Zhong Xiong, 27, enjoys shopping online. He spends a considerable amount of time and a big chunk of his US$1,000 monthly income on electronic gadgets from internet auction site Taobao. He tends to look for products not widely available in China. Last summer, he bought a Blackberry 7730.
"It just stands out… [It] looks like a calculator with a huge screen and full keyboard," he said. "But what really bugged out my eyeballs and put my gadget desire into action was the price – only RMB680 (US$87)."
In China, phones are fashion statements. A phone that costs about US$130 (RMB1,000) is cheap and under US$100 (RMB800) is dirt cheap. Really desirable models packed with extra features come in at a pricey US$260-US$515 (RMB2,000-RMB4,000)
Zhong's Blackberry was cheap but looks like it belongs in the top bracket. Best of all, it was not a knock-off, despite the price. It can make and receive phone calls, short messages and access news from around the world.
Thousands of similar Blackberry transactions took place on Taobao last year, many of them in the western hinterland. One user nicknamed MaxPDA said most of the units for sale online were returned by buyers in North America or Europe and sold to middlemen that bring them into China through "special distribution channels" (possibly smuggling).
Many are brought through Hong Kong to duck a 17% VAT on imports. A Blackberry 7730 that retails for several hundred dollars in the US can sell for less than US$90.
The low price is offset by a lack of features. Blackberry's distinctive push-mail feature does not work on smuggled devices. Blackberries bought through official channels – which come with official PIN numbers – can get push-mail in China for a monthly fee of up to US$75 after a deal last May between service provider Research In Motion (RIM) and China Mobile.
Blackberries are not the only units widely available. Nokia phones, for example, were officially sold through just a couple of distributors before 2000 and could only reach first-tier cities. Since then, the company has built up a network of distributors.
Meanwhile, domestic service providers are rushing to meet the needs of modern phones. China Unicom – the country's second largest wireless provider – now has its own push-mail service, Redberry. It costs US$1 per month plus a few cents per e-mail. Management software specialist UFIDA Software released Umail in January, which works on regular phones and costs about US$8 per month. Even China Mobile has developed a cheaper e-mail service than RIM.
China is already the world's largest mobile phone market with 460 million users in 2006. New subscribers are being added at a rate of six million per month.
Much of this growth is coming in rural areas where the handset market is dominated by cheap smuggled phones that sell for a fraction of the retail cost.
At least for the service providers, these cheap units – legal or otherwise – may open up new markets and prove to be a marketing boon.
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