C&B Notes

Inside Look at Commerce in China

China has become the second most important economy in the world; as such, we follow what is going on there closely.   We continue to look for investment opportunities in China like the one we had success with several years ago, but remain very careful because of our ongoing concerns around rule of law and property rights (which makes it much harder to reliably avoid permanent impairments of capital, in line with our investment philosophy).
The following passages give some insights into the way business is frequently conducted in China:

“According to a recent investigation by TVB’s News Magazine, the runners or scalpers work in groups to smuggle in the devices and boxes separately, in order to dodge the 10 percent import duty enforced by the Chinese border control. Once the lucky folks reach mainland China, they regroup, repackage the devices, and then pass them on to their dealers in order to collect their dirty money.”

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“We caught some shops repackaging what were presumably refurbished phones, as well as sticking new labels onto parts and accessories. We’re normally cool with buying refurbished goods to save a few pennies, but here in Huaqiangbei, you need to know the game in order to avoid being scammed.  That said, it’s not that hard once you’ve explored the site a few times — these guys just do it in front of you. Hell, we even watched a woman carefully applying fake AT&T-stamped labels onto fake iPhone 3GS boxes, while chatting with us about the then-missing white iPhone 4.

But here’s what really worried us: some of the booths were peeling old labels off used phone batteries to put on new ones, while the others were slapping shiny “QC approved” stickers onto “SanDisk” microSD cards.  Frankly speaking, both sightings immediately killed our gadget lust on the spot.  On one hand, it’s rather hilarious that all of this happened right in front of our eyes; but looking from the other side, it makes you wonder who could guarantee the reliability of these random parts, how many of these end up on eBay, and whether the phones were pick-pocketed in the first place.”

>> Click here to read the full story on engadget