Counterfeit key part of local economies---reducing it would lead to nationwide crackdown in China.

The CSCG and the trade in counterfeit goods has become essential to the local economy. In the 1990s, the CSCG accounted for nearly 26% of the entire tax revenues of the city and was the single largest taxpayer in the municipality. The payment of tax is essential because it integrates the CSCG and the trade in counterfeit goods into the local economy. In addition to paying taxes, the CGSC and its illegal trade in counterfeit goods has given rise to a whole host of other legitimate businesses that support the trade. Hotels, restaurants, night clubs, transportation companies, and warehouse and storage facilities all depend on the trade in counterfeit goods.

Shutting down the trade in counterfeit goods in Yiwu would result in shutting down the local economy and would lead to the closing of many businesses and high levels of unemployment. A shutdown may also lead to social chaos and unrest, which the PRC government fears more than anything else. A small town by China’s standards, Yiwu has a population of about 650,000, the bulk of which depend upon the trade in counterfeit goods. There are hundreds of other towns like Yiwu in China that depend upon the trade in counterfeit goods to sustain the local economy. All told there are likely millions, if not tens of millions, of people in China who depend directly or indirectly on the trade in counterfeit goods for their economic livelihood and survival. A nationwide crackdown would impose significant costs on the PRC government, as it would need to expend significant resources and political capital to deal with the massive economic and social problems that would likely arise as a result.