An analysis of Chinese “Shanzhai” economics

Abstract: Behind the prosperity, the Chinese economy is always being considered as a copycat economy. Recently, the counterfeiting of cell phone products brings this topic onto the table and this topic is widely discussed by many people around the world. This paper provides several methods from microeconomic perspectives trying to analyze the influence of counterfeits generally on the competitive market and price of genuine goods. Also this paper will try to analyze the essential characteristics of the Chinese “Shanzhai” goods. These analyses will give answers to the questions like: Why the “Shanzhai” products were so powerful in China? How the “Shanzhai” economy affects the existing price of genuine goods? How the “Shanzhai” goods (counterfeits) attract ordinary consumers? This paper will try to investigate these questions from different aspects. Finally try to give an explanation why and how “Shanzhai” products exist and where “Shanzhai” economy will head to