Inside the China counterfeit trade taking K-beauty for a ride

[NEWS ANALYSIS]

China's K-beauty counterfeit industry has expanded from serving domestic consumers to exporting copycat products on a mass production scale, according to multiple intellectual property (IP) experts. In response, Korean cosmetics companies are stepping up efforts to protect their brands against the rising tide of fakes, but their efforts may amount to just a drop in the bucket.

The number of blocked online listings for counterfeit Korean cosmetics sold at home and abroad has risen steadily since 2023, reaching 37,544 in the first eight months of this year — just shy of last year's full-year total.

Southeast Asian countries account for the largest share of blocked listings, but experts believe the vast majority of the counterfeit products were manufactured in China, with much of it shipped in bulk to wholesalers in Southeast Asia and other overseas markets.

Behind those shipments is production on an industrial scale. One factory raided in Guangxi, for instance, held about 100,000 fake products, according to Mun Byung-hoon, CEO of IP Space, a Korean firm specializing in tracking down counterfeit goods. Production is often split among separate suppliers for the contents, containers and boxes, which are later assembled into finished goods.

Counterfeit production is concentrated in manufacturing clusters in Guangdong, Shenzhen, Guangzhou and other large cities in China, making raids on individual factories insufficient to tackle the broader problem.

Inside China's K-beauty counterfeit trade           

Not long ago, China's K-beauty fakes were largely sold to Chinese shoppers. But as K-beauty's foothold in China has shrunk, counterfeiters have turned their attention overseas, industry experts say.

“Now they are being counterfeited for export, built around overseas sales from the production stage,” said Yang Hye-yun, head of the IP team at Logos Law Firm. “Before, they copied famous products that Chinese consumers liked. Now it has expanded to globally popular indie labels such as Ma:nyo [a Korean skincare brand known for its cleansing oil].”

Many Korean beauty brands that do not sell in China treat fakes made there as someone else's problem, said Mun, who previously led Amorepacific’s China IP team.

“But those fakes are not made for the Chinese market,” he said. “They end up on Amazon in the United States and Shopee in Brazil.”

China's own market helps explain why. Korean brands account for just 4 percent of the country's cosmetics market, while local labels, which have improved their quality and are aggressively marketing themselves online, now occupy more than half of it, according to the China Association of Fragrance, Flavor and Cosmetic Industries.

Enforcement data show where the fakes are going instead. The Ministry of Intellectual Property blocked 39,295 listings for counterfeit cosmetics on domestic and overseas platforms last year, according to data submitted to Rep. Baek Jong-hean of the People Power Party. Of the 37,544 blocked this year, 21,266 of them, or 56.6 percent, were in Southeast Asia. Europe saw the sharpest rise in blocked listings, from 145 last year to 2,224.

Some of the fakes also make their way back into Korea. The Korea Customs Service seized 117,005 counterfeit Korean brand items at the border last year, with cosmetics making up the largest category at 35.9 percent. Virtually all of them, 97.7 percent, were shipped from China, according to the agency.

Raids in China have grown in scale, too. A single seizure used to involve 2,000 to 3,000 items, but they now often run into the tens of thousands, Mun said in a webinar on responding to Chinese-made counterfeit cosmetics entering the U.S. market, hosted by the Korea Cosmetic Association in January last year.

“There are places that make boxes, places that make containers and places that make the contents, all divided up, and a central player that puts them together into the finished product,” Mun said in the webinar.

“Guangdong has the containers, the contents and the logistics all in one place,” he said in an interview. “If someone sets their mind to it, they can copy any brand.”

Many are sold in bulk through wholesale channels.

“Counterfeits are traded on Chinese business-to-business (B2B) platforms at a tenth of the genuine price,” Yang said. “They are made in Chinese factories, traded on sites like 1688 [Alibaba’s Chinese wholesale marketplace] and go to open-market sellers in Southeast Asia, Europe and the United States, who ship them directly to consumers without going through Korea.”

The Ministry of Intellectual Property's figures similarly point to B2B trade. In the first eight months of this year, 1,291 counterfeit cosmetics listings were blocked on Alibaba.com, a B2B platform, compared to 368 on AliExpress, its consumer-facing sister site, though the ministry's data covers a limited number of platforms.

“Once fakes are made in China, the easiest places for them to go are Hong Kong and Taiwan, because they share the same language,” said Kim Jong-myun, CEO of Wegofair, an AI-based brand protection firm. “Once counterfeits start circulating in Taiwan, someone who listed them on Shopee Taiwan can easily list cosmetics on Shopee Thailand or Malaysia and sell them there.”

