RENEE MONTAGNE, Host:

As part of this week's series on China's economy, today we're focusing on the single biggest irritant in Chinese-American trade ties - intellectual property rights.

Nothing, it seems, is safe from pirates who are exporting Chinese fakes around the world. China says it seized 39 million fake products in the first half of this year: a crackdown on counterfeiting that may or may not be effective.

NPR's Louisa Lim reports from Shanghai.

LOUISA LIM: Spend any time in China and you'll get used to hearing the counterfeiters' chant. Gucci, Prada, Chanel, is the whispered refrain that follows foreigners. Beijing's battle against copyright pirates has a long way to go.

Here in Shanghai, the local government claimed a victory when it recently shut a famous market. It said 80 percent of goods sold there were fake. But for tourists, like Jenny Jones and her father Stan, from California, the market's closure represented yet another shopping opportunity. Even as store holders prepared to close shop, she was rapt at the selection on offer.

JENNY JONES: All the fake goods - Gucci, Prada - they have everything.

LIM: And how much cheaper are they here than you would be paying in the U.S.?

JONES: Hundreds of dollars. Thousands. Yeah!

LIM: Do you feel bad at all about buying fake brands?

JONES: No. Not at all. When I see the price difference, I don't really care.

LIM: That view was shared by Americans Melissa Townsley(ph) and Jason Jones(ph). Touting newly acquired golf bags over their shoulders.

MELISSA TOWNSLEY: Oh, I bought a whole set of Callaway golf clubs for $900.

LIM: That's about a hundred dollars? I mean, roughly, how much would that cost in the states?

TOWNSLEY: Oh, my goodness. How much would that cost in the states?

JASON JONES: You can buy one driver in the states for approximately, like $200-some dollars. To get an entire golf set for about a hundred is really, really good.

LIM: And nobody really believed closing one market would make a dent in the thriving trade in fakes. Stallholder Huang Xiaoyu had been selling fake Cartier watches, among other things, for the past ten years. She wasn't sure what she'd do, but thought she'd probably move her stall elsewhere.

HUANG XIAOYU: (Through translator) I don't feel guilty. The more demand there is, the more we sell. We're not forcing anyone to buy these things.

LIM: If it's all about supply and demand, it seems there's an inexhaustible demand for fake - just about everything. Newspapers here have reported on fake roller coasters, fake Canadian ice wine, even the faking of an entire orchestra, when second-rate performers posed as a famous orchestra at a concert here in Shanghai.

And increasingly, China is becoming a production export base for counterfeit goods, as homegrown crime networks build up their own international distribution channels. Figures from U.S. Customs reflect this. Last year, almost 70 percent of counterfeit goods seized were made in China.

JACK CHANG: I personally call piracy counterfeiting as the cancer of the century. We need to cut it as soon as possible.

LIM: Lawyer Jack Chang heads the Intellectual Property Committee of the American Chamber of Commerce here in Shanghai. Tackling piracy, he says, means educating or shaming the public into doing the right thing.

CHANG: Counterfeiting drugs kills. No counterfeiting of drugs is safe. Counterfeiting auto parts: that could kill. Even luxury gifts, even pirated DVDs, because the funds go into the bad guys' pocket. But peoples' mindsets can be changed if you show the western world that child labor were employed by counterfeiters. When you buy a counterfeited goods, you actually be viewed as a supporter to child labor, to violent crime. Do you still buy it?

LIM: Such talk of child labor and violent crime seems a million miles from Shanghai's book fair. But even here, local publishers are hurting.

KAREN CAO: (Speaking foreign language).

LIM: The more popular a book is, the more likely it is to be counterfeited, says Karen Cao, from Horizon Media. Her company's Chinese version of Dan Brown's Da Vinci Code was widely counterfeited by pirates.

So Chinese firms are also suffering from intellectual property violations. Jack Chang says copyright pirates are always one step ahead of the government.

CHANG: I personally called that firefighting. They put out a fire, but cannot track down the arsonist. Effective criminal enforcement is the key. However, in China, because counterfeiting is not necessarily a crime until the situation becomes serious - so there's a threshold issue. For an individual offender, the total illegal operation now has to exceed 50,000 RMB, which is about $6,000 U.S. dollars.

LIM: Other experts doubt whether China can or even wants to enforce its own piracy laws. After all, the industry in knockoffs generates income and employment for local governments.

For now, the overwhelming perception is the problem is getting worse, not better. Louisa Lim, NPR News, Shanghai.

MONTAGNE: You can learn about China's economic boom, and the scope of Chinese- made counterfeits, by going to npr.org.

Tomorrow, China's high flying real estate market. In Shanghai, a 300 percent rise in housing prices in just three years has turned many homeowners into mortgage slaves.

Unidentified Woman (China): We have to pay so much money every month. Now, we're short of money. It's very terrible here for us now.

MONTAGNE: Efforts to cool China's red-hot housing market when our series continues tomorrow.

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