Govt crackdown shrinks China gray market

Govt crackdown shrinks China gray market

Robert Clark  |   July 13, 2010
A government crackdown is shrinking China’s handset gray market, according to research firm iSuppli,
It says sales of gray market phones in the mainland China market shrunk by a quarter in June, while it has trimmed its full-year forecast to just 18.6% growth, well short of last year’s 43.6%.
The current large-scale crackdown had “caught many by surprise” and showed that authorities were finally taking the issue seriously, iSuppli said.
The gray market is the unauthorized sale of handsets, usually at a lower price than through regular channels. 
Gray market sales are not always illegal, but in China they involve the use of fake IMEI numbers, allowing manufacturers and importers to avoid applying for a network permit and paying a 17% value-added tax.
iSuppli said customs officials have investigated a Suzhou firm, Hualong, suspected of making and importing pirate phones, and had arrested a number of investors and suppliers.
Several design houses in Shanghai are also under investigation for allegedly building main boards and other key components for Hualong.

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