China’s Shanzhai Entrepreneurs Hooligans or Heroes? 《中國⼭寨企業家：流氓抑或是英雄》 Callum Smith ⾼林著 Submitted for Bachelor of Asia Pacific Studies (Honours) The Australian National University October 2015 2 Declaration of originality This thesis is my own work. All sources used have been acknowledGed. Callum Smith 30 October 2015 3 ACKNOWLEDGEMENTS I am indebted to the many people whose acquaintance I have had the fortune of makinG. In particular, I would like to express my thanks to my hiGh-school Chinese teacher Shabai Li 李莎白 for her years of guidance and cherished friendship. I am also grateful for the support of my friends in Beijing, particularly Li HuifanG 李慧芳. I am thankful for the companionship of my family and friends in Canberra, and in particular Sandy 翟思纯, who have all been there for me. I would like to thank Neil Thomas for his comments and suggestions on previous drafts. I am also Grateful to Geremie Barmé. Callum Smith 30 October 2015 4 CONTENTS ACKNOWLEDGEMENTS ................................................................................................................................ 3 ABSTRACT ........................................................................................................................................................ 5 INTRODUCTION .............................................................................................................................................. 6 THE EMERGENCE OF A SOCIOCULTURAL PHENOMENON .................................................................................................... 8 IMITATIVE INNOVATION ....................................................................................................................................................... 11 DISRUPTIVE INNOVATION .................................................................................................................................................... 14 THE ‘HOOLIGAN’ OR LIUMANG SPIRIT – WHERE MOUNT LIANG MEETS SHENZHEN ................................................. 16 A HISTORICAL PERSPECTIVE ................................................................................................................................................ 18 CHAPTER OUTLINE ................................................................................................................................................................ 21 CHAPTER I: DEFINING SHANZHAI ........................................................................................................... 24 DEFINING SHANZHAI .............................................................................................................................................................. 29 SAME WINE, NEW LABEL ...................................................................................................................................................... 36 MADE FOR CHINA .................................................................................................................................................................. 40 CHAPTER II: MAKING SHANZHAI HANDSETS ...................................................................................... 47 EMPOWERING THE POWERLESS — SHANZHAI EMERGES ............................................................................................... 50 SHENZHEN’S BLACK MARKET .............................................................................................................................................. 53 IMITATIVE INNOVATION ....................................................................................................................................................... 57 FROM BLACK TO GREY ........................................................................................................................................................... 59 AT THE MARGINS ................................................................................................................................................................... 62 CHAPTER III: CHINA'S NON-CONSUMERS ............................................................................................. 65 CHINA’S NON-CONSUMERS ................................................................................................................................................... 66 PATENTLY INFRINGING ......................................................................................................................................................... 71 HARMONIOUS HOOLIGANS ................................................................................................................................................... 74 A ‘MODERATELY PROSPEROUS’ SHANZHAI ‘HARMONIOUS SOCIETY’ .......................................................................... 78 CONCLUSION .................................................................................................................................................. 83 KEY FINDINGS ......................................................................................................................................................................... 84 CONTRIBUTIONS OF THIS STUDY ......................................................................................................................................... 86 WORKS CITED ............................................................................................................................................... 91 APPENDICES .................................................................................................................................................. 94 TRANSLATIONS OF TEXTS CITED ......................................................................................................................................... 94 A SERIES OF INTERVIEWS .................................................................................................................................................... 96 MAKING SHANZHAI HANDSETS ........................................................................................................................................... 98 THE GOLD RUSH ................................................................................................................................................................. 111 THE GENUINE AND THE ‘GENUINE’ ................................................................................................................................. 116 5 ABSTRACT In the final months of 2008, a certain kind of imitation mobile phone became popularly known as the ‘shanzhai handset’ ⼭寨⼿机. OriGinatinG from the Cantonese word saanjaaih chong ⼭寨廠, the modern Chinese term shanzhai ⼭寨 is often used to refer to activities that are unorthodox, involve imitation, and often mock the mainstream. Despite its widespread use, the actual meaninG of the term shanzhai remains debateable. Through an analysis of academic and popular discourse, and with reference to research interviews conducted in China, in this study I attempt to understand the different nuances and siGnificance of the term shanzhai. I assess the extent to which the shanzhai approach is a historical one for China. In comparinG ‘shanzhai culture’ to similar practices observable over the past two centuries of Chinese history, I demonstrate that shanzhai is distinctively related to ‘grassroots’ civilian culture. I conceptualise shanzhai production as a form of ‘disruptive innovation’ — a revolutionised mode of production which is enabled by disruptive technologies. Shanzhai products provide what I call the ‘non-consumers’ of the orthodox economy with access to technoloGies that would be otherwise unaffordable. I speculate that for the Chinese Government, a tolerance of the sometimes law-infringing shanzhai consumption culture miGht serve to dampen the impact of income inequality and maintain social stability. For some policymakers, the unregulated shanzhai economy represents a safety risk. For aspirational up-and-cominG local brands, however, it presents an opportunity. Keywords: Shanzhai, Disruptive Innovation, Imitative Innovation, Non-consumption, Harmonious Society 6 INTRODUCTION It was 2 December 2008. Like every other evening, millions of viewers tuned into the state television broadcaster China Central Television (CCTV) for the seven o’clock Central Network News. On this night, viewers were taken to the Beijing Muxiyuan Wholesale Mobile Phone Market 北京⽊樨园⼿机批发市场 where, along with the other ten thousand daily visitors to the market, the CCTV reporter declared he was ‘there for the shanzhai ⼭寨 products’. The cheap, feature-rich imitation mobile phone handsets on sale at the market were known as shanzhai handsets, or shanzhaiji ⼭寨机.1 The reporter told his viewers that: Since the advent of the first shanzhai mobile handsets in 2003, a myriad of shanzhai products has appeared. Shanzhai has evolved from an economic behaviour into a sociocultural phenomenon.2 This news report marked the first acknowledGment of the existence of the shanzhai phenomenon in mainstream state media. LonG before the CCTV report, however, the shanzhai telephone handset market has been flourishing. In 2007 alone, a year before the news report, an estimated 150 million shanzhai handsets were 1 Shanzhaiji ⼭寨机 is an abbreviation of shanzhai yidong dianhua shouji ⼭寨移动电话⼿机. 2 ‘Shanzhai Mobile Handsets Snatch the Low-end of the Market, Experts Call it InfrinGement’ ⼭寨⼿机抢低端市场 专家称侵权, Sohu 搜狐, 2 December 2008, online at: http://tv.sohu.com/20081202/n260982719.shtml