.^[12] In short, Chinese central authorities are increasingly incentivized to crack down on IP infringements, and local officials are, in the end, accountable to central government directives.

At the central level, recent rounds of government reorganization have created several agencies tasked with protecting IP, which can make navigating the bureaucratic maze difficult for companies attempting to pursue anti-counterfeiting remedies.

• The State Administration for Market Regulation (SAMR) has nearly a dozen departments focused on anti-counterfeiting and consumer rights protection efforts. The SAMR’s Law Enforcement and Inspection Bureau has taken over the functions of the State Administration for Industry and Commerce’s (SAIC) Office of Combatting Counterfeiting.
• The China National Intellectual Property Administration (CNIPA) has taken over the responsibility for trademark registration and protection from the SAIC.
• China Customs has assumed the responsibility for overseeing import and export quality, quarantine, and inspection from the General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ). Chinese counterfeit goods are globally available and have made their way through international e-commerce platforms like Amazon. Cooperation from China Customs is essential to any effort combatting counterfeits shipped from to China to overseas markets.

In addition to consumer products, Chinese manufacturers of course also produce counterfeit high-end components for various industries. For example, to combat counterfeiting for tobacco firms, companies should engage with the China National Tobacco Monopoly Administration^[13] and pharmaceutical companies should seek help from the National Medical Products Administration. To address counterfeit electronics goods and automotive parts, international businesses should consider seeking the support of the Ministry of Industry and Information Technology, in addition to the SAMR.

The PRC judiciary has also created courts to adjudicate IP disputes. The Supreme People’s Court (SPC) has a special IP court with the authority to render final verdict on all IP cases that are unsettled in lower IP courts. China has also established IP courts in Beijing, Shanghai, Guangzhou, and Haikou in Hainan Province.^[14] The Shanghai IP court reportedly has a history of rendering verdicts favorable to international companies in multi-jurisdictional cases. According to the SPC’s IP court, in 2024 Chinese IP courts received 529,370 new cases and adjudicated 543,9111.^[15]

Western companies can also seek collaboration with various Chinese consumer rights protection associations. Organizations such as the China Consumers Association and the China Association of Consumer Products Quality and Safety Promotion are managed by government agencies like the SAMR, giving them considerable political clout. In many cases, they act as regulatory enforcement agencies.  

Lastly, China has witnessed the emergence of law firms and private investigation companies that specialize in IP and counterfeiting in recent years. However, it is important to conduct thorough due diligence before employing them.

Pamir has years of experience facilitating successful anti-counterfeiting efforts in China on behalf of its clients, backed by extensive knowledge about China’s political economy and the maze of regulatory bodies that must be navigated. Contact us to find out how our expertise and access can help you protect your most valuable assets.

^[1] https://www.china-briefing.com/news/chinas-new-trademark-law-effect-november-1-2019/

^[2] https://www.awa.com/awapoint/ip-enforcement-strategies-combating-counterfeiting-in-southeast-asia-and-china/#:~:text=This%20rise%20in%20punitive%20damages,rights%20of%20the%20trademark%20holder.

^[3] https://euipo.europa.eu/tunnel-web/secure/webdav/guest/document_library/observatory/documents/reports/2025_Global_Trade_in_Fakes/2025_Global_Trade_in_Fakes_FullR_en.pdf

^[4] https://www.businessinsider.com/labubu-knockoff-lafufu-monsters-cost-counterfeit-fake-pop-mart-doll-2025-5

^[5] https://m.jfdaily.com/wx/detail.do?id=932441

^[6] https://www.xhby.net/content/s67680edce4b0595c185fb2af.html; https://www.thepaper.cn/newsDetail_forward_25694692

^[7] https://www.stats.gov.cn/english/PressRelease/202402/t20240201_1947120.html

^[8] https://www.gov.cn/lianbo/difang/202402/content_6931838.htm

^[9] https://english.khabarhub.com/2025/31/432460/

^[10] https://itif.org/publications/2025/08/20/how-chinese-online-marketplaces-fuel-counterfeits/

^[11] https://www.sellerscommerce.com/blog/largest-ecommerce-markets/#:~:text=China%20%E2%80%93%20$3.45%20trillion,digital%20wallets%20make%20up%2026%25.

^[12] https://qstheory.cn/dukan/qs/2021-02/01/c_1127044259.htm

^[13] The China National Tobacco Corporation is the commercial arm of this agency, led by the same management. https://pmc.ncbi.nlm.nih.gov/articles/PMC3541807/

^[14] Hainan is an island situated in the South China Sea. The Hainan Free Trade Port, an island-wide special customs supervision zone, will go into effect on 18 December 2025. According to the Chinese government, the zone will permit companies to import components tariff-free, process them in Hainan, and then export the processed goods to Mainland China without tariffs, provided that the value-added exceeds 30 percent. https://english.www.gov.cn/news/202507/23/content_WS68804eebc6d0868f4e8f45d9.html

^[15] https://www.chinaiplawupdate.com/wp-content/uploads/2025/04/%E4%B8%AD%E5%9B%BD%E6%B3%95%E9%99%A2%E7%9F%A5%E8%AF%86%E4%BA%A7%E6%9D%83%E5%8F%B8%E6%B3%95%E4%BF%9D%E6%8A%A4%E7%8A%B6%E5%86%B5%EF%BC%882024%EF%BC%89.pdf