The head of the world's largest luxury goods maker, LVMH, Wednesday condemned the huge counterfeiting business thriving in China and called on the authorities to take on the "mafia" behind the trade. "When somebody buys a fake, they are giving money to the mafia, to organised crime," LVMH managing director Bernard Arnault told reporters.
"It is very difficult to fight against because there are very large risks, but it is absolutely necessary to do so. "It is like drug trafficking. The same organisations control the drug and counterfeiting businesses," Arnault said on the sidelines of "Luxury 2004: The Lure of Asia", a conference in Hong Kong.
Arnault said counterfeiting was costing the industry billions of dollars every year and had a turnover equivalent to 10 percent of all world trade. He singled out Asia - in particular China but also Indonesia, South Korea, Taiwan and Thailand - as being the main source of the world's counterfeit goods.
Although counterfeiting does not affect profitability, he said, "it is not good for the image."
China alone accounts for 60 percent of all counterfeited luxury goods, said Arnault, whose company owns renowned brands such as Louis Vuitton, Christian Dior and Moet et Chandon.
Asked about the Chinese authorities' willingness to counter the problem, Arnault said: "The government at the highest level is very clear, they want to fight that. What we need now is execution at the ground level in cities where these products are shown, and places where they are sent out of China. In a country as big as China, this is more complicated."
He said fakes should be seized and destroyed.
"It should be relatively feasible if you attack these places where you see the products. The number of places is relatively limited world-wide... we will kill large chunk of these products," he added.
Despite the growing goods piracy problem, Arnaud reiterated the company's commitment to the nation's huge and growing domestic market where it made its first pioneering forays in 1992 and says it is now profitable.
Arnaud was speaking at the fourth instalment of the global luxury conference, held for the first time outside of Paris in Hong Kong, an indication he said of the growing importance of the region.
"China and the city of Hong Kong are one of the most important players that will shape the new world," he said. In one generation China will be as big as the US, he said, adding that LVMH had ambitious expansion plans to take advantage of the market's growth.
"We want to have shops in the main cities ... we will wait until we see what the market is worth. We don't want to rush," he said. "We want to be there and be able to know where the best places are and (form) the best relationship ... we should really follow the market, follow the trend."
"Yes, China is the future. We see the energy, this is where things are going to happen for a generation but today it is still not there", he said.
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