China's Seven Most Popular Moneymaking Scams

Seven ubiquitous moneymaking scams in China, as detailed in the Chinese investment site, provide an inside look at the state of China’s efforts at creating a modern economic system.

1. Fake Tax Invoices

China’s most popular tax-evasion scheme involves amassing large numbers of fake invoices to support massive deductions for business expenses. The production and sales of fake invoices has become a growth industry in its own right, estimated to be worth up to 5% of China’s GDP Some firms even require employees to provide invoices equal to the amount of their salaries before they can receive their annual bonuses.

2. Mooncake Discount Coupons

An industry of trading discount mooncake coupons has sprung up to capitalize on the tradition of giving the costly treats as obligatory gifts during the Autumn Moon Festival, China’s equivalent to Thanksgiving. Since only a small percentage of the cakes are actually eaten, most people give gift certificates. Bakeries issue them to retailers at a 35% discount. The retailers sell them to consumers at a 20% discount. The consumers give them as gifts. The gift certificates are redeemed at a 60% discount by street hustlers who then redeem them at the bakeries for 50% discount off face value.

3. Shanzhai

Tens of thousands of small enterprises have sprung up throughout China to sell consumers what they want at a fraction of the cost of the real thing. The term “Shanzhai” (“mountain village”) refers to goods that pretend to be something they aren’t. The terms cover everything from designers bags to college diplomas to cheap meats masquerading as more costly variants and alludes to bandit strongholds outside the reach of law which were once typically located in mountains. Today Shanzhai operations are typically located in private homes. Some such operations become successful enough to emerge into factories churning out cell phones, garments, housewares and packaged foods.

4. Trojan-Horse Viruses

Rogue mobile phone vendors pre-install Trojan-horses on the phones’ operating systems. The code is used to gain access to credit card and bank data. Apps containing trojan code are another way hackers can take control of mobile phones for profit. Such code is also installed into pirated versions of popular software like the Microsoft Windows operating system or the Office suite.

5. Masters

Not a few Chinese have made fortunes by persuading consumers to see them as “masters” that can teach how to achieve wealth, vitality or sexual prowess. An example is Wang Lin who leveraged his skills in traditional forms of exercise, meditation and healing into celebrity status. He forged connections with celebrities like Jackie Chan and Alibaba founder Jack Ma. By the time he was exposed as a fraud in July and fled to Hong Kong he had amassed an estimated 1 billion yuan ($163 million) through donations and sales of books and other products.

6. Shopping Cards

Pre-paid shopping cards that provide anonymous payments have become a popular way to transfer large amounts of wealth without leaving a paper trail, making them an ideal vehicle for bribery and corruption.

7. Spying

Modern communications technologies have allowed the traditional art of spying on business rivals, spouses, social enemies and public officials to explode into the digital domain. Hackers have joined electronics experts and old-fashioned private detectives to offer many ways to get compromising personal and business information.