The mystique of the Orient has attracted all manner of shady types. An age of Victorian literature cast freebooters, bandits and brigands as coming to Shanghai and other cities in eastern China to make a quick buck.

Today, these crooks favor power ties over gold teeth but their illegal dealings may soon be curtailed by a new drive to close Chinese legal loopholes.

Yiwu, a city  in Zhejiang Province known as the world's largest commodity distribution center, is one of the cities where people have felt such legal changes most strongly in China.

Each year more than 400,000 foreign businessmen from all over the world come to Yiwu for business and purchase all kinds of products to export back to more than 200 countries and regions worldwide.

Over the past seven years, transnational intellectual property rights (IPR) crimes have continually been increasing in Yiwu, badly damaging the city's reputation.

The Office of the US Trade Representative named the city on its 2011 and 2012 global "notorious markets" list, saying that "these wholesale markets are a center for the export of infringing goods to international markets."

However, due to restrictions in Chinese laws, greedy businessmen have been illegally garnering fat profits in China and have been able to easily avoid legal sanctions.

According to the Yiwu procuratorial authority, among a total of 198 IPR cases solved over the past seven years, 64 were transnational IPR crimes involving foreign businessmen, but not a single foreign suspect has been brought to justice.

It is now hoped that such a shameful track record will be consigned to the history books with the implementation of the new Chinese criminal procedure law system.

Trails run cold

Zheng Ming (pseudonym), a 41-year-old glasses retailer and producer, never thought he would end up in jail because of a bulk order received from an overseas contact. 

According to files revealed by the Yiwu procuratorial authority, Zheng got a phone call from an old business partner in South Africa, known only as Mary, in 2011. Mary told him she had a 300,000-yuan ($48,560) deal from a buyer named Peter in Johannesburg.

Peter gave Zheng a list, which required him to produce 200,000 pairs of counterfeit glasses involving 17 international brands. Although Zheng knew he was making bogus products because the price the buyer gave him was so low, he took the deal.

Mary then contacted another Chinese businessman who ran an international freight forwarding company in Yiwu to ship the products out of China.

The freight forwarding company manager agreed to the deal after taking a 20,000-yuan commission from Mary. The fake glasses were placed among other headwear products into a container and declared only as headwear products to customs.

The General Administration of Customs approved this mode of declaration in Yiwu in 2007, as the city was trying to build its reputation as an export mecca.

This means buyers only need to declare the products that have the highest value among all the goods.

This policy was specially designed to be convenient to foreign tourists or businessmen who purchased multiple goods under $50,000 in value in Yiwu, but it also opened up loopholes that smugglers rushed through.

In all transnational IPR crime cases solved by the Yiwu procuratorate, criminals used these legal loopholes and hid illegal fake goods among other legitimate goods together for declaration.

Zheng's container was seized by customs in January 2012. All Chinese businessmen involved were detained except Mary and Peter, who stayed safe in South Africa.

Zheng eventually received a two-year sentence suspended for three years for counterfeiting registered trademarks.

"Those foreign businessmen played a dominant role in IPR crimes which caused economic losses and damaged our country's reputation. But almost all of them got away with it," Fu Xinmin, chief procurator of Yiwu, told the Global Times.

According to Fu, such illegal transactions are usually conducted through personal contacts and verbal agreements. The identities of foreign businessmen are difficult to verify and track. Some never come to China but pass down orders by phone or online, adding further obstacles to their capture.

"They knew they could escape Chinese legal sanctions. The low costs and high profits encouraged them to use the Yiwu international trade market and customs to conduct more and more crimes," Fu said.

Hard to hold to account

Yiwu was approved by the State Council as a pilot city to undergo comprehensive international trade reform in March 2011. But transnational IPR crime has become a cancer attacking this reform's very lifeblood.

Yiwu now has more than 13,000 foreign residents. It is the city with the largest number of foreigners and foreign criminals in Zhejiang, and the number of IPR cases its police solved is among the highest in China.

