SHANGHAI, May 29 (UPI) -- Shao Jiayi surveys the busy street corner before setting up his portable box-table and stool, then hastily unveils a bounty of pirated Hollywood films for sale.
Within minutes, hordes of pedestrians converge on the makeshift booth and begin thumbing over scores of recent blockbuster American films such as "The Scorpion King" and "Spider-Man".
The movies, in both DVD and VCD format, sell for 10 yuan each (about $1.20) and come in shrink-wrapped packages with a jacket cover that, for all intents and purposes, looks just like the real thing.
"It's not a respectable job, but I've got to make a living," said the 25-year-old vendor, who claims he sells hundreds of DVDs and VCDs daily. "Sure, it's illegal, but I don't worry about the police."
Local police take kick-backs from vendor's bosses to look the other way, he said, except during the national holidays when citywide crackdowns on vice force them off the street for a few days.
Across town, at another bootleg DVD outlet that doubles as a small music store, customers hover over notebooks packed full of movie titles. After choosing a movie, or two, or three, shoppers give a list to the store clerk, who disappears behind a curtain, returning minutes later with the booty.
"Most Chinese people can't afford to buy real DVDs, they're too expensive," said a man in his 30s with a handful of DVDs. "Besides, those film companies in Hollywood make too much money."
Despite calls from trade groups to crack down on the counterfeiting industry, and claims by the Chinese government that it's taking action, the trade in pirated American films is still booming.
Economists say the piracy industry in China has grown into a shadow economy in recent years, absorbing the rising unemployment levels from government layoffs at state-owned enterprises.
Recent estimates by international trade groups indicate that piracy in China directly or indirectly employs 3 million to 5 million people, and brings in between $40 and $80 billion every year.
Industry analysts say the scale, capability, and techniques of the counterfeiting trade have greatly increased in recent years, as fears of punitive action by the central government have weakened.
Indeed, three days before the debut of the Star Wars movie "Episode II: Attack of the Clones" in the United States, pirated DVD copies of the film were available for sale in major Chinese cities.
Analysts say well-trained individuals produce most of the pirated DVDs sold in China with high-end manufacturing equipment at their disposal, given the complexity of the digital authoring.
For Hollywood film studios, which collect more than 50 percent of a film's revenue from overseas box office receipts, profit losses from pirated DVDs is considerable, according to industry groups.
The Motion Picture Association of America estimates that pirated DVDs make up more than 90 percent of the DVD market in China, which is the world's largest maker of DVD players. Pirated movies cost the industry about $3 billion dollars in lost revenue every year, the group says.
Analysts say an insatiable demand for Western motion pictures is fueling the illegal industry. A recent survey, conducted by both the Shanghai and Beijing city governments, found that almost 80 percent of people openly admitted to buying pirated movies, music and computer software.
The piracy issue has proven to be embarrassing for the Chinese government, which has pledged to improve copyright protection as part of its membership in the World Trade Organization.
China's state-controlled media, which until the time of its entry into the World Trade Organization last December had published regular accounts of the anti-piracy crackdown, has recently been silent on the issue.
Chinese officials say the pirated DVD industry has connections with organized crime syndicates and claim that more than 70 percent of the bootleg products come from other nearby countries.
Officials say raids, like the one last month in the southern city of Shenzhen, in which authorities seized two vessels carrying about 4 million compact discs, are indications of a tough stance on the illegal industry. They claim nationwide anti-piracy efforts will eventually break the industry.
But the piracy issue has also discouraged most Hollywood studios from distributing their films in China in the past six months, according to analysts, and few have plans to do so anytime soon.
"Widespread intellectual property abuse had discouraged most international distributors from releasing products in the mainland, despite aggressively marketing DVD products to other parts of the world," said David Winston, a Shanghai-based film industry market researcher.
Warner Brothers has been the most aggressive Hollywood studio in marketing DVDs in China, he said, having released 177 titles, compared with 87 from Disney and 15 from Columbia Tristar.
Most Hollywood studios still sell VCD copies of their movies in China but the VCD market is only a small portion of the overall home-entertainment movie market, Winston said.
Still, Warner's suggested retail price for its DVDs in China is between 120 yuan (about $14) and 168 yuan, making a legal DVD at least 10 times more expensive than a pirated version.
An entire season of the popular Fox-TV hit series the "X-Files" -- a full box set of 24 episodes on eight pirated DVDs -- sells for less than 90 yuan (about $10) on the black market in Shanghai.
"Essentially, strict government regulations on the distribution of foreign films and the high cost of original quality DVDs are supporting the pirate industry and keeping the studios away," he said.
Beijing limits the number of foreign movies allowed into Chinese theaters to 10 each year, and it can take months, even years, before government censors approve a film for the domestic market.
Many of the pirated movies would never be approved for distribution in China -- those which carry violence, nudity, politics and other topics that the ruling Communist party deems objectionable.
Most copies improve with time, from the first appearance of the films on the street, indicating that a well-organized system of piracy is working behind the scenes to market original-quality DVDs.
Some of the copies are flawless versions, dubbed from original DVDs or from videos submitted for awards, and include interviews with directors and actors, restored outtakes and other extras.
Interviews with several movie storeowners conducted by United Press International in Shanghai indicate that the pirated movie industry in China is well organized and sheltered by local officials.
One owner described an elaborate sales and distribution system, with "underground salesmen" who visit the stores regularly with shipments full of DVDs or VCDs for sale on consignment.
"It must be a very profitable business for those people at the top, but for me, I just make enough to feed and support my family," he said. "I'm just a little man, swimming in a ocean of big fish."
Others claim citywide crackdowns on the illegal trade have been largely ineffective as most stores are tipped off beforehand about upcoming inspections by the city's anti-piracy authorities.
"When we are told that the authorities will come to inspect the store, we just take them off the shelves for a couple days," one store manager said boldly. "It's like a game of cat and mouse."