The list of destinations keeps growing.

“Lately, a lot of cases are coming out of Turkey, the United Arab Emirates and Russia,” Kim said. “These are countries that didn't stand out before, but our clients are now finding many counterfeits there.”

Harder to tell apart

The fakes are not only traveling farther. They are also getting harder to tell from the authentic product. Crudely made knockoffs have given way to packaging and containers that rival the originals, as printing technology in China improves, Kim said.

“In terms of quality, they're not lacking at all,” he said. “You have to go as far as analyzing the formula to catch them.”

The imitation now extends to small details. Fakes of Korean skincare brand Beauty of Joseon's Relief Sun, a rice-based sunscreen, copied even the sealing sticker on the container's opening, according to the government.

“There are even cases where counterfeiters copy the batch number exactly or set prices similar to the genuine product, adding to consumer confusion,” a spokesperson at Kahi, the Korean skincare brand behind the stick-type Multi Balm, said.

Sales tactics have grown more sophisticated, too. Some sellers skip the wholesale route entirely.

“Sellers copy the product photos and descriptions from official online stores and dress themselves up as authorized sellers, and when an order comes in, it's shipped directly from China,” Yang said. “When products go straight from China to the United States or Europe in small shipments, customs doesn't catch them.”

Brands weigh their options

For Korean beauty brands, the challenge is figuring out how to fight back. Many have turned to a mix of authentication codes on packaging and round-the-clock online monitoring, though each is still testing what works.

Kahi attaches a QR code to the top of every box it sells, both in Korea and overseas, and has done so since December 2023.

“The number choices on the screen change every time the QR code is scanned, and the product is authenticated only when the customer picks the number that matches the one attached above the QR code,” the company said in a written response. “It's designed to prevent cases where counterfeiters steal only the number.”

Kahi also runs a dedicated in-house team that monitors online marketplaces and social media with an AI-based system.

APR, a Korean beauty company best known for its skincare brand Medicube, applies QR authentication across its products. It has worked with outside AI-based counterfeit detection firms since 2024 and is hiring staff dedicated to IP infringement on global platforms including Amazon and TikTok Shop.

Amorepacific, home to brands such as Sulwhasoo and Laneige, runs a certification mark for authorized sellers and real-time AI monitoring with an outside counterfeit detection firm. When it finds fakes, it reports them to platforms and pursues legal action.

“Products sold at unusually low prices may be counterfeits, so we ask customers to check the seller and product information before buying,” the company said in a written response.

None of these tools are foolproof, said Kim.

“Authentication technology is necessary, but applying it doesn't mean fakes stop appearing,” Kim said.

Limits to enforcement

In practice, most cases just end with a listing being taken down.

It is up to APR to spot fakes, prove to platforms that they are not genuine and ask for their removal, the company said. Legal action is often too costly and time-consuming, it added, so a takedown is usually as far as it goes.

“If an unlicensed restaurant selling bad food is removed from a delivery app, that doesn't mean the restaurant is gone,” Mun said. “It's the same with counterfeits. Deleting a listing doesn't make the fakes disappear. They're still sitting in the warehouse, so the seller loses nothing.”

“Sellers put listings back up or open new accounts and post them again,” Kim said.

Tracing the fakes back to their source is even harder.

“Finding the factories in China is hard, and raiding one doesn't make them go away,” he said. “Another factory will just make them.”

Experts say no single company can dismantle a network this organized on its own. That is where the government has started to step in.

The first line of defense is the border with China, where most of the fakes originate. In January, the Korea Customs Service signed a memorandum of understanding with China's General Administration of Customs on protecting IP at the border.

At home, agencies that once handled counterfeits separately are now sharing what they know. In June, the Ministry of Food and Drug Safety, the Ministry of Intellectual Property, the Korea Customs Service, and the Korea Cosmetic Association signed an agreement to share information on the manufacturing, import, and distribution of counterfeit cosmetics and to block their import, export, and direct overseas purchases.

The cooperation is also extending overseas. On Friday, the Ministry of SMEs and Startups and the IP ministry launched a council to share information on infringement cases collected through their overseas offices.

For now, brands still bear much of the burden, as Korea's trademark law applies only within the country.

“If the whole process is done in Chinese factories, Korean law can't catch it,” Yang said. “Right now, the only way is for companies to secure their rights in each country, and that isn't easy. China works on a first-to-file system, so a brand's trademark can be registered by someone else first.”

BY KIM HA-YOON [[email protected]]