However, local judicial organs did not have the authority to investigate or handle cases involving foreigners. Instead, they had to report to higher authorities every step of the way before making a decision.

"They used to think any cases involving foreigners were sensitive. Everything needed to be reported, and no action could be taken before evidence was secured, but the best time for catching suspects was wasted waiting for permission," Zhu Qin, director of the Yiwu procuratorate executive office, told the Global Times.

The Chinese Criminal Law, revised in 1997, said crimes committed by foreigners should be judged by intermediate level courts, and correspondingly, only the middle levels of the public security bureau and procuratorate had the authority to handle cases involving foreigners.

"This 'special treatment' that foreigners received actually gave them special treatment which didn't fit in with international practices as all people are equal before the law," Zhu said.

"For example, we had a case in 2010 when a local student was hit by a foreign student in Yiwu after drunk driving and died. But local police authorities didn't officially detain the suspect until they received approval from higher authorities. Many Chinese people didn't understand and thought the foreigners had special treatment. The government had to hold a press conference to calm public outrage," Zhu said.

Furthermore, the countries where most foreign IPR criminals hail from do not have judicial cooperation agreements with China, which means that when these suspects leave the country, they cannot be extradited or brought to justice.

Legal amendments

To solve this problem, the Yiwu procuratorate submitted a report to the Zhejiang Province People's Procuratorate in 2012 which was later sent to the Supreme People's Procuratorate to suggest revisions to the current law.

In the report, the Yiwu procuratorate proposed decentralizing judicial rights including the power of approval for arrests and prosecution to local judicial organs, allowing for a more effective crackdown on transnational IPR crimes by foreigners.

The report said with the rapid development of the economy as well as the improvement of judicial practitioners' skills, the old obstacles faced by local judicial organs have been broken.

The suggestions were taken on board as part of the new criminal law which came into effect in January. The document made clear that local judicial organs had the authority to detain foreign suspects leaving the country and in other suspicious circumstances.

After the new law came into force, the Yiwu procuratorate established a new department staffed with procurators proficient in foreign languages who specialize in foreign-related crimes and drafted a specific document that stated the detailed procedure involved in dealing with foreigners.

It requires that judicial officers ensure the legal rights of foreign suspects during the investigation period, inform them that they have the right to contact and meet with their family and their consulate, the right to a translator and translated copies of judicial documents, the right to legal representation and to having their interrogation videotaped and recorded.

Jiang Qiming, the director of the new department, told the Global Times it was his first time investigating foreign criminal cases despite working in Yiwu for 17 years.

In January, Jiang filed the first lawsuit conducted by a grass-roots level court under the new rules.

An Indian national was charged with drunk driving and sentenced to three months in prison by the Yiwu local court in March.

According to Jiang, although no transnational IPR cases have been encountered so far this year, seven cases involving foreign suspects for offenses such as kidnapping, robbery, organizing prostitution and manslaughter had been solved by April.

Obstacles remain

Although the newly modified law removed many obstacles for judicial authorities, in practice, certain difficulties remain.

"The biggest issue is to find out how those foreign businessmen conduct their illegal affairs," Zhu from the Yiwu procuratorate said.

Zhu said the local government is working on building a more efficient foreign identity verification and management system to track foreigners after they enter the country.

"We are expecting commercial and trade management authorities to issue stricter standards and requirements for foreign businessmen to prevent them using fake IDs to conduct IPR crimes. And we also expect our country to form and strengthen transnational cooperation mechanisms with other countries to leave foreign criminals with no chance," he said.

Mei Xinyu, senior researcher at the Chinese Academy of International Trade and Economic Cooperation, thinks that with increasing trade between China and the rest of the world, such problems will increase but can only be solved by following international rules.

"It's not a task that can be changed by one department in a short time. It relies on cooperation among different departments and determination to follow the rule of law. This is the right way out," he said.