Why China Remains the Epicenter of Luxury Counterfeiting and How Brands Can Fight Back

If you work in luxury goods, the fight against counterfeiting is a perpetual, costly, and often disheartening battle. While fake products are seen and often reported on in markets and bazaars around the world, for decades, one country has remained the production epicenter of this global challenge: The People’s Republic of China.

The conditions that have contributed to China’s production of counterfeit products dovetail with the rise of the country itself. China’s manufacturing and digital distribution systems have developed in scope and skill over the last 30 years, resulting in a formidable factory and logistics base exporting increasingly complex goods to all corners of the globe.

For brand protection officers, general counsels, and executives, understanding this situation is the first step in building a strong defense.

1. The Counterfeit Production Base: It’s More Than Cheap Labor

Many people believe that counterfeiting in China primarily occurs due to low labor costs. While that plays a role in the delta between the counterfeit cost compared to the genuine, the truth is much more complicated.

• The Manufacturing Ecosystem: Southern China, especially the Pearl River Delta in Guangdong province, is a major manufacturing hub with a historical focus on consumer goods, including finished metal components, leather, textiles, ceramics, packaging, and specialized hardware, including for wristwatches. A counterfeiter can find nearly identical watch cases, bracelets, dials, and hologram-stamped boxes all within 50 miles from wholesalers, and if something is not available, it can be tooled and made in short order by vendors well versed in how to make the genuine article for other brands. This network helps to lower the time and cost of making fake components.

• Skill and Speed: The artisanship and technical skill in these regions come from workers often having years of experience producing high-quality goods for legitimate brands. When a counterfeiter wants to make a fake product in this area, there is a ready supply of experienced labor who can quickly reverse-engineer new designs and achieve a level of finish that would take much longer for those outside of the ecosystem. The speed-to-market for a high-quality fake can now be a matter of weeks after a product’s launch, sometimes starting before launch if leaked images are found and sent to factories.

The counterfeit trade operates as a shadow industry within the legitimate product ecosystem, and utilizes its technology to make and move their wares. As a number of legitimate brands have done business in China and contract manufacturers made investments to produce better and better goods, counterfeiters have come in to leverage the ecosystem’s capabilities (sometimes even) against the very brands that helped build it.

2. The Digital Distribution Revolution: WeChat, AliExpress, and Promoting to Western Markets Online 

The production of fakes is only half the story, as once produced, the criminals need a way to sell them and recoup their investment. The digital landscape in China has created a vast and notoriously difficult-to-police distribution network for B2B transactions, while wholesalers go to AliExpress and Western social media to sell the goods to the end buyers.

• The Role of Social Commerce: WeChat is the central nervous system of modern Chinese life and also its counterfeit economy. Through private chats, membership-based groups, and dedicated "Moments" feeds (WeChat's social timeline), sellers will operate storefronts for a largely domestic, B2B customer base. This creates a closed, trusted and hidden network that is difficult for authorities to find and shut down.

• E-Commerce Giants: Platforms like AliExpress and DH Gate have made significant efforts to combat fakes in recent years and monitor the use of word marks on products that would violate IP rights. However, the volume of sellers and the use of coded language or misspellings make it a game of whack-a-mole. Sellers will quickly shut down, only to reappear under new names.

• Western Channels: The demographic with the largest appetite and budget for counterfeit wares is the Western world, and counterfeit dealers will approach clients via Instagram and Facebook accounts, while others will set up their own E-Commerce channels and accept payments in crypto or third-party processors.

This domestic digital ecosystem doesn't just serve the Chinese market; it acts as a primary source for wholesale distributors who then resell and ship these fakes globally, feeding marketplaces from Instagram, Facebook Marketplace or E-Commerce stores worldwide.

So, How Can Brands Fight Back?

Sporadic cease-and-desist letters or one-off domain takedown notices no longer deter today’s counterfeiters. To confront a counterfeiter’s supply chain, brands need a partner that can bring real intelligence, on-the-ground presence and coordinated action. STU’s integrated approach does just that:

1. Integrated Intelligence and Surveillance

   STU’s teams regularly visit street markets, beach sellers and bazaars across Asia and monitor online marketplaces to identify where counterfeit goods appear. Information from these thousands of market visits turn into collective intelligence that contributes to a strategy of enforcement with a measurable deterrent effect. The same surveillance extends to online and e-commerce channels, allowing STU to spot patterns and trace counterfeits back up the supply chain.

   
   

2. On the Ground Investigations

   Proper enforcement requires more than hearsay. STU develops a deep, first hand understanding of both legitimate and illicit supply chains through fieldwork and informants. Decades of experience across eight Asian territories and thousands of operations mean our investigators know how to uncover the real operators stealing your IP and gather evidence leading to arrests.

   
   

3. Enforcement at the Source

   Legal notices and takedown letters simply remind counterfeiters that they are breaking the law, which they are aware of already. STU goes further by working with local authorities to deliver real consequences and deterrents for others considering entering the trade. Coordinated raids result in fines, jail time and factory closures. Our clients have seen workshops closed, those responsible brought to justice and the flow of counterfeit products affected because of STU’s collaborations with law enforcement on the ground.

   
   

4. Training and Collaboration

   STU believes lasting results come from empowering authorities. We organise two types of training: small, targeted Brand Protection Awareness sessions and larger Product Identification Awareness workshops. These teach officers what to look out for to identify situations in which there might be fakes, what to photograph, and how to build a robust case. After training, officers have direct lines to STU for guidance, ensuring future enforcement remains effective.

   
   

5. Protecting Your Brand and Customers

   With over 40 years of experience, STU  carries out more than 12,000 enforcement operations  each year, destroying over 2.5 million counterfeit goods yearly. STU’s services protect not just your IP but also your brand’s reputation and safeguard your customers’ loyalty.

   
   

The counterfeit economy in Asia is vast, but brands are not powerless. By partnering with STU, you gain a team that monitors, investigates, and enforces across the region, working hand in hand with authorities to deliver lasting results.

The Path Forward

China remains the epicenter of luxury counterfeiting in large part due to its success as the world’s most capable manufacturing and digital ecosystem. 

While counterfeiting in China will be a persistent issue for brands with a desirable IP, success in anti-counterfeiting is defined as making it harder and more costly for counterfeiters to operate, which makes their business less profitable and more risky. 

For brands, achieving success requires acknowledging this reality and engaging with it strategically via a partner who understands the reality on the ground, like STU. By doing so, they can protect their reputation, reclaim value, and stay ahead in the fight against counterfeiting.