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January 14, 2011

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Number's up for fake cell phones

China's infamous "shanzhai," or counterfeit, cell phone industry may be doomed after several years of booming business.

The Ministry of Industry and Information Technology has joined with the State Administration of Industry and Commerce to crack down on the industry for the first time.

Targeting sellers and producers, illegal phones will be seized and destroyed and those involved in the business punished.

The phones are mass-produced at low cost by small domestic companies. They are illegal because some producers don't have business licenses and none of the phones has network access licenses.

The phones have been extremely popular in China because they look like all the current popular brands, such as iPhone and BlackBerry, with some even boasting similar functions but selling for a much lower price.

But the cheap phones have many drawbacks. After-sales service is poor or non-existent, some have high power batteries that may explode, and they are prone to the latest "money-stealing" scandal.

The two state administrations said yesterday that the crackdown was an attempt to ban illegal "money-stealing" services where users can be charged huge amounts for services they didn't sign up for.

They said many of these services were triggered automatically because software had been installed and hidden in shanzhai phones.

Users can easily fall into a fee-charging trap when inserting their SIM card as the phone would automatically call a user in another province or even overseas, costing a huge fee.

Some shanzhai phones would also apply for expensive short message services or other phone services without the user being aware of it.

However, one industry insider said it wasn't the phones that were to blame.

Liu Sheng, owner of the country's biggest shanzhai phone news website,, told Shanghai Daily that it was a common sense that any phone, even shanzhai phones, could not be directly linked with illegal fee-charging services and the government was using that as an excuse to overturn the industry.

"If they want to ban the illegal money-stealing services at their source, they should target the software makers," said Liu. "Shanzhai phones, like all the others, are only platforms for such software that is downloaded by the users themselves."

He questioned why a shanzhai phone producer would install auto-dialing software to help the phone's operators gain money while they would not earn a penny.

He believed the crackdown was more likely to have something to do with the country's intellectual property rights protection campaigns as most of the shanzhai phones were breaking IPR laws.

"But the crackdown might not have much impact on the industry as most shanzhai vendors have already gone underground, selling the products secretly online," Liu said.


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