The True Cost of China’s Fakes

http://www.nytimes.com/2014/06/10/opinion/yu-hua-the-true-cost-of-chinas-fakes.html

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BEIJING — Taobao, China’s online shopping website, opened for business on May 10, 2003, a brainchild of Jack Ma’s Alibaba Group. Taobao’s range of operations spans both consumer-to-consumer and business-to-consumer sales, and during the last 11 years it has achieved spectacular growth.

By 2013, it already had 500 million registered users and daily totals of more than 60 million visits. The number of products listed by Taobao exceeds 800 million items, and on average 48,000 items are sold every minute. Taobao commands more than an 80 percent market share of consumer-to-consumer e-commerce in China.

Mr. Ma’s commercial empire is transforming the Chinese people’s lifestyle: Without leaving your home, you can buy everything you need, at prices much lower than what traditional store retailers offer. We’re now used to seeing delivery workers shuttling in and out of apartment complexes in China’s cities at all hours of the day.

The most awesome sight has to be the sports grounds of our universities. In the middle of the day, the fields are piled high with the merchandise that students have purchased on Taobao, with the delivery people mopping their faces as they try to cope with the advancing hordes of college students.

The workers don’t have time to verify so many shoppers’ IDs, so they just yell at them to call out the last four digits of their cellphone numbers. After a quick check, they hand over the goods.

Taobao is relegating many conventional retail outlets to the role of display rooms. In shopping malls, fashion-conscious young women tirelessly try on new outfits as always, but they no longer buy the stuff in the stores. Instead, they simply make a note of the style, size and brand of the items they like. Then they make their purchases on Taobao when they get home, because the same clothes will be much cheaper online.

In spite of its success, however, Taobao has been dogged by charges that it sells pirated goods. To those who say Taobao has turned a blind eye to knockoff merchandise, the response of Mr. Ma is, in effect: “If you could put an end to knockoffs just by shutting down Taobao, we’d close Taobao tonight.”

In China, where the marketplace generally is flooded with shoddy imitations, it’s unrealistic to expect that there will be no copycat merchandise for sale on Taobao. Since there’s no shortage of fake products being peddled at traditional stores, even a series of well-publicized incidents involving counterfeit goods sold on Taobao has not affected its steadily rising sales figures. Chinese consumers fume about all the fraud, but they are also inured to it.

The ubiquity of counterfeits points to a serious problem in China today: an absence of good faith. In a society where people lack confidence in the integrity of others, a key factor behind Taobao’s rapid expansion was Alibaba’s introduction of the Alipay online payment service in 2004.

Alipay is a third-party platform that provides an escrow system. When you buy an item on Taobao, you make the payment to Alipay. The vendor sees that the customer has paid, but cannot get the money until the customer has received, inspected and acknowledged satisfactory delivery. Only then will Alipay transfer the payment to the vendor’s account.

Further, if the buyer, after inspecting the item, finds that it’s not what is wanted, he or she can return it. Alipay will then post a refund to the buyer’s account.

Alipay, which has about 300 million users and accounts for nearly half of online payments in China, effectively addressed the crisis of confidence that once discouraged Internet shopping in China. But in so doing, it also highlighted the erosion of trust in Chinese society.

Our government is always trying to give the Chinese people the impression that social problems stem not from its policies, but from people’s behaviors. In fact, the basic issue underlying the lack of moral integrity in society is that the government itself has lost credibility.

The government blindly pursued economic growth. But once environmental pollution got out of hand, the authorities immediately put the blame on industry, keeping tight-lipped about its own responsibility.

When we look back over the developments of the last 30 or so years, we see that government policy constantly shifted course. What it encouraged yesterday, today it suppresses. What it suppresses today will be encouraged again tomorrow. Or in the more mischievous terms that China’s online commenters have put it: first, the government encourages prostitution; then, it turns around and promotes an anti-vice campaign.

Here’s my proposal: I’d like to pay my taxes through Alipay. Then, if the government delivers on its commitments and re-establishes trust, I will confirm it has fulfilled its side of the bargain and make my payment. Otherwise, I want my money back, in full.

Yu Hua is the author of “Boy in the Twilight: Stories of the Hidden China.” This essay was translated by Allan H. Barr from the Chinese.