Apple goods smuggled to match high demand in China

News Anjum Dhir 15:28, 26 Jul 2011

Business is booming for smugglers in China who bring in Apple products from Hong Kong to match the rising local demand

Apple products are the new status symbols desired by almost every upwardly mobile Chinese these days. From the iPad to the iPhone, the Chinese want it all. Since Apple has only 4 stores in the world’s 3rd largest economy, it is unable to match the increasing demand. That is, at least till the company is able to open more stores.

Meanwhile, smugglers employing all means necessary are gladly meeting the local demand, news agency Reuters has uncovered. They bring in original Apple products from Hong Kong, a semi autonomous region within the county governed by its own rules and regulations, and sell them at a premium.

Profit margins for smugglers in this trade are good. For example, an iPad 2 in Hong Kong costs about $499 and about $572 in China. This is due to the HK$ being weaker than the Yuan and Hong Kong’s policy of imposing no duties for certain electronic imports. A smuggler sneaks the device onto the mainland and sells it for a profit by pricing it anywhere between $499 and $572, at a price dictated by demand.

Smugglers have come up with an ingenious way to bring in goods to places like Shenzhen in Southern China. They employ students who live in China and make the daily commute to Hong Kong to attend college. These children smuggle in goods in their jackets and knapsacks, sometimes even removing the coverings to prove the devices are for personal use. If caught, they try paying the import duty (around $150) and getting away.

Selling the smuggled Apple goods in unauthorized stores and online on China’s largest online market place, students make a profit of as much as 300-400 Yuan a piece. A Hong Kong newspaper has caught this whole process on camera and has shared it with the world on YouTube.

It is not yet clear what China plans to do to curb this racket. If caught, fines and duties are high, but smugglers are willing to take the risks. With people belonging to Government authorities and corporate offices making up a big chunk of clients who desire the smuggled goods, crackdowns may be few and far in between.

Possibly the best way to solve this problem is for the Government and Apple to work together to expand the company’s presence in the retail market. In fact, Morgan Stanley forecasts that Apple sales in the world’s largest mobile market may well cross $9 billion in the year ending September 2012.

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